Transcript
Good morning, and welcome to Shoe Carnival's Third Quarter 2025 Earnings Conference Call. Today's conference call is being recorded and is also being broadcast via webcast. Any reproduction or rebroadcast of any portion of this call is expressly prohibited. Management's remarks today may contain forward-looking statements that involve a number of risk factors. These risk factors could cause the company's actual results to be materially different from those projected in such statements. Forward-looking statements should also be considered in conjunction with the discussion of risk factors included in the company's SEC filings and today's earnings press release. Investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of today's date. The company disclaims any obligation to update any of the risk factors or to publicly announce any revisions to the forward-looking statements discussed on today's conference call or contained in today's press release to reflect future events or developments. I will now turn the call over to Mr. Mark Worden, President and CEO of Shoe Carnival for opening remarks. Mr. Worden, you may begin.
Good morning, everyone, and thank you for joining us today. With me are Kerry Jackson, our Chief Financial Officer, and Tanya Gordon, our Chief Merchandising Officer. This is a pivotal moment for our company. Last week, we announced that our Board of Directors unanimously approved changing our corporate name to Shoe Station Group, Inc., pending shareholder approval at our annual meeting in June 2026. This decision reflects our Board's belief in the direction of the company. We are committed to building a stronger, more focused, and more profitable organization. Today, I will detail our third quarter performance, update you on our strategic execution, and provide insights for fiscal years 2026 and 2027. Let’s start with the quarter. We had a solid third quarter, with earnings per share of $0.53 and net sales of $297.2 million, both surpassing consensus expectations. Our gross profit margin increased by 160 basis points to 37.6%, driven by disciplined pricing and our ongoing focus on attracting higher-income Shoe Station customers. We also saw positive comparable sales during the August back-to-school season, along with margin growth. This is noteworthy given the promotional intensity in family footwear retail and the ongoing challenges faced by lower-income households. Athletics made up 51% of total sales in the quarter and saw low single-digit growth. At Shoe Station, our emphasis on premium brands and higher transaction values resulted in double-digit athletic growth for both the third quarter and year-to-date. Our non-athletic categories represented 43% of third quarter sales but experienced a mid-single-digit comp decline overall. Consistently, Shoe Station has outperformed Shoe Carnival in every major category. However, the performance between our two banners has diverged significantly. Shoe Station’s net sales increased by 5.3%, with product margins expanding by 260 basis points. In contrast, Shoe Carnival’s net sales fell by 5.2%, a trend influenced by the economic strain on households earning less than $40,000 a year, which resulted in a performance gap of 10.5 percentage points between our two banners. This gap is not new, but the scale is different and we are confident it will continue. Shoe Station's core customer has a median household income between $60,000 and $100,000, and they are leaning towards premium products, valuing quality service and our brand positioning. The traditional Shoe Carnival customer, however, is facing economic challenges, leading to declining margins citywide in that market segment. This quarter, we adhered to our pricing discipline instead of trying to boost traffic from lower-income customers, which we are strategically moving away from. Consequently, we also saw a margin increase in Carnival. The EPS for the third quarter included a $0.22 impact from planned rebanner investments, totaling $0.58 per share year-to-date. These investments are intended to revamp underperforming locations to the successful Shoe Station format. We anticipate recouping these investments within 2 to 3 years following each store's conversion. We have made notable progress, completing 101 store rebanners during fiscal 2025. Currently, we operate 428 stores: 144 Shoe Station locations and 284 Shoe Carnival locations. This transformation started with test-and-learn phases, evolved to expansion in the Southeast, and now represents a full chain rollout. Having acquired Shoe Station in December 2021 with just 21 stores, it now constitutes 34% of our store fleet, with an expectation of 51% by back-to-school 2026. This threshold is crucial as it signals when Shoe Station will become the majority of our business and we anticipate a return to comparable sales growth. From our experiences with the 101 conversion stores this year, we now expect that over 90% of our fleet will be Shoe Station by the end of fiscal 2028. The remaining locations will be assessed for rebannering, outlet repositioning, or closure. The decision to consolidate to a single brand is based on the inefficiencies of operating two distinct banners with different customer targets and strategies. The sales performance gap between Shoe Station and Shoe Carnival has consistently exceeded 10 percentage points this year, indicating lost value by maintaining a dual brand presence when one is clearly outperforming. Shoe Station differs in three ways: its target customer, which is the median-income household seeking quality; its product offerings, focusing on premium brands and full-price sales; and the shopping experience, which is modern and service-oriented. In contrast, Shoe Carnival targets a value-driven customer facing economic pressures, emphasizing lower-priced products and a heavily promotional model. Consolidating under one brand is expected to yield significant cost savings and operational efficiencies. By the end of fiscal 2027, we project to achieve $20 million in annual savings and a return to comparable sales growth as Shoe Station becomes the primary brand. Our financial stability underpins this transformation, with zero debt and over $100 million in cash, allowing us to fund operations and growth sustainably for two decades. Regarding inventory, we strategically sourced products to mitigate tariff risks, leading to positive same-store sales during the back-to-school season. We are now prepared for the fall, holiday, and spring seasons and plan to effectively manage our inventory to unlock $100 million in working capital by the end of fiscal 2027. The transition to Shoe Station allows us to present products better and promote higher transaction values while maintaining lower inventory levels. Looking ahead, fiscal 2026 will mark our transitional year as we convert 70 stores to meet the critical 51% Shoe Station threshold. The first half of 2026 will closely resemble 2025 as we continue rebanner conversions, but we anticipate hitting the 51% mark in the second half and returning to comparable sales growth. Investment in the P&L will be necessary in 2026 to harness the synergies of one brand, with full benefits expected towards the end of fiscal 2027. Ultimately, we are making investments throughout 2025, all of 2026, and into 2027, expecting modest gains in 2027 and significant growth by 2028. In summary, the performance gap between Shoe Station and Shoe Carnival this quarter clearly illustrates the market trend. Shoe Station significantly outperformed Shoe Carnival by over 10 percentage points, with expanded margins amid industry decline, aligning with consumer preferences for premium brands and quality experiences. Our financial flexibility positions us advantageously to invest in this strategic transformation, reflecting our unwavering commitment to building a stronger future. Now, I will turn the call over to Kerry for more details on our financials and outlook for fiscal 2025, 2026, and 2027.
Thank you, Mark, and good morning, everyone. Let me start with the quarter performance, then walk you through our outlook and the financial framework for fiscal 2026 and 2027. Net sales totaled $297.2 million, down 3.2% versus $306.9 million last year. Comparable store sales declined 2.7%, including approximately 0.5 percentage point of headwind from the 56 stores rebannered during the quarter. The banner divergence Mark described is the critical story. Shoe Station net sales grew 5.3% with mid-single-digit comparable sales growth. Shoe Carnival net sales declined 5.2% with mid-single-digit comparable sales decline. Rogan's generated $21 million in net sales, consistent with our integration plan. Three category highlights worth noting. First, men's and women's athletics, 35% of our business, delivered breakeven comps overall, but Shoe Station's athletic business grew high teens. Second, kids' footwear, 22% of Q3 sales, delivered low double-digit athletic growth at Station. Overall, for the company, kids were down low singles for the quarter due to weakness in kids' nonathletic footwear. Third, the boot season started modestly, but we were well positioned with inventory depth as we move into the heart of the season. Rounding out the categories, men's and women's nonathletic categories both declined mid-single digits compared to Q3 last year. Athletics across our men's, women's, and kids' categories was 51% of our business in the quarter, up from 49% in Q3 last year and was key to our overall comp positive results in back-to-school August. Shoe Station's athletic sales have strong comparable store growth every quarter this year as our premium brands continue to resonate with higher-income consumers that the Shoe Station banner attracts. Non-athletics was 43% of our total sales in Q3, down 1% from last year, again, reflecting the strong athletic cycle we are in. Gross profit margin expanded 160 basis points to 37.6%, exceeding the high end of our guidance. Merchandise margins increased 190 basis points, driven by disciplined pricing, favorable mix shift towards Shoe Station's higher-income consumers and our strategic inventory investments. This more than offset 30 basis points of deleverage in our buying, distribution, and occupancy costs. SG&A was $93.2 million or 31.3% of sales compared to $85.9 million or 28% of sales last year. The 3.3 percentage point increase breaks down as follows: 2.5 points reflect banner reinvestments, including store closing costs, new store construction depreciation, and customer acquisition costs. The remaining 0.8 points is the deleveraging on lower sales. The rebanner P&L investment in Q3 was approximately $8 million. Year-to-date, we've invested $20 million in operating income or $0.58 per share towards this transformation. Net income for Q3 was $14.6 million or $0.53 per diluted share compared to $19.2 million or $0.70 per share last year. This year-over-year decrease of $0.17 primarily reflects our rebanner investments, which we estimate impacted Q3 by $0.22 per share. In the quarter, our EPS otherwise grew by $0.05. The 2- to 3-year payback of these rebanner investments we've consistently discussed remains on track. Shoe Station's net sales were up 3.8% year-to-date compared to Shoe Carnival's net sales down 8.5%. Said differently, year-to-date through Q3, Shoe Station's net sales growth has outperformed Shoe Carnival by 12.3 percentage points. These results support the One Banner strategy timeline Mark just outlined and our view of the long-term profit potential from doing so. Our balance sheet continues to strengthen. We ended the quarter with over $107 million in cash, cash equivalents, and marketable securities, up 18.2% versus last year, and we remain debt-free with $100 million of available credit. Based on strong Q3 results and continued rebanner momentum, we updated our full-year outlook. We are reaffirming our net sales guidance and continue to expect net sales of $1.12 billion to $1.15 billion. We are raising the EPS guidance range to $1.80 to $2.10, increasing the low end by $0.10. We continue to expect gross profit margin of 36.5% to 37.5% and now expect SG&A in the range of $350 million to $355 million, down $5 million from previous guidance. For Q4 specifically, we are forecasting net sales of $240 million to $270 million, ranging from down 7% to up 2% compared to Q4 last year, with the midpoint down 3%, consistent with Q3 trends. Our Q4 net sales range is wider than typical, given macroeconomic volatility, consumer behavior in nonevent periods, and fourth quarter weather uncertainty. We expect Q4 EPS in the range consistent with consensus prior to our earnings release in a range of $0.25 to $0.30. Q4 EPS in that range targets full-year EPS at the lower end of our annual outlook. The higher end of our outlook assumes stronger holiday selling and improvement in lower-income consumer spending. Regarding our One Banner strategy, we have rebannered 101 stores in fiscal 2025, including 56 in Q3 and 1 additional store after quarter end. We anticipate no further rebanners this year. The Rogan's acquisition is now fully integrated into Shoe Station. And beginning in Q4, we'll report Rogan's results as a part of the Shoe Station banner. Year-to-date rebanner CapEx is approximately $31 million with minimal additional CapEx expected for the remainder of the year. Full year P&L investment remains on track at approximately $25 million. For Q4, we expect rebanner investments of $0.10 to $0.12 per share, bringing the full-year impact to $0.68 to $0.70 per share. Looking ahead to our fiscal 2026 and 2027 framework, while we're not providing detailed fiscal 2026 guidance today, that will come in March, we can provide transparency on what to expect. As Mark has clearly identified, it's critical for our financial success to reach the milestone of 51% of our stores banner at Shoe Station, our inflection point. To achieve that goal, fiscal 2026 will be a year of continued investment. We believe that next year's investments will lead to a return to sales and earnings growth in fiscal 2027 and further accelerating in fiscal 2028 as we complete the rebannering program. Let me detail our future expectations for sales, SG&A, and inventory reductions. Sales trends will mirror what we've seen in fiscal 2025. The first half will be challenging as Shoe Carnival's mid- to high single-digit declines more than offset Stations growth. The inflection comes in the second half when station crosses 51% of the fleet. We expect flat to very low single-digit growth in the back half. Overall, for fiscal 2026, we expect net sales and comparable sales will be down, but improved compared to the 6% year-to-date declines we have seen so far this year. With respect to SG&A for fiscal 2026, we expect rebanner investments to range from $25 million to $30 million for the entire year. Given the timing of the rebanners in fiscal 2026, we do expect costs in fiscal 2026 to be more front-loaded. In addition, we continue to recognize costs associated with stores rebannered in fiscal 2025 as we continue to educate customers in those markets and as CapEx investments made in fiscal 2025 are depreciated. As a result, we currently see significant SG&A investment in Q1 and Q2 of fiscal 2026 compared to 2025. And we expect those headwinds to moderate post back-to-school as fiscal 2025 costs become comparable and the $20 million of expected synergies and efficiencies from the implementation of the One banner strategy begin to be realized. Overall, we do not expect SG&A to decline in fiscal 2026 compared to fiscal 2025 and may increase. Given the impacts on sales and SG&A, we expect fiscal 2026 EPS to be lower than fiscal 2025 with more significant decreases in Q1 and Q2 compared to the prior year. Now for more insight on expected inventory reductions driven by the One Banner strategy. We expect higher inventory for the remainder of fiscal 2025 and for inventory at the end of fiscal '25 to be flat to up from the Q3 balance, inclusive of additional buys in Q4 to support launching new athletic assortments and styles next year. The level of inventory we are carrying this year has been intentional given the tariff backdrop and the opportunistic buy of seasonal merchandise and in-demand product. These opportunistic purchases were key to our 160 basis point gross profit margin increase in Q3 and 270 basis increase in Q2. We expect our inventory position will also drive a margin increase in Q4 of over 100 basis points. We expect tariff-related increases in our inventory to moderate in fiscal 2026, assuming there is more tariff certainty. As Mark stated, we are planning for more dramatic shifts in inventory as Shoe Station becomes our dominant banner, which is expected to free up $100 million of cash through inventory reduction over the next 2 years. This inventory reduction comes from Shoe Station's fundamentally different operating model, which requires 20% to 25% less inventory per store compared to Carnival's model. When we get to 51% of our stores operating the Shoe Station model, we expect a $50 million to $60 million reduction by the end of fiscal 2026. As we transition the inventory model, we expect some near-term gross margin pressure from selling through legacy Carnival inventory, partially offset by the lower-cost opportunistic purchases we made in fiscal 2025. This inventory reduction will more than fully fund our rebanner capital needs over the course of the year, maintaining our debt-free position at year-end. We expect rebanner capital expenditures between $25 million and $35 million to be concentrated in Q1 and Q2, while inventory reductions may be more gradual and more focused on the back half of the year. The payoff comes in fiscal 2027 and accelerates into fiscal 2028. By the end of fiscal 2027, we expect to see the full $20 million in annual cost savings from reduced dual-brand complexity, the full $100 million in working capital freed from inventory reduction, a return to annual comparable sales growth, and EPS growth resumes in fiscal 2027 and expands significantly in fiscal 2028. We'll provide more specific fiscal 2026 and 2027 guidance in our March earnings call.
Before we open for questions, let me put this quarter and this transformation in context. We're not at the beginning of this journey. We're at the acceleration point. Shoe Station was 10% of our company when we started this fiscal year. Today, it's 34%. Eight months from now, it will be 51%, the inflection point where this business returns to comparable sales growth. Now we're scaling Shoe Station across the fleet. This transformation unlocks significant value, $20 million in annual cost savings by the end of fiscal 2027, $100 million in working capital freed from inventory reductions. We're building a company positioned for sustained growth while funding this entire transformation from a debt-free balance sheet with over $100 million in cash. The performance gap between our two banners continues. Station outperformed Carnival by more than 10 percentage points every quarter this year. Station margins are 260 basis points higher than Q3 last year. Consumer preferences are shifting toward premium brands and quality over price. We're aligning our entire company with where the market is headed. Our Board's approval to change the corporate name to Shoe Station Group reflects conviction about this path. We're investing through fiscal 2025, 2026, and into 2027 to capture gains that begin in 2027 and accelerate into 2028. This isn't a rebrand; it's a repositioning of this entire company around what's winning. Now I'd like to open up the call for questions.
Your first question comes from the line of Mitch Kummetz with Seaport Research.
Welcome back, Kerry. You guys provided a lot of color around the rebannering and kind of the cadence of those impacts. I was hoping you might be able to boil it down a little bit more. So I think you said that for this year, the drag on earnings is $0.68 to $0.70. Can you say what the additional drag will be next year? And then help us kind of think through what happens in 2027 and '28. How much of that you get back in '27? And by '28, will all of that kind of flow back to the P&L? And I've got a few follow-ups.
Thank you for the welcome back. I appreciate it and it's great to be back with my friends. We expect $25 million to $30 million in rebanner expenses next year, which will be front-loaded due to approximately 70 stores being rebannered. The impact will include ongoing rebanner costs alongside store closing costs and depreciation from capital expenditures in the stores, as well as customer acquisition costs, which will persist over the coming years. However, it's important to note that when evaluating each store individually and the timing of our investments, we anticipate recovering those costs within a 2- to 3-year period after the conversion as the stores become profitable.
When considering core earnings, if I were to adjust for some of the rebannering expenses, is it reasonable to expect stronger earnings growth than in 2025 by excluding those costs? I believe this is likely because it seems you'll perform better in terms of comparable sales. Therefore, I think this could significantly contribute to better earnings growth next year compared to this year.
No. Let me explain a bit more. Next year is going to be an investment year for us. In the first half, we anticipate that Shoe Carnival will remain the dominant brand, but we expect sales to decline by mid-single digits, which will overshadow any progress we make with Shoe Station. So, overall, sales will be down in the first half. However, once we reach back-to-school and Shoe Station becomes the dominant brand at the 51% threshold, we expect to see flat to slight positive sales growth in the second half. That said, as we update our stores, we may encounter some margin pressure in the second half due to the rebanners, as we will have fewer Shoe Carnival stores available to transfer the inventory. In 2025, we had a significant number of stores to work with, allowing for product transfers between the locations. With fewer stores, we might experience some margin pressure from clearing out non-strategic Shoe Carnival inventory. Additionally, we expect to face considerable pressure on our SG&A line, especially in the first and second quarters because of the rebanner costs. We anticipate that SG&A next year will remain flat or possibly increase. While we cannot provide complete guidance for 2026 numbers until March, it's clear that next year will be a down earnings year due to lower sales, some margin pressure from clearance, and flat to higher SG&A costs.
Got it. I was just trying to think about it in terms of stripping out some of these sort of extraneous events. But a couple of last ones for me. One, I think it was mentioned that boots started slowly. I think that was more of a Q3 comment. Have you seen any improvement in the boot business early in the fourth quarter? And kind of what is your outlook there? And then I have one last one.
Yes, Mitch, it's Tanya. And yes, boots did start a little bit slow. But as we got our inventory in, again, just based on some delayed deliveries as we moved into October, we saw nice double-digit increases. So bodes well as we move into the fourth quarter, and we really saw it balanced across all categories. So tall shaft boots, booties, combat looks and fur doing very well.
Okay, that's helpful. And then last one for you, Mark. On the Shoe Station side, you discussed how it's focused on a higher-income consumer with more premium brand access and service-oriented stores. I'm curious if there's an opportunity to enhance the assortment there. Like Tanya just mentioned regarding the fur business, you sell certain brands in athletics but do not sell Ugg. Can you get Ugg? Also, in your athletic business, you offer VL courts but not Sambas; or court visions but not Air Force 1. As Shoe Station grows in the industry, is there a chance to introduce more elevated products beyond the existing upgrades from Carnival to Station, or is there potential for further elevation within Station going forward?
Mitch, absolutely. We believe that maybe the most exciting part of the Shoe Station model and the key reason why we're proceeding publicly now with our move to the Shoe Station Group is so that Tanya and I can be working transparently long term with our partners to build out those new assortments and new brand launches and more premium topics. And so now we're having those great fully multiyear discussions with the best of the best brands in the world. And we're getting very enthusiastic partnership meetings of where we could go together. I think it's that core element of serving the middle-income American household, that working everyday American consumer that values all of the activities that get life done. So absolutely. And Tanya's team is doing a great job. We'll see new assortments, new styles coming in Q1.
Your next question comes from the line of Sam Poser with Williams Trading.
So I just would like to dig into the comp that you talked about for Shoe Station. So as I understand it, at the end of the third quarter last year, I believe there were 42 Shoe Station stores. And today, there are 144. Is that correct?
The 144 is correct. I’ll have to double-check, but the 42 is approximately right.
What was the comparison for Shoe Carnival? My question is about the performance of those 42 stores on a like-for-like basis comparing last year to this year. I know this doesn't capture the full picture, but it gives a clear perspective on how an existing Shoe Station store a year ago compares to an existing Shoe Station store today.
Well, Sam, we’re not going to break down the banners into smaller components. We’ve been analyzing the rebanner stores to help you understand the transition process. However, we have enough critical mass that in future quarters, we’ll discuss the banners in total numbers because they provide the necessary information to comprehend the underlying fundamentals of the business. We believe the most exciting aspect of the business is the overall brand. Honestly, within the full banner, there are varying outcomes, but they ultimately result in a very positive number, especially when comparing to Shoe Carnival on a like-for-like basis, where we’re seeing continued declines, yet our numbers are increasing. I hesitate to dissect the various components too much as it might distract from the main story.
Okay. Regarding the inventory decrease, you mentioned the goal of reducing inventory by 50 million to 60 million next year, and an additional 40 million to 50 million in '27. There are various strategies to achieve this. You could return goods to vendors, accept lower margins which would then increase your cost of goods sold, or reduce product intake. How should we assess the breakdown of these strategies? Also, what level of gross margin pressure should we expect in fiscal '26, considering your comments about the challenges of managing inventory with fewer Carnival stores?
Sam, it's Mark. I'll start and then the team can add more. I'm really excited about the changes we're making in how we serve our customers, especially with the new assortments we'll be rolling out to Shoe Station. The Carnival store features tall displays that promote products above a person's reach, unless you're Shaquille O'Neal. In contrast, Shoe Station will have a very different structure focused on offering curated products that are lower profile and easily accessible for customers. Because of this significant change, we plan to reduce our inventory in stores by 20% to 25% as we move forward. This reduction, along with selling through our tariff inventory at favorable margins, will help us achieve the $100 million reduction that Tanya, Kerry, and I have discussed. We aim to reach this goal quickly but need to collaborate closely with our partners to do so. Tanya and I will intentionally plan our purchases starting with this year's back-to-school season to align with Shoe Station and the direction of the company, now that we're done with testing. Kerry mentioned a crucial point: we're not going to keep Carnival products that don't sell past the season. For instance, after this year's boot season, if we have excess product, we'll clear it rather than hold onto it unless it aligns with Shoe Station's future plans, which will result in some margin pressure but is the right approach. As we liquidate non-core products from boot season and for the 51% of stores that will become Shoe Station by back-to-school, we will eliminate those non-go-forward brand styles. We'll provide more detailed guidance in March, but for now, we want stakeholders to understand that we're moving toward a significant structural advantage, effectively clearing tariff-related products with strong margins, and eliminating non-core items. As we've discussed before, there's no reason to carry forward products that don't make sense for our future. There will be some margin pressure, and Kerry or Tanya may want to add more to that.
I agree with you, Mark, that right now, we need to get through the inventory further along. We'll know in March better how those stores, what their position of their inventories are on the stores we're going to be rebannering, and therefore, the potential for the inventory that might be clearance. At this stage, it's too early. We need to see some sales through of those products.
Okay. To follow up, I'm looking at the current year's receipts, which are around $770 million, slightly higher than last year but still down a bit. For next year to hit your targets, it seems like the total receipts would need to be down, especially with inventory receipts potentially falling by about $100 million. Am I thinking about that correctly? This might be better suited for Tanya, but is my understanding accurate?
Well, let me start out with that, and then Tanya can build on it. You need to keep in mind that we have pre-purchased goods for the spring season. We plan to include opportunistic buys and tariff products in our spring offerings. As a result, we have made those purchases in advance, which will lead to a reduction in the overall. So you are correct regarding the purchases.
Yes. And just to build on that, Sam, based on the pre-tariff goods that we're bringing in, those are sitting in our current inventory today. And then based on our go-forward model, rebanner to Shoe Station, our pairs have to come down. Our pairs are coming down in that model, and our AURs are going up. So the new model, our pairs have to come down significantly. So that's what's going to get us back to the inventory levels that we need to be at.
Okay. When you front-load a lot of spring products and purchase them well in advance, the consumer's preferences can lead to buying items earlier and potentially at discounts that may not allow you to achieve the desired margins. So, when you mention aiming to reduce by 50 million to 60 million next year, how do you break that down? What percentage of that will come from fewer receipts, how much do you anticipate from RTVs, and what portion do you expect to be driven by higher costs of goods and lower gross margins? How do you conceptualize that?
Sam, it's me again. You're not thinking about it wrong in general terms. We're not ready to provide firm guidance, but thinking about receipts coming down next year in a range around $100 million is not the wrong way to think about it right now. We'll get tighter at Q1, but I don't want to dance it. You're thinking about it similar to how we're thinking about it. We'll get tighter as we fine-tune some of those elements we've talked about. But spot on. Our model requires less receipts.
Lastly, given the tough comparisons at Shoe Carnival, which are likely to continue, why not take a more aggressive approach during the holiday season to clean up inventory, especially in the 70 or so stores that won’t be carrying that product moving forward? Is it correct to say that around 50% of the brands and styles are the same or different between Shoe Carnival and Shoe Station, such as with Nike, Skechers, and Adidas? While you do share some products like Birkenstocks, there are some exclusive items at Shoe Station that won’t be available at Carnival. However, a substantial amount of inventory won’t move forward. How aggressive are you in your approach? Additionally, regarding the plan to create clearance stores, why not initiate that process sooner to convert some Carnival stores into clearance locations ahead of time to aid in liquidation?
Those are three great questions. This is Mark again. Let me answer them all. The first, it's not wrong to think 40% to 60% of the Carnival inventory does not go forward into Shoe Station. There's variability, but the range you're talking about is the right way to think about it. Second, the 70 stores that are Shoe Carnival today and will be Shoe Stations, that product that does not go forward will be liquidated aggressively. Totally agree with your point; it will be gone. And that's what we're alluding to. You said it better than we may have communicated it. That's what we're alluding to when we say there will be margin pressure. In the past, when it was test and learn, it was easy to reallocate 10 stores. And then it was still easy to do it when it's 25. Now that it's not test and learn, and it's a full corporation rollout, now we need to clear that product out because it makes no sense to move it around. We'll be doing that for those 70 stores, full stop. Sorry, you might have had a third or fourth point, but hopefully, that answers your question, Sam.
Your next question comes from the line of Jim Chartier with Monness, Crespi, Hardt.
You previously talked about getting to 80% of stores rebannered by March of 2027. Is that still the plan? Or is that pushed back?
Jim, it's Mark. What I tried to say in the speech today is we will be well over 90% before we finish 2028, and we will surpass the critical point of 51% this summer. We're not putting any intermediary dates in there because we think it's far more important that we focus on delivering that experience, that inventory transformation we've just talked about and unlocking the $20 million of synergies. As we get closer, we're going to learn a lot more, and we can provide better guidance on those intermediary dates of '27 as we get much closer. We're going to stay really focused on the tight 2026. Here's what we know. We're doing 70; we'll get to 51, and we turn that pivotal quarter this year. We'll do more in '27, but we want to lock into 2028 versus an intermediary date. Now that's not test and learn, and it's a full company rollout.
Okay. Makes sense. And then on the $20 million of savings, how much of that do you expect flows to the bottom line versus might go towards reinvestment? And then, how should we think about the timing of those savings?
Yes. As we get into 2028, we think it flows. We may choose to invest more in brand building for the corporation or other activities. But when you look at SG&A this year versus SG&A that year, excluding advertising expense, I would see it would flow in 2028. Now Kerry did a nice job saying it's not going to manifest in 2026 because there are other investment costs here. But Kerry can build on that, if you like.
That's the key right there. So 2026 is an investment year. We're going to be rebannering significant stores, and we'll just be starting to get the benefit of that $20 million in 2026, but it might mitigate some of the rebanner costs, but it's not going to offset them, like Mark said, that once the rebanner costs are diminished in '28 and we have that full benefit of that $20 million savings, that's when we can start to realize it.
That concludes our Q&A session. I would now like to turn the call back over to Mark Worden for closing remarks.
Thank you all for joining us today. As we said, it's a pivotal moment for the company as we move towards Shoe Station Group becoming our new corporate name, pending shareholder approval next summer, the majority of our fleet next summer, and we progress towards one brand unlocking significant value. I want to thank you all so much for your time and wish each of you and your families a happy Thanksgiving and holiday season ahead. I hope to see you in the markets or a Shoe Station store between now and then. Take care.
Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.