SHOE CARNIVAL, INC. Factors That May Affect Future Results
This quarterly report on Form 10-Q contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve a number of risks and uncertainties. A number of factors could cause our actual results, performance, achievements or industry results to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. These factors include, but are not limited to: general economic conditions in the areas of the continentalUnited States in which our stores are located and the impact of the ongoing economic crisis inPuerto Rico on sales at, and cash flows of, our stores located inPuerto Rico ; the effects and duration of economic downturns and unemployment rates; changes in the overall retail environment and more specifically in the apparel and footwear retail sectors; our ability to generate increased sales at our stores; our ability to successfully navigate the increasing use of online retailers for fashion purchases and the impact on traffic and transactions in our physical stores; our ability to attract customers to our e-commerce website and to successfully grow our e-commerce sales; the potential impact of national and international security concerns on the retail environment; changes in our relationships with key suppliers; changes in the political and economic environments in, the status of trade relations with, and the impact of changes in trade policies and tariffs impacting,China and other countries which are the major manufacturers of footwear; the impact of competition and pricing; our ability to successfully manage and execute our marketing initiatives and maintain positive brand perception and recognition; changes in weather patterns, consumer buying trends and our ability to identify and respond to emerging fashion trends; the impact of disruptions in our distribution or information technology operations; the effectiveness of our inventory management; the impact of natural disasters on our stores, as well as on consumer confidence and purchasing in general; risks associated with the seasonality of the retail industry; the impact of unauthorized disclosure or misuse of personal and confidential information about our customers, vendors and employees, including as a result of a cyber-security breach; our ability to manage our third-party vendor relationships; our ability to successfully execute our business strategy, including the availability of desirable store locations at acceptable lease terms, our ability to open new stores in a timely and profitable manner, including our entry into major new markets, and the availability of sufficient funds to implement our business plans; higher than anticipated costs associated with the closing of underperforming stores; the inability of manufacturers to deliver products in a timely manner; the impact of regulatory changes inthe United States and the countries where our manufacturers are located; the resolution of litigation or regulatory proceedings in which we are or may become involved; our ability to meet our labor needs while controlling costs; and future stock repurchases under our stock repurchase program and future dividend payments. For a more detailed discussion of certain risk factors, see the "Risk Factors" section of our Annual Report on Form 10-K for the fiscal year endedFebruary 2, 2019 . General Management's Discussion and Analysis of Financial Condition and Results of Operations is intended to provide information to assist the reader in better understanding and evaluating our financial condition and results of operations. We encourage you to read this in conjunction with our Condensed Consolidated Financial Statements and the notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q, as well as our Annual Report on Form 10-K for the fiscal year endedFebruary 2, 2019 as filed with theSEC .
Overview of Our Business
Shoe Carnival, Inc. is one of the nation's largest family footwear retailers, providing the convenience of shopping at any of our store locations or online at shoecarnival.com. Our stores combine competitive pricing with a fun and promotional, in-store marketing effort that encourages customer participation and injects fun and surprise into every shopping experience. We believe this fun and promotional atmosphere results in various competitive advantages, including increased multiple unit sales; the building of a loyal, repeat customer base; the creation of word-of-mouth advertising; and enhanced sell-through of in-season goods. A similar customer experience is reflected in our e-commerce site through special promotions and limited time sales, along with relevant product stories featured on our home page. Our objective is to be the destination retailer-of-choice for a wide range of consumers seeking value-priced, current season name brand and private label footwear. Our product assortment includes dress and casual shoes, sandals, boots and a wide assortment of athletic shoes for the entire family in four general categories - women's, men's, children's and athletics. In addition to footwear, our stores carry selected accessory items such as socks, belts, shoe care items, handbags, sport bags, backpacks and wallets. Our e-commerce site offers customers an opportunity to choose from a large selection of products in all of the same categories of footwear with a depth of sizes and colors that may not be available in our stores and introduces our concept to consumers who are new toShoe Carnival in both existing and new markets. 17
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Critical Accounting Policies
We use judgment in reporting our financial results. This judgment involves estimates based in part on our historical experience and incorporates the impact of the current general economic climate and company-specific circumstances. However, because future events and economic conditions are inherently uncertain, our actual results could differ materially from these estimates. Our accounting policies that require more significant judgments include those with respect to merchandise inventories, valuation of long-lived assets, insurance reserves, leases and income taxes. Other than our new accounting policy on leases, which we adopted in the first quarter of fiscal 2019 and is discussed in Note 7 to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, the accounting policies that require more significant judgment are discussed in our Annual Report on Form 10-K for the fiscal year endedFebruary 2, 2019 . With the exception of our newly adopted accounting policy on leases, there have been no material changes to our critical accounting policies and estimates disclosed in our Annual Report on Form 10-K for the fiscal year endedFebruary 2, 2019 . See Note 3 to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for information on recently issued accounting pronouncements.
Results of Operations Summary Information
Number of Stores Store Square Footage
Beginning End of Net End Comparable
Quarter Ended Of Period Opened Closed Period Change of Period Store Sales
May 4, 2019 397 0 2 395 (22,000 ) 4,246,000 (0.2 )%
August 3, 2019 395 0 2 393 (16,000 ) 4,230,000 1.4 %
November 2, 2019 393 1 1 393 1,000 4,231,000 3.5 %
Year-to-date 397 1 5 393 (37,000 ) 4,231,000 1.6 %
May 5, 2018 408 0 3 405 (31,000 ) 4,360,000 1.3 %
August 4, 2018 405 3 402 (36,000 ) 4,324,000 6.7 %
November 3, 2018 402 3 3 402 (5,000 ) 4,319,000 4.5 %
Year-to-date 408 3 9 402 (72,000 ) 4,319,000 4.2 %
Comparable store sales for the periods indicated include stores that have been
open for 13 full months after such store's grand opening prior to the beginning
of the period, including those stores that have been relocated or remodeled.
Therefore, stores opened or closed during the periods indicated are not included
in comparable store sales. We include e-commerce sales in our comparable store
sales. Due to our multi-channel retailer strategy, we view e-commerce sales as
an extension of our physical stores.
The following table sets forth our results of operations expressed as a percentage of net sales for the periods indicated:
Thirteen Thirteen Thirty-nine Thirty-nine
Weeks Ended Weeks Ended Weeks Ended Weeks Ended
November 2, 2019 November 3,
2018
100.0 % 100.0 % 100.0 % 100.0 %
Cost of sales (including buying,
distribution and
occupancy costs) 69.1 69.8 69.6 69.5
Gross profit 30.9 30.2 30.4 30.5
Selling, general and administrative
expenses 24.3 24.3 24.2 24.4
Operating income 6.6 5.9 6.2 6.1
Interest income (0.1 ) (0.1 ) (0.1 ) 0.0
Income tax expense 1.7 1.5 1.3 1.5
Net income 5.0 % 4.5 % 5.0 % 4.6 %
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Executive Summary for Third Quarter Ended
During the third quarter of fiscal 2019, we achieved a comparable store sales increase of 3.5%, which was in addition to the 4.5% comparable store sales increase in the third quarter of fiscal 2018. Our broad-based sales growth, which was across all product categories, geographies, and sales channels, was primarily driven by non-athletic sales. Fiscal year 2019 marked the 17th consecutive year we have recognized a comparable store sales increase during the month of August, our peak back-to-school season. During the third quarter of fiscal 2019, our brick-and-mortar store and e-commerce traffic and store conversion increased, which also contributed to the$5.5 million increase in net sales year-over-year. We ended the quarter with inventory up 1.4% on a per-store basis as we continued to purchase inventory ahead of any new tariffs that might go into effect in the future.
Highlights for the third quarter of fiscal 2019 and a brief discussion of some key initiatives are as follows:
• Net sales increased 2.0% to
last year.
• Diluted earnings per share was a quarterly record of
over the third quarter of fiscal 2018.
• Gross profit margin for the third quarter increased 0.7% to 30.9% compared to
30.2% in the third quarter of fiscal 2018. This was driven by an increase in
sales of women's fashion product, which typically carry a higher margin,
along with the leveraging effect of higher sales on lower distribution costs.
• We purchased 521,800 shares of our common stock during the third quarter of
fiscal 2019 at a total cost of
• We ended the quarter with
outstanding debt.
• We continue to invest in our Customer Relationship Management ("CRM")
program, and our initial implementation of CRM was placed into service during
the third quarter of fiscal 2019. We believe that our holistic approach to
CRM will be a sales driver and that the data received and the insight our
real estate team and merchants are gaining as a result of our CRM program
will allow us to better merchandise our stores, market to specific customers
and aid in identifying new store opportunities.
• We believe early results of our CRM program have enabled us to grow our Shoe
Perks customer loyalty membership to over 23 million members at the end of
the third quarter of fiscal 2019, an 11% increase over the third quarter of
the prior year. Additionally, we experienced a 61% increase in Gold
membership status as of the end of the third quarter of fiscal 2019 compared
to as of the end of the third quarter of the prior year. During the first
nine months of fiscal 2019, Gold members spent on average over
transaction than basic members spent per transaction. As we continue to
leverage our CRM capabilities, we believe we will continue to convert
additional loyalty members to Gold status and grow our active shopper
database.
• We expect to open six to eight new stores in fiscal 2020 within our existing
35-state geographic footprint, leading to flat to slightly positive net store
growth in fiscal 2020.
Results of Operations for the Third Quarter Ended
Net sales increased$5.5 million to$274.6 million during the third quarter of fiscal 2019, a 2.0% increase over the prior year's third quarter net sales of$269.2 million . Of this change in net sales,$9.2 million was attributable to the 3.5% increase in comparable store sales and$1.2 million was attributable to the four new stores opened since the beginning of the third quarter of fiscal 2018. These increases were partially offset by a loss in sales of$4.2 million from the 13 stores closed over the same period and a decrease in sales of$0.7 million year-over-year attributable to our other non-comparable stores. The increase in comparable store sales, including e-commerce sales, was primarily driven by higher traffic and store conversion.
Gross Profit
Gross profit increased$3.5 million to$84.7 million during the third quarter of fiscal 2019 compared to gross profit of$81.2 million for the third quarter of fiscal 2018 primarily due to higher sales. Our gross profit margin increased to 30.9% compared to 30.2% in the third quarter of fiscal 2018. The increased profit margin was positively impacted by an increase in sales of women's non-athletic product, which typically carry a higher margin, lower distribution costs and the leveraging of expenses against a higher sales base. 19
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Selling, General and Administrative Expenses
Selling, general and administrative expenses increased$1.4 million in the third quarter of fiscal 2019 to$66.6 million compared to$65.2 million in the third quarter of fiscal 2018. As a percentage of sales, these expenses remained flat at 24.3% compared to the third quarter of fiscal 2018. Significant changes in selling, general and administrative expenses for the third quarter included increases in payroll, incentive compensation, employee benefits and store closing costs, which were partially offset by decreases in equity compensation, depreciation and advertising expenses and the impact of operating fewer stores during the quarter. Additionally, during the third quarter of fiscal 2018, we recorded a net gain of$911,000 associated with insurance recoveries related to ourPuerto Rico operations, which reduced selling, general and administrative expenses in that year. Store closing costs included in selling, general and administrative expenses were$639,000 in the third quarter of fiscal 2019 and$580,000 in the third quarter last year. We closed one store in the third quarter of 2019 and three stores in the third quarter of fiscal 2018. Included in store closing costs were non-cash impairments of fixed assets of$561,000 on three stores recorded during the third quarter of fiscal 2019. There were no impairments of long-lived assets recorded in the same prior year period. Pre-opening expenses included in selling, general and administrative expenses were$43,000 in the third quarter of fiscal 2019 compared to$108,000 in the third quarter of fiscal 2018. We opened one new store in the third quarter of fiscal 2019 compared to three new stores in the third quarter of fiscal 2018. Pre-opening costs, such as advertising, payroll and supplies, incurred prior to the opening of a new store are charged to expense in the period in which they are incurred. The total amount of pre-opening expense incurred will vary by store depending on the specific market and the promotional activities involved.
Income Taxes
The effective income tax rate for the third quarter of fiscal 2019 was 24.9% as compared to 25.9% for the same period in fiscal 2018. The lower tax rate in the quarter was primarily driven by the reversal of a valuation allowance associated with ourPuerto Rico operations.
Results of Operations for the Nine-Month Period Ended
Net sales increased$1.7 million to$796.7 million for the nine-month period endedNovember 2, 2019 , a 0.2% increase compared to net sales of$795.0 million for the nine-month period endedNovember 3, 2018 . Of this change in net sales,$12.5 million was attributable to the 1.6% increase in comparable store sales and$3.9 million was attributable to the four new stores opened since the beginning of fiscal 2018. These increases were partially offset by a loss in sales of$12.4 million from the 19 stores closed over the same period and a decrease in sales of$2.3 million year-over-year attributable to our other non-comparable stores.
Gross Profit
Gross profit decreased$357,000 to$242.0 million during the first nine months of fiscal 2019 compared to gross profit of$242.3 million for the first nine months of fiscal 2018, as increased sales and lower merchandise costs were more than offset by higher occupancy costs. The gross profit margin for the first nine months of fiscal 2019 decreased to 30.4% from 30.5% in the comparable prior year period primarily due to the increase in occupancy costs resulting from higher property taxes and common area maintenance passed through from landlords. Additionally, occupancy expense was lower during the first nine months of fiscal 2018 as a result of a$1.0 million lease termination benefit recognized for two stores inPuerto Rico where the landlord failed to make contractually required repairs.
Selling, General and Administrative Expenses
Selling, general and administrative expenses decreased$1.5 million in the first nine months of fiscal 2019 to$192.5 million compared to$194.1 million in the same period last year. As a percentage of sales, these expenses decreased to 24.2% in the first nine months of fiscal 2019 from 24.4% in the first nine months of fiscal 2018. The overall decrease in selling, general and administrative expenses during the first nine months of fiscal 2019 was primarily due to a decrease in incentive and stock-based compensation, lower depreciation expense, lower store closing costs and the impact of operating fewer stores during the first nine months of fiscal 2019. These decreases were partially offset by higher store level payroll and benefit costs recognized in the first nine months of fiscal 2019 compared to the first nine months of fiscal 2018 and the net gain associated with insurance recoveries recognized in the first nine months of fiscal 2018. 20 -------------------------------------------------------------------------------- Store closing costs included in selling, general and administrative expenses were$1.1 million in the first nine months of fiscal 2019 and$1.9 million in the first nine months of last year. We closed five stores in the first nine months of fiscal 2019 and nine stores in the first nine months of fiscal 2018. Included in store closing costs were non-cash impairments of fixed assets of$604,000 on four stores recorded during the first nine months of fiscal 2019. There were no impairments of long-lived assets recorded during the first nine months of fiscal 2018. Pre-opening expenses included in selling, general and administrative expenses were$43,000 in the first nine months of fiscal 2019 and$112,000 in the first nine months of fiscal 2018. We opened one new store in the first nine months of fiscal 2019 compared to three new stores in the first nine months of fiscal 2018. Pre-opening costs, such as advertising, payroll and supplies, incurred prior to the opening of a new store are charged to expense in the period in which they are incurred. The total amount of pre-opening expense incurred will vary by store depending on the specific market and the promotional activities involved. Income Taxes The effective income tax rate for the first nine months of fiscal 2019 was 20.9% compared to 24.2% for the same period in fiscal 2018. The change in the effective tax rate for the first nine months of fiscal 2019 was primarily due to the third quarter reversal of a valuation allowance and a$1.9 million tax benefit related to the vesting of stock-based compensation recognized during the first quarter of fiscal 2019. Our provision for income tax expense is based on the current estimate of our annual effective tax rate and is adjusted as necessary for quarterly events. For the full year of fiscal 2019, we expect our tax rate to be approximately 21.3% compared to 24.3% last year. The reduction in our expected annual tax rate for fiscal 2019 is primarily the result of the reversal of the valuation allowance and the tax benefit related to the vesting of stock-based compensation described above.
Liquidity and Capital Resources
Our primary sources of liquidity are cash and cash equivalents on hand, cash generated from operations and availability under our credit facility. We believe these resources will be sufficient to fund our cash needs, as they arise, for at least the next 12 months. Our primary uses of cash are for working capital, which are principally inventory purchases; store initiatives; potential dividend payments; potential share repurchases under our share repurchase program; the financing of capital projects, including investments in new systems and various other commitments and obligations.
Cash Flow - Operating Activities
Our net cash provided by operating activities was$28.0 million in the first nine months of fiscal 2019 compared to$37.8 million in the first nine months of fiscal 2018. These amounts reflect our income from operations adjusted for non-cash items and working capital changes. The$9.7 million decrease in operating cash flow was primarily due to the timing of payments for inventory and payments related to developing our CRM and order management projects, which are hosted arrangements. The current ratio was 2.6 as ofNovember 2, 2019 compared to 4.2 as ofNovember 3, 2018 . This decrease was primarily due to classifying a portion of our operating lease liabilities as current in fiscal 2019 due to the adoption of the new lease accounting guidance.
Cash Flow - Investing Activities
Our cash outflows for investing activities are primarily for capital expenditures. During the first nine months of fiscal 2019, we expended$15.1 million for the purchase of property and equipment, of which approximately$7 million was for the purchase of our corporate headquarters and the remainder was for remodels of existing stores, investments in technology and normal asset replacement activities. During the first nine months of fiscal 2018, we expended$5.0 million for the purchase of property and equipment, primarily related to remodels of existing stores, investments in technology and normal asset replacement activities.
Cash Flow - Financing Activities
Our cash outflows for financing activities were primarily for cash dividend payments, share repurchases and payments on our credit facility described below. Shares of our common stock can be either acquired as part of a publicly announced repurchase program or withheld by us in connection with employee payroll tax withholding upon the vesting of equity awards. Our cash inflows from financing activities have represented purchases under our Employee Stock Purchase Plan and borrowings under our credit facility. During the first nine months of fiscal 2019, net cash used in financing activities was$46.3 million compared to$42.8 million in the first nine months of fiscal 2018. The increase in net cash used in financing activities was primarily due to a$10.7 million increase for shares withheld upon the vesting of equity awards and an$873,000 increase in dividends paid during the first nine months of fiscal 2019 compared to the first nine months of fiscal 2018, partially offset by a$8.1 million decrease in common stock repurchased in the first nine months of fiscal 2019 compared to the first nine months of fiscal 2018. 21
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Capital Expenditures
Capital expenditures for fiscal 2019, including actual expenditures during the first nine months, are expected to be between$18 million and$19 million , with approximately$11 million to be used for one new store, relocations, remodels and the purchase of our corporate headquarters, which we purchased in the first quarter of fiscal 2019 for$7 million . The remaining capital expenditures are expected to be, or have been, incurred for other store improvements, continued investments in technology and normal asset replacement activities. Lease incentives to be received from landlords during fiscal 2019, including actual amounts received during the first nine months, are expected to be approximately$1.9 million . The actual amount of cash required for capital expenditures for store operations depends in part on the number of new stores opened and relocated, the amount of lease incentives, if any, received from landlords and the number of stores remodeled.
Store Openings and Closings
Increasing market penetration by opening new stores has historically been a key component of our growth strategy, and our focus continues to be on generating positive long-term financial performance for our store portfolio. As we leverage customer data from our CRM program, and as more attractive real estate opportunities become available, we will continue to pursue opportunities for brick-and-mortar store growth across existing large and mid-size markets. In fiscal 2020, we expect to open six to eight new stores within our existing 35-state geographic footprint, and we expect flat to slightly positive net store growth. The opening of new stores is dependent upon, among other things, the availability of desirable locations, the negotiation of acceptable lease terms and general economic and business conditions affecting consumer spending in areas we target for expansion. We utilize a formal review process in our evaluation of potential new store sites as well as for decisions surrounding leases on existing store locations. Our approach is both qualitative and quantitative in nature. We look to continually enhance this process with tools such as real estate software used for portfolio analysis that aid in identifying viable locations for future expansion and identifying potential store closings and relocations, as well as additional information we learn about customers from our CRM program. We opened one store in the first nine months of fiscal 2019 and do not expect to open any new stores in the fourth quarter of fiscal 2019. Pre-opening expenses, including rent, freight, advertising, salaries and supplies, are presently expected to total approximately$43,000 for fiscal 2019. During fiscal 2018, we opened three new stores and expended$288,000 on pre-opening expenses, or an average of$96,000 per store. We closed five stores during the first nine months of fiscal 2019. There are no expected store closures for the fourth quarter of fiscal 2019. Over the past several years, we have analyzed our entire portfolio of stores, with a concentration on underperforming stores, to meet our long-term goal of increasing shareholder value through increasing operating income. Our objective is to identify and address underperforming stores that produce low or negative contribution and either renegotiate lease terms, relocate or close the stores. Even though this could reduce our overall net sales volume, we believe this strategy has realized, and will continue to realize, long-term improvement in operating income and diluted earnings per share. Depending upon the results of lease negotiations with certain landlords of underperforming stores, we may increase or decrease the number of store closures in future periods. The timing and actual amount of expense recorded in closing a store can vary significantly depending, in part, on the period in which management commits to a closing plan, the remaining basis in the fixed assets to be disposed of at closing, and the amount of any lease buyout. We will continue to review our store portfolio based on our view of the internal and external opportunities and challenges in the marketplace. Dividends OnSeptember 19, 2019 , our Board of Directors approved the payment of our third quarter cash dividend to our shareholders. The dividend of$0.085 per share was paid onOctober 21, 2019 to shareholders of record as of the close of business onOctober 7, 2019 . The declaration and payment of any future dividends are at the discretion of the Board of Directors and will depend on our results of operations, financial condition, business conditions and other factors deemed relevant by our Board of Directors. Our Credit Agreement (as defined below) permits the payment of cash dividends as long as no default or event of default exists under the credit agreement both immediately before and immediately after giving effect to the cash dividends, and the aggregate amount of cash dividends for a fiscal year do not exceed$10.0 million . Credit Facility OnMarch 27, 2017 , we entered into a second amendment of our current unsecured credit agreement (the "Credit Agreement") to extend the expiration date by five years toMarch 27, 2022 and to renegotiate certain terms and conditions. The Credit Agreement, as amended, continues to provide for up to$50.0 million in cash advances and commercial and standby letters of credit with borrowing limits based on eligible inventory, which amount may be increased from time to time by up to an additional$50.0 million , without the consent of any lender, if certain conditions are met. The Credit Agreement contains covenants which stipulate: (1) Total Shareholders' Equity (as defined in the Credit Agreement) will not fall below$250.0 million at the end of each fiscal quarter; (2) the ratio of funded debt plus three times rent to EBITDA (as defined in the Credit Agreement) plus rent will not exceed 2.5 to 1.0; (3) the aggregate amount of cash dividends for a fiscal year will not exceed$10.0 million ; and (4) distributions in the form of redemptions of Equity Interests (as defined 22 -------------------------------------------------------------------------------- in the Credit Agreement) can be made solely with cash on hand so long as before and immediately after such distributions there are no revolving loans outstanding under the Credit Agreement. We were in compliance with these covenants as ofNovember 2, 2019 . Should a default condition be reported, the lenders may preclude additional borrowings and call all loans and accrued interest at their discretion. The credit facility bears interest, at our option, at (1) the agent bank's prime rate as defined in the Credit Agreement plus 1%, with the prime rate defined as the greater of (a) theFederal Fund rate plus 0.50% or (b) the interest rate announced from time to time by the agent bank as its "prime rate" or (2) LIBOR plus 1.25% to 2.50%, depending on our achievement of certain performance criteria. A commitment fee is charged at 0.20% to 0.35% per annum, depending on our achievement of certain performance criteria, on the unused portion of the bank group's commitment. There were no borrowings outstanding under the credit facility and letters of credit outstanding were$1.2 million atNovember 2, 2019 . As ofNovember 2, 2019 ,$48.8 million was available to us for additional borrowings under the credit facility.
Share Repurchase Program
OnDecember 13, 2018 , our Board of Directors authorized a new share repurchase program for up to$50.0 million of outstanding common stock, effectiveJanuary 1, 2019 . The purchases may be made in the open market or through privately negotiated transactions from time to time throughDecember 31, 2019 and in accordance with applicable laws, rules and regulations. The share repurchase program may be amended, suspended or discontinued at any time and does not commit us to repurchase shares of our common stock. We have funded, and intend to continue to fund, the share repurchase program from cash on hand, and any shares acquired will be available for stock-based compensation awards and other corporate purposes. The actual number and value of the shares to be purchased will depend on the performance of our stock price and other market conditions. During the third quarter of fiscal 2019, we repurchased 521,800 shares of common stock at a total cost of$16.9 million under the new share repurchase program. During the first nine months of fiscal 2019, we repurchased 932,968 shares of common stock at a total cost of$30.9 million under the share repurchase program. The amount that remained available under the share repurchase program atNovember 2, 2019 was$19.1 million .
Seasonality and Quarterly Results
Our quarterly results of operations have fluctuated, and are expected to continue to fluctuate in the future, primarily as a result of seasonal variances and the timing of sales and costs associated with opening new stores and closing underperforming stores. Non-capital expenditures, such as advertising and payroll incurred prior to the opening of a new store, are charged to expense as incurred. The timing and actual amount of expense recorded in closing an individual store can vary significantly depending, in part, on the period in which management commits to a closing plan, the remaining basis in the fixed assets to be disposed at closing and the amount of any lease buyout. Therefore, our results of operations may be adversely affected in any quarter in which we incur pre-opening expenses related to the opening of new stores or incur store closing costs related to the closure of existing stores. We have three distinct peak selling periods: Easter, back-to-school and Christmas. To prepare for our peak shopping seasons, we must order and keep in stock significantly more merchandise than we would carry during other parts of the year. Any unanticipated decrease in demand for our products during these peak shopping seasons could require us to sell excess inventory at a substantial markdown, which could reduce our net sales and gross margins and negatively affect our profitability. Our operating results depend significantly upon the sales generated during these periods.
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