SHOE CARNIVAL INC (Form: 10-K, Received: 04/15/2013 14:25:04)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-K

(Mark One)
x		Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
		For the fiscal year ended: February 2, 2013
or
¨		Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
		For the transition period from ____________________ to ____________________

Commission File Number:

0-21360

Shoe Carnival, Inc.

(Exact name of registrant as specified in its charter)

Indiana		35-1736614
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification Number)

7500 East Columbia Street Evansville, IN		47715
(Address of principal executive offices)		(Zip code)

(812) 867-6471

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Common Stock, $.01 par value		The NASDAQ Stock Market LLC
(Title of Each Class)		(Name of Each Exchange on Which Registered)

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

¨ Yes x No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.

¨ Yes x No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

x Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

x Yes ¨ No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

¨ Smaller reporting company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

¨ Yes x No

The aggregate market value of the voting stock held by non-affiliates of the registrant based on the last sale price for such stock at July 28, 2012 (the last business day of the registrant’s most recently completed second fiscal quarter) was approximately $318,661,438 (assuming solely for the purposes of this calculation that all Directors and executive officers of the registrant are “affiliates”).

Number of Shares of Common Stock, $.01 par value, outstanding at April 9, 2013 was 20,471,910.

DOCUMENTS INCORPORATED BY REFERENCE

Certain information contained in the Definitive Proxy Statement for the Annual Meeting of Shareholders of the Registrant to be held on June 13, 2013 is incorporated by reference into PART III hereof.

TABLE OF CONTENTS

PART I

Item 1.	Business	2
Item 1A.	Risk Factors	9
Item 1B.	Unresolved Staff Comments	14
Item 2.	Properties	14
Item 3.	Legal Proceedings	15
Item 4.	Mine Safety Disclosures	15

PART II

Item 5.	Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	16
Item 6.	Selected Financial Data	18
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	29
Item 8.	Financial Statements and Supplementary Data	29
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	51
Item 9A.	Controls and Procedures	51
Item 9B.	Other Information	54

PART III

Item 10.	Directors, Executive Officers and Corporate Governance	54
Item 11.	Executive Compensation	54
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	54
Item 13.	Certain Relationships and Related Transactions, and Director Independence	54
Item 14.	Principal Accountant Fees and Services	54

PART IV

Item 15.	Exhibits and Financial Statement Schedules	55

Shoe Carnival, Inc.
Evansville, Indiana

Annual Report to Securities and Exchange Commission
February 2, 2013

PART I

Cautionary Statement Regarding Forward-Looking Information

This annual report 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 continental United States and Puerto Rico in which our stores are located; 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; the potential impact of national and international security concerns on the retail environment; changes in our relationships with key suppliers; the impact of competition and pricing; 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 hurricanes or other natural disasters on our stores, as well as on consumer confidence and purchasing in general; risks associated with the seasonality of the retail industry; our ability to successfully execute our growth 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 growth plans; higher than anticipated costs associated with the closing of underperforming stores; our ability to successfully grow our e-commerce business; the inability of manufacturers to deliver products in a timely manner; changes in the political and economic environments in China, Brazil, Europe and East Asia, where the primary manufacturers of footwear are located; the impact of regulatory changes in the United States and the countries where our manufacturers are located; and the continued favorable trade relations between the United States and China and the other countries which are the major manufacturers of footwear. See ITEM 1A. RISK FACTORS of this report.

ITEM 1. BUSINESS

Shoe Carnival, Inc. is one of the nation’s largest family footwear retailers, providing the convenience of shopping at any of our more than 350 store locations or online. We offer customers a broad assortment of moderately priced dress, casual and athletic footwear for men, women and children with emphasis on national and regional name brands. We differentiate our retail concept from our competitors’ by our distinctive, highly promotional marketing efforts. On average, our stores are 10,900 square feet, generate approximately $2.5 million in annual sales and carry inventory of approximately 28,200 pairs of shoes per location. As of February 2, 2013, we operated 351 stores in 32 states and Puerto Rico and offered online shopping at www.shoecarnival.com .

We are an Indiana corporation that was initially formed in Delaware in 1993 and reincorporated in Indiana in 1996. References to “we,” “us,” “our” and the “Company” in this Annual Report on Form 10-K refer to Shoe Carnival, Inc. and its subsidiaries.

Key Competitive Strengths

We believe our financial success is due to a number of key competitive strengths that have allowed us to make Shoe Carnival a destination of choice for today’s retail consumer.

Distinctive shopping experience

Our stores combine competitive pricing with a highly promotional, in-store marketing effort that encourages customer participation and creates a fun and exciting shopping experience. We promote a high-energy retail environment by decorating with exciting graphics and bold colors, and by featuring a stage and barker as the focal point in each store. With a microphone, this barker, or “mic-person”, announces current specials, organizes contests and games, and assists and educates customers with the features and location of merchandise. Our mic-person offers limited-duration promotions throughout the day, encouraging customers to take immediate advantage of our value pricing. We believe this highly 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. The same excitement and spontaneity is reflected in our e-commerce site through special promotions and limited time sales, along with relevant fashion stories featured on our home page.

Broad merchandise assortment

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. Our average store carries approximately 28,200 pairs of shoes in four general categories – men’s, women’s, children’s and athletics. In addition to footwear, our stores carry selected accessory items complementary to the sale of footwear. We engage our customers by presenting creative three dimensional branded merchandise statements and signage upon entering our stores. Key brands are further emphasized by prominently displaying on end caps, focal walls, and within the aisles. These displays may highlight a product offering of a single vendor, highlight sales promotions, advertise promotional pricing to meet or beat competitors’ sale prices or may make a seasonal or lifestyle statement by highlighting similar footwear from multiple vendors. These visual merchandising techniques make it easier for customers to shop and focus attention on key name brands. Our e-commerce site offers customers an opportunity to choose from a large selection of products in all categories with a depth of sizes and colors that may not be available in some of our smaller stores, and introduces our concept to consumers that are new to Shoe Carnival, in both existing and new markets.

Value pricing for our customers

Our marketing effort targets moderate income, value conscious consumers seeking name brand footwear for all age groups. We believe that by offering a wide selection of popular styles of name brand merchandise at competitive prices, we generate broad customer appeal. Additionally, the time conscious customer appreciates the convenience of one stop shopping for the entire family, whether it is at any of our more than 350 store locations or online at shoecarnival.com. We also believe our highly promotional shopping environment contributes to a reputation of value pricing.

Efficient store level cost structure

Our cost efficient store operations and real estate strategy enable us to price products competitively. We achieve low labor costs by housing merchandise directly on the selling floor in an open stock format, allowing customers to serve themselves, if they choose. This reduces the staffing required to assist customers and reduces store level labor costs as a percentage of sales. We prefer to locate stores predominantly in open-air shopping centers in order to take advantage of lower occupancy costs and maximize our exposure to value oriented shoppers.

Heavy reliance on information technology

We have invested significant resources in information technology. Our proprietary inventory management and advanced point-of-sale (“POS”) systems provide corporate management, buyers and store managers with the timely information necessary to monitor and control all phases of operations. The POS provides, in addition to other features, full price management (including price look-up), promotion tracking capabilities (in support of the spontaneous nature of the in-store price promotions), real-time sales and gross margin analysis by product category at the store level and customer tracking. Using the POS, store managers are able to monitor sales and gross profit margins on a real-time basis throughout the day. Reacting to sales trends, our mic-people use POS reports to choose from among a number of product promotions supplied by our centralized merchandising staff.

Our centralized network connects our corporate office to our distribution center and retail stores via a wide area network, providing up-to-date sales and inventory information as required. Our data warehouse enables our merchandising staff to analyze sales, margin and inventory levels by location, by day, down to the size of shoe. Using this information, our merchandise managers meet regularly with vendors to compare their product sales, gross margins and return on inventory investment against previously stated objectives. We believe timely access to key business data has enabled us in the past to drive annual comparable store sales increases, manage our markdown activity and improve inventory turnover.

Growth Strategy

Our goal is to continue to grow our net sales and earnings by opening additional stores throughout the United States and Puerto Rico and growing our e-commerce business. On February 2, 2013, we operated 351 stores located across 32 states. Our stores averaged approximately 10,900 square feet, ranging in size from 6,400 to 26,500 square feet. Our current store prototype utilizes between 8,000 and 12,000 square feet, depending upon, among other factors, the location of the store and the population base we expect the store to service. Our stores are typically located in open-air shopping centers. The sales area of most stores is approximately 85% of the gross store size.

	Historical Store Count
Fiscal Years	2012			2011			2010			2009			2008

Stores open at the beginning of the year		327			314			311			304			291

New store openings		31			17			10			16			24

Store closings		7			4			7			9			11

Stores open at the end of the year		351			327			314			311			304

Stores relocated		6			9			3			1			4
Percentage of store base remodeled		5	%		8	%		4	%		1	%		1	%

Expanding our store base both in number of stores, as well as geographic footprint

Increasing market penetration by opening new stores is a key component of our growth strategy. We believe our strong unleveraged financial position provides a solid platform for additional growth. For fiscal 2013, we expect to open between 30 to 35 new stores and close five to seven stores. The majority of our new store locations will serve to fill-in certain under-penetrated markets with additional stores, thereby increasing the performance of the overall market. The balance of our new store openings will be in new smaller markets that we can fully penetrate with one or two stores.

Critical to the success of opening new stores in larger markets or geographic areas is our ability to cluster stores. In larger markets (populations greater than 400,000), clustering involves opening two or more stores at approximately the same time, and in smaller markets that can only support a single store, clustering involves seeking locations in reasonably close proximity to other existing markets. This strategy creates cost efficiencies by enabling us to leverage store expenses with respect to advertising, distribution and management costs. We believe the advantages of clustering stores in existing markets will lead to cost efficiencies and overall incremental sales gains that should more than offset any adverse effect on sales of existing stores.

We lease all store locations, as we believe the flexibility afforded by leasing allows us to avoid the inherent risks of owning real estate, particularly with respect to under-performing stores. Before entering a new market, we perform a market, demographic and competition analysis to evaluate the suitability of the potential market. Potential store site selection criteria include, among other factors, market demographics, traffic counts, the tenant mix of a potential open-air shopping center, visibility within the center and from major thoroughfares, overall retail activity of the area and proposed lease terms. The time required to open a store after signing a lease depends primarily upon the property owner’s ability to deliver the premises. After we accept the premises from the property owner in turnkey condition, we can generally open a store within 60 days.

E-commerce

To enhance our e-commerce site, which launched in the fall of fiscal 2011, we added a mobile version in the third quarter of fiscal 2012. By the end of fiscal 2012, traffic from mobile devices accounted for over 30% of our overall e-commerce site traffic. We believe our e-commerce site represents an additional long-term growth vehicle for Shoe Carnival and, along with our social media efforts, provides us with an opportunity to acquire national brand exposure by introducing Shoe Carnival to new customers and markets.

Merchandising and Pricing

Our merchandising strategy is designed to provide a large selection of value priced footwear for the entire family. Our stores carry an average of approximately 28,200 pairs of shoes featuring a broad assortment of current-season name brand footwear, supplemented with private label merchandise. Our stores also carry complementary accessories such as handbags, shoe care items and socks. The mix of merchandise and the brands offered in a particular store reflect the demographics of each market, among other factors. Online, we offer a large selection of product in all categories with a depth of sizes and colors that may not be available in some of our smaller stores.

Our pricing strategy emphasizes value. By combining current season name brand product with promotional pricing, we feel that we create a better value for customers. Initial pricing decisions are guided by gross profit margin targets, which vary by merchandise category and depend on whether the item is name brand or private label merchandise. Our buying staff centrally manages markdowns.

The table below sets forth our percentage of sales by product category:

Fiscal Years	2012			2011			2010			2009			2008
Women’s		26	%		26	%		26	%		26	%		26	%
Men’s		15			16			16			15			15
Children’s ⁽¹⁾		17			17			17			17			17
Athletics ⁽²⁾		38			37			37			38			38
Accessories and miscellaneous items		4			4			4			4			4
		100	%		100	%		100	%		100	%		100	%

(1) Children’s includes children’s athletic shoes.

(2) Includes men’s and women’s sizes only.

Women’s, men’s and children’s non-athletic footwear categories are further divided into dress, casual, sport, sandals and boots. We classify athletic shoes by functionality, such as running, basketball or fitness shoes. For the fiscal years presented, athletic styles, including children’s sizes, have represented approximately half of our footwear sales.

Building Brand Awareness

Our goal is to communicate a consistent brand image across all aspects of our operations. We utilize a blend of advertising mediums and marketing methods to communicate who we are and the values we offer. Special emphasis is made to highlight brands as well as specific styles of product, and visual graphics are used extensively in our stores to emphasize the lifestyle aspect of the styles we carry. The use of social media has become an increasingly important medium in our digital marketing efforts, allowing us to directly communicate, as well as advertise, to our core customers. For fiscal 2012, approximately 43% of our total advertising budget was directed to television, radio and digital media. Print media (including inserts, direct mail and newspaper advertising) and outdoor advertising accounted for the balance. Easter, back-to-school and the Christmas holiday season are the three key seasonal selling periods, during which we advertise the most heavily. We make a special effort to utilize the cooperative advertising dollars and collateral offered by vendors whenever possible.

Promotions are a key element in our marketing efforts. By utilizing both planned and impromptu contests and games, store managers create an environment that encourages customer interaction with store personnel. For example, a customer is enticed to purchase additional merchandise by winning an on-the-spot discount. Online, we create a similar shopping experience by offering special promotions and limited time sales. Our promotions will continue our emphasis on fun and excitement in order to enhance our customers’ total shopping experience. We are also continuing to focus on enrollment in our Shoe Perks® customer loyalty program. Members in our ShoePerks ^® program spend an average of 35% more per transaction, and this program allows us to communicate directly with those customers.

We strive to make each store opening a major retail event. Major promotions during grand openings and peak selling periods feature contests and prize giveaways. We believe our grand openings help to establish the high-energy, promotional atmosphere that develops a loyal, repeat customer base and generates word-of-mouth advertising.

Distribution

We operate a single 410,000 square foot distribution center located in Evansville, Indiana. Our facility is leased from a third party and can support the processing and distribution needs of a minimum of 460 stores to facilitate future growth. We have the right to expand the facility by 200,000 square feet, which would provide us processing capacity to support approximately 650 stores.

Our distribution center is equipped with state-of-the-art processing and product movement equipment. The facility utilizes cross docking/store replenishment and redistribution methods to fill store product requirements. These methods may include count verification, price and bar code labeling of each unit (when not performed by the manufacturer), redistribution of an order into size assortments (when not performed by the manufacturer) and allocation of shipments to individual stores. Throughout packing, allocating, storing and shipping, our distribution process is essentially paperless. Merchandise is typically shipped to each store location once per week. We utilize a third party fulfillment agent located in southwestern Ohio to provide comprehensive fulfillment services for our e-commerce site. They are supplied with merchandise from our distribution center on a weekly basis. For stores within the continental United States, a dedicated carrier, with occasional use of common carriers, handles the majority of shipments to our stores and our fulfillment agent. Our shipments to Puerto Rico are loaded for containerized overseas shipment, with final delivery by a third party provider. Our third party provider also maintains store replenishment inventory for us at their on-island facility.

Buying Operations

Maintaining fresh, fashionable merchandise is critical to our success. Our buyers stay in touch with evolving trends by shopping fashion-leading markets, attending national trade shows, gathering vendor input and monitoring the current styles shown in leading fashion and lifestyle magazines. Management of the purchasing function is the responsibility of our Executive Vice President - General Merchandise Manager. Management encourages store operations personnel to provide input to our merchandising staff regarding market specific fashion trends.

We purchase merchandise from over 170 footwear vendors. In fiscal 2012, two suppliers, Nike USA, Inc. and Skechers USA, Inc., each accounted for 10% or more of our net sales and together accounted for over 37% of our net sales. A loss of any of our key suppliers in certain product categories could have a material adverse effect on our business. As is common in the industry, we do not have any long-term contracts with suppliers.

Competition

The retail footwear business is highly competitive. We believe the principal competitive factors in our industry are merchandise selection, price, fashion, quality, location, shopping environment and service. We compete with department stores, shoe stores, sporting goods stores, online retailers and mass merchandisers. Our specific competitors vary from market to market. We compete with most department stores and traditional shoe stores by offering lower prices. We compete with off-price retailers, mass merchandisers and discount stores by offering a wider and deeper selection of merchandise.

Many of our competitors are significantly larger and have substantially greater resources. However, we believe that our distinctive retail format, in combination with our wide merchandise selection, competitive prices and low operating costs, enables us to compete effectively.

Store Operations

Management of store operations is the responsibility of our Executive Vice President - Store Operations, who is assisted by divisional managers, regional managers and the individual store general managers. Generally, each store has a general manager and up to three assistant managers, depending on sales volume. Store operations personnel make certain merchandising decisions necessary to maximize sales and profits primarily through merchandise placement, signage and timely clearance of slower selling items. Administrative functions are centralized at the corporate headquarters. These functions include accounting, purchasing, store maintenance, information systems, advertising, human resources, distribution and pricing. Management oversight for e-commerce is also located at our corporate headquarters.

Employees

At February 2, 2013, we had approximately 5,000 employees, of which approximately 3,000 were employed on a part-time basis. The number of employees fluctuates during the year primarily due to seasonality. None of our employees are represented by a labor union.

We attribute a large portion of our success in various areas of cost control to our inclusion of virtually all management level employees in incentive compensation plans. We contribute all or a portion of the cost of medical, disability and life insurance coverage for those employees who are eligible to participate in Company-sponsored plans. Additionally, we sponsor retirement plans that are open to all employees who have met the minimum age and work hour requirements. All employees are eligible to receive discounts on purchases from our stores. We consider our relationship with our employees to be satisfactory.

Seasonality

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. Non-capital expenditures, such as advertising and payroll, incurred prior to the opening of a new store are charged to expense as incurred. 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.

We have three distinct peak selling periods: Easter, back-to-school and Christmas.

Trademarks

We own the following federally registered trademarks and service marks: Shoe Carnival ^® and associated trade dress and related logos, The Carnival ^® , Donna Lawrence ^® , Victoria Spenser ^® , Via Nova ^® , Innocence ^® , Y-NOT? ^® , UNR8ED ^® , Solanz ^® , 93 Octane ^® , Cabrizi ^® , Shoe Perks ^® , WHEN YOU WANT 2 ^® , JUMP BACK IN ^® , STEP OUT OF BORING ^® , and Laces for Learning ^® . We believe these marks are valuable and, accordingly, we intend to maintain the marks and the related registrations. We are not aware of any pending claims of infringement or other challenges to our right to use these marks.

Environmental

Compliance with federal, state and local provisions regulating the discharge of material into the environment or otherwise relating to the protection of the environment has not had a material effect upon our capital expenditures, earnings or competitive position. We believe the nature of our operations have little, if any, environmental impact. We therefore anticipate no material capital expenditures for environmental control facilities for our current fiscal year or for the near future.

Available Information

We make available free of charge through the investor relations portion of our website at www.shoecarnival.com our annual reports on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission. We have included our website address throughout this filing as textual references only. The information contained on our website is not incorporated into this Form 10-K.

Our annual report on Form 10-K as filed with the Securities and Exchange Commission is available without charge to shareholders, investment professionals and securities analysts upon written request. Requests should be directed to Investor Relations at our corporate address.

Executive Officers

Name	Age	Position
J. Wayne Weaver	78	Chairman of the Board and Director
Clifton E. Sifford	59	President, Chief Executive Officer, Chief Merchandising Officer and Director
W. Kerry Jackson	51	Senior Executive Vice President - Chief Operating and Financial Officer and Treasurer
Timothy T. Baker	56	Executive Vice President - Store Operations
Carl N. Scibetta	54	Executive Vice President - General Merchandise Manager
Kathy A. Yearwood	46	Senior Vice President - Controller and Chief Accounting Officer

Mr. Weaver is Shoe Carnival’s largest shareholder and has served as Chairman of the Board since March 1988. From 1978 until February 2, 1993, Mr. Weaver had served as president and chief executive officer of Nine West Group, Inc., a designer, developer and marketer of women’s footwear. He has over 40 years of experience in the footwear industry. Mr. Weaver is a former director of Nine West Group, Inc. Mr. Weaver served as chairman and chief executive officer of Jacksonville Jaguars, LTD until January 2012. He is a member of LC Footwear, LLC.

Mr. Sifford has been employed as President, Chief Executive Officer and Chief Merchandising Officer and has served as a Director since October 2012. From June 2001 to October 2012, Mr. Sifford served as Executive Vice President - General Merchandise Manager and from April 13, 1997 to June 2001, Mr. Sifford served as Senior Vice President - General Merchandise Manager. Prior to joining us, Mr. Sifford served as merchandise manager-shoes for Belk Store Services, Inc.

Mr. Jackson has been employed as Senior Executive Vice President, Chief Operating and Financial Officer and Treasurer since October 2012. From August 2004 to October 2012, Mr. Jackson served as Executive Vice President - Chief Financial Officer and Treasurer. From June 2001 to August 2004, Mr. Jackson served as Senior Vice President – Chief Financial Officer and Treasurer. From September 1996 to June 2001, Mr. Jackson served as Vice President – Chief Financial Officer and Treasurer. From January 1993 to September 1996, Mr. Jackson served as Vice President - Controller and Chief Accounting Officer. Prior to January 1993, Mr. Jackson held various accounting positions with us. Prior to joining us in 1988, Mr. Jackson was associated with a public accounting firm. He is a Certified Public Accountant.

Mr. Baker has been employed as Executive Vice President - Store Operations since June 2001. From March 1994 to June 2001, Mr. Baker served as Senior Vice President - Store Operations. From May 1992 to March 1994, Mr. Baker served as Vice President - Store Operations. Prior to that time, he served as one of our regional managers. From 1983 to June 1989, Mr. Baker held various retail management positions with Payless ShoeSource.

Mr. Scibetta has been employed as Executive Vice President - General Merchandise Manager since December 2012. Prior to joining us, Mr. Scibetta served as Vice President, Divisional Merchandise Manager-Footwear for Belk, Inc. since 2008. From 2004 to 2007, Mr. Scibetta served as Vice President, Divisional Merchandise Manager-Footwear for Parisian Department Stores. From 1998 to 2000, Mr. Scibetta served as Vice President, Divisional Merchandise Manager for Shoe Corporation of America. Mr. Scibetta began his retail career with Wohl Shoe Company in 1980.

Ms. Yearwood has served as Senior Vice President - Controller since March 2011, principal accounting officer since March 2010 and Chief Accounting Officer since June 2010. From March 2005 through February 2011, Ms. Yearwood served as Vice President - Controller and prior to that served as corporate Controller since joining us in December 2002. Before joining us, Ms. Yearwood served in various financial positions in the radio, newspaper and public accounting industries. She is a Certified Public Accountant.

Our executive officers serve at the discretion of the Board of Directors. There is no family relationship between any of our Directors or executive officers.

(Pursuant to General Instruction G (3) of Form 10-K, the foregoing information is included as an unnumbered Item in PART I of this annual report in lieu of being included in our Proxy Statement for our 2013 Annual Meeting of Shareholders.)

ITEM 1A. Risk Factors

Carefully consider the following risk factors and all other information contained in this annual report before making an investment decision with respect to our common stock. Investing in our common stock involves a high degree of risk. If any of the following risks actually occur, we may not be able to conduct our business as currently planned and our financial condition and operating results could be seriously harmed. See PART I “Cautionary Statement Regarding Forward-Looking Information” at the beginning of this Annual Report on Form 10-K.

Economic conditions and unemployment rates may adversely affect consumer spending and may significantly harm our business. The success of our business depends to a significant extent upon the level of consumer spending. A number of factors may affect the level of consumer spending on merchandise that we offer, including, among other things:

general economic, industry and weather conditions;

unemployment trends and salaries and wage rates;

energy costs, which affect gasoline and home heating prices;

the level of consumer debt;

consumer credit availability;

real estate values and foreclosure rates;

consumer confidence in future economic conditions;

interest rates;

tax rates and policies; and

war, terrorism, other hostilities and security concerns.

The merchandise we sell generally consists of discretionary items. Adverse economic conditions and unemployment rates, and any related decrease in consumer confidence and spending may result in reduced consumer demand for discretionary items. Any decrease in consumer demand could reduce traffic in our stores, limit the prices we can charge for our products and force us to take inventory markdowns, which could have a material adverse effect on our business, results of operations and financial condition. Reduced demand may also require increased selling and promotional expenses. Reduced demand and increased competition could increase the need to close underperforming stores, which could result in higher than anticipated closing costs.

We face significant competition in our markets and we may be unable to compete favorably. The retail footwear industry is highly competitive with few barriers to entry. We compete primarily with department stores, shoe stores, sporting goods stores, online retailers and mass merchandisers. Many of our competitors are significantly larger and have substantially greater financial and other resources than we do. Economic pressures on or bankruptcies of our competition could result in increased pricing pressures. This competition could adversely affect our results of operations and financial condition in the future.

Our failure to identify fashion trends could result in lower sales, higher markdowns and lower gross profits. Our success depends upon our ability to anticipate and react to the fashion tastes of our customers and provide merchandise that satisfies consumer demand. Our failure to anticipate, identify or react appropriately to changes in consumer fashion preferences may result in lower sales, higher markdowns to reduce excess inventories and lower gross profits. Conversely, if we fail to anticipate or react to consumer demand for our products, we may experience inventory shortages, which would result in lost sales and could negatively impact our customer goodwill, our brand image and our profitability. Moreover, our business relies on continuous changes in fashion preferences. Stagnating consumer preferences could also result in lower sales and would require us to take higher markdowns to reduce excess inventories.

A failure to increase sales at our existing stores may adversely affect our stock price and impact our results of operations. A number of factors have historically affected, and will continue to affect, our comparable store sales results, including:

competition;

timing of holidays including sales tax holidays;

general regional and national economic conditions;

inclement weather;

consumer trends, such as less disposable income due to the impact of higher prices on consumer goods;

fashion trends;

changes in our merchandise mix;

our ability to efficiently distribute merchandise;

timing and type of, and customer response to, sales events, promotional activities or other advertising;

the effectiveness of our inventory management;

new merchandise introductions; and

our ability to execute our business strategy effectively.

Our comparable store sales results have fluctuated in the past, and we believe such fluctuations may continue. The unpredictability of our comparable store sales may cause our revenue and results of operations to vary from quarter to quarter, and an unanticipated decline in revenues or operating income may cause our stock price to fluctuate significantly.

We depend on our key suppliers for merchandise and advertising support and the loss of key suppliers could adversely affect our business. Our business depends upon our ability to purchase fashionable, name brand and other merchandise at competitive prices from our suppliers. In fiscal 2012, two branded suppliers, Nike USA, Inc. and Skechers USA, Inc., collectively accounted for over 37% of our net sales. Nike USA, Inc. accounted for over 27% of our net sales and Skechers USA, Inc. accounted for approximately 10%. Name brand suppliers also provide us with cooperative advertising and visual merchandising funds. A loss of any of our key suppliers in certain product categories or our inability to obtain name brand or other merchandise from suppliers at competitive prices could have a material adverse effect on our business. As is common in the industry, we do not have any long-term contracts with our suppliers.

An increase in the cost or a disruption in the flow of imported goods may decrease our sales and profits. We rely on imported goods to sell in our stores. Substantially all of the footwear product we sell is manufactured overseas, including the merchandise we import directly from overseas manufacturers and agents and the merchandise we purchase from domestic vendors. The primary footwear manufacturers are located in China, Brazil, Europe and East Asia. A disruption in the flow of imported merchandise or an increase in the cost of those goods may decrease our sales and profits. In addition, we do not control our vendors or their labor and business practices. The violation of labor or other laws by one of our vendors could have an adverse effect on our business.

If imported merchandise becomes more expensive or unavailable, the transition to alternative sources may not occur in time to meet our demands. Products from alternative sources may be of lesser quality and more expensive than those we currently import. Other risks associated with our use of imported goods include:

disruptions in the flow of imported goods because of factors such as electricity or raw material shortages, work stoppages, strikes, political unrest and natural disasters;

problems with oceanic shipping, including shipping container shortages and piracy;

economic crises and international disputes;

currency exchange rate fluctuations;

increases in the cost of purchasing or shipping foreign merchandise resulting from the failure to maintain normal trade relations with source countries;

import duties, import quotas and other trade sanctions;

increases in shipping rates imposed by the trans-Pacific shipping cartel; and

the impact of regulatory changes in the United States and the countries where our manufacturers are located, including but not limited to requirements relating to shipping security, product safety and testing and environmental requirements.

We may not be able to successfully execute our growth strategy, which could have a material adverse effect on our business, financial condition and results of operations. We intend to open new stores as a part of our growth strategy. We may not be able to open all of the new stores contemplated by our growth strategy and the new stores that we open may not be as profitable as existing stores.

The complexity of our operations and management responsibilities will increase as we grow. Our growth strategy requires that we continue to expand and improve our operating and financial systems and to expand, train and manage our employee base. In addition, as we open new stores, we may be unable to hire a sufficient number of qualified store personnel or successfully integrate the new stores into our business.

The success of our growth strategy will depend on a number of other factors, many of which are out of our control, including, among other things:

our ability to locate suitable store sites and negotiate store leases (for new stores and renewals) on favorable terms;

the acceptance of the Shoe Carnival concept in new markets;

our ability to provide adequate distribution to support growth;

our ability to source sufficient levels of inventory to meet the needs of new stores;

particularly in new markets, our ability to open a sufficient number of new stores to provide the critical mass needed for efficient advertising and effective name recognition;

the availability of financing for capital expenditures and working capital requirements;

our ability to improve costs and timing associated with opening new stores; and

the impact of new stores on sales or profitability of existing stores in the same market.

Due to the risks involved, we may be unable to open new stores at the rates expected. If we fail to successfully implement our growth strategy, it could have a material adverse effect on our business, financial condition or results of operations.

Various risks associated with our e-commerce business may adversely affect our business and results of operations. We launched our e-commerce business during the third quarter of 2011, selling shoes and related accessories through our website at www.shoecarnival.com. Although our e-commerce operations are not at this time material in relation to our total sales, we anticipate that the percentage of our sales through our e-commerce site will grow and thus the risks associated with these operations could have an impact on our overall operations. Our e-commerce operations are subject to numerous risks, including unanticipated operating problems, reliance on third party computer hardware and software providers and our third party fulfillment agent, and the need to invest in additional computer systems. Any significant interruptions in the operations of these third party providers and fulfillment agent, over which we have no control, could have a material adverse effect on our e-commerce business. Our e-commerce operations also involve other risks that could have an impact on our results of operations including hiring, retaining and training personnel to conduct our e-commerce operations, diversion of sales from our stores, our ability to manage any upgrades or other technological changes, exposure to potential liability for online content, risks related to the failure of the computer systems that operate our e-commerce site and its related support systems, including computer viruses, telecommunication failures and electronic break-ins and similar disruptions, and security risks related to our electronic processing and transmission of confidential customer information. There can be no assurance that our e-commerce operations will achieve growing sales and profitability.

We would be adversely affected if our distribution or information technology operations were disrupted. We currently operate a single, 410,000 square foot distribution center in Evansville, Indiana. Virtually all merchandise received by our stores and our third party fulfillment agent for our e-commerce orders is and will be shipped through our distribution center. Our corporate computer network is essential to our distribution process. If our distribution center is shut down for any reason, such as a natural disaster, power outage or terrorist attack, or if our information technology systems do not operate effectively, or if we are the target of attacks or breaches, we could incur significantly higher costs and longer lead times associated with distributing our products to our stores. Our insurance only covers costs relating to specified, limited matters such as a shutdown due to fire and windstorms, but does not cover other events such as acts of war, terrorist attacks or cyber security incidents. Even in the event of a shutdown due to covered matters, we cannot assure you that our insurance will be sufficient, or that the insurance proceeds will be paid to us in a timely fashion. Shutdowns or information technology disruptions could have an adverse effect on our operating and financial performance.

In addition, our stores and our e-commerce site process debit and credit card transactions. We believe we have established appropriate controls to protect our customers’ personal confidential information gathered when a debit or credit card is utilized. However, in the event that such confidential information is misused or obtained by an unauthorized third party or we experience a similar cyber security incident, we could be subject to negative publicity and could be exposed to the risk of litigation that could adversely affect our business and reputation, could result in significant costs, fines, litigation or regulatory action against us and could otherwise have a material adverse effect on our financial condition or results of operations.

We will require significant funds to implement our growth strategy and meet our other liquidity needs. We cannot assure you that we will continue to generate sufficient cash flow from operations or obtain sufficient borrowings under our existing credit agreement to finance our growth strategy and meet our other liquidity needs. In fiscal 2013, capital expenditures are expected to range from $29 million to $30 million. Our actual costs may be greater than anticipated. We also require working capital to support inventory for our existing stores. Failure to generate or raise sufficient funds may require us to modify, delay or abandon some of our future growth or expenditure plans. In addition, our results could be adversely affected if we borrow funds and interest rates materially increase from present levels.

If our long-lived assets become impaired, we may need to record significant non-cash impairment charges. Periodically, we review our long-lived assets for impairment whenever economic events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Significant negative industry or general economic trends, disruptions to our business and unexpected significant changes or planned changes in our use of the assets (such as store relocations or closures) may result in impairment charges. Any such impairment charges, if significant, would adversely impact our financial position and results of operations.

Our failure to manage key executive succession and retention and to continue to attract qualified personnel could adversely affect our business. Our success depends to a large extent on the continued service of our executive management team. Our business would be adversely affected if we fail to adequately plan for the succession and retention of our executive management team. While we have succession plans in place for members of our executive management team, and continue to review and update those plans, and we have employment agreements with certain key executive officers, these plans and agreements do not guarantee that the services of our executive officers will continue to be available to us or that we will be able to find suitable management personnel to replace departing executives on a timely basis. Furthermore, our strategy requires us to continue to train, motivate and manage our employees and to attract, motivate and retain additional qualified managerial and merchandising personnel. Competition for these types of personnel is intense, and we cannot assure you that we will be successful in attracting, assimilating and retaining the personnel required to grow and operate our business profitably.

Failure to maintain effective internal control over financial reporting could result in a loss of investor confidence in our financial reports and have a material adverse effect on our stock price. We must continue to document, test and evaluate our internal control over financial reporting in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, which requires annual reports by management regarding the effectiveness of our internal control over financial reporting and a report by our independent registered public accounting firm attesting to the effectiveness of our internal control over financial reporting. We have expended, and expect that we will continue to expend, significant management time and resources documenting and testing our internal control over financial reporting. If we conclude in future periods that our internal control over financial reporting is not effective, it could result in lost investor confidence in the accuracy, reliability and completeness of our financial reports. Any such events could have a material adverse effect on our stock price.

Our quarterly operating results will fluctuate due to seasonality and other factors. Our quarterly results of operations have fluctuated in the past and can be expected to continue to fluctuate in the future. Our quarterly results of operations are affected by a variety of factors, including:

fashion trends;

calendar shifts of holiday or seasonal periods;

the effectiveness of our inventory management;

weather conditions;

timing of opening of new stores;

changes in general economic conditions and consumer spending patterns; and

actions of competitors or co-tenants.

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 impact our profitability. Our operating results depend significantly upon the sales generated during these periods.

We also increase our inventory levels to offer styles particularly suited for the relevant season, such as sandals in the early summer season and boots during the winter season. If the weather conditions for a particular season vary significantly from those typical for such season, such as an unusually cold early summer or an unusually warm winter, consumer demand for the seasonally appropriate merchandise that we have available in our stores could be adversely affected and negatively impact net sales and margins. Lower demand for seasonally appropriate merchandise may leave us with an excess inventory of our seasonally appropriate products, forcing us to sell these products at significantly discounted prices and adversely affecting our net sales margins and operating cash flow. Conversely, if weather conditions permit us to sell our seasonal product early in the season, this may reduce inventory levels needed to meet our customers’ needs later in that same season. Consequently, our results of operations are highly dependent on somewhat predictable weather conditions and our ability to react to changes in weather conditions. If our future quarterly results fail to meet the expectations of research analysts, then the market price of our common stock could decline substantially.

Our stock price may be volatile and could decline substantially. The stock market has, from time to time, experienced extreme price and volume fluctuations. Many factors may cause the market price for our common stock to decline, including:

operating results failing to meet the expectations of securities analysts or investors in any quarter;

downward revisions in securities analysts’ estimates;

material announcements by us or our competitors; and

the other risk factors cited in this annual report.

In the past, companies that have experienced volatility in the market price of their stock have been the subject of securities class action litigation. If we become involved in a securities class action litigation in the future, it could result in substantial costs and diversion of management attention and resources, thus harming our business.

We are controlled by our principal shareholder. J. Wayne Weaver, our Chairman of the Board of Directors and principal shareholder, and his spouse together own approximately 24.6% of our outstanding common stock. Accordingly, Mr. Weaver is able to exert substantial influence over our management and operations. In addition, his interests may differ from or be opposed to the interests of our other shareholders, and his control may have the effect of delaying or preventing a change in control that may be favored by other shareholders.

Provisions of our organizational documents and Indiana law might deter acquisition bids for us. Our Restated Articles of Incorporation and Indiana corporate laws contain provisions that may discourage other persons from attempting to acquire control of us, including, without limitation, a Board of Directors that has staggered terms for its members, supermajority voting provisions, restrictions on the ability of shareholders to call a special meeting of shareholders and procedural requirements in connection with shareholder proposals or director nominations. The Board of Directors has the authority to issue preferred stock in one or more series without the approval of the holders of our common stock. Further, Indiana corporate law contains business combination provisions that, in general, prohibit for five years any business combination with a beneficial owner of 10% or more of our common stock unless the holder’s acquisition of the stock was approved in advance by our Board of Directors. Indiana corporate law also contains control share acquisition provisions that limit the ability of certain shareholders to vote their shares unless their control share acquisition is approved. In certain circumstances, the fact that corporate devices are in place that inhibit or discourage takeover attempts could reduce the market value of our common stock.

ITEM 1B. Unresolved staff comments

None.

ITEM 2. PROPERTIES

We lease all existing stores and intend to lease all future stores. Approximately 99% of the leases for our existing stores provide for fixed minimum rentals and approximately 60% provide for contingent rental payments based upon various specified percentages of sales above minimum levels. Certain leases also contain escalation clauses for increases in minimum rentals, operating costs and taxes.

The following table identifies the number of our stores in each state and Puerto Rico as of February 2, 2013:

State/Territory		State/Territory
Alabama	11	Montana	2
Arkansas	9	North Carolina	18
Arizona	4	North Dakota	2
Colorado	3	Nebraska	1
Florida	23	Ohio	19
Georgia	15	Oklahoma	7
Idaho	5	Pennsylvania	9
Iowa	7	Puerto Rico	4
Illinois	26	South Carolina	12
Indiana	22	South Dakota	2
Kansas	3	Tennessee	18
Kentucky	12	Texas	46
Louisiana	12	Utah	9
Michigan	5	Virginia	9
Missouri	21	Wisconsin	2
Mississippi	7	West Virginia	5
		Wyoming	1
		Total Stores	351

In February 2006, we entered into an operating lease with an independent third party to lease our 410,000 square foot distribution center located in Evansville, Indiana. The lease has an initial term of 15 years, commencing on December 1, 2006. We have the right to extend the initial lease term for up to three additional periods of five years each, and to expand the facility by up to 200,000 square feet.

In June 2006, we entered into an operating lease with an independent third party to lease our corporate headquarters for an initial term of 15 years, commencing on June 1, 2007. We have the right to extend the initial lease term for up to three additional periods of five years each, and to expand the facility by up to 30,000 square feet.

For additional information with respect to our properties, see ITEM 1. BUSINESS – “Growth Strategy” and “Distribution” as well as PART II, ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS – “Executive Summary” of this report.

ITEM 3. LEGAL PROCEEDINGS

We are involved in various legal proceedings incidental to the conduct of our business. While the outcome of any legal proceeding is uncertain, we do not currently expect that any such proceedings will have a material effect on our financial position or results of operations.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

PART II

ITEM 5.

MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information and Holders

Our common stock has been quoted on The NASDAQ Stock Market, LLC under the trading symbol “SCVL” since March 16, 1993.

The quarterly intraday high and low trading prices, in addition to cash dividends, were as follows:

	High		Low		Dividends Paid

Fiscal 2012

First Quarter	$	22.61	$	16.40	$	0.00
Second Quarter		23.58		19.05		0.05
Third Quarter		24.66		20.80		0.05
Fourth Quarter		23.83		18.80		1.05

Fiscal 2011

First Quarter	$	19.65	$	16.00	$	0.00
Second Quarter		22.70		16.24		0.00
Third Quarter		21.83		14.00		0.00
Fourth Quarter		18.66		12.79		0.00

As of April 1, 2013, there were approximately 194 holders of record of our common stock.

No unregistered equity securities were sold by us during fiscal 2012.

On March 23, 2012, our Board of Directors authorized a three-for-two stock split of the shares of our common stock, which was effected in the form of a stock dividend. The stock split entitled each shareholder of record at the close of business on April 13, 2012 to receive one additional share of common stock for every two shares of common stock owned as of that date, and was paid on April 27, 2012. Upon the completion of the stock split, our outstanding shares increased from approximately 13.6 million shares to approximately 20.4 million shares. All share and per share amounts in this Annual Report on Form 10-K give effect to the stock split and have been adjusted retroactively for all periods presented.

Cash Dividends

Our Board of Directors approved the payment of our first-ever quarterly cash dividend to our shareholders during the second quarter of fiscal 2012. The initial dividend was followed by the approval and payment of two additional quarterly dividends during fiscal 2012, each in the amount of $0.05 per share of common stock. Additionally, our Board of Directors approved the payment of a special cash dividend of $1.00 per share of common stock during December 2012. In total during fiscal 2012, we returned $23.5 million in cash to our shareholders through our quarterly and special cash dividends.

On March 27, 2013, the Board of Directors approved the payment of a cash dividend to our shareholders in the first quarter of fiscal 2013. The quarterly cash dividend of $0.06 per share will be paid on April 26, 2013 to shareholders of record as of the close of business on April 12, 2013.

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 permits the payment of dividends as long as the dividends distributed do not exceed 30% of our consolidated net income for the preceding fiscal year. The lenders under our credit agreement consented to the payment of the special cash dividend in December 2012, which was in excess of the amount of dividends otherwise permitted to be made under our credit agreement.

Issuer Purchases of Equity Securities

Throughout fiscal 2012, we issued treasury shares to employees for the exercise of stock options and for the issuance of restricted stock awards. We also repurchased 2,015 shares of common stock as a result of our withholding shares or allowing our employees to deliver shares to us to cover the income taxes resulting from the vesting of certain restricted stock awards. It is our intention to continue these practices as they relate to the issuance of treasury shares.

On August 23, 2010, our Board of Directors authorized a $25 million share repurchase program, which was to terminate upon the earlier of the repurchase of the maximum amount or December 31, 2011. Since then, our Board of Directors has extended the date of termination to December 31, 2013. The purchases may be made in the open market or through privately negotiated transactions from time-to-time and in accordance with applicable laws, rules and regulations. The 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. As required by our credit agreement, consent was obtained from the Agent and the Majority Banks, each as defined in the credit agreement. As of February 2, 2013, approximately 220,000 shares had been repurchased at an aggregate cost of $4.7 million.

The following table summarizes repurchase activity during the fourth quarter of fiscal 2012:

Issuer Purchases of Equity Securities

					Total Number		Approximate
					Of Shares		Dollar Value
					Purchased		of Shares
					as Part		that May Yet
	Total Number		Average		of Publicly		Be Purchased
	of Shares		Price Paid		Announced		Under
Period	Purchased		per Share		Programs ⁽²⁾		Programs

October 28, 2012 to November 24, 2012		27,000	$	20.62		27,000	$	22,584,000
November 25, 2012 to December 29, 2012		111,300	$	20.29		111,300	$	20,325,000
December 30, 2012 to February 2, 2013 ⁽¹⁾		1,229	$	20.55		0	$	20,325,000
		139,529				138,300

(1)

Total number of shares purchased represents shares delivered to or withheld by us in connection with employee payroll tax withholding upon the vesting of certain restricted stock awards.

(2)

Securities Authorized for Issuance Under Equity Compensation Plans

The information required by this Item concerning securities authorized for issuance under our equity plans has been incorporated by reference into PART III, ITEM 12 of this report.

ITEM 6. SELECTED FINANCIAL DATA

The following selected financial data should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations as contained in PART II, ITEM 7 along with our consolidated financial statements and notes to those statements included in PART II, ITEM 8 of this report.

(In thousands, except per share and operating data)

Fiscal years ⁽¹⁾	2012			2011			2010			2009			2008
Income Statement Data:
Net Sales	$	854,998		$	762,534		$	739,189		$	682,422		$	647,572
Cost of sales (including buying, distribution and occupancy costs)		597,521			537,681			517,650			488,816			473,244
Gross Profit		257,447			224,853			221,539			193,606			174,328
Selling, general and administrative expenses		208,983			182,716			179,154			168,476			165,953
Operating income		48,494			42,137			42,385			25,130			8,375
Interest income		(32	)		(79	)		(165	)		(39	)		(148	)
Interest expense		273			266			258			174			153
Income before income taxes		48,253			41,950			42,292			24,995			8,370
Income tax expense		18,915			15,568			15,471			9,829			3,051
Net income	$	29,338		$	26,382		$	26,821		$	15,166		$	5,319

Net income per share:
Basic	$	1.44		$	1.32		$	1.41		$	0.81		$	0.29
Diluted	$	1.43		$	1.31		$	1.37		$	0.80		$	0.28

Weighted average shares:
Basic		19,911			19,524			19,085			18,770			18,609
Diluted		19,972			19,694			19,587			18,990			18,738

Dividends declared per share	$	1.15		$	0.00		$	0.00		$	0.00		$	0.00

Selected Operating Data:
Stores open at end of year		351			327			314			311			304
Square footage of store space at year end (000’s)		3,823			3,554			3,390			3,372			3,335
Average sales per store (000’s) ⁽²⁾	$	2,478		$	2,390		$	2,384		$	2,219		$	2,206
Average sales per square foot ⁽²⁾	$	227		$	221		$	221		$	204		$	198
Comparable store sales ⁽²⁾⁽³⁾		4.5	%		0.7	%		8.2	%		3.5	%		(4.6	)%
Balance Sheet Data:
Cash and cash equivalents	$	45,756		$	70,602		$	60,193		$	44,168		$	24,817
Total assets	$	407,196		$	386,562		$	345,145		$	311,641		$	293,074
Long-term debt	$	0		$	0		$	0		$	0		$	0
Total shareholders’ equity	$	292,368		$	283,684		$	254,343		$	221,829		$	204,636

(1)

Our fiscal year is a 52/53 week year ending on the Saturday closest to January 31. Unless otherwise stated, references to years 2012, 2011, 2010, 2009, and 2008 relate respectively to the fiscal years ended February 2, 2013, January 28, 2012, January 29, 2011, January 30, 2010, and January 31, 2009. Fiscal year 2012 consisted of 53 weeks and the other fiscal years consisted of 52 weeks.

(2)

Selected Operating Data for fiscal 2012 has been adjusted to a comparable 52-week period ended January 26, 2013.

(3)

Comparable store sales for the periods indicated include stores that have been open for 13 full months 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 nor are our e-commerce sales. Our e-commerce sales were included in comparable sales starting with the fourth quarter of fiscal 2012.

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition and results of operations should be read together with our consolidated financial statements and notes to those statements included in PART II, ITEM 8 of this report.

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 more than 350 store locations or online at shoecarnival.com. Our stores combine competitive pricing with a highly promotional, in-store marketing effort that encourages customer participation and creates a fun and exciting shopping experience. We believe this highly 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. The same excitement and spontaneity is reflected in our e-commerce site through special promotions and limited time sales, along with relevant fashion stories featured on our home page.

Our fiscal year is a 52/53 week year ending on the Saturday closest to January 31. Unless otherwise stated, references to years 2012, 2011 and 2010 relate respectively to the fiscal years ended February 2, 2013, January 28, 2012, and January 29, 2011. Fiscal year 2012 consisted of 53 weeks and the other fiscal years consisted of 52 weeks.

Executive Summary

Fiscal 2012

We continued to execute on two strategic initiatives during fiscal 2012, which included capitalizing on the fashion driving consumer footwear demand and aggressively opening stores in new and existing markets.

Unseasonably warm weather patterns early in our first quarter of fiscal 2012 served as a catalyst for early sales of sandalized footwear and athletic shoes for all ages. Coupling this with the traditional period for our customer to receive their income tax refund proved instrumental in driving strong comparable store sales growth for February and provided momentum to drive athletic business throughout the first quarter. As we progressed through spring and into the back-to-school season, sales and earnings continued to be strong, with sales gains on a comparable store basis being driven by an increase in the average selling price of our footwear. Consumer demand began to temper early in the fourth quarter as our moderate-income customer was impacted by the rising economic uncertainties and unfavorable weather patterns for the purchase of seasonal footwear.

During fiscal 2012, we opened 31 new stores, including stores in the Dallas/Fort Worth Metroplex and Puerto Rico, which were new major markets for us. Pre-opening expenses, including distribution, occupancy and selling expenses, were $4.1 million for fiscal 2012, a $2.3 million increase over fiscal 2011 during which we opened 17 new stores.

Despite the challenges presented by the changes in consumer demand late in fiscal 2012 and a significant increase in new store openings, we were able to manage our inventories and control our costs such that operating income, as a percentage of sales, improved by 0.2% to 5.7% for fiscal 2012, as compared to the prior year. We achieved record earnings per diluted share of $1.43 in fiscal 2012, representing a 9.2% increase over earnings per diluted share of $1.31 achieved in fiscal 2011.

Fiscal 2012 was also a period of senior leadership transition for us. Mark Lemond retired at the end of October 2012 after serving as our President and Chief Executive Officer for the last 16 years. Cliff Sifford, who was then serving as our Executive Vice President – General Merchandise Manager, was appointed as President, Chief Executive Officer and Chief Merchandising Officer.

Additionally for fiscal 2012:

Net sales increased 12.1% over fiscal 2011 to $855.0 million. Similar to other retailers, we follow the retail 4-5-4 reporting calendar, which included an extra week in the fourth quarter of fiscal 2012 (the 53 ^rd week). Our sales for the 53 ^rd week approximated $10.7 million. Comparable store sales, which were reported on a 52-week comparable sales basis, increased 4.5%.

Inventories at February 2, 2013 increased $34.6 million compared to the end of the prior year. Approximately one-half of this increase was attributable to our net store growth with the remaining increase primarily due to increases in the average cost of footwear.

During the first quarter of fiscal 2012, our Board of Directors authorized a three-for-two stock split of the shares of our common stock, which was effected in the form of a stock dividend on April 27, 2012. Upon the completion of the stock split, our outstanding shares increased from approximately 13.6 million shares to approximately 20.4 million shares.

Our Board of Directors approved the payment of our first-ever quarterly cash dividend to our shareholders during the second quarter of fiscal 2012. The initial dividend was followed by the approval and payment of two additional quarterly dividends during fiscal 2012, each in the amount of $0.05 per share. Additionally, our Board of Directors approved the payment of a special cash dividend of $1.00 per share during December 2012. In total during fiscal 2012, we returned $23.5 million to our shareholders through our quarterly and special cash dividends.

During fiscal 2012, we returned additional capital to our shareholders through the repurchase of approximately 220,000 shares of our common stock at an average price of $21.29, or an aggregate cost of $4.7 million.

Fiscal 2013

In fiscal 2013, we remain focused on growing our business both through store expansion and enhancing the Shoe Carnival brand. We expect to open between 30 to 35 new stores and close five to seven stores. The majority of our new store locations will serve to fill in certain under-penetrated markets with additional stores, thereby increasing the performance of the overall market. The balance of our new store openings will be in new smaller markets that we can fully penetrate with one or two stores.

Our fiscal 2013 plans also call for continued reinvestment in our existing brick-and-mortar store base, focusing on in-store graphics, including signage updates to focal walls and end-caps. Dependent upon successful lease negotiations, we plan to remodel approximately 30 stores.

In the second half of fiscal 2013, we will begin testing the addition of certain women’s non-athletic better brands in approximately 20% of our stores. Our consumer research indicates that this customer is coming into our store and purchasing footwear for her husband and children, but purchasing this better product elsewhere. Our goal is to capture this customer by filling this product void.

We are also introducing a new television campaign in fiscal 2013, which is designed to better communicate to our customers, especially in new markets, what makes shopping at Shoe Carnival a unique and differentiated shopping experience. While this television campaign is expected to help us attract new customers, we believe it will also keep the attention of our existing customers.

Critical Accounting Policies

It is necessary for us to include certain judgments in our reported financial results. These judgments involve estimates based in part on our historical experience and incorporate 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. The accounting policies that require the more significant judgments are included below.

Merchandise Inventories – Our merchandise inventories are stated at the lower of cost or market (LCM) as of the balance sheet date and consist primarily of dress, casual and athletic footwear for men, women and children. The cost of our merchandise is determined using the first-in, first-out valuation method (FIFO). For determining market value, we estimate the future demand and related sale price of merchandise in our inventory. The stated value of merchandise inventories contained on our consolidated balance sheets also includes freight, certain capitalized overhead costs and reserves.

We review our inventory at the end of each quarter to determine if it is properly stated at LCM. Factors considered include, among others, recent sale prices, the length of time merchandise has been held in inventory, quantities of the various styles held in inventory, seasonality of the merchandise, expected consideration to be received from our vendors and current and expected future sales trends. We reduce the value of our inventory to its estimated net realizable value where cost exceeds the estimated future selling price. Merchandise inventories as of February 2, 2013 totaled $272.3 million, representing approximately 67% of total assets. Merchandise inventories as of January 28, 2012 totaled $237.7 million, representing approximately 62% of total assets. Given the significance of inventories to our consolidated financial statements, the determination of net realizable value is considered to be a critical accounting estimate. Material changes in the factors noted above could have a significant impact on the actual net realizable value of our inventory and our reported operating results.

Valuation of Long-Lived Assets – Long-lived assets, such as property and equipment subject to depreciation, are evaluated for impairment on a periodic basis if events or circumstances indicate the carrying value may not be recoverable. This evaluation includes performing an analysis of the estimated undiscounted future cash flows of the long-lived assets. Assets are grouped and the evaluation performed at the lowest level for which there are identifiable cash flows, which is generally at a store level.

If the estimated future cash flows for a store are determined to be less than the carrying value of the store’s assets, an impairment loss is recorded for the difference between estimated fair value and carrying value. We estimate the fair value of our long-lived assets using store specific cash flow assumptions discounted by a rate commensurate with the risk involved with such assets while incorporating marketplace assumptions. Our assumptions and estimates used in the evaluation of impairment, including current and future economic trends for stores, are subject to a high degree of judgment. Assets subject to impairment are adjusted to estimated fair value and, if applicable, an impairment loss is recorded in selling, general and administrative expenses. Our long-lived assets as of February 2, 2013 totaled $77.4 million, or 19% of total assets, and as of January 28, 2012 totaled $69.2 million, or 18% of total assets. Our evaluations performed during fiscal 2012 and fiscal 2011 resulted in non-cash impairment charges of $425,000 and $338,000, respectively. If actual operating results or market conditions differ from those anticipated, the carrying value of certain of our assets may prove unrecoverable and we may incur additional impairment charges in the future.

Insurance Reserves – We self-insure a significant portion of our workers’ compensation, general liability and employee health care costs and also maintain insurance in each area of risk protecting us from individual and aggregate losses over specified dollar values. We review the liability reserved for our self-insured portions on a quarterly basis, taking into consideration a number of factors, including historical claims experience, severity factors, statistical trends and, in certain instances, valuation assistance provided by independent third parties. Our self-insurance reserves include estimates of both claims filed, carried at their expected ultimate settlement value, and claims incurred but not yet reported. As of February 2, 2013 and January 28, 2012, our self-insurance reserves totaled $2.5 million and $2.4 million, respectively. While we believe that the recorded amounts are adequate, there can be no assurance that changes to management’s estimates will not occur due to limitations inherent in the estimating process. If actual results are not consistent with our estimates or assumptions, we may be exposed to future losses or gains that could be material.

Income Taxes – As part of the process of preparing our consolidated financial statements we are required to estimate our current and future income taxes for each tax jurisdiction in which we operate. Significant judgment is required in determining our annual tax expense and evaluating our tax positions. As a part of this process deferred tax assets and liabilities are recognized based on the difference between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Our temporary timing differences relate primarily to inventory, depreciation, accrued expenses, deferred lease incentives and stock-based compensation. Deferred tax assets and liabilities are measured using the tax rates enacted and expected to be in effect in the years when those temporary differences are expected to reverse.

We are also required to make many subjective assumptions and judgments regarding our income tax exposures and account for uncertain tax positions associated with our income tax filings. We must presume that taxing authorities will examine all uncertain tax positions and that they have full knowledge of all relevant information. However, interpretations of guidance surrounding income tax laws and regulations are often complex, ambiguous and frequently change over time and a number of years may elapse before a particular issue is resolved. As such, changes in our subjective assumptions and judgments can materially affect amounts recognized in our consolidated financial statements. Although we believe we have adequately provided for all uncertain tax positions, tax authorities could assess tax liabilities greater or less than our accrued positions for open tax periods.

Results of Operations

The following table sets forth our results of operations expressed as a percentage of net sales for the following fiscal years:

	2012			2011			2010
Net Sales		100.0	%		100.0	%		100.0	%
Cost of sales (including buying, distribution, and occupancy costs)		69.9			70.5			70.0
Gross profit		30.1			29.5			30.0
Selling, general and administrative expenses		24.4			24.0			24.3
Operating income		5.7			5.5			5.7
Interest income		(0.0	)		(0.0	)		(0.0	)
Interest expense		0.0			0.0			0.0
Income before income taxes		5.7			5.5			5.7
Income tax expense		2.3			2.0			2.1
Net income		3.4	%		3.5	%		3.6	%

In the regular course of business, we offer our customers sales incentives including coupons, discounts, and free merchandise. Sales are recorded net of such incentives and returns and allowances. If an incentive involves free merchandise, that merchandise is recorded as a zero sale and the cost is included in cost of sales. Comparable store sales for the periods indicated below include stores that have been open for 13 full months 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 nor are our e-commerce sales. Our e-commerce sales were included in comparable sales starting with the fourth quarter of fiscal 2012.

2012 Compared to 2011

Net Sales

Net sales increased $92.5 million to $855.0 million for fiscal 2012, a 12.1% increase over net sales for fiscal 2011. Similar to other retailers, we follow the retail 4-5-4 reporting calendar, which included an extra week in the fourth quarter of fiscal 2012 (the 53 ^rd week). Net sales of approximately $10.7 million were recorded for this extra week. Of our $92.5 million increase in net sales, the 48 stores opened since the beginning of fiscal 2011 and our e-commerce operation contributed $59.0 million. Sales increased within our comparable store base by approximately $42.5 million. Comparable store sales for the 52-week period ended January 26, 2013 increased 4.5%, driven by an increase in the average unit selling price of our footwear, which was partially offset by a decline in the number of footwear units sold. These sales increases were partially offset by a decline in sales of $9.1 million from the 11 stores closed since the beginning of fiscal 2011.

Gross Profit

Gross profit increased $32.6 million to $257.5 million in fiscal 2012. The gross profit margin in fiscal 2012 increased to 30.1% from 29.5% in the prior fiscal year. Our merchandise margin increased 0.4% while buying, distribution and occupancy costs, as a percentage of sales, decreased 0.2%. Buying, distribution and occupancy costs increased approximately $8.0 million during fiscal 2012 as compared to the prior fiscal year primarily as a result of the operation of additional store locations. However, our sales gain enabled us to leverage these costs by 0.2% as a percentage of sales.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased $26.3 million in fiscal 2012 to $209.0 million. Significant changes in expense between the comparative periods included the following:

We incurred an additional $17.1 million of expense during fiscal 2012, as compared to the same period last year, in the operation of new stores and our e-commerce initiative. This increase was net of expense reductions for stores that have closed since the beginning of fiscal 2011.

Incentive compensation, inclusive of stock-based compensation, increased $5.2 million in fiscal 2012 as compared to the same period last year primarily due to our improved financial performance.

In connection with his retirement, we paid a one-time retirement and severance payment of $1.4 million to our former President and Chief Executive Officer in October 2012, which was included as incentive compensation in selling, general and administrative expenses. Also included were incentive compensation expense reductions of approximately $154,000 in fiscal 2012 to reflect the forfeiture of certain of his non-vested restricted stock awards.

We experienced a year-over-year increase in self-insured health care costs of $1.8 million in fiscal 2012 as compared to the same period last year. Costs related to our self-insured health care programs are subject to a significant degree of volatility, especially as it relates to the frequency of catastrophic claims. Consequently, we are subject to a risk of material variances between reporting periods.

In fiscal 2012, pre-opening costs included in selling, general and administrative expenses were $2.7 million, or 0.3% as a percentage of sales, as compared to $1.2 million, or 0.2% as a percentage of sales, for fiscal 2011. We opened 31 stores during fiscal 2012 as compared to 17 stores last year. 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.

The portion of store closing costs and non-cash asset impairment charges included in selling, general and administrative expenses for fiscal 2012 was $646,000, or 0.1% as a percentage of sales. These costs related to the closing of seven stores, non-cash asset impairment of certain underperforming stores and acceleration of expenses associated with management’s determination to close certain underperforming stores in future periods. In fiscal 2011 we incurred store closing costs and non-cash asset impairment charges of $554,000, or 0.1% as a percentage of sales. These costs related to the closing of four stores, non-cash asset impairment of certain underperforming stores and acceleration of expenses associated with management’s determination to close certain underperforming stores 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.

Income Taxes

The effective income tax rate for fiscal 2012 was 39.2% as compared to 37.1% for fiscal 2011. 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. Approximately 1.3% of the increase in our effective tax rate between comparative periods was due to the non-deductible portion of compensation attributable to the retirement of our former President and Chief Executive Officer. Our fiscal 2011 effective tax rate included benefits related to the favorable resolution of certain tax positions, which lowered the effective tax rate as compared to other historical periods.

2011 Compared to 2010

Net Sales

Net sales increased $23.3 million to $762.5 million in fiscal 2011, a 3.2% increase over the prior year’s net sales of $739.2 million. Of this increase, $22.5 million was attributable to the sales generated by the 17 new stores we opened during fiscal 2011, our e-commerce business which was launched in the third quarter of fiscal 2011 along with the full year effect of sales generated by the ten stores we opened in fiscal 2010. Our comparable stores sales increased 0.7% for fiscal 2011. These increases in sales were partially offset by a decline in sales of $4.7 million from the 11 stores closed during fiscal 2011 and fiscal 2010.

During fiscal 2011, comparable store sales were negatively impacted by a decline in consumer demand within two key product areas, toning footwear and boots. We were able to mitigate our year over year comparable store sales loss in toning footwear as sales within the balance of the athletic category, particularly performance running, remained strong. However, the unseasonably warm weather that was experienced late in the third quarter and throughout the fourth quarter of fiscal 2011 significantly impacted consumer demand for fall footwear, particularly boots. Consequently, heavy promotional activity, including markdowns, was required during the fourth quarter of fiscal 2011 to effectively sell through this inventory.

Gross Profit

Gross profit increased $3.4 million to $224.9 million in fiscal 2011, a 1.5% increase from gross profit of $221.5 million in fiscal 2010. The gross profit margin for fiscal 2011 decreased to 29.5% from 30.0% in fiscal 2010. Our merchandise margin decreased 0.5% while buying, distribution and occupancy costs, as a percentage of sales, remained unchanged. The decrease in our merchandise margin was primarily the result of the heavy promotional activity that was required during the fourth quarter of fiscal 2011 to effectively sell through our fall footwear, particularly boots.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased $3.5 million in fiscal 2011 to $182.7 million from $179.2 million in fiscal 2010; however, our sales gain enabled us to leverage these costs by 0.3% as a percentage of sales. Significant changes in expense between the comparative periods included the following:

We incurred an additional $7.8 million of incremental expense during fiscal 2011, as compared to the prior year, to support our sales growth, expanded store base and e-commerce initiative. The increase in selling expenses was primarily due to increases in wages and advertising.

During fiscal 2010, we experienced a significant decrease in the average cost of health claims per participant as compared to recent historical periods. Our average claims per participant returned to a more normalized level in fiscal 2011 and, together with a small increase in covered employees, we experienced a year over year increase in self-insured health care costs of $1.7 million. Costs related to our self-insured health care programs are subject to a significant degree of volatility and will continue to carry the risk of material variances between reporting periods.

The increases in selling, general and administration expenses were partially offset by a $6.6 million reduction in incentive compensation for fiscal 2011 as compared to the prior year when record-breaking financial performance drove material increases in performance-based compensation.

Pre-opening costs included in selling, general and administrative expenses were $1.2 million, or 0.2% as a percentage of sales, in fiscal 2011, as compared to $642,000, or 0.1% as a percentage of sales, in fiscal 2010. We opened 17 stores during fiscal 2011 and ten stores in fiscal 2010. Pre-opening costs, such as advertising, payroll and supplies, incurred prior to the opening of a new store are charged in the period 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.

The portion of store closing costs and non-cash asset impairment charges included in selling, general and administrative expenses for fiscal 2011 was $554,000, or 0.1% as a percentage of sales. These costs related to the closing of four stores, non-cash asset impairment of certain underperforming stores and acceleration of expenses associated with management’s determination to close certain underperforming stores in future periods. In fiscal 2010, we incurred store closing costs and non-cash asset impairment charges of $2.0 million, or 0.3% as a percentage of sales. These costs related to the closing of seven stores, non-cash asset impairment of certain underperforming stores and acceleration of expenses associated with management’s determination to close certain underperforming stores 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.

Income Taxes

The effective income tax rate was 37.1% for fiscal 2011 and 36.6% for fiscal 2010. Included in income tax expense for both fiscal years were benefits related to the favorable resolution of certain tax positions, which lowered our effective income tax rate as compared to other historical periods.

Liquidity and Capital Resources

Our sources and uses of cash are summarized as follows:

(In thousands)	2012			2011			2010

Net income plus depreciation and amortization	$	45,293		$	40,832		$	40,556
Deferred income taxes		(3,347	)		3,040			(1,403	)
Lease incentives		7,189			5,903			2,974
Changes in operating assets and liabilities		(27,396	)		(20,891	)		(19,340	)
Other operating activities		4,111			1,991			6,636
Net cash provided by operating activities		25,850			30,875			29,423
Net cash used in investing activities		(25,777	)		(21,155	)		(14,000	)
Net cash (used in) provided by financing activities		(24,919	)		689			602
Net (decrease) increase in cash and cash equivalents	$	(24,846	)	$	10,409		$	16,025

We anticipate that our existing cash and cash flows from operations will be sufficient to fund our planned store expansion along with other capital expenditures, working capital needs, potential dividend payments, potential share repurchases, and various other commitments and obligations, as they arise, for at least the next 12 months.

Cash Flow - Operating Activities

Our net cash provided by operating activities was $25.9 million in fiscal 2012 as compared to $30.9 million in fiscal 2011. These amounts reflect our income from operations adjusted for non-cash items and working capital changes. Working capital increased to $246.0 million at February 2, 2013 from $240.5 million at January 28, 2012. This $5.5 million increase resulted primarily from a $34.6 million increase in inventory to support new stores and planned sales increases, partially offset by $23.5 million in cash dividends paid to our shareholders. The current ratio was 4.0 at February 2, 2013 and 4.2 at January 28, 2012.

Cash Flow - Investing Activities

Our cash outflows for investing activities were primarily for capital expenditures. During fiscal 2012, we expended $26.0 million for the purchase of property and equipment, of which $21.5 million was for construction of new stores, remodeling and relocations. During the fiscal 2011, we expended $21.3 million for the purchase of property and equipment, of which $15.9 million was for construction of new stores, remodeling and relocations and approximately $1.9 million was used in developing our e-commerce platform. The remaining capital expenditures in both periods were for continued investments in technology and normal asset replacement activities.

Cash Flow - Financing Activities

Our cash inflows from financing activities were primarily proceeds from the issuance of shares as a result of stock option exercises. Cash outflows for financing activities were primarily share repurchases and, in fiscal 2012, cash dividend payments. 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 restricted stock awards.

During fiscal 2012, net cash used in financing activities was $24.9 million as compared to net cash provided by financing activities of $689,000 during fiscal 2011. The increase in cash used in financing activities was primarily attributable to the payment of $23.5 million in dividends during fiscal 2012, which included a $1.00 per share special cash dividend declared and paid in December 2012.

Store Openings and Closings – Fiscal 2012

In fiscal 2012, we opened 31 new stores, including stores in the Dallas/Fort Worth Metroplex and Puerto Rico, which were new major markets for us. On a per-store basis, the initial inventory investment for stores opened in the continental United States averaged $630,000, capital expenditures averaged $355,000 and lease incentives received from landlords averaged $170,000. On a per-store basis, the initial inventory investment for our new stores in Puerto Rico averaged $1.1 million, capital expenditures averaged $925,000 and lease incentive received from landlords averaged $305,000.

Pre-opening expenses, including rent, freight, advertising, salaries and supplies, totaled approximately $4.1 million for fiscal 2012, or an average of $133,000 per store. During fiscal 2011, we opened 17 new stores and expended $1.8 million on pre-opening expenses, or an average of $108,000 per store. The increase in the average expenditures per new store was primarily the result of increases in pre-opening freight, onsite training and support and advertising. We closed seven stores during fiscal 2012 and four stores during fiscal 2011.

Capital Expenditures – Fiscal 2013

Capital expenditures are expected to be $28 million to $29 million in fiscal 2013. Approximately $12.5 million of our total capital expenditures are expected to be used for new store construction, $2.5 million will be used for store relocations and $8.3 million will be used to remodel approximately 10% of our existing store base. Lease incentives to be received from landlords are expected to be approximately $8 million to $8.5 million. The remaining capital expenditures are expected to be incurred for various other store improvements, continued investments in technology and normal asset replacement activities. 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. The number of new store openings and relocations will be dependent upon, among other things, the availability of desirable locations, and the negotiation of acceptable lease terms and general economic and business conditions affecting consumer spending in areas we target for expansion.

Store Openings and Closings – Fiscal 2013

Our current store prototype for stores located in the continental United States uses between 8,000 and 12,000 square feet depending upon, among other factors, the location of the store and the population base the store is expected to service. Capital invested in these fiscal 2013 new stores is expected to average approximately $360,000 with landlord incentives averaging $140,000. The average initial inventory investment is expected to range from $425,000 to $575,000 depending on the size and sales expectation of the store and the timing of the new store opening. Our new stores opening in Puerto Rico in fiscal 2013 are expected to be slightly larger with an initial inventory investment of up to $1.0 million. Capital invested in our Puerto Rican stores is expected to average $870,000 with landlord incentives averaging $280,000. During fiscal 2013, we anticipate opening approximately 30 to 35 new stores and relocating seven store locations.

Pre-opening expenses, such as rent, freight, advertising, salaries and supplies, are expected to average approximately $124,000 per store in fiscal 2013. This represents a decrease of $9,000 over our average fiscal 2012 expenditure and is primarily the result of a decrease in the average expenditure on advertising.

During fiscal 2013, we expect to close between five and seven stores. 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 cost incurred in terminating the lease. We will continue to review our annual store growth rate based on our view of the internal and external opportunities and challenges in the marketplace. During fiscal 2013, we expect to incur $170,000 in expense associated with these closings.

Dividends

Share Repurchase Program

Contractual Obligations

Significant contractual obligations as of February 2, 2013 and the fiscal years in which payments are due include:

(In thousands)	Payments Due By Fiscal Year
Contractual Obligations	Total		2013		2014 & 2015		2016 & 2017		2018 and after
Letters of credit	$	4,165	$	4,165	$	-	$	-	$	-
Operating leases		356,940		51,167		89,314		86,771		129,688
Purchase commitments		327,515		326,072		1,224		219		-
Unrecognized tax positions		69		-		-		-		69
Deferred compensation		7,250		857		10		-		6,383
Total contractual obligations	$	695,939	$	382,261	$	90,548	$	86,990	$	136,140

Our unsecured credit agreement provides for up to $50.0 million in cash advances and commercial and standby letters of credit with borrowing limits based on eligible inventory. It contains covenants which stipulate: (1) Total Shareholders’ Equity, adjusted for the effect of any share repurchases, will not fall below that of the prior fiscal year-end; (2) the ratio of funded debt plus rent to EBITDA plus rent will not exceed 2.5 to 1.0; and (3) cash dividends for a fiscal year will not exceed 30% of consolidated net income for the immediately preceding fiscal year. We were in compliance with these covenants as of February 2, 2013. Should a default condition be reported, the lenders may preclude additional borrowings and call all loans and accrued interest at their discretion. There were no borrowings outstanding under the credit facility and letters of credit outstanding were $4.2 million at February 2, 2013. Estimated interest payments on our line of credit are not included in the above table as our line of credit provides for frequent borrowing and/or repayment activities, which does not lend itself to reliable forecasting for disclosure purposes. As of February 2, 2013, $45.8 million was available to us for additional borrowings under the credit facility.

For purposes of our contractual obligations table above, we have assumed that we will make all payments scheduled or reasonably estimated to be made under those obligations that have a determinable expiration date. We have disregarded the possibility that such obligations may be prematurely terminated or extended, whether automatically by the terms of the obligation or by agreement between us and the counterparty, due to the speculative nature of premature termination or extension. Except for operating leases, the balances included in the “2018 and after” column of the contractual obligations table includes amounts where we are not able to reasonably estimate the timing of the potential future payments.

See Note 5 – “Long-Term Debt”, Note 6 – “Leases”, Note 7 – “Income Taxes” and Note 8 – “Employee Benefit Plans” to our Notes to Consolidated Financial Statements contained in PART II, ITEM 8 of this report for a further discussion of our contractual obligations.

Off-Balance Sheet Arrangements

We did not assign any store operating leases to separate third parties during fiscal 2012. We remain liable on two assignments of operating leases covering two former store locations. We believe that the likelihood of material liability being triggered under these leases is remote, and no liability has been accrued for contingent lease obligations in our consolidated financial statements as of February 2, 2013. See Note 6 – “Leases” to our Notes to Consolidated Financial Statements contained in PART II, ITEM 8 of this report for further discussion.

Except for operating leases entered into in the normal course of business, including leases for stores and equipment, we have not entered into any off-balance sheet arrangements during fiscal 2012 or fiscal 2011.

Seasonality

We have three distinct peak selling periods: Easter, back-to-school and Christmas.

New Accounting Pronouncements

Recent accounting pronouncements applicable to our operations are contained in Note 2 – “Summary of Significant Accounting Policies,” contained in the Notes to Consolidated Financial Statements included in PART II, ITEM 8 of this report.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risk in that the interest payable on our credit facility is based on variable interest rates and therefore is affected by changes in market rates. We do not use interest rate derivative instruments to manage exposure to changes in market interest rates. We had no borrowings under our credit facility during fiscal 2012 or fiscal 2011.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required by this item appears beginning on page 31.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

Shoe Carnival, Inc.

Evansville, Indiana

We have audited the accompanying consolidated balance sheets of Shoe Carnival, Inc. and subsidiaries (the “Company”) as of February 2, 2013 and January 28, 2012, and the related consolidated statements of income, shareholders’ equity, and cash flows for the years ended February 2, 2013, January 28, 2012, and January 29, 2011. Our audits also included the financial statement schedule listed in the Index at Item 15. These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on the financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Shoe Carnival, Inc. and subsidiaries as of February 2, 2013 and January 28, 2012, and the results of their operations and their cash flows for the years ended February 2, 2013, January 28, 2012, and January 29, 2011, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of February 2, 2013, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated April 15, 2013 expressed an unqualified opinion on the Company's internal control over financial reporting.

/s/ DELOITTE & TOUCHE LLP

Indianapolis, Indiana

April 15, 2013

Shoe Carnival, Inc.

Consolidated Balance Sheets

(In thousands)

	February 2, 2013			January 28, 2012
Assets
Current Assets:
Cash and cash equivalents	$	45,756		$	70,602
Accounts receivable		2,152			2,621
Merchandise inventories		272,282			237,655
Deferred income taxes		2,914			2,496
Other		4,918			2,887
Total Current Assets		328,022			316,261
Property and equipment – net		77,364			69,232
Deferred income taxes		999			0
Other noncurrent assets		811			1,069
Total Assets	$	407,196		$	386,562

Liabilities and Shareholders’ Equity
Current Liabilities:
Accounts payable	$	65,026		$	61,238
Accrued and other liabilities		16,995			14,522
Total Current Liabilities		82,021			75,760
Deferred lease incentives		18,426			12,964
Accrued rent		7,475			6,029
Deferred income taxes		0			1,930
Deferred compensation		6,412			6,054
Other		494			141
Total Liabilities		114,828			102,878

Shareholders’ Equity:
Common stock, $.01 par value, 50,000 shares authorized, 20,465 and 20,478 shares issued, respectively		205			205
Additional paid-in capital		66,533			67,574
Retained earnings		228,113			222,235
Treasury stock, at cost, 124 and 391 shares, respectively		(2,483	)		(6,330	)
Total Shareholders’ Equity		292,368			283,684
Total Liabilities and Shareholders’ Equity	$	407,196		$	386,562

See notes to consolidated financial statements.

Shoe Carnival, Inc.

Consolidated Statements of Income

(In thousands, except per share data)

	February 2, 2013			January 28, 2012			January 29, 2011

Net sales	$	854,998		$	762,534		$	739,189
Cost of sales (including buying, distribution and occupancy costs)		597,521			537,681			517,650

Gross profit		257,477			224,853			221,539
Selling, general and administrative expenses		208,983			182,716			179,154

Operating income		48,494			42,137			42,385
Interest income		(32	)		(79	)		(165	)
Interest expense		273			266			258

Income before income taxes		48,253			41,950			42,292
Income tax expense		18,915			15,568			15,471

Net income	$	29,338		$	26,382		$	26,821

Net income per share:
Basic	$	1.44		$	1.32		$	1.41
Diluted	$	1.43		$	1.31		$	1.37

Weighted average shares:
Basic		19,911			19,524			19,085
Diluted		19,972			19,694			19,587

Cash dividends declared per share	$	1.15		$	0.00		$	0.00

See notes to consolidated financial statements.

Shoe Carnival, Inc.

Consolidated Statements of Shareholders’ Equity

(In thousands)

	Common Stock								Additional Paid-In			Retained			Treasury
	Issued			Treasury			Amount		Capital			Earnings			Stock			Total
Balance at January 30, 2010		20,483			(932	)	$	205	$	66,783		$	169,032		$	(14,191	)	$	221,829
Stock option exercises					75					(568	)					1,146			578
Stock-based compensation income tax benefit										626									626
Employee stock purchase plan purchases					12					(30	)					190			160
Restricted stock awards					199					(3,031	)					3,031			0
Shares surrendered by employees to pay taxes on restricted stock					(39	)										(656	)		(656	)
Stock-based compensation expense										4,985									4,985
Net income													26,821						26,821

Balance at January 29, 2011		20,483			(685	)		205		68,765			195,853			(10,480	)		254,343
Stock option exercises					243					(1,449	)					3,913			2,464
Stock-based compensation income tax benefit										1,586									1,586
Employee stock purchase plan purchases					12					(12	)					202			190
Restricted stock awards		(5	)		212					(3,254	)					3,254			0
Shares surrendered by employees to pay taxes on restricted stock					(173	)										(3,219	)		(3,219	)
Stock-based compensation expense										1,938									1,938
Net income													26,382						26,382

Balance at January 28, 2012		20,478			(391	)		205		67,574			222,235			(6,330	)		283,684
Stock option exercises					233					(1,598	)					3,817			2,219
Dividends paid ($1.15 per share)													(23,460	)					(23,460	)
Stock-based compensation income tax benefit										1,402									1,402
Employee stock purchase plan purchases					11					16						185			201
Restricted stock awards		(13	)		244					(4,561	)					4,561			0
Shares surrendered by employees to pay taxes on restricted stock					(2	)										(41	)		(41	)
Purchase of common stock for treasury					(219	)										(4,675	)		(4,675	)
Stock-based compensation expense										3,700									3,700
Net income													29,338						29,338
Balance at February 2, 2013		20,465			(124	)	$	205	$	66,533		$	228,113		$	(2,483	)	$	292,368

See notes to consolidated financial statements.

Shoe Carnival, Inc.

Consolidated Statements of Cash Flows

(In thousands)

	February 2, 2013			January 28, 2012			January 29, 2011

Cash Flows From Operating Activities
Net income	$	29,338		$	26,382		$	26,821
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		15,955			14,450			13,735
Stock-based compensation		4,049			2,135			5,468
Loss on retirement and impairment of assets		628			666			1,995
Deferred income taxes		(3,347	)		3,040			(1,403	)
Lease incentives		7,189			5,903			2,974
Other		(566	)		(810	)		(827	)
Changes in operating assets and liabilities:
Accounts receivable		470			(971	)		(804	)
Merchandise inventories		(34,627	)		(24,726	)		(15,477	)
Accounts payable and accrued liabilities		9,269			3,960			(2,669	)
Other		(2,508	)		846			(390	)
Net cash provided by operating activities		25,850			30,875			29,423

Cash Flows From Investing Activities
Purchases of property and equipment		(25,977	)		(21,260	)		(14,412	)
Proceeds from sale of property and equipment		0			5			312
Proceeds from note receivable		200			100			100
Net cash used in investing activities		(25,777	)		(21,155	)		(14,000	)

Cash Flow From Financing Activities
Proceeds from issuance of stock		2,420			2,654			738
Dividends paid		(23,460	)		0			0
Excess tax benefits from stock-based compensation		837			1,254			520
Purchase of common stock for treasury		(4,675	)		0			0
Shares surrendered by employees to pay taxes on restricted stock		(41	)		(3,219	)		(656	)
Net cash (used in) provided by financing activities		(24,919	)		689			602
Net (decrease) increase in cash and cash equivalents		(24,846	)		10,409			16,025
Cash and cash equivalents at beginning of year		70,602			60,193			44,168

Cash and Cash Equivalents at End of Year	$	45,756		$	70,602		$	60,193

Supplemental disclosures of cash flow information:
Cash paid during year for interest	$	270		$	264		$	252
Cash paid during year for income taxes	$	22,793		$	10,930		$	17,433
Capital expenditures incurred but not yet paid	$	1,562		$	2,825		$	2,123

See notes to consolidated financial statements.

Shoe Carnival, Inc.

Notes to Consolidated Financial Statements

Note 1 – Organization and Description of Business

Our consolidated financial statements include the accounts of Shoe Carnival, Inc. and its wholly-owned subsidiaries SCHC, Inc. and Shoe Carnival Ventures, LLC, and SCLC, Inc., a wholly-owned subsidiary of SCHC, Inc. (collectively referred to as “we”, “our” or “us”). All intercompany accounts and transactions have been eliminated. Our primary activity is the sale of footwear and related products through our retail stores in 32 states within the continental United States and in Puerto Rico. We also offer online shopping on our e-commerce site at www.shoecarnival.com.

Note 2 – Summary of Significant Accounting Policies

Fiscal Year

Our fiscal year is a 52/53 week year ending on the Saturday closest to January 31. Unless otherwise stated, references to years 2012, 2011, and 2010 relate respectively to the fiscal years ended February 2, 2013, January 28, 2012, and January 29, 2011. Fiscal year 2012 consisted of 53 weeks and the other fiscal years consisted of 52 weeks.

Use of Estimates in the Preparation of Consolidated Financial Statements

The preparation of our consolidated financial statements in conformity with generally accepted accounting principles, in the United States of America, requires management to make estimates and assumptions that affect the reported amounts of certain assets and liabilities as of the financial statement reporting date in addition to the reported amounts of certain revenues and expenses for the reporting period. The assumptions used by management in future estimates could change significantly due to changes in circumstances and actual results could differ from those estimates.

Cash and Cash Equivalents

We had cash and cash equivalents of $45.8 million at February 2, 2013 and $70.6 million at January 28, 2012. Credit and debit card receivables (which generally settle within three days) totaling $4.7 million and $4.5 million were included in cash equivalents at February 2, 2013 and January 28, 2012, respectively.

We consider all short-term investments with an original maturity date of three months or less to be cash equivalents. As of February 2, 2013, all invested cash was held in a money market account. While investments are not considered by management to be at significant risk, they could be impacted if the underlying financial institutions fail or are subject to other adverse conditions in the financial markets. To date, we have experienced no loss or lack of access to either invested cash or cash held in our bank accounts.

Fair Value of Financial Instruments

Our financial assets as of February 2, 2013 and January 28, 2012 included cash and cash equivalents. The carrying value of cash and cash equivalents approximates fair value due to its short-term nature. We did not have any financial liabilities measured at fair value for these periods. Non-financial assets measured at fair value included on our consolidated balance sheet as of February 2, 2013 were those long-lived assets for which an impairment charge has been recorded. We did not have any non-financial liabilities measured at fair value for this period. See Note 3 – “Fair Value Measurements” for further discussion.

Shoe Carnival, Inc.

Notes to Consolidated Financial Statements – continued

Merchandise Inventories and Cost of Sales

Merchandise inventories are stated at the lower of cost or market (LCM) using the first-in, first-out (FIFO) method. For determining market value, we estimate the future demand and related sale price of merchandise contained in inventory as of the balance sheet date. The stated value of merchandise inventories contained on our consolidated balance sheets also includes freight, certain capitalized overhead costs and reserves. Factors considered in determining if our inventory is properly stated at LCM includes, among others, recent sale prices, the length of time merchandise has been held in inventory, quantities of various styles held in inventory, seasonality of merchandise, expected consideration to be received from our vendors and current and expected future sales trends. We reduce the value of our inventory to its estimated net realizable value where cost exceeds the estimated future selling price. Material changes in the factors previously noted could have a significant impact on the actual net realizable value of our inventory and our reported operating results.

Cost of sales includes the cost of merchandise sold, buying, distribution, and occupancy costs, inbound freight expense, provision for inventory obsolescence, inventory shrink and credits and allowances from merchandise vendors. With the launch of our e-commerce site in the third quarter of fiscal 2011, cost of sales now also includes the charges related to our utilization of a third party fulfillment agent in addition to the freight expense for delivering merchandise to our customer.

Property and Equipment-Net

Property and equipment is stated at cost. Depreciation and amortization of property, equipment and leasehold improvements are taken on the straight-line method over the shorter of the estimated useful lives of the assets or the applicable lease terms. Lives used in computing depreciation and amortization range from two to twenty years. Expenditures for maintenance and repairs are charged to expense as incurred. Expenditures, which materially increase values, improve capacities or extend useful lives are capitalized. Upon sale or retirement, the costs and related accumulated depreciation or amortization are eliminated from the respective accounts and any resulting gain or loss is included in operations.

We periodically evaluate our long-lived assets if events or circumstances indicate the carrying value may not be recoverable. The carrying value of long-lived assets is considered impaired when the carrying value of the assets exceeds the expected future cash flows to be derived from their use. Assets are grouped, and the evaluation performed, at the lowest level for which there are identifiable cash flows, which is generally at a store level. If the estimated future cash flows for a store are determined to be less than the carrying value of the store’s assets, an impairment loss is recorded for the difference between estimated fair value and carrying value. Assets subject to impairment are adjusted to estimated fair value and, if applicable, an impairment loss is recorded in selling, general and administrative expenses. We estimate the fair value of our long-lived assets using store specific cash flow assumptions discounted by a rate commensurate with the risk involved with such assets while incorporating marketplace assumptions. Our assumptions and estimates used in the evaluation of impairment, including current and future economic trends for stores, are subject to a high degree of judgment. If actual operating results or market conditions differ from those anticipated, the carrying value of certain of our assets may prove unrecoverable and we may incur additional impairment charges in the future. Our evaluations resulted in the recording of non-cash impairment charges of $425,000, $338,000 and $1.7 million in fiscal years 2012, 2011 and 2010, respectively.

Insurance Reserves

We self-insure a significant portion of our workers’ compensation, general liability and employee health care costs and also maintain insurance in each area of risk, protecting us from individual and aggregate losses over specified dollar values. We review the liability reserved for our self-insured portions on a quarterly basis, taking into consideration a number of factors, including historical claims experience, severity factors, statistical trends and, in certain instances, valuation assistance provided by independent third parties. Self-insurance reserves include estimates of claims filed, carried at their expected ultimate settlement value, and claims incurred but not yet reported. As of February 2, 2013 and January 28, 2012, our self-insurance reserves totaled $2.5 million and $2.4 million, respectively. While we believe that the recorded amounts are adequate, there can be no assurance that changes to management’s estimates will not occur due to limitations inherent in the estimating process. If actual results are not consistent with our estimates or assumptions, we may be exposed to losses or gains that could be material.

Shoe Carnival, Inc.

Notes to Consolidated Financial Statements – continued

Deferred Lease Incentives

All cash incentives received from landlords are recorded as deferred income and amortized over the life of the lease on a straight-line basis as a reduction of rental expense.

Accrued Rent

We are party to various lease agreements, which require scheduled rent increases over the initial lease term. Rent expense for such leases is recognized on a straight-line basis over the initial lease term beginning the earlier of the start date of the lease or when we take possession of the property. The difference between rent based upon scheduled monthly payments and rent expense recognized on a straight-line basis is recorded as accrued rent.

Revenue Recognition

Revenue from sales of merchandise at our store locations is recognized at the time of sale. We record revenue from our e-commerce sales, including shipping and handling fees, based on an estimated customer receipt date. Our sales are recorded exclusive of sales tax. In the regular course of business, we offer our customers sales incentives including coupons, discounts, and free merchandise. Sales are recorded net of such incentives and returns and allowances. If an incentive involves free merchandise, that merchandise is recorded as a zero sale and the cost is included in cost of sales. Gift card revenue is recognized at the time of redemption.

Consideration Received From a Vendor

Consideration is primarily received from merchandise vendors. Consideration is either recorded as a reduction of the price paid for the vendor’s products and recorded as a reduction of our cost of sales or if the consideration represents a reimbursement of a specific, incremental and identifiable cost then it is recorded as an offset to the same financial statement line item.

Consideration received from our vendors includes co-operative advertising/promotion, margin assistance, damage allowances and rebates earned for a specific level of purchases over a defined period. Consideration principally takes the form of credits that we can apply against trade amounts owed.

Consideration received after the related merchandise has been sold is recorded as an offset to cost of sales in the period negotiations are finalized. For consideration received on merchandise still in inventory, the allowance is recorded as a reduction to the cost of on-hand inventory and recorded as a reduction of our cost of sales at the time of sale. Allowances received from vendors representing a reimbursement of specific, incremental and identifiable costs are offset to the same financial statement line item. Should the allowances received exceed the incremental cost then the excess consideration is recorded as a reduction to the cost of on-hand inventory and allocated to cost of sales in future periods utilizing an average inventory turn rate.

Store Opening and Start-up Costs

Non-capital expenditures, such as advertising, payroll and supplies, incurred prior to the opening of a new store are charged to expense in the period they are incurred.

Advertising Costs

Print, television, radio, outdoor and digital media costs are generally expensed when incurred. Internal production costs are expensed when incurred and external production costs are expensed in the period the advertisement first takes place. Advertising expenses included in selling, general and administrative expenses were $37.4 million, $33.5 million and $31.1 million in fiscal years 2012, 2011 and 2010, respectively.

Shoe Carnival, Inc.

Notes to Consolidated Financial Statements – continued

Stock-Based Compensation

We recognize compensation expense for stock-based awards based on the fair value of the awards. Stock-based awards may include stock option grants, stock appreciation rights, restricted stock grants and certain transactions under our stock-based compensation plans. Additionally, we recognize stock-based compensation expense for the discount on shares sold to employees through our employee stock purchase plan. This discount represents the difference between the market price and the employee purchase price. Stock-based compensation expense is included in selling, general and administrative expense.

We apply an estimated forfeiture rate in calculating the stock-based compensation expense for the period. Forfeiture estimates are adjusted periodically based on the extent to which actual forfeitures differ, or are expected to differ, from previous estimates.

Segment Information

We have identified each retail store and our e-commerce site as individual operating segments. Our operating segments have been aggregated and are reported as one reportable segment based on the similar nature of products sold, merchandising and distribution processes involved, target customers and economic characteristics.

Income Taxes

We compute income taxes using the asset and liability method, under which deferred income taxes are provided for the temporary differences between the financial reporting basis and the tax basis of our assets and liabilities. We account for uncertain tax positions in accordance with current authoritative guidance and report a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return. We recognize interest expense and penalties, if any, related to uncertain tax positions in income tax expense.

Stock Split

On March 23, 2012, our Board of Directors authorized a three-for-two stock split of the shares of our common stock, which was effected in the form of a stock dividend. The stock split entitled each shareholder of record at the close of business on April 13, 2012 to receive one additional share of common stock for every two shares of common stock owned as of that date, and was paid on April 27, 2012. Upon the completion of the stock split, our outstanding shares increased from approximately 13.6 million shares to approximately 20.4 million shares. In accordance with the provisions of our equity award plans, and as determined by our Board of Directors, the following were adjusted to equitably reflect the effect of the three-for-two stock split:

The number of shares reserved and available for issuance;

The number of shares that may be granted to a plan participant in a calendar year;

The number of shares subject to outstanding equity awards;

The exercise prices of outstanding equity awards; and

The annual earnings per diluted share targets associated with our outstanding performance-based restricted stock awards.

All share and per share amounts in this Annual Report on Form 10-K give effect to the stock split and have been adjusted retroactively for all periods presented.

Shoe Carnival, Inc.

Notes to Consolidated Financial Statements – continued

Net Income Per Share

The following table sets forth the computation of basic and diluted earnings per share as shown on the face of the accompanying condensed consolidated statements of income.

	Fiscal Year Ended
	February 2, 2013							January 28, 2012							January 29, 2011
	(In thousands except per share data)
Basic Earnings per Share:	Net Income			Shares		Per Share Amount		Net Income			Shares		Per Share Amount		Net Income		Shares		Per Share Amount
Net income	$	29,338						$	26,382						$	26,821
Amount allocated to participating securities		(698	)						(554	)						0
Net income available for basic common shares and basic earnings per share	$	28,640			19,911	$	1.44	$	25,828			19,524	$	1.32	$	26,821		19,085	$	1.41

Diluted Earnings per Share:
Net income	$	29,338						$	26,382						$	26,821
Amount allocated to participating securities		(698	)						(554	)						0
Adjustment for dilutive potential common shares					61							170						502
Net income available for diluted common shares and diluted earnings per share	$	28,640			19,972	$	1.43	$	25,828			19,694	$	1.31	$	26,821		19,587	$	1.37

Our basic and diluted earnings per share are computed using the two-class method. The two-class method is an earnings allocation that determines net income per share for each class of common stock and participating securities according to their participation rights in dividends and undistributed earnings or losses. Non-vested restricted stock awards that include non-forfeitable rights to dividends are considered participating securities. During periods of undistributed losses however, no effect is given to our participating securities since they do not share in the losses. Per share amounts are computed by dividing net income available to common shareholders by the weighted average shares outstanding during each period. No options to purchase shares of common stock were excluded in the computation of diluted shares for the periods presented.

New Accounting Pronouncements

In May 2011, the Financial Accounting Standards Board (“FASB”) issued guidance which amends certain accounting and disclosure requirements related to fair value measurements. For fair value measurements categorized as Level 3, a reporting entity should disclose quantitative information of the unobservable inputs and assumptions, a description of the valuation processes and a narrative description of the sensitivity of the fair value to changes in unobservable inputs. The guidance became effective for interim and annual reporting periods beginning on or after December 15, 2011, with early adoption prohibited. We adopted the guidance on January 29, 2012. This adoption did not have a material impact on our consolidated financial position, results of operations or cash flows.

Shoe Carnival, Inc.

Notes to Consolidated Financial Statements - continued

Note 3 – Fair Value Measurements

The accounting standards related to fair value measurements define fair value and provide a consistent framework for measuring fair value under the authoritative literature. Valuation techniques are based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect market assumptions. This guidance only applies when other standards require or permit the fair value measurement of assets and liabilities. The guidance does not expand the use of fair value measurements. A fair value hierarchy was established, which prioritizes the inputs used in measuring fair value into three broad levels.

Level 1 – Quoted prices in active markets for identical assets or liabilities;

Level 2 – Observable market-based inputs or unobservable inputs that are corroborated by market data;

Level 3 – Significant unobservable inputs that are not corroborated by market data. Generally, these fair value measures are model-based valuation techniques such as discounted cash flows, and are based on the best information available, including our own data. Fair values of our long-lived assets are estimated using an income-based approach and are classified within Level 3 of the valuation hierarchy.

The following table presents assets that are measured at fair value on a recurring basis at February 2, 2013 and January 28, 2012. We have no material liabilities measured at fair value on a recurring or non-recurring basis.

	Fair Value Measurements
(In thousands)	Level 1		Level 2		Level 3		Total
As of February 2, 2013:
Cash equivalents – money market fund	$	5,259	$	0	$	0	$	5,259

As of January 28, 2012:
Cash equivalents– money market fund	$	25,231	$	0	$	0	$	25,231

The fair values of cash, receivables, accounts payable, accrued expenses and other current liabilities approximate their carrying values because of their short-term nature. From time to time, we measure certain assets at fair value on a non-recurring basis, specifically long-lived assets evaluated for impairment. These are typically store specific assets, which are reviewed for impairment whenever events or changes in circumstances indicate that recoverability of their carrying value is questionable. If the expected future cash flows related to a store’s assets are less than their carrying value, an impairment loss would be recognized for the difference between estimated fair value and carrying value and recorded in selling, general and administrative expenses. We estimate the fair value of store assets using an income-based approach considering the cash flows expected over the remaining lease term for each location. These projections are primarily based on management’s estimates of store-level sales, gross margins, direct expenses, exercise of future lease renewal options and resulting cash flows and, by their nature, include judgments about how current initiatives will impact future performance. External factors, such as the local environment in which the store resides, including strip-mall traffic and competition, are evaluated in terms of their effect on sales trends. Changes in sales and operating income assumptions or unfavorable changes in external factors can significantly impact the estimated future cash flows. An increase or decrease in the projected cash flow can significantly decrease or increase the fair value of these assets, which would have an effect on the impairment recorded.

During the fifty-three weeks ended February 2, 2013, long-lived assets held and used with a gross carrying amount of $1.7 million were written down to their fair value of $1.3 million, resulting in an impairment charge of $425,000, which was included in earnings for the period. Subsequent to this impairment, these long-lived assets had a remaining unamortized basis of $328,000. During the fifty-two weeks ended January 28, 2012, long-lived assets held and used with a gross carrying amount of $966,000 were written down to their fair value of $628,000, resulting in an impairment charge of $338,000, which was included in earnings for the period. Subsequent to this impairment, these long-lived assets had a remaining unamortized basis of $84,000.

Shoe Carnival, Inc.

Notes to Consolidated Financial Statements - continued

Note 4 – Property and Equipment-Net

The following is a summary of property and equipment:

(In thousands)	February 2, 2013			January 28, 2012

Furniture, fixtures and equipment	$	124,511		$	116,034
Leasehold improvements		75,796			68,246
Total		200,307			184,280
Less accumulated depreciation and amortization		(122,943	)		(115,048	)
Property and equipment – net	$	77,364		$	69,232

Note 5 – Long-Term Debt

On April 10, 2013 we amended our current unsecured credit agreement (the “Credit Agreement”) to extend the expiration date by five years and renegotiated certain terms and conditions. The Credit Agreement 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.

The Credit Agreement continues to contain covenants which stipulate: (1) Total Shareholders’ Equity, adjusted for the effect of any share repurchases, will not fall below that of the prior fiscal year-end; (2) the ratio of funded debt plus rent to EBITDA plus rent will not exceed 2.5 to 1.0; and, (3) cash dividends for a fiscal year will not exceed 30% of consolidated net income for the immediately preceding fiscal year. We were in compliance with these covenants as of February 2, 2013. Should a default condition be reported, the lenders may preclude additional borrowings and call all loans and accrued interest at their discretion. As of February 2, 2013, there were $4.2 million in letters of credit outstanding and $45.8 million available to us for borrowing under the Credit Agreement.

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 lesser of (a) the Federal Fund rate plus 0.50% or (b) the interest rate announced from time to time by the agent bank as its “prime rate” on commercial loans or (2) LIBOR plus 1.50% to 3.0%, depending on our achievement of certain performance criteria. A commitment fee is charged at 0.25% to 0.40% per annum, depending on our achievement of certain performance criteria, on the unused portion of the bank group’s commitment. The Credit Agreement expires April 10, 2018.

Note 6 – Leases

We lease all of our retail locations and certain equipment under operating leases expiring at various dates through fiscal 2024. Various lease agreements require scheduled rent increases over the initial lease term. Rent expense for such leases is recognized on a straight-line basis over the initial lease term beginning the earlier of the start date of the lease or when we take possession of the property. The difference between rent based upon scheduled monthly payments and rent expense recognized on a straight-line basis is recorded as accrued rent. All incentives received from landlords are recorded as deferred income and amortized over the life of the lease on a straight-line basis as a reduction of rental expense.

Certain leases provide for contingent rents that are not measurable at inception. These contingent rents are primarily based on a percentage of sales that are in excess of a predetermined level. These amounts are excluded from minimum rent and are included in the determination of total rent expense when it is probable that the expense has been incurred and the amount is reasonably estimable. Certain leases also contain escalation clauses for increases in operating costs and taxes.

Shoe Carnival, Inc.

Notes to Consolidated Financial Statements - continued

We did not assign any store operating leases during fiscal 2012. We remain liable on two assignments of operating leases covering former store locations, which were assigned to third parties in prior years. The assignments require us to make payments under the lease agreements in certain events of default. The maximum potential amount of future payments (undiscounted) that we could be required to make under all assignments was approximately $133,000 at February 2, 2013. Both of the assignments remain in effect until the leases expire in fiscal year 2013. We believe that the likelihood of material liability being triggered under these leases is remote, and no liability has been accrued for these contingent lease obligations in our consolidated financial statements as of February 2, 2013.

Rental expense for our operating leases consisted of:

(In thousands)	2012		2011		2010

Rentals for real property	$	53,832	$	49,328	$	47,745
Contingent rent		189		156		136
Equipment rentals		110		113		133
Total	$	54,131	$	49,597	$	48,014

Future minimum lease payments at February 2, 2013 were as follows:

(In thousands)	Operating Leases

2013	$	51,167
2014		43,726
2015		45,588
2016		44,142
2017		42,629
Thereafter to 2024		129,688
Total	$	356,940

Note 7 – Income Taxes

The provision for income taxes consisted of:

(In thousands)	2012			2011		2010

Current:
Federal	$	19,581		$	11,318	$	15,514
State		2,601			1,210		1,360
Puerto Rico		79			0		0
Total current		22,261			12,528		16,874

Deferred:
Federal		(2,692	)		2,918		(1,220	)
State		(304	)		122		(183	)
Puerto Rico		(350	)		0		0
Total deferred		(3,347	)		3,040		(1,403	)

Total provision	$	18,915		$	15,568	$	15,471

We realized a tax benefit of $1.4 million, $1.6 million and $626,000 in fiscal years 2012, 2011 and 2010, respectively, as a result of the exercise of stock options and the vesting of restricted stock, which is recorded in shareholders’ equity.

Shoe Carnival, Inc.

Notes to Consolidated Financial Statements - continued

Reconciliation between the statutory federal income tax rate and the effective income tax rate is as follows:

Fiscal years	2012			2011			2010

U.S. Federal statutory tax rate		35.0	%		35.0	%		35.0	%
State and local income taxes, net of federal tax benefit		4.8			2.1			1.6
Puerto Rico		(0.6	)		0.0			0.0
Effective income tax rate		39.2	%		37.1	%		36.6	%

We recorded $162,000, $328,000 and $222,000 in federal employment related tax credits in fiscal 2012, 2011 and 2010, respectively. Each of these credits reduced our effective tax rate in the respective years. For fiscal 2012, approximately 1.3% of the increase in our effective tax rate as compared to fiscal 2011 was due to the non-deductible portion of compensation attributable to the retirement of our former President and Chief Executive Officer. Additionally, in both fiscal 2011 and fiscal 2010, we recognized a decrease in our state and local income tax rate due to favorable settlements with certain taxing authorities.

Deferred income taxes are the result of temporary differences in the recognition of revenue and expense for tax and financial reporting purposes. The sources of these differences and the tax effect of each are as follows:

(In thousands)	February 2, 2013			January 28, 2012
Deferred tax assets:
Accrued rent	$	2,878		$	2,301
Accrued compensation		5,191			2,849
Accrued employee benefits		479			1,092
Inventory		916			862
Self-insurance reserves		494			587
Lease incentives		7,438			4,941
Unrecognized tax benefits		0			39
State bonus depreciation add-back		0			426
Net operating loss carry forward		359			0
Other		337			367
Total deferred tax assets		18,092			13,464

Deferred tax liabilities:
Depreciation		12,801			12,058
Capitalized costs		1,017			840
Puerto Rico net operating loss carry forward impact to federal taxes		350			0
Other		11			0
Total deferred tax liabilities		14,179			12,898
Net deferred tax asset		3,913			566
Less current deferred income tax benefit		(2,914	)		(2,496	)
Long-term deferred income taxes	$	999		$	(1,930	)

At the end of fiscal 2012 we estimated state net operating loss carry forwards of $294,000 which expire between fiscal 2013 and fiscal 2023 and net operating loss carry forwards of $350,000 for Puerto Rico which expire in fiscal 2019. As of February 2, 2013, we had no available state tax credits that could be carried forward.

Shoe Carnival, Inc.

Notes to Consolidated Financial Statements - continued

Our unrecognized tax liabilities, as discussed below, relate to tax years encompassing our fiscal years 1999 through 2012, the tax years that remain subject to examination by major tax jurisdictions as of February 2, 2013. A reconciliation of the beginning and ending amount for our unrecognized tax positions, which exclude interest and penalties, is as follows:

(In thousands)	2012		2011			2010

Beginning balance	$	69	$	693		$	1,357
Increases – tax positions in prior period		0		0			0
Decreases – tax positions in prior period		0		(339	)		(617	)
Gross increases – current period tax positions		0		0			100
Decreases related to settlements with taxing authorities		0		(285	)		(147	)
Ending balance	$	69	$	69		$	693

We have recorded $145,000 in unrecognized tax liabilities as of February 2, 2013 in Other liabilities on the Consolidated Balance Sheets. This liability is comprised of $69,000 related to unrecognized tax positions, $41,000 related to accrued interest and $35,000 related to accrued penalties. Our policy is to record interest and penalty expense related to income taxes as a component of income tax expense in the Consolidated Statements of Income. If our uncertain tax positions become recognizable, the amount would affect our effective tax rate.

Note 8 – Employee Benefit Plans

Retirement Savings Plans

On February 24, 1994, our Board of Directors approved the Shoe Carnival Retirement Savings Plan (the “Domestic Savings Plan”). The Domestic Savings Plan is open to all employees working in the continental United States who have been employed for at least one year, are at least 21 years of age and who work at least 1,000 hours in a defined year. The primary savings mechanism under the Domestic Savings Plan is a 401(k) plan under which an employee may contribute up to 20% of annual earnings with us matching the first 4% at a rate of 50%. Our contributions to the participants’ accounts become fully vested when the participant reaches their third anniversary of employment with us. Contributions charged to expense were $611,000, $591,000, and $508,000 in fiscal years 2012, 2011, and 2010, respectively.

On March 19, 2012, our Board of Directors approved the Shoe Carnival Puerto Rico Savings Plan (the “Puerto Rico Savings Plan”). The Puerto Rico Savings Plan is open to all employees working in Puerto Rico who have been employed for at least one year, are at least 21 years of age and who work at least 1,000 hours in a defined year. This plan is similar to our Domestic Savings Plan whereby an employee may contribute up to 20% of his or her annual earnings, with us matching the first 4% at a rate of 50%. The effective date of the plan for associate deferral and employer matching is April 1, 2013.

Stock Purchase Plan

On May 11, 1995, our shareholders approved the Shoe Carnival, Inc. Employee Stock Purchase Plan (the “Stock Purchase Plan”) as adopted by our Board of Directors on February 9, 1995. The Stock Purchase Plan reserves 450,000 shares of our common stock (subject to adjustment for any subsequent stock splits, stock dividends and certain other changes in the common stock) for issuance and sale to any employee who has been employed for more than a year at the beginning of the calendar year, and who is not a 10% owner of our common stock, at 85% of the then fair market value up to a maximum of $5,000 in any calendar year. Under the Stock Purchase Plan, 11,000, 12,500 and 12,500 shares of common stock were purchased by participants in the plan and proceeds to us for the sale of those shares were approximately $201,000, $190,000 and $160,000 for fiscal years 2012, 2011 and 2010, respectively. At February 2, 2013, there were 136,093 shares of unissued common stock reserved for future purchase under the Stock Purchase Plan.

Shoe Carnival, Inc.

Notes to Consolidated Financial Statements - continued

The following table summarizes information regarding stock-based compensation expense recognized for the Stock Purchase Plan:

(In thousands)	2012		2011 ⁽¹⁾		2010 ⁽¹⁾

Stock-based compensation expense before the recognized income tax benefit ⁽²⁾	$	36	$	34	$	28
Income tax benefit	$	14	$	13	$	11

(1)

Income tax benefit was calculated using an adjusted effective tax rate. The adjusted rate removes the tax effects from the favorable resolution of certain tax positions.

(2)

Amounts are representative of the 15% discount employees are provided for purchases under the Stock Purchase Plan.

Deferred Compensation Plan

In fiscal 2000, we established a non-qualified deferred compensation plan for certain key employees who, due to Internal Revenue Service guidelines, cannot take full advantage of the employer sponsored 401(k) plan. Participants in the plan elect on an annual basis to defer, on a pre-tax basis, portions of their current compensation until retirement, or earlier if so elected. While not required to, we can match a portion of the employees’ contributions, which would be subject to vesting requirements. The compensation deferred under this plan is credited with earnings or losses measured by the rate of return on investments elected by plan participants. The plan is currently unfunded. Compensation expense for our match and earnings on the deferred amounts was $867,000, $432,000 and $879,000 for fiscal 2012, 2011 and 2010, respectively. The total deferred compensation liability at February 2, 2013 and January 28, 2012 was $7.2 million and $6.1 million, respectively.

Note 9 – Stock Based Compensation

Compensation Plan Summaries

On April 27, 2012, we completed a three-for-two stock split of the shares of our common stock, which was effected in the form of a stock dividend. All share and per share amounts referenced below give effect to the stock split and have been adjusted retroactively for all periods presented.

We have three stock-based compensation plans: the 1993 Stock Option and Incentive Plan (the “1993 Plan”), the Outside Directors Stock Option Plan (the “Directors Plan”) and the 2000 Stock Option and Incentive Plan (the “2000 Plan”).

The 1993 Plan was approved by our Board of Directors and shareholders effective January 15, 1993, and amended at the 1997 annual meeting of shareholders. The 1993 Plan reserved 2,250,000 shares of common stock for stock option grants (subject to adjustment for subsequent stock splits, stock dividends and certain other changes in the common stock). On January 14, 2003, the 1993 Plan expired. Previously issued stock options could be exercised for up to ten years from their date of grant. During fiscal 2012 all remaining stock options were exercised.

The Directors Plan was approved by our Board of Directors on March 4, 1999. The plan reserves for issuance 37,500 shares of common stock (subject to adjustment for stock splits, stock dividends and certain other changes to the common stock). No grants have been made under this plan since fiscal 2006, and it is currently the intention of the Board of Directors not to grant stock options under this plan in the future. At February 2, 2013, 16,500 shares of unissued common stock were reserved for possible future grants and there were 3,000 fully vested stock options outstanding under the Directors Plan.

Shoe Carnival, Inc.

Notes to Consolidated Financial Statements - continued

The 2000 Plan was approved by our Board of Directors and shareholders effective June 8, 2000. On June 14, 2012, the 2000 Plan was amended to increase the number of shares reserved for issuance from 3,000,000 to 3,900,000 (subject to adjustment for subsequent stock splits, stock dividends and certain other changes in the common stock). The 2000 Plan was also amended to revise the provision governing the payment of dividends on shares of restricted stock. At February 2, 2013, there were 1.1 million shares of unissued common stock reserved for future grants under the 2000 Plan.

Stock options currently outstanding under the 2000 Plan typically were granted such that one-third of the shares underlying the stock options granted would vest and become fully exercisable on each of the first three anniversaries of the date of the grant and were assigned a 10-year term from the date of grant. Restricted stock awards issued to employees under the 2000 Plan are classified as either performance-based or service-based. Performance-based restricted stock awards typically are granted such that they vest upon the achievement of specified levels of annual earnings per diluted share during a six-year period starting from the grant date. Should the annual earnings per diluted share criteria not be met within the six-year period from the grant date, any shares still restricted will be forfeited. Service-based restricted stock awards typically are granted under one of three vesting periods: (a) one-third of the shares would vest on each of the first three anniversaries subsequent to the date of the grant; (b) the full award would vest at the end of a 5-year service period subsequent to date of grant; or (c) for our Directors, all restricted stock awards are issued to vest on January 2 of the year following the year of the grant.

Plan Specific Activity and End of Period Balance Summaries

Stock Options

The following table summarizes the stock option transactions pursuant to the stock-based compensation plans:

	Number of Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value (in thousands)
Outstanding at January 28, 2012		271,546		$	9.48
Granted		0
Forfeited or expired		0
Exercised		(232,974	)		9.53
Outstanding and exercisable at February 2, 2013		38,572		$	9.21		3.59	$	436

The following table summarizes information regarding options exercised:

(In thousands)	2012		2011		2010

Total intrinsic value ⁽¹⁾	$	2,473	$	1,624	$	656
Total cash received	$	2,219	$	2,464	$	578
Associated excess income tax benefits recorded	$	465	$	399	$	220

(1)

Defined as the difference between the market value at exercise and the grant price of stock options exercised.

The following table summarizes information regarding outstanding and exercisable options at February 2, 2013:

		Options Outstanding						Options Exercisable
Range of Exercise Price		Number of Options Outstanding		Weighted Average Remaining Life		Weighted Average Exercise Price		Number of Options Exercisable		Weighted Average Exercise Price
$	7.63 – 10.73		38,572		3.59	$	9.21		38,572	$	9.21

Shoe Carnival, Inc.

Notes to Consolidated Financial Statements - continued

The following table summarizes information regarding stock-based compensation expense recognized for non-vested options:

(In thousands)	2012		2011 ⁽¹⁾		2010 ⁽¹⁾

Stock-based compensation expense before the recognized income tax benefit	$	0	$	22	$	82
Income tax benefit	$	0	$	8	$	31

(1)

Income tax benefit was calculated using an adjusted effective tax rate. The adjusted rate removes the tax effects from the favorable resolution of certain tax positions.

No stock options have been granted since fiscal 2008. All outstanding options had vested as of the end of fiscal 2011, therefore no unrecognized compensation expense remains. The total fair value at grant date of previously non-vested stock options that vested during fiscal years 2011 and 2010 was $46,000 and $87,000 respectively.

Restricted Stock Awards

The following table summarizes the restricted share transactions pursuant to the 2000 Plan:

	Number of Shares			Weighted- Average Grant Date Fair Value
Restricted stock at January 28, 2012		277,145		$	17.31
Granted		344,354			19.51
Vested		(8,954	)		17.88
Forfeited or expired		(113,265	)		17.18
Restricted stock at February 2, 2013		499,280		$	18.84

The total fair value at grant date of restricted stock awards that vested during fiscal 2012, 2011 and 2010 was $160,000, $6.5 million and $1.3 million, respectively. The weighted-average grant date fair value of stock awards granted during fiscal 2011 and fiscal 2010 was $17.08 and $14.43, respectively. Of the 113,265 restricted stock awards that were forfeited or that expired during the current fiscal year, 22,539 shares were restricted stock awards that expired unvested, as the performance measure was not achieved. These awards represented the third tier of the restricted stock granted on March 13, 2006 that expired in the first quarter of fiscal 2012. An additional 77,500 shares of non-vested restricted stock were forfeited upon the retirement of our former President and Chief Executive Officer on October 27, 2012.

The following table summarizes information regarding stock-based compensation expense recognized for restricted stock awards:

(In thousands)	2012		2011 ⁽¹⁾		2010 ⁽¹⁾

Stock-based compensation expense before the recognized income tax benefit	$	3,663	$	1,882	$	4,875
Income tax benefit	$	1,436	$	712	$	1,851

(1)

Income tax benefit was calculated using an adjusted effective tax rate. The adjusted rate removes the tax effects from the favorable resolution of certain tax positions.

The $1.9 million of expense recognized in fiscal 2011 was comprised of compensation expense of $2.6 million offset by income of $716,000. The income was attributable to the fourth quarter reversal of the cumulative prior period expense for performance-based awards, which were deemed by management as not probable of vesting. These performance based awards represent the third tier of the of the restricted stock granted on March 13, 2007 which will expire unvested on March 31, 2013 as the performance measure was not achieved within the six-year period from the grant date.

Shoe Carnival, Inc.

Notes to Consolidated Financial Statements - continued

As of February 2, 2013, there was approximately $4.7 million of unrecognized compensation expense remaining related to both the performance-based and service-based restricted stock awards. The cost is expected to be recognized over a weighted average period of approximately 1.9 years. This incorporates our current assumptions with respect to the estimated requisite service period required to achieve the designated performance conditions for performance-based stock awards.

Cash-Settled Stock Appreciation Rights (SARs)

Our outstanding Cash-Settled Stock Appreciation Rights (SARs) were granted to certain non-executive employees such that one-third of the shares underlying the SARs would vest annually. The SARs were assigned a five-year term from the date of grant, after which any unexercised SARs will expire. Each SAR entitles the holder, upon exercise of their vested shares, to receive cash in an amount equal to the closing price of our stock on the date of exercise less the exercise price, with a maximum amount of gain defined. SARs were granted during the first quarter of fiscal 2012 and issued with a defined maximum gain of $6.67 over the exercise price of $17.17. In accordance with current authoritative guidance, cash-settled SARs are classified as Other liabilities on the Condensed Consolidated Balance Sheets.

The following table summarizes the SARs activity:

	Number of Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)
Outstanding at January 28, 2012		0		$	0.00
Granted		135,375			17.17
Forfeited		(11,625	)		17.17
Exercised		0			0.00
Outstanding at February 2, 2013		123,750		$	17.17		3.99

The fair value of liability awards are remeasured, using a trinomial lattice model, at each reporting period until the date of settlement. Increases or decreases in stock-based compensation expense is recognized over the vesting period, or immediately for vested awards. The weighted-average fair value of outstanding, non-vested SAR awards was $4.18 as of February 2, 2013.

The fair value was estimated using a trinomial lattice model with the following assumptions:

	February 2, 2013
Risk free interest rate yield curve		0.02% - 0.88	%
Expected dividend yield		1.0	%
Expected volatility		57.16	%
Maximum life		3.99 Years
Exercise multiple		1.38
Maximum payout	$	6.67
Employee exit rate		2.2% - 9.0	%

Shoe Carnival, Inc.

Notes to Consolidated Financial Statements - continued

The risk free interest rate was based on the U.S. Treasury yield curve in effect at the end of the reporting period. The expected dividend yield was based on our quarterly cash dividends in fiscal 2012, with the assumption that quarterly dividends would continue at the current rate. Expected volatility was based on the historical volatility of our stock. The exercise multiple and employee exit rate are based on historical option data.

The following table summarizes information regarding stock-based compensation expense recognized for SARs:

(In thousands)	2012		2011 ⁽¹⁾		2010 ⁽¹⁾

Stock-based compensation expense before the recognized income tax benefit	$	349	$	197	$	483
Income tax benefit	$	137	$	74	$	183

(1) Income tax benefit was calculated using an adjusted effective tax rate. The adjusted rate removes the tax effects from the favorable resolution of certain tax positions.

As of February 2, 2013, approximately $187,000 in unrecognized compensation expense remained related to non-vested SARs. This expense is expected to be recognized over a weighted-average period of approximately 1.5 years.

Note 10 – Business Risk

We purchase merchandise from over 170 footwear vendors. In fiscal 2012, two suppliers each accounted for 10% or more of our net sales and together accounted for over 37% of our net sales. A loss of any of our key suppliers in certain product categories could have a material adverse effect on our business. As is common in the industry, we do not have any long-term contracts with suppliers.

Note 11 – Litigation Matters

Note 12 – Related Party Transactions

Our Chairman and principal shareholder and his son are members of LC Footwear, LLC. They also were shareholders of PL Footwear, Inc., which during December 2007 became a wholly owned subsidiary of LC Footwear, LLC. Historically, we have purchased name brand merchandise from LC Footwear, LLC, and PL Footwear, Inc. has served as an import agent for us. PL Footwear, Inc. represented us on a commission basis in dealings with shoe factories in mainland China, where most of our private label shoes are manufactured. No purchases were made from LC Footwear, LLC in fiscal years 2012 or 2011. During fiscal 2010, purchases from LC Footwear, LLC were $50,000. Commissions paid to PL Footwear, Inc. were $726,000, $561,000 and $638,000 in fiscal years 2012, 2011 and 2010, respectively. During fiscal 2012, both companies ceased a significant portion of their operations, and as a result, we no longer anticipate purchasing merchandise from LC Footwear, LLC or utilizing PL Footwear, Inc. as an import agent.

Shoe Carnival, Inc.

Notes to Consolidated Financial Statements - continued

Note 13 – Quarterly Results (Unaudited)

Quarterly results are determined in accordance with the accounting policies used for annual data and include certain items based upon estimates for the entire year. All fiscal quarters in 2012 and 2011 include results for 13 weeks except for the fourth quarter of 2012, which includes results for 14 weeks.

(In thousands, except per share data)

Fiscal 2012	First Quarter		Second Quarter		Third Quarter		Fourth Quarter ⁽¹⁾

Net sales	$	222,613	$	182,207	$	244,434	$	205,744
Gross profit		68,539		52,329		76,435		60,174
Operating income		17,977		4,692		20,560		5,265
Net income		11,020		2,859		12,248		3,211
Net income per share – Basic ⁽²⁾	$	0.54	$	0.14	$	0.60	$	0.13
Net income per share – Diluted ⁽²⁾	$	0.54	$	0.14	$	0.60	$	0.13

Fiscal 2011	First Quarter		Second Quarter		Third Quarter		Fourth Quarter ⁽¹⁾

Net sales	$	198,450	$	166,672	$	215,472	$	181,940
Gross profit		61,760		46,373		65,155		51,565
Operating income		16,135		4,114		16,879		5,009
Net income		9,919		2,715		10,473		3,275
Net income per share – Basic ⁽²⁾	$	0.51	$	0.14	$	0.52	$	0.16
Net income per share – Diluted ⁽²⁾	$	0.50	$	0.14	$	0.52	$	0.16

(1)

The fourth quarter of fiscal 2012 included 14 weeks compared to 13 weeks in the fourth quarter of fiscal 2011.

(2)

Per share amounts are computed independently for each of the quarters presented. The sum of the quarters may not equal the total year due to the impact of changes in weighted shares outstanding and differing applications of earnings under the two-class method. Additionally, during the fourth quarter of fiscal 2012 there was a $0.03 reduction in earnings per diluted share due to the application of the two-class method of computing earnings per share in connection with the $1.00 per share special cash dividend paid in December 2012.

Note 14 – Subsequent Events

On March 27, 2013, the Board of Directors approved the payment of a cash dividend to shareholders in the first quarter of fiscal 2013. The quarterly cash dividend of $0.06 per share will be paid on April 26, 2013 to shareholders of record as of the close of business on April 12, 2013.

Future declarations of dividends are subject to approval of the Board of Directors and will depend on the Company's results of operations, financial condition, business conditions and other factors deemed relevant by the Board of Directors .

On April 10, 2013 we amended our Credit Agreement to extend the expiration date by five years and renegotiated certain terms and conditions. The Credit Agreement 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. The details of the amended Credit Agreement are contained in Note 5 – “Long –Term Debt.”

SHOE CARNIVAL, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

(In thousands) Reserve for sales returns and allowances	Balance at Beginning of Period		Charged to Cost and Expenses		Credited to Costs and Expenses		Balance at End of Period

Year ended January 29, 2011	$	106	$	80,337	$	80,339	$	104
Year ended January 28, 2012	$	104	$	83,816	$	83,811	$	109
Year ended February 2, 2013	$	109	$	94,379	$	94,377	$	111

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A.

CONTROLS AND PROCEDURES

Management’s Report on Internal Control Over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934. Internal control over financial reporting is a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers and effected by the Company’s board of directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;

Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and

Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of
February 2, 2013. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations (“COSO”) of the Treadway Commission in Internal Control-Integrated Framework. Based on its assessment, management believes that the Company’s internal control over financial reporting was effective as of February 2, 2013.

The Company’s internal control over financial reporting as of February 2, 2013 has been audited by its independent registered public accounting firm, Deloitte & Touche LLP, as stated in their report, which is included herein.

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures and Changes in Internal Control over Financial Reporting

Our Chief Executive Officer and Chief Financial Officer have concluded, based on their evaluation as of
February 2, 2013, that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and include controls and procedures designed to ensure that information required to be disclosed by us in such reports is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

There has been no significant change in our internal controls over financial reporting that occurred during the quarter ended February 2, 2013 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

Shoe Carnival, Inc.

Evansville, Indiana

We have audited the internal control over financial reporting of Shoe Carnival, Inc. and subsidiaries (the “Company”) as of February 2, 2013, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of February 2, 2013, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedule as of and for the year ended February 2, 2013 of the Company and our report dated April 15, 2013 expressed an unqualified opinion on those financial statements and financial statement schedule.

/s/Deloitte & Touche LLP

Indianapolis, Indiana

April 15, 2013

ITEM 9B.

OTHER INFORMATION

None

PART III

ITEM 10.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by this Item concerning our Directors, nominees for Director, Code of Ethics, designation of the Audit Committee financial expert and identification of the Audit Committee, and concerning any disclosure of delinquent filers under Section 16(a) of the Exchange Act, is incorporated herein by reference to our definitive Proxy Statement for the 2013 Annual Meeting of Shareholders, to be filed with the Securities and Exchange Commission pursuant to Regulation 14A within 120 days after the end of our last fiscal year. Information concerning our executive officers is included under the caption “Executive Officers” at the end of PART I, ITEM 1. BUSINESS of this Annual Report on Form 10-K. Such information is incorporated herein by reference, in accordance with General Instruction G(3) to Form 10-K and Instruction 3 to Item 401(b) of Regulation S-K.

We have adopted a Code of Business Conduct and Ethics (the “Code”) that applies to all of our Directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer and controller. The Code is posted on our website at www.shoecarnival.com. We intend to disclose any amendments to the Code by posting such amendments on our website. In addition, any waivers of the Code for our Directors or executive officers will be disclosed in a report on Form 8-K.

ITEM 11.

EXECUTIVE COMPENSATION

The information required by this Item concerning remuneration of our officers and Directors and information concerning material transactions involving such officers and Directors and Compensation Committee interlocks, including the Compensation Committee Report and the Compensation Discussion and Analysis, is incorporated herein by reference to our definitive Proxy Statement for the 2013 Annual Meeting of Shareholders which will be filed pursuant to Regulation 14A within 120 days after the end of our last fiscal year.

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by this Item concerning the stock ownership of management, five percent beneficial owners and securities authorized for issuance under equity compensation plans is incorporated herein by reference to our definitive Proxy Statement for the 2013 Annual Meeting of Shareholders which will be filed pursuant to Regulation 14A within 120 days after the end of our last fiscal year.

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by this Item concerning certain relationships and related transactions and the independence of our Directors is incorporated herein by reference to our definitive Proxy Statement for the 2013 Annual Meeting of Shareholders, which will be filed pursuant to Regulation 14A within 120 days after the end of our last fiscal year.

ITEM 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this Item concerning principal accountant fees and services is incorporated herein by reference to our definitive Proxy Statement for the 2013 Annual Meeting of Shareholders, which will be filed pursuant to Regulation 14A within 120 days after the end of our last fiscal year.

PART IV

ITEM 15.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

1.		Financial Statements:

		The following financial statements of Shoe Carnival, Inc. are set forth in PART II, ITEM 8 of this report:

		Report of Independent Registered Public Accounting Firm

		Consolidated Balance Sheets at February 2, 2013 and January 28, 2012

		Consolidated Statements of Income for the years ended February 2, 2013, January 28, 2012, and January 29, 2011

		Consolidated Statements of Shareholders’ Equity for the years ended February 2, 2013, January 28, 2012, and January 29, 2011

		Consolidated Statements of Cash Flows for the years ended February 2, 2013, January 28, 2012, and January 29, 2011

		Notes to Consolidated Financial Statements

2.		Financial Statement Schedule:

		The following financial statement schedule of Shoe Carnival, Inc. is set forth in PART II, ITEM 8 of this report.

		Schedule II Valuation and Qualifying Accounts

3.		Exhibits:

		A list of exhibits required to be filed as part of this report is set forth in the Index to Exhibits, which immediately precedes such exhibits, and is incorporated herein by reference.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Shoe Carnival, Inc.

Date: April 15, 2013	By:	/s/ Clifton E. Sifford
		Clifton E. Sifford
		President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date

/s/ J. Wayne Weaver	Chairman of the Board and Director	April 15, 2013
J. Wayne Weaver

/s/ Clifton E. Sifford	President, Chief Executive Officer, Chief	April 15, 2013
Clifton E. Sifford	Merchandising Officer and Director (Principal
	Executive Officer)

/s/ James A. Aschleman	Director	April 15, 2013
James A. Aschleman

/s/ Kent A. Kleeberger	Director	April 15, 2013
Kent A. Kleeberger

/s/ Gerald W. Schoor	Director	April 15, 2013
Gerald W. Schoor

/s/ Joseph W. Wood	Director	April 15, 2013
Joseph W. Wood

/s/ W. Kerry Jackson	Senior Executive Vice President - Chief Operating	April 15, 2013
W. Kerry Jackson	and Financial Officer and Treasurer (Principal Financial Officer)

/s/ Kathy A. Yearwood	Senior Vice President – Controller and Chief	April 15, 2013
Kathy A. Yearwood	Accounting Officer (Principal Accounting Officer)

INDEX TO EXHIBITS

		Incorporated by Reference To
Exhibit No.	Description	Form	Exhibit	Filing Date	Filed Herewith

3-A	Restated Articles of Incorporation of Registrant	10-K	3-A	4/25/2002

3-B	By-laws of Registrant, as amended to date	10-Q	3-B	12/09/2010

4-A	Credit Agreement, dated as of January 20, 2010, among Shoe Carnival, Inc., the financial institutions from time to time party thereto as Banks, and Wachovia Bank, National Association, as Agent	8-K	4.1	1/26/2010

4-B	Amendment to Credit Agreement dated April 10, 2013, between Registrant and the financial institutions from time to time party thereto as Banks, and Wachovia Bank, National Association, as Agent				X

10-A	Lease, dated as of February 8, 2006, by and between Registrant and Big-Shoe Properties, LLC	10-K	10-A	4/13/2006

10-B*	2006 Executive Incentive Compensation Plan, as amended	8-K	10-B	6/17/2011

10-C*	Form of Award Agreement for restricted stock granted under the Shoe Carnival, Inc. 2000 Stock Option and Incentive Plan	8-K	10-C	3/24/2005

10-D	Lease, dated as of June 22, 2006, by and between the Registrant and Outback Holdings, LLC	8-K	10-D	6/28/2006

10-E*	1993 Stock Option and Incentive Plan of Registrant, as amended	10-Q	10-E	9/15/1997

10-F*	Outside Directors Stock Option Plan	S-8	4.4	7/14/1999

10-G*	Summary Compensation Sheet				X

10-H	Non-competition Agreement dated as of January 15, 1993, between Registrant and J. Wayne Weaver	S-1	10-I	2/4/1993

10-I*	Employee Stock Purchase Plan of Registrant, as amended	10-Q	10-L	9/15/1997

10-J*	Form of Notice of Grant of Stock Options and Option Agreement for incentive stock options granted under the Registrant’s 2000 Stock Option and Incentive Plan	8-K	10-A	9/2/2004

10-K*	Form of Notice of Grant of Stock Options and Option Agreement for non-qualified stock options granted under the Registrant’s 2000 Stock Option and Incentive Plan	8-K	10-B	9/2/2004

10-L*	2000 Stock Option and Incentive Plan of Registrant, as amended	8-K	10-L	6/15/2012

10-M*	Amended and Restated Employment and Noncompetition Agreement dated December 11, 2008, between Registrant and Mark L. Lemond	8-K	10.1	12/17/2008

INDEX TO EXHIBITS - Continued

		Incorporated by Reference To
Exhibit No.	Description	Form	Exhibit	Filing Date	Filed Herewith

10-N*	Amended and Restated Employment and Noncompetition Agreement dated December 11, 2008, between Registrant and Timothy Baker	8-K	10.2	12/17/2008

10-O*	Amended and Restated Employment and Noncompetition Agreement dated December 11, 2008, between Registrant and Clifton E. Sifford	8-K	10.3	12/17/2008

10-P*	Amended and Restated Employment and Noncompetition Agreement dated December 11, 2008, between Registrant and W. Kerry Jackson	8-K	10.4	12/17/2008

10-Q*	Shoe Carnival, Inc. Deferred Compensation Plan	8-K	10.1	10/14/2008

10-R*	Employment and Noncompetition Agreement dated April 7, 2011, between Registrant and Kathy A. Yearwood	10-K	10-X	4/14/2011

10-S*	Separation and Release Agreement, dated October 17, 2012, by and between the Company and Mark L. Lemond	8-K	10.1	10/19/2012

10-T*	Form of Award Agreement for time-based restricted stock with cliff vesting granted under the Shoe Carnival, Inc. 2000 Stock Option and Incentive Plan, as amended	8-K	10.2	10/19/2012

10-U*	Employment and Noncompetition Agreement dated December 4, 2012, between Registrant and Carl N. Scibetta				X

21	A list of subsidiaries of Shoe Carnival, Inc.				X

23	Written consent of Deloitte & Touche LLP				X

31.1	Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002				X

31.2	Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002				X

32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002				X

32.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002				X

INDEX TO EXHIBITS - Continued

		Incorporated by Reference To
Exhibit No.	Description	Form	Exhibit	Filing Date	Filed Herewith
101	The following materials from Shoe Carnival, Inc.’s Annual Report on Form 10-K for the year ended February 2, 2013, formatted in XBRL (Extensible Business Reporting Language): (1) Condensed Consolidated Balance Sheets, (2) Condensed Consolidated Statements of Income, (3) Condensed Consolidated Statement of Shareholders’ Equity, (4) Condensed Consolidated Statements of Cash Flows, and (5) Notes to Consolidated Financial Statements.				X

The indicated exhibit is a management contract, compensatory plan or arrangement required to be filed by Item 601 of Regulation S-K.

EXHIBIT 4-B

FIRST AMENDMENT TO CREDIT AGREEMENT

THIS FIRST AMENDMENT TO CREDIT AGREEMENT (this “ Agreement ”) is made and entered into as of April 10, 2013, by and among SHOE CARNIVAL, INC., an Indiana corporation (the “ Borrower ”), the Banks (as defined herein) party hereto, and WELLS FARGO BANK, N.A., a national banking association, as successor-by-merger to Wachovia Bank, National Association (together with its successors and assigns, the “ Agent ”), as Agent on behalf of itself and the Banks.

WITNESSETH :

WHEREAS, Borrower, the financial institutions from time to time party thereto (the “ Banks ”), and Agent have executed and delivered that certain Credit Agreement dated as of January 20, 2010 (as the same may be amended, restated, supplemented, or otherwise modified from time to time, the “ Credit Agreement ”); and

WHEREAS, the Borrower has requested that the Agent and the Banks party hereto amend certain provisions of the Credit Agreement as set forth herein, and the Agent and the Banks party hereto have agreed to such amendments, subject to the terms and conditions hereof.

NOW, THEREFORE, for and in consideration of the above premises and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by the parties hereto, the parties hereto hereby covenant and agree as follows:

SECTION 1. Definitions . Unless otherwise specifically defined herein, each term used herein (and in the recitals above) which is defined in the Credit Agreement shall have the meaning assigned to such term in the Credit Agreement. Each reference to “hereof,” “hereunder,” “herein,” and “hereby” and each other similar reference and each reference to “this Agreement” and each other similar reference contained in the Credit Agreement shall from and after the date hereof refer to the Credit Agreement as amended hereby.

SECTION 2. Amendments to Credit Agreement .

(a) The definition of “Term” in Section 1.1 of the Credit Agreement is amended so that it reads, in its entirety, as follows:

“Term” shall mean the period from the Effective Date up to and including April 10, 2018, except that (a) all, but not less than all, of the Banks may, in their sole discretion, extend such Term for additional one year periods by notifying Borrower of each such extension at least twelve (12) months prior to the expiration of the then current Term and of their intention to extend the Term by an additional year; (b) Agent may terminate the Banks’ obligations hereunder at any time prior to stated maturity date or any extension thereof pursuant to Article 6 herein; and (c) Borrower may terminate the facility as provided in Section 2.7.

(b) The following definitions are added to Section 1.1 of the Credit Agreement in appropriate alphabetical order:

“First Amendment Effective Date” shall mean April 10, 2013.

“Fitch” shall mean Fitch Ratings, Inc., and its successors.

“Moody’s” shall mean Moody’s Investor Service, Inc., and its successors.

“Permitted Distributions” shall mean Distributions by Borrower permitted to be made under Section 5.2(e) of this Agreement.

“Permitted Distribution Conditions” shall mean, with respect to any Distribution, that (a) no Default or Event of Default exists before and immediately after giving effect to such Distribution; (b) such Distribution is lawful; and (c) the Agent has received the financial statements described in Section 5.1(a)(i) for the most recent fiscal year-end of Borrower.

“Permitted Investments” shall mean:

(a) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States), in each case maturing within one year from the date of acquisition thereof;

(b) commercial paper having the highest rating, at the time of acquisition thereof, of S&P or Moody’s and in either case maturing within six months from the date of acquisition thereof;

(c) certificates of deposit, bankers’ acceptances and time deposits maturing within 180 days of the date of acquisition thereof issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, any domestic office of any commercial bank organized under the laws of the United States or any state thereof which has a combined capital and surplus and undivided profits of not less than $500,000,000.00;

(d) fully collateralized repurchase agreements with a term of not more than 30 days for securities described in clause (a) above and entered into with a financial institution satisfying the criteria described in clause (c) above;

(e) investments in money market mutual funds that are registered with the SEC and subject to Rule 2a-7 of the Investment Company Act of 1940 and have a net asset value of at least $1,000,000,000;

(f) municipal obligations issued by any state of the United States of America or any municipality or other political subdivision of any such state rated at least AAA by S&P, Aaa by Moody’s or AAA by Fitch at the time of purchase; in each case maturing within one year from the date of acquisition thereof;

(g) fixed income mutual funds that provide next day liquidity and have a duration of one year or less;

(h) FDIC insured demand deposits and certificate of deposits with various banks not to exceed $250,000 with any one bank with funds availability of seven days to 90 days and with the deposit program having the U.S. government sovereign credit rating as given by Standard & Poor’s Corporation or Moody’s Investor Service, Inc.; and

(i) Short-term market accounts, of one year or less in duration, located at one or more Banks.

“S&P” shall mean Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc., and its successors.

(c) The definition of “LIBOR Margin” in Section 2.5(b) of the Credit Agreement is amended so that it reads, in its entirety, as follows:

“LIBOR Margin” shall mean (a) at any time of determination prior to the First Amendment Effective Date, the percentage determined by reference to the table in this Section 5.2(b) as in effect prior to the First Amendment Effective Date and (b) at any time of determination on and after the First Amendment Effective Date, the percentage determined by reference to the following table as adjusted on a quarterly basis simultaneously with the delivery of the Compliance Certificate required by Section 5.1(a)(iii) for any fiscal quarter and based on the ratio of Funded Debt to EBITDA determined as of the last day of the immediately preceding fiscal quarter for the four fiscal quarters then ending:

Level	Funded Debt to EBITDA	LIBOR Margin
1	Greater than 1.50 to 1.00	3.00%
2	Greater than 1.25 to 1.00 but less than or equal to 1.50 to 1.00	2.50%
3	Greater than 1.00 to 1.00 but less than or equal to 1.25 to 1.00	2.00%
4	Less than 1.00 to 1.00	1.50%

(d) The second sentence in Section 2.6 of the Credit Agreement is amended so that it reads, in its entirety, as follows:

(a) Prior to the First Amendment Effective Date, the unused fee shall be calculated for each day based on the percentage per annum applicable to such day determined by reference to the table in this Section 2.6 as in effect prior to the First Amendment Effective Date (as adjusted on a quarterly basis simultaneously with the delivery of the Compliance Certificate required by Section 5.1(a)(iii) for any fiscal quarter based on the ratio of Funded Debt to EBITDA determined as of the last day of the immediately preceding fiscal quarter for the four fiscal quarters then ending), multiplied by the amount by which the Commitment exceeded the Working Capital Obligations on such day and (b) on and after the First Amendment Effective Date, the unused fee shall be calculated for each day based on the percentage per annum applicable to such day determined by reference to the following table (as adjusted on a quarterly basis simultaneously with the delivery of the Compliance Certificate required by Section 5.1(a)(iii) for any fiscal quarter based on the ratio of Funded Debt to EBITDA determined as of the last day of the immediately preceding fiscal quarter for the four fiscal quarters then ending), multiplied by the amount by which the Commitment exceeded the Working Capital Obligations on such day:

Level	Funded Debt to EBITDA	Unused Fee
1	Greater than 1.50 to 1.00	0.40%
2	Greater than 1.25 to 1.00 but less than or equal to 1.50 to 1.00	0.35%
3	Greater than 1.00 to 1.00 but less than or equal to 1.25 to 1.00	0.30%
4	Less than 1.00 to 1.00	0.25%

(e) Section 5.1(a)(vi) of the Credit Agreement is amended to replace the reference to “30 days” with “60 days.”

(f) Section 5.1(e)(i) of the Credit Agreement is amended so that it reads, in its entirety, as follows:

(i) Have, as of the end of each fiscal quarter, an Adjusted Net Worth (as defined below) of not less than the amount shown as Borrower’s Net Worth on its most recent fiscal year-end financial statements delivered pursuant to Section 5.1(a)(i) (“Actual Net Worth”), provided that Adjusted Net Worth for any fiscal year end shall not in any event be less than the Actual Net Worth for the previous fiscal year end. “Adjusted Net Worth” shall mean, at any time of determination, the sum of (1) Net Worth at such time and (2) the aggregate amount of Permitted Distributions made after the most recent fiscal year-end.

(g) Section 5.2(e) of the Credit Agreement is amended so that it reads, in its entirety, as follows:

(e) Stock Redemptions and Distributions . No Subsidiary shall make any Distribution except to Borrower or to a Subsidiary wholly owned by Borrower. With respect to its common Equity Interests, Borrower will not declare or make any Distribution to its shareholders (excluding any stock split or stock dividend) except, so long as the Permitted Distribution Conditions are satisfied before and immediately after giving effect to such proposed Distributions, Borrower may declare and make the following Distributions:

(i) during any fiscal year, Distributions in an aggregate amount not to exceed 30% of Borrower’s consolidated net income for the immediately preceding fiscal year; and

(ii) Distributions made solely with Borrower’s cash on hand so long as before and immediately after such Distributions there are no Revolving Loans outstanding;

provided that in no event shall the amount of all Distributions made pursuant to clauses (i) and (ii) above in any fiscal year of Borrower exceed 25% of the amount shown as Borrower’s Net Worth on its most recent fiscal year-end financial statements delivered pursuant to Section 5.1(a)(i).

(h) Section 5.2(h)(ii) of the Credit Agreement is amended so that it reads, in its entirety, as follows:

(ii) Borrower or such Subsidiary may make investments in Permitted Investments,

(i) Sections 5.2(h)(iv), (v), (vi), (vii), (viii), and (x) of the Credit Agreement are each amended so that they read, in their entirety, respectively, as follows:

(iv) [Reserved.]

(v) [Reserved.]

(vi) [Reserved.]

(vii) [Reserved.]

(viii) [Reserved.]

(x) [Reserved.]

SECTION 3. Conditions Precedent . This Agreement shall become effective only upon satisfaction of the following conditions precedent:

(a) execution and delivery of this Agreement by Borrower, Agent, and each of the Banks;

(b) execution and delivery of the Consent, Reaffirmation, and Agreement of the Guarantors at the end hereof by each of the Guarantors;

(c) execution and delivery of the Florida Out-of-State Affidavit in the form of Exhibit A , attached hereto and made a part hereof, by the Borrower; and

(d) Borrower shall have paid (or the Agent shall be satisfied with the arrangements made for the payment of) (i) an upfront fee to each of the Banks in an amount equal to 0.20% of each such Bank’s Commitment on the date hereof and (ii) all other costs, fees, and expense owed by Borrower to the Banks and Agent as of the date hereof (with the Borrower hereby authorizing the Agent to debit its applicable deposit account maintained with the Agent and to apply the proceeds thereof to the payment of the foregoing items).

SECTION 4. Miscellaneous Terms .

(a) Effect of Agreement . Except as set forth expressly hereinabove, all terms of the Credit Agreement and the other Loan Documents shall be and remain in full force and effect, and shall constitute the legal, valid, binding, and enforceable obligations of Borrower. Except to the extent otherwise expressly set forth herein, the amendments set forth herein shall have prospective application only from and after the date of this Agreement.

(b) No Novation or Mutual Departure . Borrower expressly acknowledges and agrees that (i) there has not been, and this Agreement does not constitute or establish, a novation with respect to the Credit Agreement or any of the other Loan Documents, or a mutual departure from the strict terms, provisions, and conditions thereof, other than with respect to the amendments contained in Section 2 above; (ii) nothing in this Agreement shall affect or limit Agent’s and Banks’ right to demand payment of liabilities owing from Borrower to Agent and Banks under, or to demand strict performance of, the terms, provisions, and conditions of the Credit Agreement and the other Loan Documents, to exercise any and all rights, powers, and remedies under the Credit Agreement or the other Loan Documents or at law or in equity, or to do any and all of the foregoing, immediately at any time after the occurrence and continuance of a Default or an Event of Default under the Credit Agreement or the other Loan Documents; and (iii) the amendments in Section 2 above shall not apply to any other past, present, or future noncompliance with any provision of the Credit Agreement or any of the other Loan Documents and do not constitute any course of dealing between Agent, Banks, and Borrower.

(c) Ratification . Borrower (i) hereby restates, ratifies, and reaffirms each and every term, covenant, and condition set forth in the Credit Agreement and the other Loan Documents to which it is a party effective as of the date hereof and (ii) restates and renews each and every representation and warranty heretofore made by it in the Credit Agreement and the other Loan Documents as fully as if made on the date hereof and with specific reference to this Agreement and any other Loan Documents executed or delivered in connection herewith (except with respect to representations and warranties made as of an expressed date, in which case such representations and warranties shall be true and correct as of such date).

(d) No Default . To induce Agent and the Banks a party hereto to enter into this Agreement and to continue to make advances pursuant to the Credit Agreement (subject to the terms and conditions hereof and thereof), Borrower hereby acknowledges and agrees that, as of the date hereof, and after giving effect to the terms hereof, there exists (i) no Default or Event of Default and (ii) no right of offset, defense, counterclaim, claim, or objection in favor of Borrower or arising out of or with respect to any of the Loans or other obligations of Borrower owed to the Agent and the Banks under the Credit Agreement or any other Loan Document.

(e) Counterparts . This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the same instrument. This Agreement may be executed by each party on separate copies, which copies, when combined so as to include the signatures of all parties, shall constitute a single counterpart of the Agreement.

(f) Fax or Other Transmission . Delivery by one or more parties hereto of an executed counterpart of this Agreement via facsimile, telecopy, or other electronic method of transmission pursuant to which the signature of such party can be seen (including, without limitation, Adobe Corporation’s Portable Document Format) shall have the same force and effect as the delivery of an original executed counterpart of this Agreement. Any party delivering an executed counterpart of this Agreement by facsimile or other electronic method of transmission shall also deliver an original executed counterpart, but the failure to do so shall not affect the validity, enforceability, or binding effect of this Agreement.

(g) Section References . Section titles and references used in this Agreement shall be without substantive meaning or content of any kind whatsoever and are not a part of the agreements among the parties hereto evidenced hereby.

(h) Further Assurances . Borrower agrees to take, at Borrower’s expense, such further actions as Agent shall reasonably request from time to time to evidence the amendments set forth herein and the transactions contemplated hereby.

(i) Severability . Any provision of this Agreement which is prohibited or unenforceable shall be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof in that jurisdiction or affecting the validity or enforceability of such provision in any other jurisdiction.

(j) Governing Law . This Agreement shall be governed by and construed and interpreted in accordance with the internal laws of the State of New York but excluding any principles of conflicts of law or other rule of law that would cause the application of the law of any jurisdiction other than the laws of the State of New York.

[SIGNATURES ON FOLLOWING PAGES.]

IN WITNESS WHEREOF, each of the Borrower, the Agent, and the Banks a party hereto has caused this Agreement to be duly executed by its duly authorized officer as of the day and year first above written.

	BORROWER :

	SHOE CARNIVAL, INC. ,
	an Indiana corporation

	By:	/s/ W. Kerry Jackson

	Name: W. Kerry Jackson

	Title: SEVP – COO & CFO

	AGENT AND BANKS :

	WELLS FARGO BANK, N.A., as successor-by-
	merger to Wachovia Bank, National Association, as
	Agent and a Bank

	By:	/s/ Charles N. Kauffman

	Name: Charles N. Kauffman

	Title: Senior Vice President

	FIFTH THIRD BANK , as a Bank

	By:	/s/ Richard A. Clements

	Name: Richard A. Clements

	Title: Assistant Vice President

CONSENT, REAFFIRMATION, AND AGREEMENT OF GUARANTORS

Each of the undersigned (i) acknowledges receipt of the foregoing First Amendment to Credit Agreement (the “ Agreement ”), (ii) consents to the execution and delivery of the Agreement by the parties thereto, and (iii) reaffirms all of its respective obligations and covenants under that certain Subsidiary Guaranty dated as of January 20, 2010 (as amended, restated, supplemented, or otherwise modified from time to time) and, in each case, agrees that none of its respective obligations and covenants thereunder shall be reduced or limited by the execution and delivery of the Agreement.

This Consent, Reaffirmation, and Agreement of Guarantors (this “ Consent ”) may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the same instrument. This Consent may be executed by each party on separate copies, which copies, when combined so as to include the signatures of all parties, shall constitute a single counterpart of the Consent.

Dated April 10, 2013.

	SCLC, INC., a Delaware corporation

	By:	/s/ Darryl E. Smith

	Name: Darryl E. Smith

	Title: Secretary & Treasurer

	SCHC, INC., a Delaware corporation

	By:	/s/ John J. Koach

	Name: John J. Koach

	Title: President

EXHIBIT A

TO FIRST AMENDMENT TO CREDIT AGREEMENT

form of Florida Out-of-State Affidavit of BORROWER

Florida Out-of-State Affidavit of BORROWER

STATE OF INDIANA

COUNTY OF VANDERBURGH

I, W. Kerry Jackson, after being duly sworn, depose and say:

(1) I am the SEVP – COO & CFO of Shoe Carnival, Inc., an Indiana corporation (the “ Borrower ”).

(2) On the date hereof, I, on behalf of the Borrower and with full authorization, executed that certain First Amendment to Credit Agreement (the “ Amendment ”) dated as of April 10, 2013, by and among the Borrower, the financial institutions party thereto, and Wells Fargo Bank, N.A.., as successor-by-merger to Wachovia Bank, National Association (together with its successors and assigns, the “ Agent ”), in Evansville, Indiana.

(3) On the date hereof, I, on behalf of Borrower, delivered the executed Consent to Christopher Dillon, Esq., via overnight courier (to Jones Day, 1420 Peachtree Street, NE, Suite 800, Atlanta, GA 30309-3053, Attn: Christopher Dillon), in Atlanta, Georgia.

(4) This Affidavit is made for the benefit of Agent for compliance with the laws of the State of Florida relating to documentary stamp taxes.

[CONTINUED ON FOLLOWING PAGE]

FURTHER AFFIANTS SAYETH NOT:

Signature of Borrower:		Dated: April 9, 2013

shoe Carnival, Inc.

By:	/s/ W. Kerry Jackson
Name: W. Kerry Jackson
Title: SEVP – COO & CFO

The foregoing affidavit was sworn to before me this 9th day of April, 2013, at Evansville, Indiana.

	/s/ Kelly Koch
	Notary Public, State of Indiana

	My commission expires: April 17, 2014

Exhibit 10-G

SUMMARY COMPENSATION SHEET

The following summarizes certain compensation decisions taken by the Compensation Committee (the "Committee") and/or the Board of Directors ("Board") of Shoe Carnival, Inc. (the "Company"), with respect to the compensation of the Company’s named executive officers and directors.

1. 2013 Base Salary

The Committee increased the base salaries of Mr. Sifford and Ms. Yearwood to keep their respective salaries competitive. The base salaries of the other named executive officers were not adjusted. The following base salaries are effective for the Company’s named executive officers for fiscal 2013:

Name	Title	Base Salary

Clifton E. Sifford	President, Chief Executive Officer and Chief Merchandising Officer	$	575,000

W. Kerry Jackson	Senior Executive Vice President, Chief Operating and Financial Officer and Treasurer	$	520,000

Timothy T. Baker	Executive Vice President - Store Operations	$	500,000

Carl N. Scibetta	Executive Vice President – General Merchandise Manager	$	350,000

Kathy A. Yearwood	Senior Vice President – Controller and Chief Accounting Officer	$	215,000

2. Grants of Restricted Stock and Stock Options

The Committee approved grants of restricted stock to all of the Company's named executive officers and other key personnel under the Shoe Carnival, Inc. 2000 Stock Option and Incentive Plan. Grants to the Company's named executive officers were as follows:

Name	Shares Awarded
Clifton E. Sifford		30,000
W. Kerry Jackson		20,000
Timothy T. Baker		15,000
Carl N. Scibetta		15,000
Kathy A. Yearwood		7,500

The restricted shares will vest upon the achievement of specified levels of annual earnings per diluted share during a six-year period.

3. Annual Incentive Compensation for Fiscal 2013

The Committee established the performance criteria and targets for the fiscal 2013 bonus payable in fiscal 2014 under the Company's 2006 Executive Incentive Compensation Plan. The performance criterion is operating income before bonus expense. Subjective factors based on an executive's individual performance can reduce an executive's bonus. As Chief Executive Officer, Mr. Sifford's bonus target is 80% of his salary but he can earn up to 125% of his salary if all performance targets are met. The bonus target for Messrs. Baker, Jackson, and Scibetta is 60% of their salary but they can earn up to 100% of their salary if all performance targets are met. The bonus target for Ms. Yearwood is 40% of her base salary but she can earn up to 60% of her salary if all performance targets are met.

4. Director's Compensation

The Company pays to non-employee Directors an annual retainer of $20,000. The Chairman of the Audit Committee receives additional annual compensation of $7,500. The Chairman of the Compensation Committee and the Chairman of the Nominating and Corporate Governance Committee receive additional annual compensation of $5,000 and the Lead Director receives additional annual compensation of $2,000.

Non-employee Directors receive a per meeting fee of $1,000 for each meeting of the Board and the accompanying committee meetings attended and $1,000 for each committee meeting attended in person in which the full Board does not meet. If the committee meeting is attended by conference call, the non-employee Directors receive $750. The Company reimburses all Directors for all reasonable out-of-pocket expenses incurred in connection with meetings of the Board.

Non-employee Directors will annually receive restricted shares valued at $17,500 as of the date of grant under the Company's 2000 Stock Option and Incentive Plan. The restrictions on the shares lapse on January 2 ^nd of the year following the year in which the grant was made.

Exhibit 10-U

EMPLOYMENT AND NONCOMPETITION AGREEMENT

This EMPLOYMENT AND NONCOMPETITION AGREEMENT (the "Agreement") is made and entered into as of the 4th day of December, 2012, by and between SHOE CARNIVAL, INC ., an Indiana corporation with its principal offices located at 7500 East Columbia Street, Evansville, Indiana (the "Company"), and CARL N. SCIBETTA , an individual residing at 4252 Birkshire Heights, Fort Mill, South Carolina (the "Employee").

RECITALS

WHEREAS , the Company is one of the leading retailers of family shoes in the United States; and

WHEREAS , the Company desires to retain the services of the Employee upon the terms and conditions set forth herein; and

WHEREAS , the Employee desires to be so employed by the Company, to be eligible for opportunities of advancement, potential compensation increases and the potential payments provided for herein; and

WHEREAS , the Company and the Employee desire to enter into this Agreement to set forth the terms and conditions of the employment relationship between the Company and the Employee; and

WHEREAS , in connection with its business, the Company has expended a substantial amount of time, money, and effort to develop and maintain its confidential, proprietary and trade secret information, and that this information, if misused or disclosed, could be very harmful to Company’s business and its competitive position in the marketplace.

AGREEMENT

1. Term of Employment . The Company hereby agrees to employ Employee and Employee hereby agrees to be employed by the Company, in accordance with the terms and conditions herein, for a period commencing on the effective date of this Agreement up to and through January 31, 2014, subject, however, to earlier termination as expressly provided in this Agreement (such term, including any extension thereof, shall herein be referred to as the "Term"). This Agreement shall be renewed automatically for successive terms of one (1) year each unless either party provides written notice of non-renewal to the other party not more than ninety (90) days and not less than thirty (30) days before the end of the then current Term.

2. Scope of Duties . The Employee shall serve in the position of Executive Vice President, General Merchandise Manager. During the Term, the Employee agrees to perform such other services for the Company as may be directed by any superior officer of the Company, and to assume such other title, duties, and/or responsibilities as the Board of Directors may determine. The Employee shall be supportive of the Company's business and its best interests and shall not, directly or indirectly, take any action which could reasonably be expected to have an adverse effect upon the business or best interests of the Company. The Employee covenants that he will at all times honestly and fairly conduct his duties, and will at all times maintain the highest of professional standards in representing the interests of the Company. The Employee will comply with Company policies, decisions, and instructions, which may be changed by the Company over time. Employee shall perform all duties incident to his position, as well as any other duties as may from time to time be assigned by the President of the Company or his designee, and agrees to abide by all By-laws, policies, practices, procedures or rules of the Company.

3. Compensation of Employee . For all services rendered by the Employee under this Agreement, the Company shall compensate the Employee as follows:

3.1 Base Salary . The base salary payable to the Employee under this Agreement shall be that amount of base salary payable as of the effective date of this Agreement ("Base Salary"), payable in accordance with the Company's usual payroll procedures, and subject to all taxes, withholdings and deductions as required by law and as the Employee may authorize. The Company will review the Base Salary on a periodic basis, approximately annually, during the Term to determine, in the discretion of the Company, whether the Base Salary should be adjusted, and if so, the amount of such adjustment and the time at which such adjustment should take effect.

3.2 Incentive Bonus . The Employee is entitled to participate in the Company’s 2006 Executive Incentive Compensation Plan, as amended, in accordance with the terms contained therein, and in any successor plan adopted by the Company from time to time. However, Employee agrees that the failure of the Company to award any such bonus and/or other incentive compensation shall not give rise to any claim against the Company.

4. Additional Compensation, Benefits, and Obligations . During the Term, and so long as the Employee serves in the position of Executive Vice President, Employee is entitled to participate in any and all employee welfare and health benefit plans (including, but not limited to, life insurance, health and medical, dental and disability plans, and executive supplemental medical coverage) and other employee benefit plans, including but not limited to, qualified pension plans, stock purchase plans, and nonqualified deferred compensation plans, established by the Company from time to time for the benefit of executives at his level and position; provided, however, the Employee's participation in such plans is subject to the eligibility requirements and other terms of such plans. The Company may change, amend or discontinue any of its employee welfare and health benefit plans at any time during the Term, and nothing in this Agreement shall obligate the Company to institute, maintain or refrain from changing, amending or discontinuing any such plans or programs.

5. Termination of Employment . Employee’s employment may be terminated as follows:

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5.1 For Cause . The Company may terminate Employee’s employment at any time effective immediately for "Cause." As used in this Agreement, the term "Cause" means the occurrence of any one or more of the following events: (i) Employee's conviction for a felony or other crime involving moral turpitude; (ii) Employee's engaging in illegal conduct or gross misconduct which is injurious to the Company; (iii) Employee's engaging in any fraudulent or dishonest conduct in his dealings with, or on behalf of, the Company; (iv) Employee's failure or refusal to follow the lawful and reasonable instructions of the Company's Chief Executive Officer, President, or other executive officer to whom Employee reports, if such failure or refusal continues for a period of ten (10) days after the Company delivers to Employee a written notice stating the instructions which Employee has failed or refused to follow; (v) Employee's material breach of any of his obligations under this Agreement; (vi) Employee's material breach of the Company's policies; (vii) Employee's use of alcohol or drugs which interferes with the performance of his duties for the Company or which compromises the integrity or reputation of the Company; or (viii) Employee's engaging in any conduct tending to bring the Company into public disgrace or disrepute.

5.2 Unilateral – The Company . The Company may terminate Employee’s employment at any time without Cause.

5.3 Unilateral - Employee . Employee may terminate his employment at any time with the Company by providing the Company with thirty (30) days' advance written notice of such termination. At the sole option of the Company, such termination will be considered effective on the date such notice is given.

5.4 For Good Reason - Employee . At any time during the Term, Employee may terminate this Agreement for Good Reason if all of the following conditions are satisfied: (a) Employee gives the Company a written notice of termination, which describes in reasonable detail the condition claimed to constitute Good Reason, within thirty (30) calendar days of the initial existence of the condition claimed to constitute Good Reason; (b) the Company does not remedy the condition within thirty (30) calendar days of the Company’s receipt of Employee’s written notice of termination (the “Good Reason Cure Period”); and (c) Employee gives the Company a second written notice of termination within thirty (30) calendar days following the expiration of the Good Reason Cure Period. For purposes of this Agreement, for “Good Reason" means the occurrence, without Employee’s written consent, of a material reduction by the Company in Employee’s Base Salary. Termination of this Agreement without Cause or for Good Reason shall not be deemed to be a voluntary termination by Employee for purposes of any stock option or equity incentive plans of the Company.

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5.5 Disability or Death . If Employee suffers a "Disability," the Company shall have the right to terminate Employee's employment by delivering to Employee a written notice of the Company's intent to terminate for Disability, specifying in such notice a termination date not less than ten (10) calendar days after the giving of the notice (the "Disability Notice Period"). The Employee's employment shall terminate at the close of business on the last day of the Disability Notice Period. For purpose of this Agreement, the term "Disability" shall mean either (a) when Employee is deemed disabled in accordance with the long-term disability insurance policy or plan of the Company in effect at the time of the illness or injury causing the Disability, or (b) the inability of Employee, because of injury, illness, disease or bodily or mental infirmity, to perform the essential functions of his job (with reasonable accommodation) for more than one hundred twenty (120) consecutive days. The existence of a Disability shall be determined by the Company. If the Employee should die during the Term, this Agreement shall terminate as of the date of Employee's death.

5.6 Compensation Upon Termination . In the event of termination of Employee’s employment as set forth herein, and subject to any lawful right of offset the Company may have against any such benefits, compensation, or severance amounts owed to Employee, whether the result of promissory notes, loans, or other financial arrangements the Company may have entered into with or on the Employee’s behalf, and which are or would become due and payable on or after the termination date, to include the principal and interest pursuant to such arrangements (which right of offset cannot be inconsistent with the standards for nonqualified deferred compensation plans under Code Section 409A, to the extent applicable), the Parties agree that the following terms shall be the exclusive severance arrangements:

5.6.1 In the event of termination of Employee's employment by the Company for Cause pursuant to Section 5.1 or unilateral termination by the Employee pursuant to Section 5.3, the Company's obligation to pay and provide Employee compensation and benefits under this Agreement shall immediately terminate, except: (a) Employee shall be entitled to receive that portion of his then Base Salary which shall have been earned through the termination date; and (b) the Company shall pay or provide Employee such other payments and benefits, if any, which had accrued hereunder before the termination date. Other than the foregoing, the Company shall have no further obligations to Employee under this Agreement.

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5.6.2 In the event the Company terminates Employee's employment without Cause pursuant to Section 5.2 or Employee terminates for Good Reason pursuant to Section 5.4 within thirty (30) calendar days of the expiration of the Good Reason Cure Period , at any time other than the two (2) year period immediately following a "Change in Control," the Company's obligation to pay and provide Employee compensation and benefits under this Agreement shall immediately terminate, except: (a) Employee shall be entitled to receive that portion of his then Base Salary which shall have been earned through the termination date; (b) the Company shall pay to Employee, within thirty (30) calendar days following the date of termination, a lump sum amount equal to fifty-five percent (55%) of the product of (i) times (ii), where (i) is his annual Base Salary for the fiscal year in which the termination occurs, and (ii) is a fraction, the numerator of which is the number of days elapsed in such fiscal year through the date of termination and the denominator of which is 365; (c) the Company shall pay or provide Employee such other payments and benefits, if any, which had accrued hereunder before the termination date; (d) the Company shall pay to Employee, within thirty (30) calendar days following the termination date, a lump sum payment in an amount equal to one hundred fifty percent (150%) of Employee's Base Salary for the fiscal year in which the termination occurs; (e) the Company shall pay Employee, within thirty (30) calendar days following the termination date, a lump sum payment in an amount equal to eighteen (18) times the monthly “COBRA Premium Rate” (which is the monthly amount charged, as of the termination date, for COBRA continuation coverage under the Company's group medical and dental plans for the coverage options and coverage levels applicable to Employee and his covered dependents immediately prior to the termination date); (f) with respect to Company stock options granted after the date of this Agreement, Employee would immediately vest in any option that would have vested within twelve (12) months of Employee’s termination date had Employee not been terminated, and such option may be exercised pursuant to the provisions of the then current Company Stock Option and Incentive Plan (“Stock Option Plan”) as if the option were vested at the date of termination; and (g) all shares of restricted stock granted to the Employee after the date of this Agreement, which are not intended to qualify as “performance based compensation” under Section 162(m) of the Code shall contain provisions which shall provide for immediate vesting upon Termination without Cause or for Good Reason. Payment of the severance compensation described in subpart (d) and (e) of this Section 5.6.2 is subject to the requirements of Sections 5.8 and 5.9. Other than the foregoing, the Company shall have no further obligations to Employee under this Agreement.

5.6.3 In the event Employee's employment is terminated as a result of Employee's Death or Disability pursuant to Section 5.5, the Company's obligation to pay and provide the Employee compensation and benefits under this Agreement shall immediately terminate except: (a) Employee shall be entitled to receive that portion of his then Base Salary which shall have been earned through the termination date; and (b) the Company shall pay or provide Employee such other payments and benefits, if any, which had accrued hereunder before the termination date. Other than the foregoing, the Company shall have no further obligations to Employee under this Agreement

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5.6.4 In the event of a "Qualifying Termination" within two (2) years immediately following a "Change In Control," then, in lieu of all other benefits under this Agreement, the Company's obligation to pay and provide Employee compensation and benefits under this Agreement shall immediately terminate, except: (a) Employee shall be entitled to receive that portion of his then Base Salary which shall have been earned through the termination date; (b) the Company shall pay or provide Employee such other payments and benefits, if any, which had accrued hereunder before the termination date; (c) the Company shall pay to Employee in a lump sum not later than thirty (30) calendar days after the termination date an amount equal to two times one hundred fifty-five percent (155%) of his annual Base Salary for the fiscal year in which the termination occurs; (d) the Company shall pay Employee, in a lump sum not later than thirty (30) calendar days after the termination date, an amount equal to eighteen (18) times the COBRA Premium Rate; (e) the Company shall provide Employee with reasonable and appropriate out-placement services, as determined and coordinated by the Company, by paying a fee, not to exceed Two Thousand Five Hundred Dollars ($2,500.00), to an outplacement services provider selected by the Company, provided that such services shall not extend past the end of the second taxable year following the taxable year in which the Qualifying Termination occurs; and (f) Employee shall be allowed to exercise available stock options in accordance with the Stock Option Plan as if he were terminated without cause pursuant to the Stock Option Plan. Payment or provision of the severance compensation or benefits described in subparts (c), (d) and (e) of this Section 5.6.4 is subject to the requirements of Sections 5.8 and 5.9. Other than the foregoing, the Company shall have no further obligations to Employee under this Agreement.

For purposes of this Agreement, a "Qualifying Termination" shall mean either (i) a unilateral termination of Employee by the Company without Cause pursuant to Section 5.2 or (ii) a termination by Employee for Good Reason pursuant to Section 5.4 within thirty (30) calendar days of the expiration of the Good Reason Cure Period.

For purposes of this Agreement, "Change In Control" of the Company shall mean and shall be deemed to have occurred as of the first day any one or more of the following conditions shall have been satisfied:

(A) The acquisition, within a 12-month period ending on the date of the most recent acquisition, by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act as in effect from time to time) of thirty percent (30%) or more of either (i) the then outstanding shares of common stock of the Company or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors; provided, however, that the following acquisitions shall not constitute an acquisition of control: (a) any acquisition directly from the Company (excluding an acquisition by virtue of the exercise of a conversion privilege), (b) any acquisition by the Company, (c) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, (d) any acquisition by any corporation pursuant to a reorganization, merger or consolidation, if, following such reorganization, merger or consolidation, the conditions described in clauses (i), (ii) and (iii) of subsection (C) of this Section 5.6.4 are satisfied, (e) any acquisition by any Person who, immediately before the commencement of the 12-month period, already held beneficial ownership of thirty percent (30%) or more of the outstanding voting securities of the Company ("Affiliated Person") or (f) upon the death of any shareholder who, on the date of this Agreement, is the beneficial owner of 10% or more of the outstanding voting securities of the Company, any acquisition triggered by the death of such shareholder by operation of law, by any testamentary bequest or by the terms of any trust or other contractual arrangement established by such shareholder; or

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(B) Individuals who, as of the date hereof, constitute the Board of Directors of the Company (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board of Directors of the Company (the "Board"); provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or

(C) Approval by the shareholders of the Company of a reorganization, merger or consolidation, in each case, unless, following such reorganization, merger or consolidation, (i) more than fifty percent (50%) of, respectively, the then outstanding shares of common stock of the corporation resulting from such reorganization, merger or consolidation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the outstanding Company common stock and outstanding Company voting securities immediately prior to such reorganization, merger or consolidation in substantially the same proportions as their ownership, immediately prior to such reorganization, merger or consolidation, of the outstanding Company stock and outstanding Company voting securities, as the case may be, (ii) no Person (excluding the Company, any employee benefit plan or related trust of the Company or such corporation resulting from such reorganization, merger or consolidation and any Person beneficially owning, immediately prior to such reorganization, merger or consolidation, directly or indirectly, thirty percent (30%) or more of the outstanding Company common stock or outstanding voting securities, as the case may be) beneficially owns, directly or indirectly, thirty percent (30%) or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such reorganization, merger or consolidation or the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors and (iii) at least a majority of the members of the board of directors of the corporation resulting from such reorganization, merger or consolidation were members of the Incumbent Board at the time of the execution of the initial agreement providing for such reorganization, merger or consolidation; or

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(D) Approval by the shareholders of the Company of (i) a complete liquidation or dissolution of the Company or (ii) the sale or other disposition of all or substantially all of the assets of the Company, other than to a corporation with respect to which following such sale or other disposition (a) more than fifty percent (50%) of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the outstanding Company common stock and outstanding Company voting securities immediately prior to such sale or other disposition in substantially the same proportion as their ownership, immediately prior to such sale or other disposition, of the outstanding Company common stock and outstanding Company voting securities, as the case may be, (b) no Person (excluding the Company and any employee benefit plan or related trust of the Company or such corporation, any Affiliated Person and any Person beneficially owning, immediately prior to such sale or other disposition, directly or indirectly, thirty percent (30%) or more of the outstanding Company common stock or outstanding Company voting securities, as the case may be) beneficially owns, directly or indirectly, thirty percent (30%) or more of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors and (c) at least a majority of the members of the board of directors of such corporation were members of the Incumbent Board at the time of the execution of the initial agreement or action of the Board providing for such sale or other disposition of assets of the Company.

Notwithstanding any other provision of this Section 5.6.4 to the contrary, an occurrence shall not constitute a Change in Control if it does not constitute a change in the ownership or effective control of, or in the ownership of a substantial portion of the assets of, the Company, within the meaning of Code Section 409A(a)(2)(A)(v) and its interpretive regulations.

5.7 Payroll Withholdings . The Company may withhold from any compensation or benefits payable under this Agreement all federal, state, city, or other taxes or deductions as may be required pursuant to any law or governmental regulation or ruling.

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5.8 Compliance With Post-Employment Restrictions . If Employee breaches, or threatens to breach any of the covenants or provisions set forth in Sections 6 and 7 of this Agreement, then in such event the Company shall have the right immediately and permanently to discontinue payment and provision of any of the severance compensation and benefits payable under this Agreement. The Employee and Company acknowledge and agree that such remedy is in addition to, and not in lieu of, any and all other legal and/or equitable remedies that may be available to the Company in connection with the Employee's breach or threatened breach of any of the covenants or provisions of this Agreement.

5.9 Release Agreement . As a condition of receiving the severance benefits described in Sections 5.6.2(c), 5.6.2(d), 5.6.4(c), 5.6.4(d), or 5.6.4(e), Employee will be required to sign a standard release agreement acceptable to the Company in which he releases and waives all claims which he may have against the Company or any affiliate, employee, shareholder, officer, director, agent or representative of the Company (except for his rights under this Agreement or any other vested rights Employee may have under any insurance, pension, employee stock ownership or stock option plans sponsored or made available by the Company). The Company will provide such release agreement to Employee at the termination of Employee's employment with the Company. As part of the release agreement, Employee will be required (a) to agree to cooperate with the Company with respect to any business matters about which he has knowledge, including any litigation or threatened litigation, (b) agree not to cooperate with any claimants against the Company unless required by law to do so, (c) agree not to make any negative or derogatory comments about the Company or its executives and (d) affirm his post-termination obligations under this Agreement, including without limitation the obligations set forth in Sections 6 and 7.

5.10 Delay of Separation Payments to Specified Employee . Notwithstanding any other provisions of this Agreement, if any amount payable to Employee under this Agreement on account of Employee’s separation from service with the Company constitutes deferred compensation within the meaning of Code Section 409A, and Employee is a specified employee, within the meaning of Code Section 409A(a)(2)(B)(i), on the date of his separation from service, payment of the amount shall be delayed until the first business day that is at least six (6) months after the date on which Employee’s separation from service occurred.

6. Non-competition .

6.1 General . Employee acknowledges that his position with the Company is special, unique and intellectual in character and his position in the Company places him in a position of confidence and trust with employees and customers of the Company. Employee further acknowledges, recognizes, and represents receipt of sufficient consideration for these restraints in the form of the Base Salary and other valuable consideration contained herein. The restrictions and obligations contained in this Section 6 shall survive the Term of this Agreement. Notwithstanding the above, if the Company terminates, or elects not to renew this Agreement, and subsequently terminates Employee’s employment without the payment of severance payments equivalent to 100% of Employee’s Base Salary in effect at the time of termination, which shall be payable in lump sum, the Employee will not be subject to the restrictions and obligations of this Section 6.

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6.2 Non-competition . Employee agrees that during his employment with the Company and for a period of one (1) year immediately after the termination of Employee’s employment with the Company (if but only if this Agreement was in effect at the time of such termination), thereafter Employee shall not:

6.2.1 Either alone or in concert with others, whether as director, officer, consultant, principal, employee, agent or otherwise, engage in or contribute Employee’s knowledge and abilities to any business or entity in competition with the Company (“Competing Business”);

6.2.2 Be employed by, work for, consult with, or act in any other capacity for, any person or entity that is engaged in any Competing Business if in such employment, work or capacity Employee likely would, because of the nature of his position with, or work for, the competitor and his knowledge of the Company's Confidential Information, inevitably use and/or disclose any of the Company's Confidential Information in his work for or with such competitor;

6.2.3 Solicit, recruit, hire, employ or attempt to hire or employ any person who is then or within the proceeding one (1) year period was, an employee of the Company, or otherwise urge, induce or seek to induce any person to terminate his/her employment with the Company;

6.2.4 Solicit, urge, induce or seek to induce any of the Company's independent contractors, subcontractors, vendors, suppliers, customers or consultants to terminate their relationship with, or representation of, the Company or to cancel, withdraw, reduce, limit or in any manner modify any such person's or entity's business with or representation of, the Company for whatever purpose or reason;

6.2.5 Take any action intended to harm the Company or its reputation, which the Company reasonably concludes could lead to unwanted or unfavorable publicity to the Company;

6.2.6 The restrictive time periods set forth in this Section 6.2 shall not expire during any period in which Employee is in violation of any of the restrictive covenants set forth in this Section 6.2, and all restrictions shall automatically be extended by the period Employee was in violation of any such restrictions;

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6.2.7 The restrictive covenants contained in this Section 6.2 prohibit Employee from engaging in certain activities directly or indirectly, whether on his own behalf or on behalf of any other person or entity.

6.2.8 The covenants and restrictions in this Section 6.2 are separate and divisible, and to the extent any covenant, provision or portion of Section 6.2 is determined to be unenforceable or invalid for any reason, such unenforceability or invalidity shall not affect the enforceability or validity of the remainder of the Agreement. Should any particular covenant, restriction, provision or portion of Section 6.2 be held unreasonable or unenforceable for any reason, including, without limitation, the time period, geographical area, and/or scope of activity covered by any restrictive covenant, provision or clause, such covenant, provision or clause shall automatically be deemed reformed such that the contested covenant, provision or portion will have the closest effect permitted by applicable law to the original form and shall be given effect and enforced as so reformed to the extent reasonable and enforceable under applicable law.

6.3 Definition of “Competing Business ” : The term “Competing Business” shall mean:

6.3.1 The retail footwear business of Collective Brands, Inc.; Brown Shoe Company, Inc.; Designer Shoe Warehouse; Rack Room (dba); Kohls Corporation; Shoe Station (dba); Shoe City (dba); Shoe Pavilion, Inc., Shoe Department; Finish Line, Inc.; Foot Locker, Inc.; Dick’s Sporting Goods, Inc.; The Sports Authority, Inc.; Off Broadway Shoe Warehouse; and their subsidiaries, and any other company which sells footwear at retail to consumers within 25 miles of any Company store at price points competitive, or likely to be competitive, with the Company, where the footwear sales of such other company constitute at least fifteen percent (15%) of such company's annual revenues.

6.3.2 Ownership of an investment of less than 5% of any class of equity or debt security of a publicly-held Competing Business shall not constitute ownership or participation in violation of the above.

6.4 Acknowledgment Regarding Restrictions . Employee acknowledges and agrees that he understands the restrictions in Section 6, and that they are reasonable and enforceable, in view of, among other things, the Employee’s position within the Company, the highly competitive nature of the Company's business, and the confidential nature of the information the Employee has been provided. Employee further agrees that the Company would not have adequate protection if Employee were permitted to work for its competitors in violation of the terms of this Agreement since the Company would be unable to verify whether its Confidential Information was being disclosed and/ or misused, and whether Employee was involved in diverting the Company’s customers and/or its customer goodwill.

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6.5 Disclosures Concerning New Employment . Employee agrees that he (a) will immediately, within ten (10) days, notify the Company in writing of his employment, engagement or other affiliation with any other business or entity during the two (2) years immediately following the termination of Employee's employment with the Company and (b) will provide a copy of Section 6 and 7 of this Agreement to any prospective employer before accepting employment or other work engagement with any such employer.

7. Confidential or Proprietary Information

7.1 Confidentiality . As used in this Agreement, the term "Confidential Information" means any and all of the Company's trade secrets, confidential and proprietary information and all other information and data of the Company that is not generally known to third persons who could derive economic value from its use or disclosure, including, without limitation, the Company's profile of prospective or current vendors or customers, business methods and structure, details of the Company's contracts and business matters, employee compensation, personnel information, marketing strategies and plans, business plans, pricing information and strategies, costs information, and financial data, whether or not reduced to writing or other tangible medium of expression, including work product created by Employee in rendering services to the Company. During his employment with the Company and thereafter, Employee will not use or disclose to others any of the Confidential Information except as authorized in writing by the Company or in the performance of work assigned Employee by the Company. Employee also will abide by the Company's policies protecting the Confidential Information. Employee's confidentiality obligations shall continue as long as the Confidential Information remains confidential, and shall not apply to information which becomes generally known to the public through no fault or action of Employee. Employee agrees that the Company owns the Confidential Information and Employee has no rights, title or interest in any of the Confidential Information. At the Company's request or upon termination of Employee's employment with the Company for any reason, Employee will immediately deliver to the Company all materials (including all copies and electronically stored data) containing any Confidential Information in Employee's possession, custody or control.

7.2 Trade Secrets-Developments . All improvements, developments, concepts, and ideas ("Developments") relating to the Company's business, or capable of beneficial use by the Company, including, but not limited to, marketing, confidential and trade secret information, techniques, discoveries, slogans, designs, artwork, and writings, which the Employee has made or will make during his employment with the Company are the sole and exclusive property of the Company without charge to the Company other than the Employee's compensation.

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7.3 Acknowledgement . Employee agrees that the restrictions set forth in Sections 7.1 and 7.2 are reasonable and necessary to protect the trade secrets, confidential information, intellectual property rights and goodwill of the Company. The restrictions and obligations contained in this Section 7 shall survive the term of this Agreement.

8. Remedies . In the event of a breach or threatened breach by the Employee of any of the above provisions, the Company shall be entitled to an injunction restraining Employee from such breach, in addition to all other remedies which the Company shall be entitled to pursue. The Company also shall be entitled to recover from Employee all litigation costs and attorneys' fees incurred by the Company in any action or proceeding relating to this Agreement in which the Company prevails, including, but not limited to, any action or proceeding in which the Company seeks enforcement of this Agreement or seeks relief from Employee's violation of this Agreement. Nothing herein shall be construed as prohibiting the Company from pursuing any other remedies available for such breach, threatened breach, or any breach of this Agreement.

9. Survival of Post-Termination Obligations . Employee acknowledges and agrees that his post-termination obligations under this Agreement, including without limitation Employee's non-competition and confidentiality obligations set forth in Sections 6 and 7 of this Agreement, shall survive the termination of Employee's employment with the Company, regardless whether such termination is voluntary or involuntary, or is with or without Cause.

10. Notices . All notices, requests, consents, and other communications under this Agreement shall be in writing and shall be deemed to have been delivered on the date personally delivered or the dated mailed, postage prepaid, by certified mail, return receipt requested, or telegraphed and confirmed, or faxed and confirmed, if addressed to the respective parties as follows;

To Employee:	Carl N. Scibetta
	4252 Birkshire Heights
	Fort Mill, South Carolina 29708

To Company:	Chief Executive Officer
	Shoe Carnival, Inc.
	7500 East Columbia Street
	Evansville, Indiana 47715

Either party hereto may designate a different address by providing written notice of such new address to the other party hereto.

11. Waiver . The failure or delay of the Company at any time or times to require performance of, or to exercise any of its powers, rights or remedies with respect to, any term or provision of this Agreement or any other aspect of Employee’s conduct or employment shall not affect the Company’s right to later enforce any such term or provision.

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12. Assignment . The Company shall have the right to assign this Agreement. This Agreement shall inure to the benefit of, may be enforced by, and shall be binding on, any and all successors and assigns of the Company, including, without limitation, by asset assignment, stock sale, merger, consolidation or other corporate reorganization, and shall be binding on Employee, his executors, administrators, personal representatives and other successors in interest. Employee shall not have the right to assign this Agreement nor any of his rights, powers, duties or obligations hereunder.

13. Code Section 409A Standards . This Agreement, and all other nonqualified deferred compensation plans in which the Employee participates, are intended to comply with the standards for nonqualified deferred compensation plans established by Code Section 409A and its interpretive regulations and other regulatory guidance (the “Section 409A Standards"), to the extent applicable, and this Agreement shall be construed accordingly. In construing or interpreting any vague or ambiguous provisions of this Agreement, the interpretation that will prevail is the interpretation that will cause this Agreement to comply with the Section 409A Standards. Any provision of this Agreement, or any deferred compensation provided under it, that would fail to satisfy the Section 409A Standards shall not have any force or effect until it is amended to comply with the applicable Section 409A Standards, which amendment may be retroactive to the extent permissible under the Section 409A Standards.

14. Entire Agreement . This Agreement cancels and supersedes all prior negotiations, discussions, commitments and understandings between the parties relating hereto, whether oral or written. This Agreement embodies the entire agreement and understanding between such parties with respect to the matters covered hereby. Neither party shall be bound by any term or condition other than as is expressly set forth herein.

15. Amendment . This Agreement may be amended only by an instrument in writing executed by the parties hereto.

16. Governing Law: Forum Selection . This Agreement shall be construed and enforced in accordance with and governed by the laws of the State of Indiana, without regard to the conflicts of law rules thereof. Any legal action relating to this Agreement shall be commenced and maintained exclusively before any appropriate state court of record in Vanderburgh County, Indiana, or, if necessary because of a federal question mandating jurisdiction in the federal courts is involved, the United States District Court for the Southern District of Indiana, Evansville Division, and the parties hereby submit the jurisdiction of such courts and waive any right to challenge or otherwise raise questions of personal jurisdiction or venue in any action commenced or maintained in such courts.

17. Severability . The parties intend that the provisions of this Agreement shall be enforced to the fullest extent permissible under the applicable law. Should any provision of this Agreement be unenforceable or invalid for any reason, such unenforceability or invalidity shall not affect the enforceability or validity of the remainder of the Agreement.

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IN WITNESS WHEREOF, the parties hereto have executed this Employment and Noncompetition Agreement on this 4th day of December, 2012.

SHOE CARNIVAL, INC.: "Company"		CARL N. SCIBETTA: "Employee"

By:	/s/Clifton E. Sifford	/s/Carl N. Scibetta

Its:	President & CEO

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Exhibit 21

SUBSIDIARIES OF SHOE CARNIVAL, INC.

Subsidiary	State of Incorporation/Organization	Percentage of Ownership

SCHC, Inc.	Delaware	100%
SCLC, Inc.	Delaware	100% Owned by SCHC, Inc.
Shoe Carnival Ventures, LLC	Indiana	100%

EXHIBIT 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-183748, 333-153421, 333-117231, and 333-60114) relating to the 2000 Stock Option and Incentive Plan of Shoe Carnival, Inc., the Registration Statements on Form S-8 (Nos. 33-74050 and 333-44047) relating to the 1993 Stock Option and Incentive Plan of Shoe Carnival, Inc., the Registration Statement on Form S-8 (No. 33-80979) relating to the Employee Stock Purchase Plan of Shoe Carnival, Inc., and the Registration Statements on Form S-8 (No. 333-82819 and No. 35-1736614) relating to the Outside Directors Stock Option Plan of Shoe Carnival, Inc. of our reports dated April 15, 2013, relating to the consolidated financial statements and financial statement schedule of Shoe Carnival, Inc. and subsidiaries (the “Company”), and the effectiveness of the Company’s internal control over financial reporting, appearing in this Annual Report on Form 10-K of the Company for the year ended February 2, 2013.

/s/ DELOITTE & TOUCHE LLP

Indianapolis, Indiana

April 15, 2013

Exhibit 31.1

SHOE CARNIVAL, INC.

CERTIFICATION PURSUANT TO RULE 13a-14(a)/15d-14(a) OF THE SECURITIES

EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

I, Clifton E. Sifford, certify that:

I have reviewed this annual report on Form 10-K of Shoe Carnival, Inc.;

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: April 15, 2013	By:	/s/ Clifton E. Sifford
		Clifton E. Sifford
		President, Chief Executive Officer and
		Chief Merchandising Officer

Exhibit 31.2

SHOE CARNIVAL, INC.
CERTIFICATION PURSUANT TO RULE 13a-14(a)/15d-14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002

I, W. Kerry Jackson, certify that:

I have reviewed this annual report on Form 10-K of Shoe Carnival, Inc.;

(a)

(b)

(c)

(d)

(a)

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: April 15, 2013	By:	/s/ W. Kerry Jackson
		W. Kerry Jackson
		Senior Executive Vice President
		Chief Operating and Financial Officer and Treasurer

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C.
SECTION 1350,
AS ADOPTED PURSUANT TO SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Shoe Carnival, Inc. (the "Company") on Form 10-K for the period ending February 2, 2013 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Clifton E. Sifford, President, Chief Executive Officer and Chief Merchandising Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: April 15, 2013	By:	/s/ Clifton E. Sifford
		Clifton E. Sifford
		President, Chief Executive Officer and
		Chief Merchandising Officer

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C.

SECTION 1350,

AS ADOPTED PURSUANT TO SECTION

906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Shoe Carnival, Inc. (the "Company") on Form 10-K for the period ending February 2, 2013 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I W. Kerry Jackson, Senior Executive Vice President, Chief Operating and Financial Officer and Treasurer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: April 15, 2013	By:	/s/ W. Kerry Jackson
		W. Kerry Jackson
		Senior Executive Vice President
		Chief Operating and Financial Officer and Treasurer