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**May 2, 2009**                                                 
|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 has submitted electronically and posted on its corporate website, if
any, every Interactive Data File required to be submitted and posted pursuant to
Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12
months (or for such shorter period that the registrant was required to submit
and post such files).

| | [   ]Yes |  | [   ]No
| | -------- |  | -------

Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, a non-accelerated
filer or a smaller reporting company. See definitions of "large accelerated
filer", "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the
Exchange Act. (Check one):

[   ] Large accelerated
filer      [X] Accelerated
filer      [   ] Non-accelerated
filer      [   ] Smaller reporting company

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

| | [   ]Yes |  | [X]No
| | -------- |  | -----

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 June 11, 2009
were 12,917,486.

---

SHOE CARNIVAL, INC.INDEX TO FORM
10-Q

|              |  |                                                                |  |                                                                   |  | Page   
|------------- |  | -------------------------------------------------------------- |  | ----------------------------------------------------------------- |  | -------
|Part
      I  |  | Financial Information                                          |  |                                                                  
|              |  | Item 1.                                                        |  | Financial Statements
      (Unaudited)                            |  |        
|              |  | Condensed Consolidated Balance
      Sheets                    |  | 3                                                                
|              |  | Condensed Consolidated Statements of
      Income              |  | 4                                                                
|              |  | Condensed Consolidated Statement of
      Shareholders' Equity |  | 5                                                                
|              |  | Condensed Consolidated Statements of Cash
      Flows          |  | 6                                                                
|              |  | Notes to Condensed Consolidated Financial
      Statements     |  | 7 - 13                                                           
|             
|              |  | Item
      2.                                                  |  | Management's Discussion and Analysis of Financial
      Condition |  |        
|              |  |                                                                |  | and Results of Operations                                         |  | 14 - 19
|             
|              |  | Item3.                                                         |  | Quantitative and Qualitative Disclosures About Market
      Risk  |  | 20     
|             
|              |  | Item4.                                                         |  | Controls and Procedures                                           |  | 20     
|             
|Part
      II |  | Other
      Information                                        |  |                                                                  
|              |  | Item1.                                                         |  | Legal
      Proceedings                                           |  | 21     
|             
|              |  | Item1A.                                                        |  | Risk
      Factors                                                |  | 21     
|             
|              |  | Item6.                                                         |  | Exhibits                                                          |  | 21 - 23
|             
|              |  | Signature                                                      |  |                                                                   |  | 24     

2

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SHOE CARNIVAL, INC. PART I -
FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SHOE CARNIVAL,
INC.CONDENSED CONSOLIDATED BALANCE
SHEETSUnaudited

|                                                            |  | May 2, |         | January 31, |  | May 3,
|----------------------------------------------------------- |  | ------ | ------- | ----------- |  | ------
|(In thousands, except per
      share data)                 |  | 2009   |         | 2009        |  | 2008  
|Assets                                                      |  |        |         |             |  |       
|Current Assets                                              |  |        |         |             |  |       
|Cash and cash
      equivalents                             |  | $      | 20,231  |             |  | $     
|Accounts receivable                                         |  |        | 1,055   |             |  |       
|Merchandise inventories                                     |  |        | 188,234 |             |  |       
|Deferred income tax benefit                                 |  |        | 2,376   |             |  |       
|Other                                                       |  |        | 7,326   |             |  |       
|Total Current
    Assets                                    |  |        | 219,222 |             |  |       
|Property and equipment-net                                  |  |        | 69,445  |             |  |       
|Other                                                       |  |        | 635     |             |  |       
|Total
      Assets                                          |  | $      | 289,302 |             |  | $     
|                                                           
|Liabilities and Shareholders' Equity                        |  |        |         |             |  |       
|Current
    Liabilities:                                    |  |        |         |             |  |       
|Accounts
      payable                                      |  | $      | 48,520  |             |  | $     
|Accrued and other
      liabilities                         |  |        | 15,775  |             |  |       
|Total
      Current Liabilities                             |  |        | 64,295  |             |  |       
|Deferred lease
      incentives                             |  |        | 5,621   |             |  |       
|Accrued rent                                                |  |        | 5,221   |             |  |       
|Deferred income
      taxes                                 |  |        | 1,104   |             |  |       
|Deferred compensation                                       |  |        | 2,865   |             |  |       
|Other                                                       |  |        | 1,681   |             |  |       
|Total
      Liabilities                                     |  |        | 80,787  |             |  |       
|                                                           
|Shareholders' Equity:                                       |  |        |         |             |  |       
|Common stock, $.01
      par value, 50,000                  |  |        |         |             |  |       
|shares authorized, 13,657, 13,664 and 13,670 shares         |  |        |         |             |  |       
|issued at May 2, 2009, January 31, 2009                     |  |        |         |             |  |       
|and May 3, 2008, respectively                               |  |        | 137     |             |  |       
|Additional paid-in
      capital                            |  |        | 67,309  |             |  |       
|Retained
      earnings                                     |  |        | 157,998 |             |  |       
|Treasury stock, at
      cost, 739, 745 and 1,054 shares at |  |        |         |             |  |       
|May 2, 2009, January 31, 2009 and May 3, 2008,              |  |        |         |             |  |       
|respectively                                                |  |        | (16,929 | )           |  |       
|Total Shareholders'
      Equity                            |  |        | 208,515 |             |  |       
|Total
      Liabilities and Shareholders' Equity            |  | $      | 289,302 |             |  | $     

See notes to condensed consolidated
financial statements.

3

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SHOE CARNIVAL,
INC.CONDENSED CONSOLIDATED STATEMENTS
OF INCOMEUnaudited

|                                            |  | Thirteen    |         | Thirteen   
|------------------------------------------- |  | ----------- | ------- | -----------
|                                            |  | Weeks Ended |         | Weeks Ended
|(In thousands, except per share
      data) |  | May 2, 2009 |         | May 3, 2008
|Net
      sales                             |  | $           | 167,269 |            
|Cost of sales (including
      buying,      |  |             |         |            
|distribution and
      occupancy costs)     |  |             | 120,629 |            
|Gross
      profit                          |  |             | 46,640  |            
|Selling, general and
      administrative   |  |             |         |            
|expenses                                    |  |             | 40,056  |            
|Operating income                            |  |             | 6,584   |            
|Interest income                             |  |             | (3      | )          
|Interest expense                            |  |             | 42      |            
|Income before income
      taxes            |  |             | 6,545   |            
|Income tax expense                          |  |             | 2,413   |            
|Net income                                  |  | $           | 4,132   |            
|                                           
|Net
      income per share:                 |  |             |         |            
|Basic                                       |  | $           | .33     |            
|Diluted                                     |  | $           | .33     |            
|                                           
|Average shares outstanding:                 |  |             |         |            
|Basic                                       |  |             | 12,480  |            
|Diluted                                     |  |             | 12,520  |            

See notes to condensed consolidated
financial statements.

4

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SHOE CARNIVAL, INC.CONDENSED CONSOLIDATED STATEMENT OF
SHAREHOLDERS' EQUITY Unaudited

|                               |  |              |   |          |      |          |  |          |     |          | Additional |        |   |       |   |         |  |   |         |   |  |  
|------------------------------ |  | ------------ | - | -------- | ---- | -------- |  | -------- | --- | -------- | ---------- | ------ | - | ----- | - | ------- |  | - | ------- | - |  | -
|                               |  | Common Stock |   | Paid-In  |      | Retained |  | Treasury |     |          |            |       
|(In thousands)                 |  | Issued       |   | Treasury |      | Amount   |  | Capital  |     | Earnings |            | Stock  |   | Total
|Balance at January 31, 2009    |  | 13,664       |   |          | (745 | )        |  | $        | 137 |          | $          | 67,686 |   |       | $ | 153,866 |  | $ | (17,053 | ) |  | $
|Stock-based
      compensation |  |              |   |          |      |          |  |          |     |          |            |        |   |       |   |         |  |   |         |   |  |  
|income tax
      benefit       |  |              |   |          |      |          |  |          |     |          |            | 32     |   |       |   |         |  |   |         |   |  |  
|Employee stock purchase plan   |  |              |   |          |      |          |  |          |     |          |            |        |   |       |   |         |  |   |         |   |  |  
|purchases                      |  |              |   |          | 6    |          |  |          |     |          |            | (76    | ) |       |   |         |  |   | 124     |   |  |  
|Restricted stock
      awards  |  | (7           | ) |          |      |          |  |          |     |          |            |        |   |       |   |         |  |   |         |   |  |  
|Stock-based compensation       |  |              |   |          |      |          |  |          |     |          |            |        |   |       |   |         |  |   |         |   |  |  
|expense                        |  |              |   |          |      |          |  |          |     |          |            | (333   | ) |       |   |         |  |   |         |   |  |  
|Net income                     |  |              |   |          |      |          |  |          |     |          |            |        |   |       |   | 4,132   |  |   |         |   |  |  
|Balance at May 2, 2009         |  | 13,657       |   |          | (739 | )        |  | $        | 137 |          | $          | 67,309 |   |       | $ | 157,998 |  | $ | (16,929 | ) |  | $

See notes to condensed consolidated
financial statements.

5

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SHOE CARNIVAL, INC.CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS Unaudited

|                                                           |  | Thirteen    |        | Thirteen   
|---------------------------------------------------------- |  | ----------- | ------ | -----------
|                                                           |  | Weeks Ended |        | Weeks Ended
|(In thousands)                                             |  | May 2, 2009 |        | May 3, 2008
|Cash
      Flows From Operating Activities                 |  |             |        |            
|Net income                                                 |  | $           | 4,132  |            
|Adjustments to
      reconcile net income to net           |  |             |        |            
|cash (used in) provided by operating activities:           |  |             |        |            
|Depreciation and amortization                              |  |             | 3,883  |            
|Stock-based compensation                                   |  |             | (230   | )          
|Loss on retirement of assets                               |  |             | 32     |            
|Deferred income taxes                                      |  |             | (111   | )          
|Lease incentives                                           |  |             | 119    |            
|Other                                                      |  |             | (206   | )          
|Changes in operating assets and liabilities:               |  |             |        |            
|Accounts receivable                                        |  |             | 552    |            
|Merchandise inventories                                    |  |             | 1,260  |            
|Accounts payable and accrued liabilities                   |  |             | (7,721 | )          
|Other                                                      |  |             | (3,211 | )          
|Net
      cash (used in) provided by operating activities  |  |             | (1,501 | )          
|                                                          
|Cash
      Flows From Investing Activities                 |  |             |        |            
|Purchases of
      property and equipment                  |  |             | (3,173 | )          
|Proceeds from sale
      of property and equipment         |  |             | 0      |            
|Net cash used in investing
      activities                |  |             | (3,173 | )          
|                                                          
|Cash
      Flows From Financing Activities                 |  |             |        |            
|Borrowings under
      line of credit                      |  |             | 0      |            
|Payments on line of
      credit                           |  |             | 0      |            
|Proceeds from
      issuance of stock                      |  |             | 48     |            
|Excess tax benefits
      from stock-based compensation    |  |             | 40     |            
|Net cash provided by
      financing activities            |  |             | 88     |            
|Net
      (decrease) increase in cash and cash equivalents |  |             | (4,586 | )          
|Cash and cash equivalents
      at beginning of period     |  |             | 24,817 |            
|Cash
      and Cash Equivalents at End of Period           |  | $           | 20,231 |            
|                                                          
|Supplemental disclosures of cash flow
    information:     |  |             |        |            
|Cash paid during
      period for interest                 |  | $           | 42     |            
|Cash paid (received)
      during period for income taxes  |  | $           | 15     |            
|Capital expenditures
      incurred but not yet paid       |  | $           | 1,665  |            

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 January 31, 2009.

We determined that certain deposits and
pre-paid expenses totaling $635,000 as of May 2, 2009 would not be utilized
within the next 12 months and should be classified as long-term. Therefore, we
have presented these amounts as Other in the long-term section of our condensed
consolidated balance sheet. Similar assets in the amount of $400,000 and
$431,000 as of January 31, 2009 and May 3, 2008, respectively, that had
previously been classified as Other within Current Assets have been presented as
long-term in the accompanying comparative condensed consolidated balance
sheets.

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   
|------------------------------------------- |  | ----------- |  | -----------
|                                            |  | Weeks Ended |  | Weeks Ended
|(In thousands)                              |  | May 2, 2009 |  | May 3, 2008
|Basic
      shares                          |  | 12,480      |  | 12,352     
|Dilutive effect of
      stock-based awards |  | 40          |  | 95         
|Diluted shares                              |  | 12,520      |  | 12,447     

Options to purchase 417,100 shares of
common stock for the first quarter of fiscal 2009 and options to purchase
213,400 shares of common stock for the first quarter of fiscal 2008 were not
included in the computation of diluted shares because the options' exercise
prices were greater than the average market price for the period.

Note 3  Recently Issued Accounting
Pronouncements

In September 2006, the Financial
Accounting Standards Board (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. The provisions of SFAS
No. 157 are effective for fiscal years beginning after November 15, 2007. In
February 2008, the FASB deferred the implementation of SFAS No. 157 for certain
non-financial assets and liabilities for fiscal years beginning after November
15, 2008. We adopted the provisions of SFAS No. 157 for financial assets and
liabilities on February 3, 2008 and adopted the provisions of SFAS No. 157 for
non-financial assets and liabilities on February 1, 2009. The adoption of SFAS
No. 157 did not have a material impact on our condensed consolidated financial
statements. See Note 6  "Fair Value Measurements" to our notes to condensed
consolidated financial statements.

7

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In December 2007, the FASB issued SFAS
No. 141R, "Business Combinations" ("SFAS No. 141R"). SFAS No. 141R requires an
acquirer to recognize the assets acquired, the liabilities assumed, and any
non-controlling interest in the acquired business at the acquisition date,
measured at their full fair values as of that date. We adopted the provisions of
SFAS No. 141R on February 1, 2009. The adoption of SFAS No. 141R did not have a
material impact on our condensed consolidated financial statements.

In April 2008, the FASB issued
Financial Statement of Position ("FSP") No. FAS 142-3, "Determination of the
Useful Life of Intangible Assets" ("FSP No. FAS 142-3"), which amends the
factors that should be considered in developing renewal or extension assumptions
used to determine the useful life of a recognized intangible asset under FASB
Statement No. 142, "Goodwill and Other Intangible Assets". FSP No. FAS 142-3
allows an entity to use its own historical experience in renewing or extending
similar arrangements, adjusted for specified entity-specific factors, in
developing assumptions about renewal or extension used to determine the useful
life of a recognized intangible asset. Additional disclosures are required to
enable financial statement users to assess the extent to which the expected
future cash flows associated with the asset are affected by the entitys intent
and/or ability to renew or extend the arrangement. The guidance for determining
the useful life of a recognized intangible asset is to be applied prospectively
to intangible assets acquired after the effective date. The disclosure
requirements are to be applied prospectively to all intangible assets recognized
as of, and subsequent to, the effective date. We adopted the provisions of FSP
No. FAS 142-3 on February 1, 2009. The adoption of FSP No. FAS 142-3 did not
have a material impact on our condensed consolidated financial
statements.

In April 2009, the FASB issued FSP No.
FAS 157-4, "Determining Fair Value When the Volume and Level of Activity for the
Asset or Liability Have Significantly Decreased and Identifying Transactions
That Are Not Orderly" ("FSP No. FAS 157-4"). FSP No. FAS 157-4 indicates that
when determining the fair value of an asset or liability that is not a Level 1
fair value measurement, an entity should assess whether the volume and level of
activity for the asset or liability have significantly decreased when compared
with normal market conditions. If the entity concludes that there has been a
significant decrease in the volume and level of activity, a quoted price (e.g.,
observed transaction) may not be determinative of fair value and may require a
significant adjustment.

In April 2009, the FASB issued FSP No.
FAS 115-2 and FAS 124-2, "Recognition and Presentation of Other-Than-Temporary
Impairments" ("FSP No. FAS 115-2 and FAS 124-2"). FSP No. FAS 115-2 and FAS
124-2 modifies the requirements for recognizing other-than-temporarily impaired
debt securities and changes the existing impairment model for such securities.
It also modifies the presentation of other-than-temporary impairment losses and
increases the frequency of and expands already required disclosures about
other-than-temporary impairment for debt and equity securities.

In April 2009, the FASB issued FSP No.
FAS 107-1 and APB 28-1, "Interim Disclosures about Fair Value of Financial
Instruments" ("FSP No. FAS 107-1 and APB 28-1"). FSP No. FSP FAS 107-1 and APB
28-1 requires publicly traded companies, as defined in Opinion No. 28, to
disclose the fair value of financial instruments within the scope of FAS No. 107
in interim financial statements, adding to the current requirement to make those
disclosures in annual financial statements. This staff position also requires
that companies disclose the method or methods and significant assumptions used
to estimate the fair value of financial instruments and a discussion of changes,
if any, in the method or methods and significant assumptions during the period.

The above three FSPs are effective for
interim and annual periods ending after June 15, 2009, with early adoption
permitted for periods ending after March 15, 2009. We do not believe the
adoption of these three FSPs will have a material impact on our condensed
consolidated financial statements.

8

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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
thirteen-week period ended May 2, 2009:

|                                          |  |           |   |                |           |              |           | Weighted-       |           |  
|----------------------------------------- |  | --------- | - | -------------- | --------- | ------------ | --------- | --------------- | --------- | -
|                                          |  |           |   |                |           |              |           | Average         |           |  
|                                          |  |           |   |                | Weighted- |              | Remaining |                 | Aggregate
|                                          |  | Number of |   | Average        |           | Contractual  |           | Intrinsic Value
|                                          |  | Shares    |   | Exercise Price |           | Term (Years) |           | (in thousands) 
|Outstanding at January 31, 2009           |  | 526,168   |   |                | $         | 12.77        |           |                 |           |  
|Grants                                    |  | 0         |   |                |           | 0.00         |           |                 |           |  
|Forfeited or expired                      |  | (7,000    | ) |                |           | 11.55        |           |                 |           |  
|Exercised                                 |  | 0         |   |                |           | 0.00         |           |                 |           |  
|Outstanding May 2, 2009                   |  | 519,168   |   |                | $         | 12.79        |           | 3.62            |           | $
|Options outstanding at May
      2, 2009, |  |           |   |                |           |              |           |                 |           |  
|net of
      estimated forfeitures        |  | 513,932   |   |                | $         | 12.79        |           | 3.57            |           | $
|Exercisable at May 2, 2009                |  | 485,001   |   |                | $         | 12.80        |           | 3.25            |           | $

The total fair value at grant date of
previously non-vested stock options that vested during the thirteen-week periods
ended May 2, 2009 and May 3, 2008 were $32,000 and $6,000,
respectively.

No stock options were granted during
the first quarter of fiscal 2009. The weighted-average fair value of options
granted was $6.46 during the first quarter of fiscal 2008. The fair value of
options granted during the first quarter of fiscal 2008 were estimated at grant
date using a Black-Scholes option-pricing model with the following
weighted-average assumptions:

2008Risk free interest rate
    3.1
    %Expected
      dividend yield
    0.0
    %Expected volatility
    45.39
    %Expected
      term
    5
      Years


The risk free interest rate was based
on the U.S. Treasury yield curve in effect at the time of the grant. We had not
paid and did not anticipate paying cash dividends; therefore, the expected
dividend yield was assumed to be zero. Expected volatility was based on the
historical volatility of our stock. The expected term of the options was based
on our historical option exercise data taking into consideration the exercise
and forfeiture patterns of the class of option holders during the options life.

No stock options were exercised during
the thirteen-week period ended May 2, 2009. The following table summarizes
information regarding options exercised during the thirteen-week period ended
May 3, 2008:

ThirteenWeeks EndedMay 3, 2008Total
      intrinsic value(1)
    
    $
    26,600Total cash received
    
    $
    292,000Associated excess income tax benefits recorded
    
    $
    1,000


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


9

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The following table summarizes
information regarding outstanding and exercisable options at May 2, 2009:

|               |                   |                  |         | Options Outstanding |      | Options Exercisable
|-------------- | ----------------- | ---------------- | ------- | ------------------- | ---- | -------------------
|               |                   |                  |         | Number              |      | Weighted           
|Range of       |                   | of
      Options |         | Average             |      | Average            
|Exercise Price |                   | Outstanding      |         | Remaining Life      |      | Exercise Price     
|$              | 4.38 5.75        |                  | 61,162  |                     | 1.59 |                    
|$              | 8.56
      12.14 |                  | 102,585 |                     | 4.31 |                    
|$              | 12.67 16.30      |                  | 197,801 |                     | 4.45 |                    
|$              | 17.12             |                  | 157,620 |                     | 2.92 |                    

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

|                                                                        |  | Thirteen    |        | Thirteen   
|----------------------------------------------------------------------- |  | ----------- | ------ | -----------
|                                                                        |  | Weeks Ended |        | Weeks Ended
|                                                                        |  | May 2, 2009 |        | May 3, 2008
|Stock-based compensation expense before the recognized
      income tax |  |             |        |            
|benefit                                                                 |  | $           | 21,000 |            
|Income tax benefit                                                      |  | $           | 8,000  |            

As of May 2, 2009, there was
approximately $139,000 of unrecognized compensation expense, net of estimated
forfeitures, remaining related to non-vested stock options. This expense is
expected to be recognized over a weighted-average period of 2.0 years.

Restricted Stock
Awards

No previously non-vested stock awards
vested during the first quarter of fiscal 2009 or fiscal 2008, and no stock
awards were granted during the first quarter of fiscal 2009. The total number of
non-vested stock awards and the weighted-average grant date fair value of these
awards at both January 31, 2009 and May 2, 2009 was 434,234 and $15.97,
respectively. The weighted-average grant date fair value of stock awards granted
during the thirteen-week period ended May 3, 2008 was $12.50.

The following table summarizes
information regarding stock-based compensation (income) expense recognized for
restricted stock awards.

|                                                                      |  | Thirteen    |          | Thirteen   
|--------------------------------------------------------------------- |  | ----------- | -------- | -----------
|                                                                      |  | Weeks Ended |          | Weeks Ended
|                                                                      |  | May 2, 2009 |          | May 3, 2008
|Stock-based compensation (income) expense before the
      recognized |  |             |          |            
|income tax benefit                                                    |  | $           | (362,000 | )          
|Income tax (expense)
      benefit                                    |  | $           | (133,000 | )          

The $362,000 of income recorded during
the first quarter of fiscal 2009 was comprised of compensation expense of
$291,000 offset by income of $653,000. The income was attributable to the
reversal of the cumulative prior period expense for performance-based awards
which now have been deemed by management as not probable of vesting.

As of May 2, 2009, there was
approximately $3.7 million of unrecognized compensation expense remaining
related to both the performance-based and service-based non-vested stock awards.
The expense is expected to be recognized over a weighted average period of 3.1
years. This incorporates the current assumptions of the estimated requisite
service period required to achieve the designated performance conditions for
performance-based stock awards.

10

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Cash-Settled Stock Appreciation
Rights (SARs)

Cash-settled stock appreciation rights
(SARs) were granted to non-executive employees in the fourth quarter of fiscal
2008 such that one-third of the shares underlying the SARs granted would vest
and become fully exercisable on each of the first three anniversaries of the
date of the grant and were assigned a five-year term from the date of grant.
Each SAR entitles the holder, upon exercise, to receive cash in the amount equal
to the closing price of our stock on the date of exercise less the exercise
price. The maximum amount paid, however, cannot exceed 100% of the exercise
price. In accordance with SFAS No. 123 (revised 2004), "Share-Based Payment"
(SFAS No. 123R), cash-settled SARs are classified as Accrued and other
liabilities on the condensed consolidated balance sheet as of May 2, 2009 and
January 31, 2009.

No previously non-vested SARs vested
nor were any SARs granted during the first quarter of fiscal 2009. The total
number of non-vested SARs and the weighted-average exercise price at both
January 31, 2009 and May 2, 2009 was 157,000 and $9.72, respectively. The
weighted-average remaining contractual term for non-vested SARs at May 2, 2009
was 4.6 years.

SFAS No. 123R requires the fair value
of these liability awards be remeasured at each reporting period until the date
of settlement. Increases or decreases in compensation expense are recognized
over the vesting period, or immediately for vested awards. The weighted-average
fair value of outstanding, non-vested SARs awards was $3.62 as of May 2, 2009.
The fair value was estimated using a trinomial lattice model with the following
assumptions:

May 2, 2009Risk
      free interest rate yield curve
    
    0.06% - 2.03%Expected dividend
      yield
    
    0.0%Expected volatility
    
    58.30%Maximum life
    
    4.63 YearsExercise multiple
    
    1.7Maximum
      payout
    
    $9.72Employee exit rate
    
    2.2% - 9.0%


The risk free interest rate was based
on the U.S. Treasury yield curve in effect at the time of the grant. We had not
paid and did not anticipate paying cash dividends; therefore, the expected
dividend yield was assumed to be zero. Expected volatility was based on the
historical volatility of our stock. The exercise multiple and employee exit rate
are based on historical option data.

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

|                                                             |  | Thirteen   
|------------------------------------------------------------ |  | -----------
|                                                             |  | Weeks Ended
|                                                             |  | May 2, 2009
|Stock-based compensation expense before the
      recognized |  |            
|income tax benefit                                           |  | $          
|Income tax
      benefit                                     |  | $          

As of May 2, 2009, there was
approximately $459,000 in unrecognized compensation expense related to
non-vested SARs. The expense is expected to be recognized over a weighted
average period of 1.6 years.

11

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Employee Stock Purchase
Plan

The following table summarizes
information regarding stock-based compensation expense recognized for the
employee stock purchase plan.

|                                                                        |  | Thirteen    |       | Thirteen   
|----------------------------------------------------------------------- |  | ----------- | ----- | -----------
|                                                                        |  | Weeks Ended |       | Weeks Ended
|                                                                        |  | May 2, 2009 |       | May 3, 2008
|Stock-based compensation expense before the recognized income
      tax |  |             |       |            
|benefit(1)                                                              |  | $           | 8,000 |            
|Income tax benefit                                                      |  | $           | 3,000 |            

|(1) |  | Amounts are representative of the
      15% discount employees are provided for purchases under the employee stock
      purchase plan.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------

Note 5 - Litigation Matters

On or about April 22, 2008, an
arbitration claim was filed by SDI Industries, Inc. ("SDI") against us with the
American Arbitration Association Western Case Management Center in Los Angeles,
California, captioned *SDI Industries, Inc. (Claimant and Counter-Respondent)
v. Shoe Carnival, Inc. (Respondent and Counterclaimant)*, in which SDI
sought payment of $1.2 million of unpaid retainage, $700,000 for services not
yet billed, plus additional interest and legal fees. The retainage was withheld
from progress billings for work performed on our distribution center and was
recorded in accrued and other liabilities and fixed assets in our consolidated
financial statements. We filed a Counterclaim and Response in this matter,
denying SDI's claim, and seeking monetary damages of more than $3.0 million. We
asserted that SDI breached our contract with SDI ("Contract") due to its failure
to deliver our distribution center's material handling system pursuant to the
specifications of the Contract.

On May 30, 2009, the parties entered
into a settlement of the above matter. Under the terms of the settlement, SDI
agreed to pay us $1.2 million towards the remediation of the distribution
center's material handling system and to forego collection of the $1.2 million
in unpaid retainage. In addition, both parties agreed to the dismissal of all
pending litigation currently under arbitration. The $1.2 million will be paid in
installments over seven years and is evidenced by a promissory note secured by a
security interest in SDI's accounts receivable and by a standby letter of
credit, renewable annually, in an amount not less than $200,000.

Although the investment we made in the
distribution center will satisfy our distribution needs throughout fiscal 2009,
we have not achieved the productivity that we expect will be required based on
our plan for long-term store growth. We have contracted with a company to
provide recommendations as to system upgrades to improve throughput.
Modifications in the range of $1 million to $3 million are expected to be
complete prior to the end of fiscal 2009.

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

Note 6 - Fair Value Measurements

As of February 1, 2009, SFAS No. 157
applies to both our financial and non-financial assets and liabilities. Although
the adoption of SFAS No. 157 had no impact on our financial position or results
of operations, it does result in additional disclosures regarding fair value
measurements.

SFAS No. 157 provides guidance for
using fair value to measure assets and liabilities and only applies when other
standards require or permit the fair value measurement of assets and
liabilities. It does not expand the use of fair value measurements. SFAS No. 157
establishes a fair value hierarchy, which prioritizes the inputs used in
measuring fair value into three broad levels.

- Level 1  Quoted prices in active markets that are unadjusted and
  accessible at the measurement date for identical, unrestricted assets or
  liabilities;
- Level 2  Quoted prices for identical assets and liabilities in markets
  that are not active, quoted prices for similar assets and liabilities in
  active markets or financial instruments for which significant inputs are
  observable, either directly or indirectly; and
- Level 3  Prices or valuations that require inputs that are both
  significant to the fair value measurement and unobservable.

12

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Our financial assets as of May 2, 2009,
January 31, 2009, and May 3, 2008 included cash and cash equivalents. We did not
have any financial liabilities measured at fair value for these periods. The
carrying value of cash and cash equivalents approximates fair value due to its
short-term nature and is considered a Level 1 fair value measurement.

The following table summarizes our cash
and cash equivalents that are measured at fair value on a recurring basis as of
May 2, 2009, January 31, 2009, and May 3, 2008:

|                                         |  | Quoted Prices     |        | Significant |   |              |  |                  |   | 
|---------------------------------------- |  | ----------------- | ------ | ----------- | - | ------------ |  | ---------------- | - | 
|                                         |  | in Active Markets |        | Other       |   | Significant  |  |                  |  
|                                         |  | for               |        | Observable  |   | Unobservable |  |                  |  
|                                         |  | Identical Assets  |        | Inputs      |   | Inputs       |  |                  |  
|(In thousands)                           |  | (Level 1)         |        | (Level 2)   |   | (Level 3)    |  | Total Fair Value
|As of
      May 2, 2009                  |  |                   |        |             |   |              |  |                  |   | 
|Cash(1)                                  |  | $                 | 14,680 |             | $ | 0            |  | $                | 0 | 
|Credit and debit card receivables(2)     |  |                   | 5,551  |             |   | 0            |  |                  | 0 | 
|                                         |  | $                 | 20,231 |             | $ | 0            |  | $                | 0 | 
|As of
      January 31, 2009             |  |                   |        |             |   |              |  |                  |   | 
|Cash and short-term
      investments(1) |  | $                 | 20,920 |             | $ | 0            |  | $                | 0 | 
|Credit and debit card receivables(2)     |  |                   | 3,897  |             |   | 0            |  |                  | 0 | 
|                                         |  | $                 | 24,817 |             | $ | 0            |  | $                | 0 | 
|As of
      May 3, 2008                  |  |                   |        |             |   |              |  |                  |   | 
|Cash and short-term
      investments(1) |  | $                 | 4,627  |             | $ | 0            |  | $                | 0 | 
|Credit and debit card receivables(2)     |  |                   | 5,282  |             |   | 0            |  |                  | 0 | 
|                                         |  | $                 | 9,909  |             | $ | 0            |  | $                | 0 | 

|(1) |  | Cash and short-term
      investments represents cash deposits and short-term investments held with
      financial institutions. The cash balances held in bank operating accounts
      are covered by the Federal Deposit Insurance Corporation Transaction
      Account Guarantee Program. Through the end of the period, non-interest
      checking accounts and certain low interest transaction accounts are fully
      guaranteed for the entire amount in the account. To date, we have
      experienced no loss or lack of access to either invested cash or cash held
      in our operating accounts. Short-term investments consist of investments
      in a money market account and commercial paper that accrue interest on a
      periodic basis.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) |  | Our credit and debit
      card receivables are highly liquid financial assets that typically settle
      in less than three days.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

We did not have any fair value
measurements for our non-financial assets and liabilities during the quarter.

13

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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; the effects and duration of the current economic downturn
and the ailing credit markets; changes in the overall retail environment and
more specifically in the apparel and footwear retail sectors; our ability to
generate increased sales at our stores; the potential impact of national and
international security concerns on the retail environment; changes in our
relationships with key suppliers; the impact of competition and pricing; changes
in weather patterns, consumer buying trends and our ability to identify and
respond to emerging fashion trends; the impact of disruptions in our
distribution or information technology operations; the effectiveness of our
inventory management; the impact of hurricanes or other natural disasters on our
stores, as well as on consumer confidence and purchasing in general; risks
associated with the seasonality of the retail industry; our ability to
successfully execute our growth strategy, including the availability of
desirable store locations at acceptable lease terms, our ability to open new
stores in a timely and profitable manner and the availability of sufficient
funds to implement our growth plans; 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, Brazil, Spain and East Asia, the
primary manufacturers of footwear; and the continued favorable trade relations
between the United States and China and the 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 January 31, 2009.

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 January 31, 2009 as filed with the SEC.

Overview of Our
Business

Shoe Carnival, Inc. is one of the
nations largest family footwear retailers. As of May 2, 2009, we operated 313
stores in 29 states primarily 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.

14

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Our marketing effort targets moderate
income, value-conscious consumers seeking name brand footwear for all age
groups. We believe that by offering a wide selection of popular styles of name
brand merchandise at competitive prices, we generate broad customer appeal. Our
cost-efficient store operations and real estate strategy enable us to price
products competitively. Low labor costs are achieved by housing merchandise
directly on the selling floor in an open-stock format, enabling customers to
serve themselves, if they choose. This reduces the staffing required to assist
customers and reduces store level labor costs as a percentage of sales. We
locate stores predominantly in strip shopping centers in order to take advantage
of lower occupancy costs and maximize our exposure to value-oriented shoppers.

Critical Accounting Policies

It is necessary for us to include
certain judgments in our reported financial results. These judgments involve
estimates that are inherently uncertain and actual results could differ
materially from these estimates. The accounting policies that require the more
significant judgments 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 judgment 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,
"Accounting for Income Taxes" ("SFAS No. 109") and account for uncertain tax
positions in accordance with Interpretation No. 48, "Accounting for Uncertainty
in Income Taxes  an interpretation of Financial Accounting Standards Board
("FASB") Statement No. 109" ("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.

Insurance Reserves- We use a combination of self-insurance and third-party
insurance for workers' compensation, employee medical and general liability
insurance. These plans have stop-loss provisions that protect us from individual
and aggregate losses over specified dollar values. When estimating our
self-insured liabilities, we consider a number of factors, including historical
claims experience, severity factors, statistical trends and, in certain
instances, valuation assistance provided by independent third-parties. We will
continue to evaluate our self-insured liabilities and the underlying assumptions
on a quarterly basis and make adjustments as needed. The ultimate cost of these
claims may be greater than or less than the established accruals. While we
believe that the recorded amounts are adequate, there can be no assurance that
changes to management's estimates will not occur due to limitations inherent in
the estimating process. In the event we determine an accrual should be increased
or reduced, we will record such adjustments in the period in which such
determination is made.

15

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Results of Operations Summary
Information

|                  |  | Number of Stores |                 | Store Square Footage |        |  
|----------------- |  | ---------------- | --------------- | -------------------- | ------ | -
|                  |  | Beginning        |                 |                      |        |  
|Quarter Ended     |  |                  | Of
      Period |                      | Opened |  
|May 2,
      2009 |  | 304              |                 | 10                   |        | 1
|May 3, 2008       |  | 291              |                 | 2                    |        | 0

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.

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

|                                       |  | Thirteen    |   | Thirteen   
|-------------------------------------- |  | ----------- | - | -----------
|                                       |  | Weeks Ended |   | Weeks Ended
|                                       |  | May 2, 2009 |   | May 3, 2008
|Net
      sales                        |  | 100.0       | % |            
|Cost of sales (including
      buying, |  |             |   |            
|distribution and occupancy costs)      |  | 72.1        |   |            
|Gross
      profit                     |  | 27.9        |   |            
|Selling, general
      and             |  |             |   |            
|administrative expenses                |  | 24.0        |   |            
|Operating income                       |  | 3.9         |   |            
|Interest (income) expense,
      net   |  | 0.0         |   |            
|Income before income taxes             |  | 3.9         |   |            
|Income tax
      expense               |  | 1.4         |   |            
|Net
      income                       |  | 2.5         | % |            

Operational Summary

We experienced stronger than
anticipated sales during the month of February and although the last two months
of the quarter did not result in a combined comparable store sales gain, our
early quarter performance was strong enough to limit the decline in comparable
sales to just 0.3% for the quarter. Comparable store sales performance was
driven largely by athletic footwear, including both children's and adult sizes,
which recorded a mid-single digit increase for the quarter.

Our customers continued to react to
value pricing of our adult dress and casual product, especially during the
clearance period of February through early March. The decline in our gross
profit margin during the first quarter of fiscal 2009 was a direct result of
this aggressive liquidation within our non-athletic categories. However, this
did enable us to reduce inventory levels and end the quarter with per-store
inventories down 8.4% as compared to the first quarter of fiscal 2008.

We were able to leverage our buying,
distribution and occupancy costs, as well as our selling, general and
administrative expenditures. Through the efforts of our store-level,
distribution center and administrative management groups, total dollar increases
in these areas of expense were held to a minimum.

As we look forward, we recognize our
targeted middle income customer will continue to be impacted by the economic
downturn and sales within the retail sector may continue to experience downward
pressure. Therefore, we will continue to manage our business conservatively,
maintaining tight control over both our inventories and our cost structure
through the remainder of fiscal 2009.

16

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Results of Operations for the First
Quarter Ended May 2, 2009

Net Sales

Net sales increased $5.2 million to
$167.3 million during the first quarter of fiscal 2009, a 3.2% increase over the
prior year's net sales of $162.1 million. The increase in net sales was
primarily due to a $9.4 million increase in sales generated by the 34 new stores
opened since the beginning of fiscal 2008. This increase was partially offset by
a 0.3% decrease in comparable store sales and the loss of sales from the 12
stores closed since the beginning of fiscal 2008.

Gross Profit

Gross profit decreased $440,000 to
$46.6 million in the first quarter of fiscal 2009 from gross profit of $47.1
million in the comparable prior year period. Gross margins for the first quarter
of 2009 decreased 1.1% over the same period last year to 27.9%. The merchandise
margin decreased 1.3% primarily due to the aggressive liquidation efforts we
undertook during the quarter to significantly lower our per-store inventories in
women's footwear. We were able to leverage buying, distribution and occupancy
costs, as a percentage of sales, by 0.2% and to limit the total dollar increase
to approximately $305,000. This increase in expense was primarily related to the
additional occupancy costs incurred for the operation of our new stores. The
increase was partially offset by rent reductions on certain comparable stores,
the elimination of rent from the stores closed since the beginning of fiscal
2008 and, to a lesser extent, other cost savings initiatives in our buying and
distribution functions.

Selling, General and Administrative
Expenses

Selling, general and administrative
expenses increased $733,000 in the first quarter of fiscal 2009 to $40.1
million, but as a percentage of sales decreased 0.2% to 24.0%. The increase in
expense was primarily the result of the $1.6 million of additional cost incurred
from the operation and support of the net new stores opened since the beginning
of fiscal 2008, along with a $594,000 increase in self-insured health care costs
resulting predominantly from several large medical claims. In addition to our
continued focus on expense control and the resulting savings, these increases
were partially offset by a reversal of $653,000 in stock-based compensation
expense related to the reduction in the number of performance-based restricted
shares anticipated to vest prior to their expiration.

Pre-opening costs were $481,000, or
0.3% of sales, for the first quarter of fiscal 2009 as compared to $34,000, or
less than 0.1% of sales, for the first quarter of fiscal 2008. We opened ten
stores in the first quarter of fiscal 2009 as compared to two stores in the
first quarter of fiscal 2008. 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.

Interest (Income) Expense, Net

We recorded net interest expense of
$39,000 in the first quarter of fiscal 2009 as compared to net interest income
of $4,000 in the first quarter of the prior year.

Income Taxes

The effective income tax rate for the
first quarter of fiscal 2009 decreased to 36.9% from 38.4% for the same time
period in fiscal 2008.

Liquidity and Capital
Resources

Our primary sources of funds are cash
flows from operations and borrowings under our revolving credit facility. Our
net cash used in operating activities was $1.5 million in the first quarter of
fiscal 2009 as compared to cash provided by operations of $3.0 million in the
first quarter of 2008. The change in operating cash flow, when comparing the two
periods of each year, was primarily driven by our aggressive management of
inventory levels partially offset by the timing of payments for accounts payable
and accrued liabilities.

17

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Working capital increased to $155.6
million at May 2, 2009 from $148.1 million at May 3, 2008. This $7.5 million
increase resulted primarily from an increase in cash and cash equivalents
partially offset by a decrease in inventories. The current ratio at May 2, 2009
was 3.4 as compared to 3.3 at May 3, 2008. We had no long-term debt as of the
end of either period.

We expended $3.2 million in cash during
the first quarter of fiscal 2009 for the purchase of property and equipment, of
which $2.9 million was for new stores.

During the first quarter of fiscal
2009, we opened ten new stores and we anticipate opening an additional five
stores through the end of the year. Additional capital expenditures of
approximately $6 million to $9 million will be made over the remainder of fiscal
2009, with $1 million to $3 million of this representing our anticipated
investment in the remediation of our distribution center. The remaining capital
expenditures will be incurred for the opening of new stores, store remodels and
various other store improvements, along with continued investments in technology
and normal asset replacement activities. We currently anticipate receiving an
additional $1.0 million in landlord incentives through the end of fiscal 2009.
The actual amount of cash required for capital expenditures for store operations
depends in part on the number of new stores opened, the amount of lease
incentives, if any, received from landlords and the number of stores remodeled.
The opening of new stores will be dependent upon, among other things, the
availability of desirable locations, the negotiation of acceptable lease terms
and general economic and business conditions affecting consumer spending in
areas we target for expansion.

Our current store prototype uses
between 8,000 and 12,000 square feet depending upon, among other factors, the
location of the store and the population base the store is expected to service.
Capital expenditures for a new store in fiscal 2009 are expected to average
approximately $338,000. The average inventory investment in a new store is
expected to range from $350,000 to $500,000 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 $62,000 per store in fiscal 2009.

We closed one store in the first
quarter of fiscal 2009 and expect to close nine stores during the remainder of
fiscal 2009. In connection with the 10 stores we plan on closing in fiscal 2009,
we expect to incur $400,000 in store closing costs of which $140,000 was
incurred during the first quarter. We will continue to evaluate under performing
stores for possible closing on a routine basis, which may result in the
identification of additional store closings for the current or future fiscal
years. 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 remaining basis in the fixed
assets to be disposed of at closing and the amount of any lease
buyout.

As of May 2, 2009, our unsecured credit
agreement provided for up to $95.0 million in cash advances on a revolving basis
and commercial and standby letters of credit. Borrowings under the revolving
credit line are based on eligible inventory and the following covenants: (1)
Total Shareholders' Equity, adjusted for the effect of any share repurchases,
will not fall below that of the prior fiscal year-end; (2) the ratio of funded
debt plus rent to EBITDA plus rent will not exceed 2.5 to 1.0; (3) total
distributions for stock repurchases will not exceed $50.0 million; and (4) cash
dividends will not reduce our Total Shareholders' Equity, adjusted for the
effect of any share repurchases, below that of the prior fiscal year-end. We
were in compliance with these covenants as of May 2, 2009. Should a default
condition be reported, the lenders may preclude additional borrowings and call
all loans and accrued interest at their discretion. As of May 2, 2009, there
were no borrowings outstanding and letters of credit outstanding were $3.9
million. The amount available to us for additional borrowings was $87.8 million
as of May 2, 2009.

Our $50.0 million share repurchase
program will terminate on December 31, 2009, unless extended by our Board of
Directors. Share repurchases under this authorization may be made in the open
market or in privately negotiated transactions. The timing and actual number of
shares repurchased will depend on a variety of factors including price,
corporate and regulatory requirements and other market conditions. As of May 2,
2009, approximately 1.2 million shares had been repurchased at an aggregate cost
of $28.1 million. The amount that remained available under the existing
repurchase authorization at May 2, 2009 was $21.9 million. No shares were
repurchased during the first quarter of fiscal 2009.

18

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On or about April 22, 2008, an
arbitration claim was filed by SDI Industries, Inc. ("SDI") against us with the
American Arbitration Association Western Case Management Center in Los Angeles,
California, captionedSDI Industries, Inc.
(Claimant and Counter-Respondent) v. Shoe Carnival, Inc. (Respondent and
Counterclaimant),in which SDI sought payment
of $1.2 million of unpaid retainage, $700,000 for services not yet billed, plus
additional interest and legal fees. The retainage was withheld from progress
billings for work performed on our distribution center and was recorded in
accrued and other liabilities and fixed assets in our consolidated financial
statements. We filed a Counterclaim and Response in this matter, denying SDI's
claim, and seeking monetary damages of more than $3.0 million. We asserted that
SDI breached our contract with SDI ("Contract") due to its failure to deliver
our distribution center's material handling system pursuant to the
specifications of the Contract.

On May 30, 2009, the parties entered
into a settlement of the above matter. Under the terms of the settlement, SDI
agreed to pay us $1.2 million towards the remediation of the distribution
center's material handling system and to forego collection of the $1.2 million
in unpaid retainage. In addition, both parties agreed to the dismissal of all
pending litigation currently under arbitration. The $1.2 million will be paid in
installments over seven years and is evidenced by a promissory note secured by a
security interest in SDI's accounts receivable and by a standby letter of
credit, renewable annually, in an amount not less than $200,000.

Although the investment we made in the
distribution center will satisfy our distribution needs throughout fiscal 2009,
we have not achieved the productivity that we expect will be required based on
our plan for long-term store growth. We have contracted with a company to
provide recommendations as to system upgrades to improve throughput.
Modifications in the range of $1 million to $3 million are expected to be
complete prior to the end of fiscal 2009.

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 along with
other capital expenditures, any future repurchase of our common stock under our
current repurchase plan and working capital 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.

19

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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. We had no borrowings during the first quarter of fiscal
2009.

ITEM 4. CONTROLS AND PROCEDURES

Our Chief Executive Officer and Chief
Financial Officer have concluded, based on their evaluation as of May 2, 2009,
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. As
part of our continued strategy to grow our store base and increase capacity, we
are in the process of redesigning certain elements of the material handling
system in our distribution center. The internal controls impacted by this
project are mainly automated and operational in nature. See our Notes to
Condensed Consolidated Financial Statements, Note 5  "Litigation Matters"
included in PART I, ITEM 1. FINANCIAL STATEMENTS of this Quarterly Report on
Form 10-Q for further details on this matter. There have been no other changes
in our internal control over financial reporting that occurred during the
quarter ended May 2, 2009 that have materially affected, or are reasonably
likely to materially affect, our internal control over financial reporting.

20

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SHOE CARNIVAL, INC.PART II -
OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The information set forth in Note 5 
"Litigation Matters" contained in the Notes to Condensed Consolidated Financial
Statement included in PART I, ITEM 1. FINANCIAL STATEMENTS of this Quarterly
Report on Form 10-Q is incorporated herein by reference.

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 January 31, 2009 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 January 31, 2009.

ITEM 6. EXHIBITS

|        |  |                                                                                                                                                                                                                                                                            |  | Incorporated by Reference To
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                            |  |                             
|No.     |  | Description                                                                                                                                                                                                                                                                |  | Form                        
|3-A     |  | Restated Articles of
      Incorporation of Registrant                                                                                                                                                                                                                     |  | 10-K                        
|        |  |                                                                                                                                                                                                                                                                            |  |                             
|3-B     |  | By-laws of Registrant, as amended
      to date                                                                                                                                                                                                                            |  | 8-K                         
|        |  |                                                                                                                                                                                                                                                                            |  |                             
|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                                                        |  | 10-K                        
|        |  |                                                                                                                                                                                                                                                                            |  |                             
|        |  | (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                                          |  | 10-K                        
|        |  |                                                                                                                                                                                                                                                                            |  |                             
|        |  | (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                |  | 10-Q                        
|        |  |                                                                                                                                                                                                                                                                            |  |                             
|        |  | (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 |  | 10-K                        

21

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EXHIBITS - Continued

|        |  |                                                                                                                                                                                                                                                                                                                         |  | Incorporated by Reference To
|------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                         |  |                             
|No.     |  | Description                                                                                                                                                                                                                                                                                                             |  | Form                        
|        |  | (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                                     |  | 10-K                        
|        |  |                                                                                                                                                                                                                                                                                                                         |  |                             
|        |  | (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                                      |  | 10-K                        
|        |  |                                                                                                                                                                                                                                                                                                                         |  |                             
|        |  | (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 |  | 10-Q                        
|        |  |                                                                                                                                                                                                                                                                                                                         |  |                             
|        |  | (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                                             |  | 8-K                         
|        |  |                                                                                                                                                                                                                                                                                                                         |  |                             
|        |  | (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                                                                                       |  | 8-K                         
|        |  |                                                                                                                                                                                                                                                                                                                         |  |                             
|        |  | (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                                                                                      |  | 8-K                         
|        |  |                                                                                                                                                                                                                                                                                                                         |  |                             
|        |  | (xi) Ninth Amendment to Amended
      and Restated Credit Agreement and Notes dated June 10, 2008, between
      Registrant and U.S. Bank National Association, Wachovia Bank, National
      Association and Fifth Third Bank                                                                                          |  | 10-Q                        
|        |  |                                                                                                                                                                                                                                                                                                                         |  |                             
|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                                                                                                            |  |                             

22

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EXHIBITS - Continued

|        |  |                                                                                                                                                                                                              |  | Incorporated by Reference To
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ----------------------------
|Exhibit |  |                                                                                                                                                                                                              |  |                             
|No.     |  | Description                                                                                                                                                                                                  |  | Form                        
|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                                                |  |                             

23

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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: June 11, 2009 |     | SHOE
      CARNIVAL, INC.    
|------------------- | --- | -----------------------------
|                    |     | (Registrant)                 
|                    |     |                              
|                    |     |                              
|                    | By: | /s/ W. Kerry Jackson         
|                    |     | W.
      Kerry Jackson       
|                    |     | Executive Vice President and 
|                    |     | Chief
      Financial Officer

24

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