UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

Form 10-Q

|[X]        |  | Quarterly
      report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
      1934 
|---------- |  | ----------------------------------------------------------------------------------------------------
|           |  | For the
      quarterly period ended November 3, 2007                                               
|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
    
    (IRS
      Employer Identification Number)incorporation or organization)7500 East
      Columbia StreetEvansville, IN
    
    47715(Address of
      principal executive offices)
    
    (Zip
      code)


(812) 867-6471(Registrants telephone number, including area
    code)  NOT
      APPLICABLE(Former name, former address and former fiscal
      year, if changed since last
report)


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 is a large accelerated
filer, an accelerated filer, or a non-accelerated filer. See definition of
accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange
Act.

[  ]Large
      accelerated filer
    [X]Accelerated
      filer
    [ 
      ]Non-accelerated filer


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

[ 
      ]Yes
    [X]No


APPLICABLE ONLY TO CORPORATE
ISSUERS:

Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.

Number of Shares of Common Stock, $.01 par value, outstanding at December
10, 2007 were 12,668,746.

---

|SHOE
      CARNIVAL, INC.
|-------------------------
|INDEX TO
      FORM 10-Q 
|                         
|                         
|Part I                   
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|                         
|                         
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|                         
|Part II                  
|                         
|                         
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|                         

2

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SHOE CARNIVAL, INC.PART I -
FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SHOE CARNIVAL,
INC.CONDENSED CONSOLIDATED BALANCE
SHEETSUnaudited

|                                                                | November 3, |         | February 3, |  | October 28,
|--------------------------------------------------------------- | ----------- | ------- | ----------- |  | -----------
|(In
      thousands, except per share data)                     | 2007        |         | 2007        |  | 2006       
|Assets                                                          |             |         |             |  |            
|Current
      Assets                                            |             |         |             |  |            
|Cash and cash equivalents                                       | $           | 6,671   |             |  | $          
|Accounts receivable                                             |             | 1,579   |             |  |            
|Merchandise inventories                                         |             | 200,242 |             |  |            
|Deferred income tax benefit                                     |             | 2,558   |             |  |            
|Other                                                           |             | 8,368   |             |  |            
|Total Current
      Assets                                      |             | 219,418 |             |  |            
|Property and equipment-net                                      |             | 74,194  |             |  |            
|Total
      Assets                                              | $           | 293,612 |             |  | $          
|                                                               
|                                                               
|Liabilities and Shareholders' Equity                            |             |         |             |  |            
|Current
      Liabilities:                                      |             |         |             |  |            
|Accounts payable                                                | $           | 51,581  |             |  | $          
|Accrued and other liabilities                                   |             | 13,355  |             |  |            
|Total Current Liabilities                                       |             | 64,936  |             |  |            
|Long-term
      debt                                            |             | 14,165  |             |  |            
|Deferred lease incentives                                       |             | 5,528   |             |  |            
|Accrued
      rent                                              |             | 6,124   |             |  |            
|Deferred income taxes                                           |             | 844     |             |  |            
|Deferred
      compensation                                     |             | 3,690   |             |  |            
|Other                                                           |             | 809     |             |  |            
|Total
      Liabilities                                         |             | 96,096  |             |  |            
|                                                               
|Shareholders' Equity:                                           |             |         |             |  |            
|Common stock, $.01 par value, 50,000                            |             |         |             |  |            
|shares authorized, 13,671, 13,561 and 13,534
      shares       |             |         |             |  |            
|issued at November 3, 2007, February 3,
      2007              |             |         |             |  |            
|and October 28, 2006                                            |             | 137     |             |  |            
|Additional paid-in capital                                      |             | 75,357  |             |  |            
|Retained earnings                                               |             | 147,420 |             |  |            
|Treasury stock, at cost, 1,002 shares at November
      3, 2007 |             |         |             |  |            
|and 0 shares at February 3, 2007 and October 28,
      2006     |             | (25,398 | )           |  |            
|Total
      Shareholders' Equity                                |             | 197,516 |             |  |            
|Total Liabilities and Shareholders' Equity                      | $           | 293,612 |             |  | $          

See notes to condensed consolidated
financial statements.

3

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SHOE CARNIVAL,
INC.CONDENSED CONSOLIDATED STATEMENTS
OF INCOMEUnaudited

|                                            |             |         |             |  |                 |         |                   
|------------------------------------------- | ----------- | ------- | ----------- |  | --------------- | ------- | ------------------
|                                            | Thirteen    |         | Thirteen    |  | **Thirty-nine** |         | **Thirty-nine**   
|                                            | Weeks Ended |         | Weeks Ended |  | Weeks Ended     |         | **Weeks****Ended**
|                                            | November 3, |         | October 28, |  | November 3,     |         | October 28,       
|(In
      thousands, except per share data) | 2007        |         | 2006        |  | 2007            |         | 2006              
|Net sales                                   | $           | 173,881 |             |  | $               | 189,086 |                   
|Cost of sales
      (including buying,      |             |         |             |  |                 |         |                   
|distribution and occupancy costs)           |             | 123,320 |             |  |                 | 132,349 |                   
|Gross profit                                |             | 50,561  |             |  |                 | 56,737  |                   
|Selling, general
      and administrative   |             |         |             |  |                 |         |                   
|expenses                                    |             | 43,627  |             |  |                 | 43,275  |                   
|Operating income                            |             | 6,934   |             |  |                 | 13,462  |                   
|Interest
      income                       |             | (101    | )           |  |                 | (353    | )                 
|Interest expense                            |             | 115     |             |  |                 | 33      |                   
|Income before
      income taxes            |             | 6,920   |             |  |                 | 13,782  |                   
|Income tax expense                          |             | 2,734   |             |  |                 | 5,406   |                   
|Net
      income                            | $           | 4,186   |             |  | $               | 8,376   |                   
|                                           
|Net income per share:                       |             |         |             |  |                 |         |                   
|Basic                                       | $           | 0.33    |             |  | $               | 0.62    |                   
|Diluted                                     | $           | 0.33    |             |  | $               | 0.61    |                   
|                                           
|Average shares outstanding:                 |             |         |             |  |                 |         |                   
|Basic                                       |             | 12,604  |             |  |                 | 13,414  |                   
|Diluted                                     |             | 12,777  |             |  |                 | 13,751  |                   

See notes to condensed consolidated
financial statements.

4

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SHOE CARNIVAL, INC.CONDENSED CONSOLIDATED STATEMENT OF
SHAREHOLDERS' EQUITYUnaudited

|                              |              |  |          |   |          |   |          |  | Additional |        |       |  |       |         |   |  |   |         |   |  |  
|----------------------------- | ------------ |  | -------- | - | -------- | - | -------- |  | ---------- | ------ | ----- |  | ----- | ------- | - |  | - | ------- | - |  | -
|                              | Common Stock |  | Paid-In  |   | Retained |   | Treasury |  |            |        |      
|(In
      thousands)          | Issued       |  | Treasury |   | Amount   |   | Capital  |  | Earnings   |        | Stock |  | Total
|Balance at                    |              |  |          |   |          |   |          |  |            |        |       |  |       |         |   |  |   |         |   |  |  
|February 3, 2007              | 13,561       |  | 0        |   |          | $ | 136      |  | $          | 73,959 |       |  | $     | 135,854 |   |  | $ | 0       |   |  | $
|Stock option
      exercises  | 23           |  | 5        |   |          |   |          |  |            | 241    |       |  |       |         |   |  |   | 168     |   |  |  
|Stock-based compensation      |              |  |          |   |          |   |          |  |            |        |       |  |       |         |   |  |   |         |   |  |  
|income tax benefit            |              |  |          |   |          |   |          |  |            | 352    |       |  |       |         |   |  |   |         |   |  |  
|Employee stock
      purchase |              |  |          |   |          |   |          |  |            |        |       |  |       |         |   |  |   |         |   |  |  
|plan purchases                | 2            |  | 5        |   |          |   |          |  |            | 21     |       |  |       |         |   |  |   | 121     |   |  |  
|Restricted stock awards       | 85           |  | 10       |   |          |   | 1        |  |            | (287   | )     |  |       |         |   |  |   | 286     |   |  |  
|Common
      stock            |              |  |          |   |          |   |          |  |            |        |       |  |       |         |   |  |   |         |   |  |  
|repurchased                   |              |  | (1,022   | ) |          |   |          |  |            |        |       |  |       |         |   |  |   | (25,973 | ) |  |  
|Stock-based compensation      |              |  |          |   |          |   |          |  |            |        |       |  |       |         |   |  |   |         |   |  |  
|expense                       |              |  |          |   |          |   |          |  |            | 1,071  |       |  |       |         |   |  |   |         |   |  |  
|Cumulative
      effect of    |              |  |          |   |          |   |          |  |            |        |       |  |       |         |   |  |   |         |   |  |  
|adoption of FIN 48            |              |  |          |   |          |   |          |  |            |        |       |  |       | (114    | ) |  |   |         |   |  |  
|Net income                    |              |  |          |   |          |   |          |  |            |        |       |  |       | 11,680  |   |  |   |         |   |  |  
|Balance
      at              |              |  |          |   |          |   |          |  |            |        |       |  |       |         |   |  |   |         |   |  |  
|November 3,
      2007        | 13,671       |  | (1,002   | ) |          | $ | 137      |  | $          | 75,357 |       |  | $     | 147,420 |   |  | $ | (25,398 | ) |  | $

See notes to condensed consolidated
financial statements.

5

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SHOE CARNIVAL,
INC.CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWSUnaudited

|                                                        | Thirty-nine |         | Thirty-nine
|------------------------------------------------------- | ----------- | ------- | -----------
|                                                        | Weeks Ended |         | Weeks Ended
|                                                        | November 3, |         | October 28,
|(In
      thousands)                                    | 2007        |         | 2006       
|Cash Flows From Operating Activities                    |             |         |            
|Net income                                              | $           | 11,680  |            
|Adjustments to reconcile net income to
      net        |             |         |            
|cash (used in) provided by operating
      activities:  |             |         |            
|Depreciation and amortization                           |             | 11,781  |            
|Stock-based compensation                                |             | 1,071   |            
|Loss on retirement and impairment of assets             |             | 508     |            
|Deferred income taxes                                   |             | (160    | )          
|Lease incentives                                        |             | 418     |            
|Other                                                   |             | (545    | )          
|Changes in operating assets and
      liabilities:      |             |         |            
|Accounts receivable                                     |             | (631    | )          
|Merchandise inventories                                 |             | (3,580  | )          
|Accounts payable and accrued liabilities                |             | (16,307 | )          
|Other                                                   |             | (6,543  | )          
|Net cash (used in) provided by operating activities     |             | (2,308  | )          
|                                                       
|Cash Flows From Investing Activities                    |             |         |            
|Purchases of property and equipment                     |             | (15,263 | )          
|Proceeds from sale of property and
      equipment      |             | 379     |            
|Other                                                   |             | 6       |            
|Net cash used in investing activities                   |             | (14,878 | )          
|                                                       
|Cash Flows From Financing Activities                    |             |         |            
|Borrowings under line of credit                         |             | 49,970  |            
|Payments on line of credit                              |             | (35,805 | )          
|Proceeds from issuance of stock                         |             | 551     |            
|Excess tax benefits from stock-based
      compensation |             | 275     |            
|Common stock repurchased                                |             | (25,973 | )          
|Net cash (used in) provided by financing activities     |             | (10,982 | )          
|Net decrease in
      cash and cash equivalents         |             | (28,168 | )          
|Cash and cash equivalents at beginning of period        |             | 34,839  |            
|Cash and Cash
      Equivalents at End of Period        | $           | 6,671   |            
|                                                       
|Supplemental disclosures of cash flow information:      |             |         |            
|Cash paid during period for interest                    | $           | 130     |            
|Cash paid during period for income
      taxes          | $           | 7,833   |            
|Capital expenditures incurred but not yet paid          | $           | 2,405   |            

See notes to condensed consolidated
financial statements.

6

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SHOE CARNIVAL, INC.NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTSUnaudited

Note 1 - Basis of
Presentation

In our opinion, the accompanying
unaudited condensed consolidated financial statements contain all adjustments
necessary to present fairly our financial position and the results of our
operations and our cash flows for the periods presented. Certain information and
disclosures normally included in the notes to consolidated financial statements
have been condensed or omitted according to the rules and regulations of the
Securities and Exchange Commission (the "SEC"), although we believe that the
disclosures are adequate to make the information presented not misleading. The
results of operations for the interim periods are not necessarily indicative of
the results to be expected for the full year. The condensed consolidated
financial statements should be read in conjunction with the audited consolidated
financial statements and the notes thereto contained in our Annual Report on
Form 10-K for the fiscal year ended February 3, 2007.

Note 2 - Net Income Per
Share

Net income per share of common stock is
based on the weighted average number of shares and common share equivalents
outstanding during the period. The following table presents a reconciliation of
our basic and diluted weighted average common shares outstanding as required by
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share":

|                                            | Thirteen              |  | Thirteen              |  | Thirty-nine        |  | Thirty-nine          
|------------------------------------------- | --------------------- |  | --------------------- |  | ------------------ |  | ---------------------
|                                            | **Weeks
      Ended** |  | **Weeks
      Ended** |  | **Weeks****Ended** |  | **Weeks
      Ended**
|                                            | November
      3,     |  | October
      28,     |  | November
      3,  |  | October
      28,    
|(In
      thousands)                        | 2007                  |  | 2006                  |  | 2007               |  | 2006                 
|Basic shares                                | 12,604                |  | 13,414                |  | 13,065             |  | 13,338               
|Dilutive effect
      of stock-based awards | 173                   |  | 337                   |  | 297                |  | 368                  
|Diluted shares                              | 12,777                |  | 13,751                |  | 13,362             |  | 13,706               

For the above current and prior year
periods, there were no anti-dilutive shares.

Note 3  Recently Issued Accounting
Pronouncements

In July 2006, the Financial Accounting
Standards Board (the "FASB") issued FASB Interpretation No. 48, "Accounting for
Uncertainty in Income Taxes" ("FIN 48"), an interpretation of FASB No. 109
("SFAS No. 109"). FIN 48 clarifies the accounting for the uncertainty in income
taxes recognized by prescribing a recognition threshold that a tax position is
required to meet before being recognized in the financial statements.
Additionally, FIN 48 provides guidance on measurement, derecognition,
classification, accounting in interim periods and disclosure requirements for
uncertain tax positions. We adopted the provisions of FIN 48 on February 4,
2007. See Note 5  "Income Taxes", in this Quarterly Report on Form 10-Q for
additional information, including the effects of adoption of this interpretation
on our consolidated financial statements.

In September 2006, the FASB issued SFAS
No. 157, "Fair Value Measurements" ("SFAS No. 157"). SFAS No. 157 defines fair
value, establishes a framework for measuring fair value in generally accepted
accounting principles, and expands disclosures about fair value measurements.
SFAS No. 157 is effective for financial statements issued for fiscal years
beginning after November 15, 2007, and interim periods within those fiscal
years. We do not believe the adoption of SFAS No. 157 will have a material
impact on our consolidated financial statements.

In February 2007, the FASB issued SFAS
No. 159, "The Fair Value Option for Financial Assets and Financial
LiabilitiesIncluding an Amendment of FASB Statement No. 115" ("SFAS No. 159").
SFAS No. 159 allowscompanies the choice to measure many
financial instruments and certain other items at fair value. This gives
companies the opportunity to mitigate volatility in reported earnings caused by
measuring related assets and liabilities differently without having to apply
complex hedge accounting provisions. The provisions of SFAS No. 159 will be
effective for fiscal years beginning after November 15, 2007. We are currently
evaluating the impact the adoption of SFAS No. 159 will have on our consolidated
financial statements.

7

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Note 4 - Stock-Based Compensation

Stock Options

The following table summarizes the
stock option transactions pursuant to the stock-based compensation plans for the
thirty-nine week period ended November 3, 2007:

|                                         |                 |   |                |       |              | Weighted- |                 |   |      
|---------------------------------------- | --------------- | - | -------------- | ----- | ------------ | --------- | --------------- | - | -----
|                                         |                 |   |                |       |              | Average   |                 |   |      
|                                         |                 |   | Weighted-      |       | Remaining    |           | Aggregate      
|                                         | Number
      of |   | Average        |       | Contractual  |           | Intrinsic Value
|                                         | Shares          |   | Exercise Price |       | Term (Years) |           | (in thousands) 
|Outstanding at February 3, 2007          | 652,946         |   | $              | 12.51 |              |           |                 |   |      
|Forfeited or expired                     | (6,301          | ) |                | 11.99 |              |           |                 |   |      
|Exercised                                | (28,836         | ) |                | 14.18 |              |           |                 |   |      
|Outstanding at
      November 3, 2007    | 617,809         |   | $              | 12.44 |              | 3.82      |                 | $ | 1,944
|Options outstanding at November 3, 2007, |                 |   |                |       |              |           |                 |   |      
|net of estimated forfeitures             | 617,412         |   | $              | 12.44 |              | 3.82      |                 | $ | 1,943
|Exercisable at
      November 3, 2007    | 616,141         |   | $              | 12.44 |              | 3.81      |                 | $ | 1,941

The following table summarizes
information regarding outstanding and exercisable options at November 3, 2007:

|               |       |                  |       |                | Options Outstanding |                | Options Exercisable
|-------------- | ----- | ---------------- | ----- | -------------- | ------------------- | -------------- | -------------------
|               |       |                  |       |                | Number              |                | Weighted           
|Range of       |       | of
      Options |       | Average        |                     | Average        |                    
|Exercise Price |       | Outstanding      |       | Remaining Life |                     | Exercise Price |                    
|$              | 4.38  |                 | 5.75  |                | 61,662              |                | 3.08               
|$              | 8.56  |                 | 11.95 |                | 182,125             |                | 1.53               
|$              | 12.14 |                 | 15.54 |                | 209,902             |                | 5.53               
|$              | 16.10 |                 | 17.12 |                | 164,120             |                | 4.45               

The following table summarizes
information regarding options exercised during the thirteen and thirty-nine week
periods ended November 3, 2007 and October 28, 2006:

|                                      | Thirteen    |   | Thirteen    |   | Thirty-nine |  | Thirty-nine
|------------------------------------- | ----------- | - | ----------- | - | ----------- |  | -----------
|                                      | Weeks Ended |   | Weeks Ended |   | Weeks Ended |  | Weeks Ended
|                                      | November 3, |   | October 28, |   | November 3, |  | October 28,
|                                      | 2007        |   | 2006        |   | 2007        |  | 2006       
|Total intrinsic value (1)             | $           | 0 |             | $ | 1,300,000   |  | $          
|Total cash
      received             | $           | 0 |             | $ | 656,000     |  | $          
|Associated excess income tax benefits |             |   |             |   |             |  |            
|recorded                              | $           | 0 |             | $ | 138,000     |  | $          

|(1) |  | Defined as the
      difference between the market value at exercise and the grant price of
      stock options exercised.
|--- |  | --------------------------------------------------------------------------------------------------------------------------

8

---

The following table summarizes
information regarding stock-based compensation expense for non-vested options
recognized during the thirteen and thirty-nine week periods ended November 3,
2007 and October 28, 2006:

|                                        | Thirteen    |        | Thirteen    |   | Thirty-nine |  | Thirty-nine
|--------------------------------------- | ----------- | ------ | ----------- | - | ----------- |  | -----------
|                                        | Weeks Ended |        | Weeks Ended |   | Weeks Ended |  | Weeks Ended
|                                        | November 3, |        | October 28, |   | November 3, |  | October 28,
|                                        | 2007        |        | 2006        |   | **2007(1)** |  | 2006       
|Stock-based compensation expense before |             |        |             |   |             |  |            
|the recognized income tax benefit       | $           | 22,000 |             | $ | 39,000      |  | $          
|Income tax
      benefit                | $           | 9,000  |             | $ | 15,300      |  | $          

|(1) |  | Income tax benefit was
      calculated using an adjusted effective tax rate. The adjusted rate removes
      the tax effect of a reduction in state income taxes from state incentives
      related to the investment in our new distribution
  center.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As of November 3, 2007, there was
approximately $16,000 of unrecognized compensation remaining related to
non-vested stock options. This expense is expected to be recognized over a
period of less than one year.

Restricted Stock
Awards

The following table summarizes the
restricted share transactions for the thirty-nine week period ended November 3,
2007:

|                               |                 |   | Weighted-      
|------------------------------ | --------------- | - | ---------------
|                               | Number
      of |   | Average Grant  
|                               | Shares          |   | Date Fair Value
|Non-vested at February 3, 2007 | 79,517          |   | $              
|Granted                        | 98,000          |   |                
|Forfeited                      | (3,768          | ) |                
|Vested                         | (41,228         | ) |                
|Non-vested at November 3, 2007 | 132,521         |   | $              

The following table summarizes
information regarding stock-based compensation for restricted stock awards
recognized during the thirteen and thirty-nine week periods ended November 3,
2007 and October 28, 2006:

|                                        | Thirteen    |         | Thirteen    |   | Thirty-nine |  | Thirty-nine
|--------------------------------------- | ----------- | ------- | ----------- | - | ----------- |  | -----------
|                                        | Weeks Ended |         | Weeks Ended |   | Weeks Ended |  | Weeks Ended
|                                        | November 3, |         | October 28, |   | November 3, |  | October 28,
|                                        | 2007        |         | 2006        |   | **2007(1)** |  | 2006       
|Stock-based compensation expense before |             |         |             |   |             |  |            
|the recognized income tax benefit       | $           | 212,000 |             | $ | 256,000     |  | $          
|Income tax
      benefit                | $           | 84,000  |             | $ | 100,400     |  | $          

|(1) |  | Income tax benefit was
      calculated using an adjusted effective tax rate. The adjusted rate removes
      the tax effect of a reduction in state income taxes from state incentives
      related to the investment in our new distribution
  center.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The total fair value at grant date of
previously non-vested stock awards that vested during the first nine months of
fiscal 2007 and 2006 was $831,000 and $826,000, respectively. No stock awards
vested during the third quarter of fiscal 2007 or 2006. The weighted-average
grant date fair value of stock awards granted during the first nine months of
fiscal 2007 and 2006 was $29.42 and $22.99, respectively.

As of November 3, 2007, there was
approximately $2.6 million of unrecognized compensation expense remaining
related to non-vested stock awards. The expense is expected to be recognized
over a weighted average period of 2.8 years, incorporating the current
assumptions of the estimated requisite service period required to achieve the
designated performance conditions for performance-based stock awards.

9

---

Employee Stock Purchase
Plan

The following table summarizes
information regarding stock-based compensation expense recognized for the
employee stock purchase plan during the thirteen and thirty-nine week periods
ended November 3, 2007 and October 28, 2006:

|                                            | Thirteen    |       | Thirteen    |   | Thirty-nine        |  | Thirty-nine
|------------------------------------------- | ----------- | ----- | ----------- | - | ------------------ |  | -----------
|                                            | Weeks Ended |       | Weeks Ended |   | Weeks Ended        |  | Weeks Ended
|                                            | November 3, |       | October 28, |   | November 3,        |  | October 28,
|                                            | 2007        |       | 2006        |   | **2007
      (1)** |  | 2006       
|Stock based compensation expense before     |             |       |             |   |                    |  |            
|the recognized income tax
      benefit (2) | $           | 7,000 |             | $ | 7,000              |  | $          
|Income tax
      benefit                    | $           | 3,000 |             | $ | 2,700              |  | $          

|(1) |  | Income tax benefit was
      calculated using an adjusted effective tax rate. The adjusted rate removes
      the tax effect of a reduction in state income taxes from state incentives
      related to the investment in our new distribution center.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) |  | Amounts are representative of the
      15% discount employees are provided for purchases under the employee stock
      purchase plan.                                                                                                                

Note 5  Income Taxes

On February 4, 2007, we adopted the
provisions of FIN 48. This interpretation of SFAS No. 109 clarifies the
accounting for the uncertainty in income taxes recognized by prescribing a
recognition threshold that a tax position is required to meet before being
recognized in the financial statements. FIN 48 also provides guidance on
derecognition of tax benefits, classification on the balance sheet, interest and
penalties, accounting in interim periods, disclosure, and transition. The total
effect of the adoption on our consolidated balance sheet as of February 4, 2007
was a $361,000 increase in tax liability including penalties and interest and a
$247,000 increase in deferred income tax benefits. This resulted in a $114,000
net reduction to retained earnings. After recording these entries, we had a
liability for unrecognized tax benefits, including interest and penalties, of
$775,000 at February 4, 2007.

Our liability for unrecognized tax
benefits is related to tax years encompassing our fiscal years 1999 through
2006, the tax years which remain subject to examination by major tax
jurisdictions as of November 3, 2007.

Prior to the adoption of FIN 48, we
recorded interest expense related to uncertain tax positions as a component of
interest expense. Upon adoption of FIN 48 we changed this policy to record such
interest expense as a component of income tax expense in the consolidated
statement of income. Penalties have historically been included as a component of
income tax expense and will continue to be recorded in this manner with the
adoption of FIN 48. For the quarter ended November 3, 2007, we recorded $13,000
of interest expense related to uncertain tax positions. For the first nine
months of fiscal 2007, we recorded $33,000 of interest expense related to
uncertain tax positions.

Our liability for unrecognized tax
benefits was $809,000 as of November 3, 2007. This total includes $567,000
related to unrecognized tax positions and $242,000 in accrued interest and
penalties. This amount was classified as an Other liability on our consolidated
balance sheet as of November 3, 2007. If our uncertain tax positions become
recognizable, the amount would reduce our effective tax rate. We do not expect
the amount of the liability for unrecognized tax benefits, excluding interest
and penalties, will change significantly within the next 12 months.

Note 6  Stock Repurchase
Program

In fiscal 2006, our Board of Directors
authorized a $50.0 million stock buy-back program, which will terminate upon the
earlier of the repurchase of the maximum amount or December 31, 2008. During the
third quarter of fiscal 2007, we repurchased 339,000 shares of our outstanding
common stock at a cost of $6.4 million under this program. As of November 3,
2007, approximately 1.0 million shares had been repurchased at an aggregate cost
of $25.6 million. The amount that remained available under the existing
repurchase authorization at November 3, 2007 was $24.4 million.

10

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|ITEM 2. | **MANAGEMENT'S DISCUSSION AND ANALYSIS
      OF FINANCIAL CONDITION AND RESULTS OF
  OPERATIONS**
|------- | -------------------------------------------------------------------------------------------------

Factors That May Effect Future
Results

This Quarterly Report on Form 10-Q
contains forward-looking statements, within the meaning of the Private
Securities Litigation Reform Act of 1995, that involve a number of risks and
uncertainties. A number of factors could cause our actual results, performance,
achievements or industry results to be materially different from any future
results, performance or achievements expressed or implied by these
forward-looking statements. These factors include, but are not limited to:
general economic conditions in the areas of the United States in which our
stores are located; changes in the overall retail environment and more
specifically in the apparel and footwear retail sectors; 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 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; the availability of desirable store locations at acceptable lease
terms and our ability to open new stores in a timely and profitable manner;
higher than anticipated costs associated with the closing of underperforming
stores; the inability of manufacturers to deliver products in a timely manner;
changes in the political and economic environments in the Peoples Republic of
China, a major manufacturer of footwear; and the continued favorable trade
relations between the United States and China and other countries which are the
major manufacturers of footwear. For a more detailed discussion of certain risk
factors, see the "Risk Factors" section of our Annual Report on Form 10-K for
the fiscal year ended February 3, 2007.

General

Managements Discussion and Analysis of
Financial Condition and Results of Operations is intended to provide information
to assist the reader in better understanding and evaluating our financial
condition and results of operations. We encourage you to read this in
conjunction with our condensed consolidated financial statements and the notes
to those statements included in PART I, ITEM 1 FINANCIAL STATEMENTS of this
Quarterly Report on Form 10-Q, as well as our Annual Report on Form 10-K for the
fiscal year ended February 3, 2007 as filed with the SEC.

Overview

Shoe Carnival, Inc. is one of the
nation's largest family footwear retailers. As of November 3, 2007, we operated
293 stores in 27 states in the Midwest, South and Southeast regions of the
United States. We offer a distinctive shopping experience, a broad merchandise
assortment and value to our customers while maintaining an efficient store level
cost structure.

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. Our objective is to be the destination
store-of-choice for a wide range of consumers seeking moderately 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. We believe that by offering a wide selection of both
athletic and non-athletic footwear, we are able to reduce our exposure to shifts
in fashion preferences between those categories. Our ability to identify and
react to fashion changes is a key factor in our sales and earnings performance.

Our marketing effort targets low to
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.
Our cost-efficient store operations and real estate strategyenable us to price products competitively and earn attractive
store level returns. Low labor costs are achieved by housing merchandise
directly on the selling floor in an open-stock format, enabling customers who so
choose to serve themselves. This reduces the staffing required to assist
customers and reduces store level labor costs as a percentage of sales. We
locate stores predominantly in strip shopping centers in order to take advantage
of lower occupancy costs and maximize our exposure to value-oriented shoppers.

11

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It is important to note that the
53rdweek in fiscal 2006 caused a one-week shift in our fiscal 2007 calendar.
Therefore, each of our fiscal 2007 quarters is shifted one week later. Due to
this one-week shift, our year-over-year sales comparisons are impacted when
there are seasonal sales influences that fall near the respective quarter-end
dates. Our reported quarterly and year-to-date comparable store sales results
for fiscal 2007, both in this Quarterly Report on Form 10-Q and in our other
public disclosures, have been adjusted for the above shift. As such, changes in
comparable store sales may not be consistent with changes in net sales reported
for the fiscal period. Net sales for our thirteen week and thirty-nine week
periods ended November 3, 2007 compare to the thirteen week and thirty-nine week
periods ended October 28, 2006. To minimize the effect of the fiscal calendar
shift on comparable store sales, we compare the thirteen week and thirty-nine
week periods ended November 3, 2007 to the thirteen week and thirty-nine week
periods ended November 4, 2006.

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.

Critical Accounting Policies

It is necessary for us to include
certain judgements in our reported financial results. These judgements involve
estimates that are inherently uncertain and actual results could differ
materially from these estimates. The accounting policies that require the more
significant judgements are:

Merchandise
Inventories- Merchandise inventories are
stated at the lower of cost or market using the first-in, first-out (FIFO)
method. In determining market value, we estimate the future sales price of items
of merchandise contained in the inventory as of the balance sheet date. Factors
considered in this determination include, among others, current and recently
recorded sales prices, the length of time product has been held in inventory and
quantities of various product styles contained in inventory. The ultimate amount
realized from the sale of certain product could differ materially from our
estimates. We also estimate a shrinkage reserve for the period between the last
physical count and the balance sheet date. The estimate for the shrinkage
reserve can be affected by changes in merchandise mix and changes in actual
shrinkage trends.

Valuation of Long-Lived
Assets- We review long-lived assets whenever
events or circumstances indicate the carrying value of an asset may not be
recoverable and annually when no such event has occurred. We evaluate the
ongoing value of assets associated with retail stores that have been open longer
than one year. When events such as these occur, the 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 assumptions and
estimates used in the evaluation of impairment, including current and future
economic trends for stores, are subject to a high degree of judgement and if
actual results or market conditions differ from those anticipated, additional
losses may be recorded.

Income Taxes- We calculate income taxes in accordance with SFAS No. 109
and account for uncertain tax positions in accordance with FIN 48. Under SFAS
No. 109, 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. Deferred tax
assets and liabilities are measured using the estimated tax rates in effect in
the years when those temporary differences are expected to reverse. Under FIN
48, we are required to make many subjective assumptions and judgments regarding
our income tax exposures. Interpretations of and guidance surrounding income tax
laws and regulations are often complex, ambiguous and change over time. As such,
changes in our subjective assumptions and judgments can materially affect
amounts recognized in the consolidated financial statements. See our Notes to
Condensed Consolidated Financial Statements, Note 5  "Income Taxes" included in
PART I, ITEM 1 FINANCIAL STATEMENTS of this Quarterly Report on Form 10-Q for
additional details on our uncertain tax positions.

12

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Results of Operations Summary
Information

|                        |  |                  |           |                      |        |                   |        |        |        |         |        |           |           | Comparable
|----------------------- |  | ---------------- | --------- | -------------------- | ------ | ----------------- | ------ | ------ | ------ | ------- | ------ | --------- | --------- | ----------
|                        |  | Number of Stores |           | Store Square Footage |        | Store
      Sales
|                        |  | Beginning        |           |                      |        |                   |        | End
of |        | Net     |        | End       |           | Increase  
|Quarter Ended           |  |                  | Of Period |                      | Opened |                   | Closed |        | Period |         | Change |           | of Period |           
|May 5, 2007             |  | 271              |           | 7                    |        | 0                 |        | 278    |        | 66,000  |        | 3,128,000 |           | (3.7      
|August 4,
      2007    |  | 278              |           | 6                    |        | 0                 |        | 284    |        | 59,000  |        | 3,187,000 |           | (7.1      
|November 3, 2007        |  | 284              |           | 11                   |        | 2                 |        | 293    |        | 78,000  |        | 3,265,000 |           | (5.0      
|Year-to-date
      2007 |  | 271              |           | 24                   |        | 2                 |        | 293    |        | 203,000 |        | 3,265,000 |           | (5.0      
|                       
|April 29, 2006          |  | 263              |           | 0                    |        | 0                 |        | 263    |        | 0       |        | 3,012,000 |           | 4.1       
|July 29,
      2006     |  | 263              |           | 4                    |        | 2                 |        | 265    |        | 12,000  |        | 3,024,000 |           | (1.0      
|October 28, 2006        |  | 265              |           | 8                    |        | 3                 |        | 270    |        | 33,000  |        | 3,057,000 |           | 2.9       
|Year-to-date
      2006 |  | 263              |           | 12                   |        | 5                 |        | 270    |        | 45,000  |        | 3,057,000 |           | 2.3       

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

|                                        |  | Thirteen               |   | Thirteen               |       | Thirty-nine            |  | Thirty-nine           
|--------------------------------------- |  | ---------------------- | - | ---------------------- | ----- | ---------------------- |  | ----------------------
|                                        |  | Weeks Ended            |   | Weeks Ended            |       | Weeks Ended            |  | Weeks Ended           
|                                        |  | November 3,
      2007 |   | October 28,
      2006 |       | November 3,
      2007 |  | October 28,
      2006
|Net
      sales                         |  | 100.0                  | % |                        | 100.0 | %                      |  | 100.0                 
|Cost of sales
      (including buying,  |  |                        |   |                        |       |                        |  |                       
|distribution and occupancy
      costs) |  | 70.9                   |   |                        | 70.0  |                        |  | 71.5                  
|Gross
      profit                      |  | 29.1                   |   |                        | 30.0  |                        |  | 28.5                  
|Selling, general
      and              |  |                        |   |                        |       |                        |  |                       
|administrative expenses                 |  | 25.1                   |   |                        | 22.9  |                        |  | 24.9                  
|Operating income                        |  | 4.0                    |   |                        | 7.1   |                        |  | 3.6                   
|Interest
    income                     |  | (0.1                   | ) |                        | (0.2  | )                      |  | (0.1                  
|Interest expense                        |  | 0.1                    |   |                        | 0.0   |                        |  | 0.0                   
|Income before income
      taxes        |  | 4.0                    |   |                        | 7.3   |                        |  | 3.7                   
|Income
      tax expense                |  | 1.6                    |   |                        | 2.9   |                        |  | 1.3                   
|Net income                              |  | 2.4                    | % |                        | 4.4   | %                      |  | 2.4                   

Results of Operations for the Third
Quarter Ended November 3, 2007

We believe the current challenging
economic environment continued to directly affect our target consumer, and
consequently, had a negative impact on both traffic and sales throughout the
third quarter of fiscal 2007 as net sales declined 8.0% and sales for stores
open more than a year fell by 5.0%. All of our product categories posted a
decline in comparable store sales, except for the adult athletic product, which
posted a small increase. The first nine months of fiscal 2007 have proved to be a
difficult period for us and footwear retailers in general. Our low to moderate
income consumer has been faced with financial challenges brought about by higher
gasoline prices, housing and mortgage issues and increased consumer debt loads.
This has resulted in lower traffic counts in our stores throughout the first
nine months as compared to the same period last year.

13

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Net Sales

Net sales decreased $15.2 million to
$173.9 million during the third quarter ended November 3, 2007, an 8.0% decrease
from net sales of $189.1 million in the third quarter ended October 28, 2006.
The seasonal differences associated with the fiscal calendar shift noted above
caused a $14.2 million decline in sales between the two comparative periods. Our
5.0% decline in comparable store sales resulted in an additional $8.4 million of
lost sales. These decreases in net sales were partially offset by a $7.4 million
increase in sales generated through operation of the 36 stores opened since
August 4, 2006 net of the sales loss from the six stores which were closed
during this same period.

Gross Profit

Gross profit decreased $6.1 million to
$50.6 million in the third quarter of fiscal 2007 from gross profit of $56.7
million in the comparable prior year period. Our gross profit margin in the
third quarter of fiscal 2007 decreased to 29.1% from 30.0% in the comparable
prior year period. As a percentage of sales, the merchandise margin increased
0.5% while buying, distribution and occupancy costs increased 1.4%. The increase
in the merchandise margin was primarily driven by improved inventory markdown
management. Approximately half of the increase in buying, distribution and
occupancy costs, as a percentage of sales, was attributable to lower sales for
the quarter. The combined increases in occupancy and distribution costs due to
operating more stores coupled with the increase in fixed costs associated with
operating our new distribution center, accounted for the remainder of the
increase as a percentage of sales.

Selling, General and Administrative
Expenses

Selling, general and administrative
expenses increased $352,000 to $43.6 million in the third quarter of fiscal 2007
from $43.3 million in the comparable prior year period. The increase in selling,
general and administrative expenses necessary to operate and support the 30 net
new stores opened since August 4, 2006 was partially offset by a decrease of
approximately $1.2 million in advertising costs due to the shift in the retail
calendar along with a $692,000 decrease in performance based incentive
compensation expense. As a percentage of sales, selling, general and
administrative expenses increased to 25.1% in the third quarter of fiscal 2007
from 22.9% for the comparable period last year. The increase, as a percentage of
sales, resulted primarily from the deleveraging effect of lower sales.

Pre-opening costs were $407,000, or
0.2% of sales, for the third quarter of fiscal 2007 as compared to $298,000, or
0.2% of sales, for the third quarter of fiscal 2006. We opened 11 stores in the
third quarter of fiscal 2007 as compared to eight stores in the third quarter of
fiscal 2006. 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 they are incurred. The total amount of pre-opening expense incurred will
vary on a store-by-store basis depending on the specific market and the
promotional activities involved.

Store closing costs were $96,000, or
0.1% of sales, for the third quarter of fiscal 2007 as compared to $232,000, or
0.1% of sales, for the third quarter of fiscal 2006. We closed two stores in the
third quarter of fiscal 2007 as compared to three stores in the third quarter of
fiscal 2006. The timing and actual amount of expense recorded in closing a store
can vary significantly on a store-by-store basis depending in part on the period
in which management commits to a closing plan, the age of the store and possible
lease buyout involved.

Interest (Income) Expense

We recorded net interest expense of
$14,000 in the third quarter of fiscal 2007, resulting from the borrowings
against our line of credit, compared to net interest income of $320,000 in the
third quarter of the prior year. We had no borrowings during the third quarter
of the prior year.

Income Taxes

The effective income tax rate for the
third quarter of fiscal 2007 increased to 39.5% from 39.2% for the same time
period in fiscal 2006.

14

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Results of Operations for the Nine
Months Ended November 3, 2007

Net Sales

Net sales decreased $10.1 million to
$494.3 million in the first nine months of fiscal 2007, a 2.0% decrease over net
sales of $504.4 million in the comparable prior year period. Of this decrease,
approximately $24.6 million was attributable to our 5.0% comparable store sales
decline, and approximately $2.8 million related to the seasonal differences
associated with the fiscal calendar shift noted above. The decrease in net sales
was partially offset by a $17.3 million increase in sales generated through
operation of the 38 new stores opened during fiscal 2006 and fiscal 2007 net of
the sales loss from eight stores which were closed during the same period.

Gross Profit

Gross profit decreased $8.4 million to
$140.6 million in the first nine months of fiscal 2007 from $149.0 million in
the comparable prior year period. Our gross profit margin decreased to 28.5% in
the first nine months of fiscal 2007 from 29.5% for the first nine months of
fiscal 2006. As a percentage of sales, the merchandise margin increased 0.1%
while buying, distribution and occupancy costs increased 1.1%. The increase in
buying, distribution and occupancy costs, as a percentage of sales, was
primarily attributable to increases in occupancy and distribution costs due to
operating more stores, coupled with the costs incurred during the first quarter of fiscal 2007
to convert to our new distribution center and the increased fixed costs
associated with operating the new facility.

Selling, General and Administrative

Selling, general and administrative
expenses increased $3.8 million to $123.1 million in the first nine months of
fiscal 2007 from $119.3 million in the comparable prior year period. The
increase in selling, general and administrative expenses necessary to operate
and support the 30 net new stores opened during fiscal 2006 and fiscal 2007 was
partially offset by a savings of approximately $2.4 million from expense
controls in addition to a $1.5 million decrease in performance based incentive
compensation expense. As a percentage of sales, selling, general and
administrative expenses increased to 24.9% from 23.7% in the first nine months
of last year. The increase, as a percentage of sales, resulted primarily from
the deleveraging effect of lower store sales.

Pre-opening costs were $963,000, or
0.2% of sales, for the first nine months of fiscal 2007 as compared to $460,000,
or 0.1% of sales, for the first nine months of fiscal 2006. We opened 24 stores
in the first nine months of fiscal 2007 as compared to 12 stores in the first
nine months of fiscal 2006. 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 they are incurred. The total amount of pre-opening expense incurred
will vary on a store-by-store basis depending on the specific market and the
promotional activities involved.

Store closing costs were $525,000, or
0.1% of sales, for the first nine months of fiscal 2007 as compared to $486,000,
or 0.1% of sales, for the first nine months of fiscal 2006. We closed two stores
in the first nine months of fiscal 2007 and five stores were closed in the first
nine months of fiscal 2006. The timing and actual amount of expense recorded in
closing a store can vary significantly on a store-by-store basis depending in
part on the period in which management commits to a closing plan, the age of the
store and possible lease buyout involved.

Interest (Income) Expense

For the first nine months of fiscal
2007, net interest income was $432,000 compared to net interest income of
$756,000 for the first nine months of fiscal 2006. The change in net interest
income was primarily related to a decrease in the first nine months of fiscal
2007 in the excess funds available for investment.

15

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Income Taxes

The effective income tax rate for the
first nine months of fiscal 2007 decreased to 35.0% from 38.8% when compared to
the same time period in fiscal 2006. The reduction in the effective income tax
rate for the nine months of fiscal 2007 as compared to fiscal 2006 was primarily
due to a reduction in state income taxes from state incentives related to the
investment in our new distribution center.

Liquidity and Capital
Resources

Net cash used in operating activities
was $2.3 million during the first nine months of fiscal 2007, as compared to net
cash provided by operating activities of $3.7 million during the first nine
months of fiscal 2006. These amounts reflect the income from operations adjusted
for non-cash items and working capital changes. The $6.0 million decrease in
cash provided by operating activities between the two respective periods related
primarily to the decrease in net income.

Working capital increased to $154.5
million at November 3, 2007 from $149.6 million at October 28, 2006. The current
ratio at November 3, 2007 was 3.4 and remained unchanged as compared to October
28, 2006. Long-term debt as a percentage of total capital (long-term debt plus
shareholders' equity) was 6.7% at November 3, 2007. We had no long-term debt as
of October 28, 2006.

Capital expenditures were $15.3 million
in the first nine months of fiscal 2007. Of this amount, $4.4 million was
incurred for our new distribution center, $5.9 million was incurred for new
stores and $2.3 million was incurred for our new corporate headquarters. The
remaining capital expenditures for the first nine months of fiscal 2007 were
incurred for store remodeling and relocation, software and information
technology, in-store graphics and miscellaneous equipment purchases. We received
$418,000 in lease incentives from landlords during the first nine months of
fiscal 2007.

During the first nine months of fiscal
2007, we opened 24 new stores and closed two stores. This compares to 12 store
openings and five store closings in the first nine months of fiscal 2006. We
anticipate opening an additional store and closing three stores in the fourth
quarter of fiscal 2007. We expect to incur additional capital expenditures of $2
million in the fourth quarter of fiscal 2007 related primarily to fiscal 2007
and fiscal 2008 new store openings.

Our current store prototype uses
between 6,500 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 expenditures for a new store in fiscal 2007 are expected to average
approximately $298,000. The average inventory investment in a new store is
expected to range from $350,000 to $750,000 depending on the size and sales
expectation of the store and the timing of the new store opening. Pre-opening
expenses, such as advertising, salaries and supplies, are expected to average
approximately $40,000 per store in fiscal 2007 with individual stores
experiencing variances in expenditure levels based on the specific market.

Our unsecured credit facility provides
for up to $70 million in cash advances on a revolving basis and commercial
letters of credit. Borrowings under the revolving credit line are based on
eligible inventory. The agreement governing the credit facility stipulates a
minimum threshold for net worth, a maximum ratio of funded debt plus rent to
EBITDA plus rent, and a maximum of total distributions for stock repurchases and
cash dividends. We were in compliance with these requirements as of November 3,
2007. Should a default condition be reported, the lenders may preclude
additional borrowings and call all loans and accrued interest at their
discretion. The credit agreement and amendments thereto are filed as exhibits to
(or incorporated by reference in) this Quarterly Report on Form 10-Q. At
November 3, 2007, there were $14.2 million in borrowings outstanding under the
credit facility and $3.0 million in letters of credit outstanding. As of
November 3, 2007, $52.8 million was available to us for additional borrowings
under the credit facility.

On December 15, 2006, the credit
agreement was amended to extend the maturity date to April 30, 2010 and to allow
us to repurchase shares of our outstanding common stock in an amount not to
exceed $50 million. During December 2006, the Board of Directors authorized a
$50 million stock buy-back program, which will terminate on the earlier of the
repurchase of the maximum amount or December 31, 2008. As of November 3, 2007,
approximately 1.0 million shares had been repurchased at an aggregate cost of
$25.6 million. The amount that remained available under the existing repurchase
authorization at November 3, 2007 was $24.4 million.

16

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We anticipate that our existing cash
and cash flow from operations, supplemented by borrowings under our revolving
credit line, will be sufficient to fund our planned store expansion, any future
repurchase of our common stock under our current repurchase plan and other
operating cash requirements for at least the next 12 months.

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 opening 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.

New Accounting Pronouncements

Recent accounting pronouncements
applicable to our operations are contained in Note 3  "Recently Issued
Accounting Pronouncements" contained in the Notes to Condensed Consolidated
Financial Statements included in PART I, ITEM 1. FINANCIAL STATEMENTS of this
Quarterly Report on Form 10-Q.

ITEM 3. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK

We are exposed to market risk in that
the interest payable under 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. A 1% change in the weighted average interest rate charged under
the credit facility would have resulted in interest expense fluctuating by
approximately $11,000 for the third quarter and first nine months of fiscal
2007. We did not incur borrowings against our revolving credit line during the
first nine months of fiscal 2006.

ITEM 4. CONTROLS AND PROCEDURES

Our Chief Executive Officer and Chief
Financial Officer have concluded, based on their evaluation as of November 3,
2007, 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.

Management is continuously seeking to
improve the efficiency and effectiveness of our operations and internal
controls. This results in refinements to processes throughout the company. In
the fourth quarter of fiscal 2006, we began conversion to our new distribution
center. We believe the launch of our new distribution center has strengthened
the overall system of internal controls due to enhanced automation and
integration of related processes. Testing of the controls related to this system
is ongoing and management will make its evaluation of the effectiveness of these
controls upon completion of all components and enhanced functions of the new
distribution center. There have been no other changes in our internal control
over financial reporting that occurred during the third quarter ended November
3, 2007, that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.

17

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SHOE CARNIVAL, INC.PART II -
OTHER INFORMATION

ITEM 1A. RISK FACTORS

You should carefully consider the risks
and uncertainties we describe both in this Quarterly Report on Form 10-Q and in
the "Risk Factors" section of our Annual Report on Form 10-K for the fiscal year
ended February 3, 2007 before deciding to invest in, or retain, shares of our
common stock. These are not the only risks and uncertainties that we face.
Additional risks and uncertainties that we do not currently know about, we
currently believe are immaterial or we have not predicted may also harm our
business operations or adversely affect us. If any of these risks or
uncertainties actually occur, our business, financial condition, results of
operations or cash flows could be materially adversely affected. There have been
no material changes to the risk factors set forth in our Annual Report on Form
10-K for the fiscal year ended February 3, 2007.

ITEM 2. UNREGISTERED SALES OF EQUITY
SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

|                                           |  |              |  |                 |       |                  |                 |           | Approximate   
|------------------------------------------ |  | ------------ |  | --------------- | ----- | ---------------- | --------------- | --------- | --------------
|                                           |  |              |  |                 |       |                  | Total Number Of |           | Dollar Value  
|                                           |  |              |  |                 |       |                  | Shares          |           | of Shares that
|                                           |  |              |  |                 |       |                  | Purchased as    |           | May Yet Be    
|                                           |  | Total Number |  | Average         |       | Part of Publicly |                 | Purchased
|                                           |  | of Shares    |  | Price Paid      |       | Announced        |                 | Under the
|Period                                     |  | Purchased(1) |  | per
      Share |       | Programs(1)      |                 | Programs 
|August
      5, 2007 to September 1, 2007  |  | 339,288      |  | $               | 18.88 |                  | 339,288         |           | $             
|September 2, 2007 to
      October 6, 2007 |  | 0            |  | $               | 0.00  |                  | 0               |           | $             
|October
      7, 2007 to November 3, 2007  |  | 0            |  | $               | 0.00  |                  | 0               |           | $             
|                                           |  | 339,288      |  |                 |       |                  | 339,288         |           |               

|(1) |  | These shares are part of a
      publicly announced, $50.0 million stock buy-back program that our Board of
      Directors approved in December 2006. The program will terminate on the
      earlier of the repurchase of the maximum amount or December 31,
      2008.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

ITEM 6. EXHIBITS

| | (a) |  |     |  | Exhibits                                                                                                                                                                                                                                                                                                                                                               
| | --- |  | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |  |     |  |                                                                                                                                                                                                                                                                                                                                                                        
| |     |  | 3-A |  | Restated Articles of Incorporation of
      Registrant (incorporated herein by reference from the same exhibit number
      to the Registrant's Annual Report on Form 10-K for the year ended February
      2, 2002)                                                                                                                                                  
| |     |  |     |  |                                                                                                                                                                                                                                                                                                                                                                        
| |     |  | 3-B |  | By-laws of Registrant, as amended to date
      (incorporated herein by reference from the same exhibit number to our
      Current Report on Form 8-K filed on March 19, 2007)                                                                                                                                                                                        
| |     |  |     |  |                                                                                                                                                                                                                                                                                                                                                                        
| |     |  | 4   |  | (i) Amended and Restated Credit
      Agreement and Promissory Notes dated April 16, 1999, between Registrant
      and Mercantile Bank National Association, First Union National Bank and
      Old National Bank (incorporated herein by reference from Exhibit 4(I) to
      the Registrant's Annual Report on Form 10-K for the year ended January 30,
      1999)

18

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| | (a) |  |  |  | Exhibits (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | --- |  |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |  |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     |  |  |  | (ii) Amendment to Amended and
      Restated Credit Agreement and Promissory Notes dated March 24, 2000,
      between Registrant and Mercantile Bank National Association, First Union
      National Bank and Old National Bank (incorporated herein by reference from
      the same exhibit number to the Registrant's Annual Report on Form 10-K for
      the year ended January 29, 2000)
      (iii) Second Amendment to Amended
      and Restated Credit Agreement and Promissory Notes dated November 8, 2000,
      between Registrant and Firstar Bank N.A., First Union National Bank, Old
      National Bank and LaSalle Bank National Association (incorporated herein
      by reference from the same exhibit number to the Registrant's Quarterly
      Report on Form 10-Q for the quarter ended October 28, 2000)
      (iv) Third Amendment to Amended
      and Restated Credit Agreement and Promissory Notes dated March 18, 2002,
      between Registrant and U.S. Bank National Association, First Union
      National Bank, Old National Bank and LaSalle Bank National Association
      (incorporated herein by reference from the same exhibit number to the
      Registrant's Annual Report on Form 10-K for the year ended February 2,
      2002)
      (v) Fourth Amendment to Amended
      and Restated Credit Agreement and Promissory Notes dated March 12, 2003,
      between Registrant and U.S. Bank National Association, Wachovia Bank
      National Association, Old National Bank and LaSalle Bank National
      Association (incorporated herein by reference from the same exhibit number
      to the Registrant's Annual Report on Form 10-K for the year ended February
      1, 2003)
      (vi) Fifth Amendment to Amended
      and Restated Credit Agreement and Promissory Notes dated April 5, 2004,
      between Registrant and U.S. Bank National Association, Wachovia Bank
      National Association, Old National Bank and LaSalle Bank National
      Association (incorporated herein by reference from the same exhibit number
      to the Registrant's Annual Report on Form 10-K for the year ended January
      31, 2004)
      (vii) Assignment Agreement dated
      June 1, 2004 among LaSalle Bank National Association as Assignor, Fifth
      Third Bank (Southern Indiana) as Assignee, Registrant as Borrower and U.S.
      Bank National Association as Agent relating to the Amended and Restated
      Credit Agreement as further amended (incorporated herein by reference from
      the same exhibit number to the Registrant's Quarterly Report on Form 10-Q
      for the quarter ended May 1, 2004)
      (viii) Sixth Amendment to Amended
      and Restated Credit Agreement and Notes dated April 5, 2005, between
      Registrant and U.S. Bank National Association, Wachovia Bank National
      Association, Fifth Third Bank (Southern Indiana) and Old National Bank
      (incorporated herein by reference from the same exhibit number to the
      Registrant's Current Report on Form 8-K filed on April 11, 2005)
      (ix) Seventh Amendment to Amended
      and Restated Credit Agreement and Notes dated March 31, 2006, between
      Registrant and U.S. Bank National Association, Wachovia Bank, National
      Association and Fifth Third Bank (incorporated herein by reference from
      the same exhibit number to the Registrant's Current Report on Form 8-K
      filed on April 4, 2006)
      (x) Eighth Amendment to Amended
      and Restated Credit Agreement and Notes dated December 15, 2006, between
      Registrant and U.S. Bank National Association, Wachovia Bank, National
      Association and Fifth Third Bank (incorporated herein by reference from
      the same exhibit number to the Registrant's Current Report on Form 8-K
      filed on December 11, 2006)

19

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| | (a) |  |      |  | Exhibits (continued)                                                                                                                                                                                        
| | --- |  | ---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |  |      |  |                                                                                                                                                                                                             
| |     |  | 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
| |     |  |      |  |                                                                                                                                                                                                             
| |     |  | 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
| |     |  |      |  |                                                                                                                                                                                                             
| |     |  | 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                                               
| |     |  |      |  |                                                                                                                                                                                                             
| |     |  | 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                                               

20

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SHOE CARNIVAL, INC.SIGNATURE

Pursuant to the requirements 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.

|Date: December 13, 2007 |  | SHOE CARNIVAL,
      INC.          | 
|----------------------- |  | ---------------------------------- | 
|                        |  | (Registrant)                       | 
|                        |  |                                    | 
|                        |  |                                    | 
|                        |  | By:/s/ W. Kerry Jackson            | 
|                        |  | W. Kerry
      Jackson             | 
|                        |  | Executive Vice
      President and | 
|                        |  | Chief Financial
      Officer      | 

21

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