UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

Form 10-K

|(Mark
      One) |                                                                                                 | 
|---------------- | ----------------------------------------------------------------------------------------------- | 
|[X]              | Annual report pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934     
|                 | For the fiscal
      year ended:**January 31,
      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)Securities registered pursuant to Section 12(b) of the
      Act:Common Stock, $.01 par
      value
    
    The NASDAQ Stock Market
      LLC(Title of
      Each Class)
    
    (Name of
      Each Exchange on Which Registered)Securities
      registered pursuant to Section 12(g) of the Act: None


Indicate by check mark if the
registrant is a well-known seasoned issuer, as defined in Rule 405 of the
Securities
Act.                           
[  ]
Yes                    [X]
No

Indicate by check mark if the
registrant is not required to file reports pursuant to Section 13 or Section
15(d) of the Exchange
Act.                           
[  ]
Yes                    [X]
No

Indicate by check mark whether the
registrant (1) has filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90
days.[X]
Yes                    [ 
] No

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

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

Indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).                           
[  ]
Yes                    [X]
No

The aggregate market value of the
voting stock held by non-affiliates of the registrant based on the last sale
price for such stock at August 2, 2008 (the last business day of the
registrants most recently completed second fiscal quarter) was approximately
$281,886,000 (assuming solely for the purposes of this calculation that all
Directors and executive officers of the registrant are "affiliates").

Number of Shares of Common Stock, $.01
par value, outstanding at April 2, 2009 was 12,912,079.

DOCUMENTS INCORPORATED BY REFERENCE

Certain information contained in the
Definitive Proxy Statement for the Annual Meeting of Shareholders of the
Registrant to be held on June 9, 2009 is incorporated by reference into PART III
hereof.

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TABLE OF CONTENTS

|PART
      I   |     |                                                                                                                       
|-------------- | --- | ----------------------------------------------------------------------------------------------------------------------
|              
|Item           | 1.  | Business                                                                                                              
|Item           | 1A. | Risk
      Factors                                                                                                    
|Item           | 1B. | Unresolved Staff Comments                                                                                             
|Item           | 2.  | Properties                                                                                                            
|Item           | 3.  | Legal Proceedings                                                                                                     
|Item           | 4.  | Submission
      of Matters to a Vote of Security Holders                                                             
|              
|              
|PART
      II  |     |                                                                                                                       
|              
|Item           | 5.  | Market for the Registrants Common Equity, Related Stockholder
      Matters and Issuer Purchases of Equity Securities
|Item           | 6.  | Selected
      Financial Data                                                                                         
|Item           | 7.  | Managements Discussion and Analysis of Financial Condition and
      Results of Operations                           
|Item           | 7A. | Quantitative
      and Qualitative Disclosures About Market Risk                                                      
|Item           | 8.  | Financial Statements and Supplementary Data                                                                           
|Item           | 9.  | Changes in
      and Disagreements with Accountants on Accounting and Financial
      Disclosure                      
|Item           | 9A. | Controls and Procedures                                                                                               
|Item           | 9B. | Other
      Information                                                                                               
|              
|              
|PART
      III |     |                                                                                                                       
|              
|Item           | 10. | Directors, Executive Officers and Corporate Governance                                                                
|Item           | 11. | Executive
      Compensation                                                                                          
|Item           | 12. | Security Ownership of Certain Beneficial Owners and Management and
      Related Stockholder Matters                  
|Item           | 13. | Certain
      Relationships and Related Transactions, and Director
Independence                                       
|Item           | 14. | Principal Accountant Fees and Services                                                                                
|              
|              
|PART
      IV  |     |                                                                                                                       
|              
|Item           | 15. | Exhibits and Financial Statement Schedules                                                                            

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Shoe Carnival, Inc.Evansville,
Indiana

Annual Report to Securities and Exchange
CommissionJanuary 31, 2009

PART I

ITEM 1.BUSINESS

Forward-Looking
Statements

This annual report contains
forward-looking statements, within the meaning of the Private Securities
Litigation Reform Act of 1995, that involve a number of risks and uncertainties.
A number of factors could cause our actual results, performance, achievements or
industry results to be materially different from any future results, performance
or achievements expressed or implied by these forward-looking statements. These
factors include, but are not limited to: general economic conditions in the
areas of the 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. See ITEM 1A. RISK FACTORS of this
report.

General

Shoe Carnival, Inc. is one of the
nations largest family footwear retailers. We offer customers a broad
assortment of moderately priced dress, casual and athletic footwear for men,
women and children with emphasis on national and regional name brands. We
differentiate our retail concept from our competitors' by our distinctive,
highly promotional in-store marketing effort and large stores that average
11,100 square feet, generate an average of approximately $2.2 million in annual
sales and carry an average inventory of approximately 28,000 pairs of shoes per
location. As of January 31, 2009, we operated 304 stores in 29 states primarily
in the Midwest, South and Southeast regions of the United States.

We make available free of charge
through the Investor Relations portion of our website at www.shoecarnival.com
our annual reports on Form 10-K, our quarterly reports on Form 10-Q, our current
reports on Form 8-K and amendments to those reports filed or furnished pursuant
to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as
amended, as soon as reasonably practicable after we electronically file such
material with, or furnish it to, the Securities and Exchange Commission.

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

We are an Indiana corporation that was
initially formed in Delaware in 1993 and reincorporated in Indiana in
1996.

2

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Business Strategy

Our goal is to continue to grow our net
sales and earnings by strengthening our position as the logical destination
store for our customers footwear needs. Key elements of our business strategy
are as follows.

We offer a distinctive shopping
experience.Our stores combine
competitive pricing with a highly promotional, in-store marketing effort that
encourages customer participation and creates a fun and exciting shopping
experience. We promote a high-energy retail environment by decorating with
bright lights and bold colors, and by featuring a stage and barker as the focal
point in each store. With a microphone, this barker, or "mic-person", announces
current specials, organizes contests and games, and assists and educates
customers with the features and location of merchandise. Our mic-person offers
limited-duration promotions throughout the day, encouraging the customers to
take immediate advantage of our value pricing. We believe this highly
promotional atmosphere results in various competitive advantages, including
increased multiple unit sales; the building of a loyal, repeat customer base;
the creation of word-of-mouth advertising; and enhanced sell through of
in-season goods.

We offer a broad merchandise
assortment.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. The average store carries approximately
28,000 pairs of shoes in four general categories - mens, womens, childrens
and athletics. In addition to footwear, our stores carry selected accessory
items complementary to the sale of footwear. We emphasize name brand merchandise
to customers with creative signage and by prominently displaying selected brands
on end caps, focal walls and within the aisles. These displays may highlight a
product offering of a single vendor, highlight sales promotions, advertise
promotional pricing to meet or beat competitors sale prices or may make a
seasonal or lifestyle statement by highlighting similar footwear from multiple
vendors. These visual merchandising techniques make it easier for customers to
shop and focus attention on key name brands. Expenses for signage and visual
displays highlighting a particular brand will often be partially or fully
reimbursed by the vendor.

We believe that by offering a wide
selection of both athletic and non-athletic footwear, we are able to reduce our
exposure to shifts in fashion preferences between those categories. Our ability
to identify and react to fashion changes is a key factor in our sales and
earnings performance.

We offer value to our
customers.Our marketing effort targets
moderate income, value conscious consumers seeking name brand footwear for all
age groups. We believe that by offering a wide selection of popular styles of
name brand merchandise at competitive prices, we generate broad customer appeal.
Additionally, the time conscious customer appreciates the convenience of one
stop shopping for the entire family. We also believe our highly promotional
in-store shopping environment contributes to a reputation of value pricing
throughout the store.

We maintain an efficient store
level cost structure.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
prefer to locate stores predominantly in strip shopping centers in order to take
advantage of lower occupancy costs and maximize our exposure to value oriented
shoppers.

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

3

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

Growth Strategy and Store
Location

In reaction to the current recessionary
economic environment, we have chosen to significantly slow our store growth.
However, when economic conditions improve, we plan to continue to grow our store
base in order to strengthen our position as a leading specialty branded footwear
retailer. Aside from comparable store sales increases, the majority of our sales
and earnings growth is expected to be generated by the opening of new stores. In
fiscal 2009, we expect to open approximately 15 stores and close ten. These new
stores will be located in large and small markets in both new and existing
geographic areas. Our intention is to fill in certain under-penetrated markets
with additional stores, thereby increasing the performance of the overall
market. We also intend to enter smaller markets that we can fully penetrate with
one or two stores. We generally can advertise more effectively in these markets,
which helps to create immediate brand awareness. We have adjusted, and will
continue to adjust, our annual store growth rate based on our view of internal
and external opportunities and challenges. We intend to increase our annual
store growth rate to between 10% to 12% in the future, subject to the
availability of sufficient real estate and the state of the U.S.
economy.

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

The number of stores opened and closed
during fiscal years 2008, 2007 and 2006 were as follows:

Fiscal
      years
    
    2008
    
    2007
    
    2006Stores open at beginning of year
    
    291
    
    271
    
    263Opened during
      year
    
    24
    
    25
    
    14Closed during year
    
    11
    
    5
    
    6Stores open at
      end of year
    
    304
    
    291
    
    271


On January 31, 2009, we had 304 stores
located in 29 states, primarily in the Midwest, South and Southeast regions of
the United States. We prefer strip shopping center locations where occupancy
costs are typically lower and we enjoy greater operating freedom to implement
our non-traditional retail methods. We feel that our target customers enjoy the
convenience offered by strip shopping centers as opposed to enclosed malls. Our
stores averaged approximately 11,100 square feet, ranging in size from 6,000 to
26,500 square feet. Our current store prototype utilizes between 8,000 and
12,000 square feet, depending upon, among other factors, the location of the
store and the population base the store is expected to service. The sales area
of most stores is approximately 86% of the gross store size.

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

4

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Merchandising and
Pricing

Our merchandising strategy is designed
to provide a large selection of moderately priced footwear for the entire
family. Our stores carry an average of approximately 28,000 pairs of shoes
featuring a broad assortment of current-season name brand footwear, supplemented
with private label merchandise and select name brand closeouts. Our stores also
carry complementary accessories such as handbags, shoe care items and socks. The
mix of merchandise and the brands offered in a particular store are based upon
the demographics of each market, among other factors.

Our pricing strategy is designed to
emphasize value. By combining current season name brand product with promotional
pricing, we feel that we create a better value for customers. Initial pricing
decisions are guided by gross profit margin targets, which vary by merchandise
category and depend on whether the item is name brand or private label
merchandise. Markdowns are centrally managed by the buying staff and
communicated to the stores through information systems as needed.

The table below sets forth our
percentage of sales by product category for fiscal years 2008, 2007 and
2006.

Fiscal
      years
    
    2008
    
    2007
    
    2006Womens
    
    26
    %
    
    27
    %
    
    27
    %Mens
    
    15
    
    
    15
    
    
    15Childrens (1)
    
    17
    
    
    17
    
    
    17Athletics
      (2)
    
    38
    
    
    37
    
    
    37Accessories and Miscellaneous Items
    
    4
    
    
    4
    
    
    4100
    %
    
    100
    %
    
    100
    %


|(1) |  | Childrens includes
      childrens athletic shoes.
|--- |  | ----------------------------------------------------
|(2) |  | Includes mens and
      womens sizes only.        

Womens, mens and childrens
non-athletic footwear categories are further divided into dress, casual, sport,
sandals and boots. Athletic shoes are classified by functionality, such as
running, basketball or fitness shoes. In fiscal 2008, athletic styles, including
childrens sizes, represented approximately half of our footwear
sales.

One of our major goals is to improve
our operating margins. We are focused on improving our operating margins by
increasing our gross margin and to a lesser extent leveraging general and
administrative expenses against a higher sales base.

Advertising and
Promotion

We use various forms of media
advertising to communicate the exceptional values offered on specific shoes or
entire product categories. Approximately 59% of our total advertising budget was
directed to print media (including newspaper ads, inserts and direct mail) and
outdoor advertising in fiscal 2008. Television and radio accounted for the
balance of the budget. A special effort is made to utilize the cooperative
advertising dollars offered by vendors whenever possible.

In-store promotions are a key element
in our marketing effort. By utilizing both planned and impromptu contests and
games, store managers create an environment that encourages customer interaction
with store personnel. For example, a customer is enticed to purchase additional
merchandise by winning an on-the-spot discount. Promotions of this type
exemplify our emphasis on fun and excitement in order to enhance our customers
total shopping experience.

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

5

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Distribution

During the fourth quarter of fiscal
2006 and the first quarter of fiscal 2007, we converted our distribution and
warehousing functions to our new 410,000 square foot distribution center,
located in Evansville, Indiana. This facility is leased from a third party and
can support the processing and distribution needs of a minimum of 460 stores to
facilitate future growth. We negotiated in our lease the right to expand into a
designated expansion area as long as we provide 120 days written notice to the
property owner. Expansion under this option would provide us the processing
capacity to support a total of approximately 650 stores.

The distribution center is equipped
with state-of-the-art processing and product movement equipment. The facility
utilizes cross docking/store replenishment and redistribution methods to fill
store product requirements. These methods may include count verification, price
and bar code labeling of each unit (when not performed by the manufacturer),
redistribution of an order into size assortments (when not performed by the
manufacturer) and allocation of shipments to individual stores. Throughout
packing, allocating, storing and shipping, our distribution process is
essentially paperless. Merchandise is typically shipped to each store one time
per week. The majority of shipments are handled by a dedicated carrier, with
occasional use of common carriers.

Buying Operations

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

We purchase merchandise from over 150
footwear vendors. In fiscal 2008, two suppliers, Nike USA, Inc. and Skechers
USA, Inc., each accounted for over 10% of our net sales and together accounted
for over 31% of our net sales. A loss of any of our key suppliers in certain
product categories could have a material adverse effect on our business. As is
common in the industry, we do not have any long-term contracts with suppliers.

Competition

The retail footwear business is highly
competitive. We believe the principal competitive factors in our industry are
merchandise selection, price, fashion, quality, location, store environment and
service. We compete primarily with department stores, shoe stores, sporting
goods stores and mass merchandisers.

We compete with most department stores
and traditional shoe stores by offering lower prices. We compete with off-price
retailers, mass merchandisers and discount stores by offering a wider and deeper
selection of merchandise.

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

Store Operations

Management of store operations is the
responsibility of our Executive Vice President - Store Operations, who is
assisted by the Senior Vice President - Store Operations, divisional managers,
regional managers and the individual store general managers. In general, each
store has a general manager and up to three assistant managers, depending on
sales volume. Store operations personnel are charged with making certain
merchandising decisions necessary to maximize sales and profits primarily
through merchandise placement, signage and timely clearance of slower selling
items. Administrative functions are centrally controlled from the corporate
headquarters. These functions include accounting, purchasing, store maintenance,
information systems, advertising, human resources, distribution and
pricing.

6

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Employees

At January 31, 2009, we had
approximately 4,200 employees, of which approximately 2,400 were employed on a
part-time basis. The number of employees fluctuates during the year primarily
due to seasonality. None of our employees are represented by a labor union.

We attribute a large portion of our
success in various areas of cost control to our inclusion of virtually all
management level employees in incentive compensation plans. We contribute all or
a portion of the cost of medical, disability and life insurance coverage for
those employees who are eligible to participate in company-sponsored plans.
Additionally, we sponsor a 401(k) retirement plan that is open to all employees
who have met the minimum age and workhour requirements. All employees are
eligible to receive discounts on purchases from our stores. We consider our
relationship with our employees to be satisfactory.

Seasonality

Our quarterly results of operations
have fluctuated, and are expected to continue to fluctuate in the future,
primarily as a result of seasonal variances and the timing of sales and costs
associated with opening new stores. Non-capital expenditures, such as
advertising and payroll, incurred prior to the opening of a new store are
charged to expense as incurred. Therefore, our results of operations may be
adversely affected in any quarter in which we incur pre-opening expenses related
to the opening of new stores.

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

Trademarks

We own the following federally
registered trademarks and servicemarks: Shoe Carnival®, The Carnival®,
Donna Lawrence®, Oak
Meadow®, Victoria
Spenser®, Via
Nova®,
Innocence®, Trade
Dress®, Carnival
Lites®, Color Block
Design®,
Y-NOT?®, and 93
Octane®. We believe these marks are
valuable and, accordingly, we intend to maintain the marks and the related
registrations. We are not aware of any pending claims of infringement or other
challenges to our right to use these marks.

ITEM 1A.RISK FACTORS

You should carefully consider the
following risk factors and all other information contained in this annual report
before making an investment decision with respect to our common stock. Investing
in our common stock involves a high degree of risk. If any of the following
risks actually occur, we may not be able to conduct our business as currently
planned and our financial condition and operating results could be seriously
harmed. See ITEM 1. BUSINESS - "Forward-Looking Statements" of this report.

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

- general economic, industry and weather
  conditions;
- energy costs, which affect gasoline and home
  heating prices;
- the level of consumer debt;
- consumer credit availability;
- real estate values and foreclosure
  rates;
- interest rates;

7

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- tax rates and policies;
- unemployment trends;
- war, terrorism, other hostilities and security
  concerns; and
- consumer confidence in future economic
  conditions.

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

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

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

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

- competition;
- timing of holidays including sales tax
  holidays;
- general regional and national economic
  conditions;
- inclement weather;
- consumer trends, such as less disposable income
  due to the impact of higher gasoline prices;
- fashion trends;
- changes in our merchandise mix;
- our ability to distribute merchandise efficiently
  to our stores;
- timing and type of, and customer response to,
  sales events, promotional activities or other advertising;
- the effectiveness of our inventory
  management;

8

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- new merchandise introductions;
  and
- our ability to execute our business strategy
  effectively.

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

We depend on our key suppliers
for merchandise and advertising support and the loss of key suppliers could
adversely affect our business.Our
business depends upon our ability to purchase fashionable, name brand and other
merchandise at competitive prices from our suppliers. In fiscal 2008, two
branded suppliers, Nike USA, Inc. and Skechers USA, Inc., collectively accounted
for over 31% of our net sales. Name brand suppliers also provide us with
cooperative advertising and visual merchandising funds. A loss of any of our key
suppliers in certain product categories or our inability to obtain name brand or
other merchandise from suppliers at competitive prices could have a material
adverse effect on our business. As is common in the industry, we do not have any
long-term contracts with our suppliers.

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

If imported merchandise becomes more
expensive or unavailable, the transition to alternative sources may not occur in
time to meet our demands. Products from alternative sources may be of lesser
quality and more expensive than those we currently import. Other risks
associated with our use of imported goods include: disruptions in the flow of
imported goods because of factors such as electricity or raw material shortages,
work stoppages, strikes and political unrest; problems with oceanic shipping,
including shipping container shortages; economic crises and international
disputes; currency exchange rate fluctuations; increases in the cost of
purchasing or shipping foreign merchandise resulting from the failure to
maintain normal trade relations with source countries; import duties, import
quotas and other trade sanctions; and increases in shipping rates imposed by the
trans-Pacific shipping cartel.

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

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

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

- our ability to locate suitable store sites and
  negotiate store leases (for new stores and renewals) on favorable
  terms;
- the acceptance of the Shoe Carnival concept in new
  markets;
- the availability of financing for capital
  expenditures and working capital requirements;
- our ability to provide adequate distribution to
  support growth;

9

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- our ability to source sufficient levels of
  inventory to meet the needs of new stores;
- particularly in new markets, our ability to open a
  sufficient number of new stores to provide the critical mass needed for
  efficient advertising and effective name recognition;
- our ability to improve costs and timing associated
  with opening new stores; and
- the impact of new stores on sales or profitability
  of existing stores in the same market.

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

We will require significant funds
to implement our growth strategy and meet our other liquidity
needs.We cannot assure you that we will
be able to generate sufficient cash flow from operations or obtain sufficient
borrowings under our existing credit agreement to finance our growth strategy
and meet our other liquidity needs. In fiscal 2009, capital expenditures are
expected to range from $9 million to $12 million. Our actual costs may be
greater than anticipated. We also require working capital to support inventory
for our existing stores. Failure to generate or raise sufficient funds may
require us to modify, delay or abandon some of our future growth or expenditure
plans. In addition, our results could be adversely affected if interest rates
materially increase from present levels.

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

In addition, our stores process debit
and credit card transactions. We believe we have established appropriate
controls to protect our customers' personal confidential information gathered
when a debit or credit card is utilized. However, in the event that such
confidential information is misused or obtained by an unauthorized third party,
we could be subject to negative publicity that could harm our business, as well
as have a material adverse effect on our financial conditions or results of
operations.

Our failure to retain our
existing senior management team and to continue to attract qualified personnel
could adversely affect our business.Our
success depends to a large extent on the continued service of our executive
management team. Departures by executive officers could have a negative impact
on our business, as we may not be able to find suitable management personnel to
replace departing executives on a timely basis. Furthermore, our strategy
requires us to continue to train, motivate and manage our employees and to
attract, motivate and retain additional qualified managerial and merchandising
personnel. Competition for these types of personnel is intense, and we cannot
assure you that we will be successful in attracting, assimilating and retaining
the personnel required to grow and operate our business profitably.

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

10

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

- fashion trends;
- calendar shifts of holiday or seasonal
  periods;
- the effectiveness of our inventory
  management;
- weather conditions;
- timing of opening of new stores;
- changes in general economic conditions and
  consumer spending patterns; and
- actions of competitors or co-tenants.



We have three distinct peak selling
periods: Easter, back-to-school and Christmas. To prepare for our peak shopping
seasons, we must order and keep in stock significantly more merchandise than we
would carry during other parts of the year. Any unanticipated decrease in demand
for our products during these peak shopping seasons could require us to sell
excess inventory at a substantial markdown, which could reduce our net sales and
gross margins and negatively impact our profitability. Our operating results
depend significantly upon the sales generated during these periods. If our
future quarterly results fail to meet the expectations of research analysts,
then the market price of our common stock could decline substantially.

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

- operating results failing to meet the expectations
  of securities analysts or investors in any quarter;
- downward revisions in securities analysts
  estimates;
- material announcements by us or our competitors;
  and
- the other risk factors cited in this annual
  report.



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

We are controlled by our
principal shareholder.J. Wayne Weaver,
our Chairman of the Board of Directors and principal shareholder, his spouse and
an adult child together own approximately 28.4% of our outstanding common stock.
Accordingly, Mr. Weaver is able to exert substantial influence over our
management and operations. In addition, his interests may differ from or be
opposed to the interests of our other shareholders, and his control may have the
effect of delaying or preventing a change in control that may be favored by
other shareholders.

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

11

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ITEM 1B.UNRESOLVED STAFF COMMENTS

None.

ITEM 2.PROPERTIES

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

The following table identifies the
number of our stores in each state as of January 31, 2009:

State
    #
    
    State
    #Alabama
    11
    
    North Carolina
    13Arkansas
    9
    
    North
      Dakota
    1Colorado
    7
    
    Nebraska
    1Florida
    23
    
    Ohio
    17Georgia
    12
    
    Oklahoma
    6Idaho
    4
    
    Pennsylvania
    3Iowa
    6
    
    South Carolina
    11Illinois
    27
    
    South
      Dakota
    2Indiana
    20
    
    Tennessee
    17Kansas
    3
    
    Texas
    37Kentucky
    12
    
    Utah
    3Louisiana
    12
    
    Virginia
    10Michigan
    5
    
    Wisconsin
    2Missouri
    20
    
    West
      Virginia
    4Mississippi
    6
    
    Total Stores
    304


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

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

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

ITEM 3.LEGAL PROCEEDINGS

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 seeks payment
of $1.2 million of unpaid retainage, $700,000 for services it has not yet
billed, plus additional interest and legal fees. The retainage was withheld from
progress billings for work performed on our distribution center and is recorded
in accrued and other liabilities and fixed assets in our consolidated financial
statements. On or about May 21, 2008, we filed a Counterclaim and Response in
this matter, denying SDI's claim, and seeking monetary damages of more than $3.0
million. We contend that SDI breached our contract with SDI ("Contract") due to
their failure to deliver our distribution center's material handling system
pursuant to the specifications of the Contract. The hearing before the
arbitration panel is currently scheduled for July 2009.

12

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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 are tentatively expected to be complete prior to the end of fiscal
2009.

ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

We did not submit any matters to a vote
of security holders during the fourth quarter of the 2008 fiscal year.

Executive Officers

|Name                   |  |    | Age |                                                                        | Position | 
|---------------------- |  | -- | --- | ---------------------------------------------------------------------- | -------- | 
|J. Wayne Weaver        |  | 74 |     | Chairman of the Board and Director                                    
|Mark
      L. Lemond   |  | 54 |     | President, Chief Executive Officer and Director                       
|Timothy T. Baker       |  | 52 |     | Executive Vice President - Store Operations                           
|W.
      Kerry Jackson |  | 47 |     | Executive Vice President - Chief Financial Officer and
      Treasurer
|Clifton E. Sifford     |  | 55 |     | Executive Vice President - General Merchandise
      Manager          

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

Mr. Lemondhas been employed as President and Chief Executive Officer since
September 1996. From March 1988 to September 1996, Mr. Lemond served as
Executive Vice President, Chief Financial Officer, Treasurer and Assistant
Secretary. On February 3, 1994, Mr. Lemond was promoted to the position of Chief
Operating Officer. Mr. Lemond has served as a Director since March 1988. Prior
to March 1988, he served in similar officer capacities with Russells Shoe Biz,
Inc. Prior to joining Russells Shoe Biz, Inc. in 1987, Mr. Lemond was a partner
with a public accounting firm. He is a Certified Public Accountant.

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

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

Mr. Siffordhas been employed as Executive Vice President - General Merchandise
Manager since June 2001. From April 13, 1997 to June 2001, Mr. Sifford served as
Senior Vice President - General Merchandise Manager. Prior to joining us, Mr.
Sifford served as merchandise manager-shoes for Belk Store Services, Inc.

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

13

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(Pursuant to General Instruction G
(3) of Form 10-K, the foregoing information is included as an unnumbered Item in
PART I of this annual report in lieu of being included in our Proxy Statement
for our 2009 Annual Meeting of Shareholders.)

14

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PART II

|ITEM
      5. |  | MARKET FOR THE REGISTRANTS
      COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
      SECURITIES
|------------- |  | ----------------------------------------------------------------------------------------------------------------------------

Market Information and Holders

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

The quarterly high and low trading
prices for fiscal 2008 and fiscal 2007 were as follows:

Fiscal year 2008
    High
    
    LowFirst
      Quarter
    $
    15.15
    
    $
    11.52Second Quarter
    
    16.25
    
    
    11.48Third
      Quarter
    
    18.45
    
    
    10.20Fourth Quarter
    
    14.65
    
    
    6.75Fiscal year 2007First
      Quarter
    $
    35.26
    
    $
    29.09Second Quarter
    
    30.66
    
    
    20.28Third
      Quarter
    
    23.18
    
    
    14.26Fourth Quarter
    
    15.47
    
    
    10.54


As of March 18, 2009 there were
approximately 218 holders of record of our common stock.

No unregistered equity securities were
sold by us during fiscal 2008.

Dividends

We have not paid, and do not currently
intend to pay, cash dividends on our common stock in the foreseeable future. The
payment of any future dividends will be at the discretion of our Board of
Directors and will depend upon, among other things, future earnings, operations,
capital requirements, our general financial condition and general business
conditions. In addition, our credit agreement allows the payment of dividends
only if after a dividend is declared, the balance of Total Shareholders' Equity,
adjusted for the effect of any share repurchases, is not reduced below the
balance at our most recent fiscal year end.

Issuer Purchases of Equity
Securities

Throughout fiscal 2008 we issued
treasury shares to employees for the exercise of stock options and the issuance
of restricted stock awards. This included the repurchase of 181 shares of common
stock as a result of our withholding shares or allowing our employees to deliver
shares to us to cover the income taxes resulting from the vesting of certain
restricted stock awards. It is our intention to continue to issue treasury
shares to employees for the exercise of stock options and the issuance of
restricted stock awards.

15

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In fiscal 2006, our Board of Directors
authorized a $50.0 million share repurchase program, which was to terminate upon
the earlier of the repurchase of the maximum amount or December 31, 2008. On
October 8, 2008, the Board of Directors extended the date of termination one
year to December 31, 2009. As of January 31, 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 January
31, 2009 was $21.9 million. The following table summarizes repurchase activity
during the fourth quarter of fiscal 2008:

|                           |  |                       |  |                  |      |                           |                        |                 | Approximate     
|-------------------------- |  | --------------------- |  | ---------------- | ---- | ------------------------- | ---------------------- | --------------- | ----------------
|                           |  |                       |  |                  |      |                           |                        |                 | Dollar Value of 
|                           |  |                       |  |                  |      |                           | Total Number
      Of  |                 | Shares that     
|                           |  |                       |  |                  |      |                           | Shares
      Purchased |                 | May
      Yet Be
|                           |  | Total Number
      of |  | Average          |      | as Part of
      Publicly |                        | Purchased      
|                           |  | Shares                |  | Price
      Paid |      | Announced                 |                        | Under
      the
|Period                     |  | Purchased (1)         |  | per Share        |      | Programs                  |                        | Programs       
|November 2, 2008 to        |  |                       |  |                  |      |                           |                        |                 |                 
|November 29, 2008          |  | 0                     |  | $                | 0.00 |                           | 0                      |                 | $               
|November 30,
      2008 to |  |                       |  |                  |      |                           |                        |                 |                 
|January 3,
      2009      |  | 0                     |  | $                | 0.00 |                           | 0                      |                 | $               
|January 4, 2009 to         |  |                       |  |                  |      |                           |                        |                 |                 
|January 31,
      2009     |  | 181                   |  | $                | 7.59 |                           | 0                      |                 | $               
|                           |  | 181                   |  |                  |      |                           | 0                      |                 |                 

|(1) |  | Total number of shares
      purchased represents shares delivered to or withheld by us in connection
      with employee payroll tax withholding upon the vesting of certain
      restricted stock awards.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Securities Authorized for Issuance
Under Equity Compensation Plans

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

16

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ITEM 6.SELECTED FINANCIAL DATA

The following selected financial data
should be read in conjunction with our consolidated financial statements and
notes to those statements included in PART II, ITEM 8 of this report.

(In thousands, except per share and
operating data)

|Fiscal years
    (1)                   |  | 2008 |         | 2007 |  | 2006 |         | 2005 |  | 2004
|-------------------------------------- |  | ---- | ------- | ---- |  | ---- | ------- | ---- |  | ----
|Income Statement
      Data:           |  |      |         |      |  |      |         |      |  |     
|Net Sales                              |  | $    | 647,572 |      |  | $    | 658,680 |      |  | $   
|Cost of sales
      (including buying, |  |      |         |      |  |      |         |      |  |     
|distribution and
      occupancy       |  |      |         |      |  |      |         |      |  |     
|costs)                                 |  |      | 473,244 |      |  |      | 472,831 |      |  |     
|Gross Profit                           |  |      | 174,328 |      |  |      | 185,849 |      |  |     
|Selling, general
      and             |  |      |         |      |  |      |         |      |  |     
|administrative expenses                |  |      | 165,953 |      |  |      | 166,717 |      |  |     
|Operating income                       |  |      | 8,375   |      |  |      | 19,132  |      |  |     
|Interest
      income                  |  |      | (148    | )    |  |      | (690    | )    |  |     
|Interest expense                       |  |      | 153     |      |  |      | 264     |      |  |     
|Income before
      income taxes       |  |      | 8,370   |      |  |      | 19,558  |      |  |     
|Income tax expense                     |  |      | 3,051   |      |  |      | 6,751   |      |  |     
|Net
      income                       |  | $    | 5,319   |      |  | $    | 12,807  |      |  | $   
|                                       |  |      |         |      |  |      |         |      |  |     
|Net income per
      share:            |  |      |         |      |  |      |         |      |  |     
|Basic                                  |  | $    | 0.43    |      |  | $    | 0.99    |      |  | $   
|Diluted                                |  | $    | 0.43    |      |  | $    | 0.97    |      |  | $   
|                                       |  |      |         |      |  |      |         |      |  |     
|Average shares
      outstanding       |  |      |         |      |  |      |         |      |  |     
|Basic                                  |  |      | 12,406  |      |  |      | 12,922  |      |  |     
|Diluted                                |  |      | 12,492  |      |  |      | 13,158  |      |  |     
|                                       |  |      |         |      |  |      |         |      |  |     
|Selected
      Operating Data (2):     |  |      |         |      |  |      |         |      |  |     
|Stores open at
      end of year       |  |      | 304     |      |  |      | 291     |      |  |     
|Square footage of
      store space    |  |      |         |      |  |      |         |      |  |     
|at year end (000s)                    |  |      | 3,335   |      |  |      | 3,238   |      |  |     
|Average sales per
      store (000s)  |  | $    | 2,206   |      |  | $    | 2,364   |      |  | $   
|Average sales per
      square foot    |  | $    | 198     |      |  | $    | 209     |      |  | $   
|Comparable store sales (3)             |  |      | (4.6    | )%   |  |      | (5.2    | )%   |  |     
|Balance Sheet
      Data:              |  |      |         |      |  |      |         |      |  |     
|Working
      capital                  |  | $    | 150,937 |      |  | $    | 141,455 |      |  | $   
|Total
      assets                     |  | $    | 293,074 |      |  | $    | 291,616 |      |  | $   
|Long-term
      debt                   |  | $    | 0       |      |  | $    | 0       |      |  | $   
|Total shareholders equity             |  | $    | 204,636 |      |  | $    | 196,612 |      |  | $   

|(1) |  | Our fiscal year is a 52/53 week
      year ending on the Saturday closest to January 31. Unless otherwise
      stated, references to years 2008, 2007, 2006, 2005, and 2004 relate
      respectively to the fiscal years ended January 31, 2009, February 2, 2008,
      February 3, 2007, January 28, 2006, and January 29, 2005. Fiscal year 2006
      consisted of 53 weeks and the other fiscal years consisted of 52
      weeks.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) |  | Selected Operating Data has been
      adjusted to a comparable 52 week basis for fiscal 2006.                                                                                                                                                                                                                                                                                                                                           
|(3) |  | Comparable store sales for the
      periods indicated include stores that have been open for 13 full months
      prior to the beginning of the period, including those stores that have
      been relocated or remodeled. Therefore, stores opened or closed during the
      periods indicated are not included in comparable store
  sales.                                                                                         

17

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|ITEM
      7. |  | MANAGEMENTS DISCUSSION AND
      ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
  OPERATIONS
|------------- |  | ---------------------------------------------------------------------------------------------

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

Overview of Our Business

Shoe Carnival, Inc. is one of the
nations largest family footwear retailers. As of January 31, 2009, we operated
304 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.

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.

In fiscal 2006, our Board of Directors
authorized a $50.0 million share repurchase program, which was to terminate upon
the earlier of the repurchase of the maximum amount or December 31, 2008. On
October 8, 2008, the Board of Directors extended the date of termination one
year to December 31, 2009. 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 January 31, 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 January 31, 2009 was
$21.9 million.

Our fiscal year is a 52/53 week year
ending on the Saturday closest to January 31. Unless otherwise stated,
references to years 2008, 2007, 2006, 2005, and 2004, relate respectively to the
fiscal years ended January 31, 2009, February 2, 2008, February 3, 2007, January
28, 2006, and January 29, 2005. Fiscal year 2006 consisted of 53 weeks and the
other fiscal years consisted of 52 weeks.

Executive Summary

Fiscal 2008, and especially the second
half of the year, proved to be a difficult economic environment during which our
targeted moderate income consumer further reduced their discretionary spending.
Consequently, like many retailers in the United States, we experienced a
continuing decline in customer traffic which negatively impacted our business.
This resulted in a comparable store sales decrease of 4.6% for the
year.

Sales results by product category were
uneven during the fiscal year. Weakness throughout the year in our non-athletic
product categories, particularly women's non-athletic, accounted for
approximately 70% of the comparable store sales decline for the year. Athletic
sales saw benefit from the economic stimulus checks in the second quarter along
with the need presented by the back-to-school period, resulting in a comparable
store sales increase through August. However, as the economic climate worsened
in the second half of the fiscal year, and particularly in the fourth quarter,
we saw our athletic category accelerate in comparable store sales declines to
also end the year negative. Total comparable store sales reached their lowest
levels during the fourth quarter, as general economic conditions worsened and
consumer confidence continued to deteriorate.

18

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Our store managers and merchants worked
diligently throughout the year to control inventories. At the end of each
quarter, inventories were at or below the prior year on a per-store average.
While the heavily promotional retail environment contributed to the 80 basis
point decline in our merchandise margins, we exited fiscal 2008 with inventories
on a per-store basis 10 percent lower than prior year levels.

During fiscal 2008, selling, general
and administrative expenses were reduced $764,000 from the prior year.
Reductions in advertising and employee incentive and benefit costs were able to
more than offset the cost of operating an average of 17 more stores and
incurring an additional $1.4 million in store closing costs.

We opened 24 new stores during fiscal
2008, and consistent with our real estate strategy, these stores were located in
large and small markets in both new and existing geographic areas. We continued
to fill in under-penetrated markets with additional stores and enter smaller one
or two store markets. We closed 11 under-performing stores and identified an
additional 13 under-performing stores for closure in future periods.

During fiscal 2008, we were able to
generate free cash flow of $13.9 million and end the year with $24.8 million in
cash and cash equivalents and no interest bearing debt. We realize the current
level of economic uncertainty and rising unemployment within the U.S.
marketplace has altered the spending habits of most consumers and we believe the
economy will continue to have a negative impact on customer traffic during
fiscal 2009. Therefore, we intend to scale back plans to open new stores,
significantly reduce capital expenditures, slightly lower per-store inventories
from fiscal 2008 levels and maintain tight control over expense. We believe
these are tremendously important strategies during what we expect to be a
volatile year in retail. Through proper execution, we expect to continue to
generate free cash flow and maintain a debt free balance sheet.

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 Statement of
Financial Accounting Standards ("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.

19

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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.

Results of
Operations

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

|Fiscal
      years                                       | 2008  |   | 2007 |       | 2006
|-------------------------------------------------------- | ----- | - | ---- | ----- | ----
|Net Sales                                                | 100.0 | % |      | 100.0 | %   
|Cost of sales
      (including buying, distribution, and |       |   |      |       |     
|occupancy costs)                                         | 73.1  |   |      | 71.8  |     
|Gross profit                                             | 26.9  |   |      | 28.2  |     
|Selling, general
      and                               |       |   |      |       |     
|administrative
    expenses                              | 25.6  |   |      | 25.3  |     
|Operating income                                         | 1.3   |   |      | 2.9   |     
|Interest
      income                                    | (0.0  | ) |      | (0.1  | )   
|Interest expense                                         | 0.0   |   |      | 0.1   |     
|Income before
      income taxes                         | 1.3   |   |      | 2.9   |     
|Income tax expense                                       | 0.5   |   |      | 1.0   |     
|Net income                                               | 0.8   | % |      | 1.9   | %   

In the regular course of business, we
offer our customers sales incentives including coupons, discounts, and free
merchandise. Sales are recorded net of such incentives and returns and
allowances. If an incentive involves free merchandise, that merchandise is
recorded as a zero sale and the cost is included in cost of sales. Comparable
store sales for the periods indicated below include stores that have been open
for 13 full months prior to the beginning of the period, including those stores
that have been relocated or remodeled. Therefore, stores opened or closed during
the periods indicated are not included in comparable store sales.

2008 Compared to 2007

Net Sales

Net sales decreased $11.1 million to
$647.6 million in fiscal 2008, a 1.7% decrease from net sales of $658.7 million
in fiscal 2007. Comparable store sales decreased 4.6%, or approximately $28.4
million, compared to the prior fiscal year. This decrease in net sales was
partially offset by a $17.3 million increase in sales generated by the 24 stores
opened in fiscal 2008 and the effect of a full year's worth of sales for the 25
stores opened in fiscal 2007, net of the sales loss from the 16 stores which
were closed during the last two years.

20

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Gross Profit

Gross profit decreased $11.5 million to
$174.3 million in fiscal 2008, a 6.2% decrease from gross profit of $185.8
million in fiscal 2007. The gross profit margin for fiscal 2008 decreased to
26.9% from 28.2% in fiscal 2007. As a percentage of sales, the merchandise
margin decreased 0.8% compared to the prior year, while buying, distribution and
occupancy costs increased 0.5%. As was seen across the retail sector, heavy
promotions throughout the year were necessary to keep inventory turning at an
acceptable level and consequently negatively impacted margins. We experienced a
0.6% increase in occupancy costs, as a percentage of sales, primarily as a
result of the lower comparable store sales, an increase in costs due to the
additional stores we operated throughout the year and additional store closing
costs. This increase, as a percentage of sales, was partially offset by a 0.2%
decline in distribution costs. Our distribution costs, both as a percentage of
sales and in dollars, declined as a result of the increased costs associated
with the conversion to our new distribution center during the first quarter of
the prior year, a reduction in volume for fiscal 2008 and increased
efficiencies.

Selling, General and Administrative
Expenses

Selling, general and administrative
expenses decreased $764,000 to $166.0 million in fiscal 2008 from $166.7 million
in fiscal 2007. As a percentage of sales, selling, general and administrative
expenses increased to 25.6% during fiscal 2008 from 25.3% in fiscal 2007. The
savings in dollars was primarily the result of a $6.2 million reduction in
advertising costs from our decision to decrease advertising during non-peak
periods along with a $1.2 million decrease in the expense for employee
incentives and benefits. These decreases were partially offset by $6.0 million
of additional costs incurred from the operation and support of the net new
stores opened since the beginning of fiscal 2007.

Pre-opening costs included in selling,
general and administrative expenses were $1.0 million, or 0.2% of sales, in both
fiscal 2008 and in fiscal 2007. We opened 24 stores in fiscal 2008 as compared
to 25 stores in fiscal 2007. 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 by store depending on the specific market and the promotional
activities involved. Our average pre-opening costs per store were $41,000 in
fiscal 2008 as compared to $40,000 in fiscal 2007.

The portion of store closing costs
included in selling, general and administrative expenses for fiscal 2008 was
$3.3 million, or 0.5% as a percentage of sales. These costs related to the
closing of 11 stores in fiscal 2008 and the impairment and acceleration of
expenses associated with management's determination to close certain
underperforming stores at future dates. In fiscal 2007, we incurred $1.9
million, or 0.3% as a percentage of sales, in costs related to the closing of
five stores in fiscal 2007 and the impairment and acceleration of expenses
associated with management's determination to close certain underperforming
stores at future dates. Currently, we have identified 10 stores to close in
fiscal 2009, eight in fiscal 2010, four in fiscal 2011, and one in fiscal 2012.
We are currently accelerating applicable expenses on all of these stores. We
will continue to evaluate underperforming 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 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.

Interest Income and Expense

Interest income decreased to $148,000
in fiscal 2008 from $690,000 in fiscal 2007. The decrease was primarily
attributable to a decrease in the rate available on investments. Interest
expense decreased to $153,000 in fiscal 2008 from $264,000 in fiscal
2007.

Income Taxes

The effective income tax rate was 36.5%
for fiscal 2008 and 34.5% in fiscal 2007. The effective income tax rate for both
years differed from the statutory rate due primarily to state and local income
taxes, net of the federal tax benefit and tax credits. In the first quarter of
fiscal 2007, we recorded $980,000 of state tax credits related to the investment
in our new distribution center, which was the primary factor in reducing our
effective tax rate in fiscal 2007.

21

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2007 Compared to 2006

Net Sales

Net sales decreased $23.0 million to
$658.7 million in fiscal 2007, a 3.4% decrease from net sales of $681.7 million
in fiscal 2006. Comparable store sales for the 52-week period ended February 2,
2008 decreased 5.2%, or approximately $34.5 million, compared to the 52-week
period ended February 3, 2007. This decrease in net sales was partially offset
by a $23.3 million increase in sales generated by the 25 stores opened in fiscal
2007 and the effect of a full year's worth of sales for the 14 stores opened in
fiscal 2006, net of the sales loss from the 11 stores which were closed during
the same periods. Additional sales of approximately $11.5 million were recorded
in the 53rd week of fiscal 2006.

We believe the constriction of the
general economy during fiscal 2007 directly affected our target customer through
higher gasoline prices, escalating food costs, housing and mortgage issues and
increased consumer debt loads. These conditions had a direct negative impact on
traffic in our stores, and consequently, resulted in lower sales for fiscal
2007. The 5.2% decline in comparable store sales was broad-based, with all
product categories experiencing a decline.

Gross Profit

Gross profit decreased $13.0 million to
$185.8 million in fiscal 2007, a 6.5% decrease from gross profit of $198.8
million in fiscal 2006. The gross profit margin for fiscal 2007 decreased to
28.2% from 29.2% in fiscal 2006. As a percentage of sales, the merchandise
margin remained unchanged compared to the prior year, while buying, distribution
and occupancy costs increased 1.0%. An increase in occupancy costs related
primarily to the operation of 28 net new stores coupled with declining sales
accounted for 0.6% of the 1.0% increase. The remaining 0.4% was primarily
related to increases in fixed distribution costs.

Selling, General and Administrative
Expenses

Selling, general and administrative
expenses increased $5.6 million to $166.7 million in fiscal 2007 from $161.1
million in fiscal 2006. As a percentage of sales, selling, general and
administrative expenses increased to 25.3% during fiscal 2007 from 23.7% in
fiscal 2006.

Pre-opening costs were $1.0 million, or
0.2% of sales, in fiscal 2007 as compared to $494,000, or 0.1% of sales in
fiscal 2006. We opened 25 stores in fiscal 2007 as compared to 14 stores in
fiscal 2006. Pre-opening costs, such as advertising, payroll and supplies,
incurred prior to the opening of a new store are charged to expense in the
period they are incurred. Our average pre-opening costs per store were $40,000
in fiscal 2007 as compared to $35,000 in fiscal 2006. This increase was
primarily due to an increase in advertising expenditures.

The portion of store closing costs
included in selling, general and administrative expenses for fiscal 2007 was
$1.9 million, or 0.3% as a percentage of sales. These costs related to five
fiscal 2007 store closings and the impairment and acceleration of expenses
associated with management's determination to close 10 stores in fiscal 2008,
four in fiscal 2009 and one each in fiscal 2010 and 2011. In fiscal 2006, we
incurred $621,000, or 0.1% as a percentage of sales, in store closing costs
related to six fiscal 2006 store closings and an impairment charge for one
store. 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 at the store and any amounts required to be paid as part of the lease
termination.

Additional significant items associated
with this net increase in selling, general and administrative expenses included
$7.2 million of additional expense to operate and support the 28 net new stores
(stores opened since the beginning of fiscal 2006, net of store closings), which
was partially offset by $3.6 million in comparable store expense savings
primarily attributable to variable expense controls along with a $2.0 million
decrease in performance based incentive compensation expense. The increase in
costs associated with providing general and administrative services to the
corporation account for the balance of the increase in selling, general and
administrative expenses and are not materially significant as individual items.

22

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Interest Income and Expense

Interest income decreased to $690,000
in fiscal 2007 from $1.2 million in fiscal 2006. The decrease was primarily
attributable to lower average cash and cash equivalents balances available for
investment purposes throughout fiscal 2007. Interest expense increased to
$264,000 in fiscal 2007 from $152,000 in fiscal 2006.

Income Taxes

The effective income tax rate was 34.5%
for fiscal 2007 and 38.6% in fiscal 2006. The effective income tax rate for both
years differed from the statutory rate due primarily to state and local income
taxes, net of the federal tax benefit and tax credits. In the first quarter of
fiscal 2007, we recorded $980,000 of state tax credits related to the investment
in our new distribution center, which was the primary factor in reducing the
company's effective tax rate in fiscal 2007 as compared to fiscal
2006.

Discontinued Operations

We evaluate our store closings for
discontinued operations classification utilizing the guidance within FASB
Statement No. 144 ("SFAS No. 144"), "Accounting for the Impairment or Disposal
of Long-Lived Assets." Based on this evaluation, we have determined that each of
our stores is the lowest level at which the operations and cash flows can be
clearly distinguished, operationally and for financial reporting purposes, from
the rest of the company. Although each of our stores, on its own, is a component
of the company, there may be cases in which we expect significant sales from
store closures to transfer to our other existing stores that we continue to
operate. In these cases, we believe the operations and cash flows from the store
closures will not be eliminated from the ongoing operations of the company, and
should not be classified as discontinued operations in accordance with the
provisions of SFAS No. 144.

The following table summarizes our
discontinued operations for the years ended January 31, 2009, February 2, 2008
and February 3, 2007:

(in thousands, except per
      store data)Fiscal years
    
    2008
    
    2007
    
    2006Total
      stores closed during year
    
    
    11
    
    
    
    5
    
    
    
    6Stores closed in which
      sales transferred to existing store locations
    
    
    4
    
    
    
    2
    
    
    
    0Discontinued operations stores (1)
    
    
    7
    
    
    
    3
    
    
    
    6Net
      sales for discontinued operations stores (1)
    
    $
    6,800
    
    
    $
    3,900
    
    
    $
    5,500Net loss for discontinued
      operations stores, net of tax (1)
    
    $
    (1,500
    )
    
    $
    (475
    )
    
    $
    (639
    )


|(1) |  | These stores are not located near
      other existing stores to facilitate transference of sales nor do we have
      significant continuing involvement in their operations after closing. We
      have not segregated the results of operations for these stores in our
      consolidated financial statements as the amounts are deemed
      immaterial.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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Liquidity and Capital
Resources

Our sources and uses of cash are
summarized as follows:

|(000s)                                                    |  |      |         |      |  |      |         |   |  |   |         |  
|---------------------------------------------------------- |  | ---- | ------- | ---- |  | ---- | ------- | - |  | - | ------- | -
|Fiscal years                                               |  | 2008 |         | 2007 |  | 2006
|Net
      income plus depreciation and amortization        |  | $    | 22,164  |      |  | $    | 28,613  |   |  | $ | 38,232  |  
|Deferred income
      taxes                                |  |      | 780     |      |  |      | (387    | ) |  |   | (2,383  | )
|Lease incentives                                           |  |      | 2,038   |      |  |      | 663     |   |  |   | 953     |  
|Changes in operating
      assets and liabilities          |  |      | 6,480   |      |  |      | (11,378 | ) |  |   | (8,676  | )
|Other operating activities                                 |  |      | 616     |      |  |      | 2,368   |   |  |   | 1,141   |  
|Net cash provided by
      operating activities            |  |      | 32,078  |      |  |      | 19,879  |   |  |   | 29,267  |  
|Net
      cash used in investing activities                |  |      | (18,201 | )    |  |      | (18,041 | ) |  |   | (17,748 | )
|Net cash provided by (used
      in) financing activities  |  |      | 1,763   |      |  |      | (27,500 | ) |  |   | 3,016   |  
|Net
      increase (decrease) in cash and cash equivalents |  | $    | 15,640  |      |  | $    | (25,662 | ) |  | $ | 14,535  |  

Our primary sources of funds are cash
flows from operations and borrowings under our revolving credit facility. For
fiscal 2008, net cash provided by operating activities was $32.1 million
compared to net cash provided by operating activities of $19.9 million for
fiscal 2007. These amounts reflect the income from operations adjusted for
non-cash items and working capital changes. This $12.2 increase in cash provided
by operations, when comparing the two periods of each year, was primarily due to
a reduction in inventory on a per store basis and the timing of payments for
accounts payable and accrued liabilities partially offset by a decrease in net
income.

Working capital increased to $150.9
million at January 31, 2009 from $141.5 million at February 2, 2008. This was
primarily attributable to a $15.6 million increase in cash and cash equivalents
and a $7.5 million decrease in accounts payable partially offset by an $11.3
million decrease in merchandise inventories. The current ratio at January 31,
2009 was 3.1 and for February 2, 2008 was 2.8. We had no outstanding
interest-bearing debt at January 31, 2009 or February 2, 2008.

Capital expenditures were $18.2 million
in fiscal 2008, $18.4 million in fiscal 2007 and $25.0 million in fiscal 2006.
No capital lease obligations were incurred during this three-year period. Of the
fiscal 2008 capital expenditures, approximately $7.3 million was used for new
stores, $4.3 million was used for remodels and relocations and $1.3 million was
used for technology. The remaining capital expenditures for fiscal 2008 were
used for in-store graphics, fixture improvements and normal asset replacement
activities. Lease incentives received from landlords were $2.0 million, $663,000
and $953,000 for fiscal years 2008, 2007 and 2006, respectively.

Capital expenditures are expected to be
$9 million to $12 million in fiscal 2009. We intend to open approximately 15
stores at an expected total cost of approximately $5.0 million in fiscal 2009.
We anticipate the remediation to the distribution center will cost up to $3.0
million. The remaining capital expenditures are expected to be incurred for
store remodels and various other store improvements, along with continued
investments in technology and normal asset replacement activities. The actual
amount of cash required for capital expenditures for store operations depends in
part on the number of new stores opened, 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, and 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 $344,000. 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 $67,000 per store in fiscal 2009. On a per-store basis, for the 24
stores opened during fiscal 2008, the initial inventory investment averaged
$425,000, capital expenditures averaged $312,000 and lease incentives received
from landlords averaged $30,000.

24

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Significant contractual obligations as
of January 31, 2009 and the fiscal years in which payments are due include:

|(000's)                       |  | Payments Due By Fiscal Year
|----------------------------- |  | ---------------------------
|                              |  |                            
|Contractual Obligations       |  | Total                      
|Letters of
credit             |  | $                          
|Operating leases              |  |                            
|Purchase
    commitments      |  |                            
|Deferred compensation         |  |                            
|FIN 48
    liabilities        |  |                            
|Total contractual obligations |  | $                          

Our unsecured credit facility provides
for up to $95.0 million in cash advances on a revolving basis and both
commercial and standby letters of credit. Borrowings under the revolving credit
line are based on eligible inventory. The agreement governing the credit
facility stipulates that Total Shareholders' Equity, adjusted for the effect of
any share repurchases, will not fall below that of the prior fiscal year-end,
the ratio of funded debt plus rent to EBITDA plus rent will not exceed 2.5 to
1.0, total distributions for stock repurchases will not exceed $50.0 million and
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 requirements as of January 31, 2009. Should a
default condition be reported, the lenders may preclude additional borrowings
and call all loans and accrued interest at their discretion. The credit
agreement and amendments thereto are filed as exhibits to (or incorporated by
reference in) this annual report on Form 10-K. There were no borrowings
outstanding under the credit facility and letters of credit outstanding were
$9.2 million at January 31, 2009. Estimated interest payments on our line of
credit are not included in the above table as our line of credit is subject to
frequent borrowing and/or repayment activities which does not lend itself to
reliable forecasting for disclosure purposes. As of January 31, 2009, $79.0
million was available to us for additional borrowings under the credit
facility.

On December 15, 2006, the credit
agreement was amended to extend the maturity date to April 30, 2010 and to allow
us to repurchase shares of our outstanding common stock in an amount not to
exceed $50 million. In December 2006, the Board of Directors authorized a $50
million share repurchase program, which was to terminate on the earlier of the
repurchase of the maximum amount or December 31, 2008. On October 8, 2008, the
Board of Directors extended the date of termination one year to December 31,
2009. As of January 31, 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 January 31, 2009 was
$21.9 million.

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 seeks payment
of $1.2 million of unpaid retainage, $700,000 for services it has not yet
billed, plus additional interest and legal fees. The retainage was withheld from
progress billings for work performed on our new distribution center and is
recorded in accrued and other liabilities and fixed assets in our consolidated
financial statements. On or about May 21, 2008, we filed a Counterclaim and
Response in this matter, denying SDI's claim, and seeking monetary damages of
more than $3.0 million. We contend that SDI breached the Contract due to their
failure to deliver our distribution center's material handling system pursuant
to the specifications of the Contract. The hearing before the arbitration panel
is currently scheduled for July 2009.

Although the investment we made in the
new distribution center will satisfy our distribution needs throughout fiscal
2009, we have not achieved the productivity that we expect will be required in
three to five years, based on our long-term store growth plan. We have
contracted with a company to provide recommendations as to system upgrades to
improve throughput. Modifications are tentatively 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 other operating cash requirements for at least the
next 12 months.

25

---

See Note 4  "Long-Term Debt", Note 5 
"Leases", Note 6  "Income Taxes" and Note 7  "Employee Benefit Plans" to our
Notes to Consolidated Financial Statements contained in PART II, ITEM 8 of this
report for a further discussion of our contractual obligations.

Off-Balance Sheet Arrangements

We did not assign any store operating
leases to separate third parties during fiscal 2008. We remain liable on three
assignments of operating leases covering former store locations. We believe that
the likelihood of material liability being triggered under these leases is
remote, and no liability has been accrued for these contingent lease obligations
in our consolidated financial statements as of January 31, 2009. See Note 5 
"Leases" to our Notes to Consolidated Financial Statements contained in PART II,
ITEM 8 of this report for further discussion.

Except for the assignment of certain
store operating leases and operating leases entered into in the normal course of
business, we have not entered into any off-balance sheet arrangements during
fiscal 2008 or fiscal 2007, nor did we have any off-balance sheet arrangements
outstanding at January 31, 2009 or February 2, 2008.

Seasonality

Our quarterly results of operations
have fluctuated, and are expected to continue to fluctuate in the future,
primarily as a result of seasonal variances and the timing of sales and costs
associated with opening new stores. Non-capital expenditures, such as
advertising and payroll, incurred prior to the opening of a new store are
charged to expense as incurred. Therefore, our results of operations may be
adversely affected in any quarter in which we incur pre-opening expenses related
to the opening of new stores.

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

New Accounting Pronouncements

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

ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK

We are exposed to market risk in that
the interest payable on our credit facility is based on variable interest rates
and therefore is affected by changes in market rates. We do not use interest
rate derivative instruments to manage exposure to changes in market interest
rates. A 1% change in the weighted average interest rate charged under the
credit facility would have resulted in interest expense fluctuating by less than
$1,000 in fiscal 2008 compared to approximately $20,000 in fiscal 2007.

ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required by this item
appears beginning on page 28.

26

---

REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM

Board of Directors and
ShareholdersShoe Carnival, Inc., Evansville, Indiana

We have audited the accompanying
consolidated balance sheets of Shoe Carnival, Inc. and subsidiaries (the
Company) as of January 31, 2009 and February 2, 2008, and the related
consolidated statements of income, stockholders' equity, and cash flows for the
years ended January 31, 2009, February 2, 2008, and February 3, 2007. Our audits
also included the financial statement schedule listed in the Index at Item 15.
These financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on the financial statements and financial statement schedule based on
our audits.

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

In our opinion, such consolidated
financial statements present fairly, in all material respects, the financial
position of Shoe Carnival, Inc. and subsidiaries as of January 31, 2009 and
February 2, 2008, and the results of their operations and their cash flows for
the years ended January 31, 2009, February 2, 2008, and February 3, 2007, in
conformity with accounting principles generally accepted in the United States of
America. Also, in our opinion, such financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information set forth
therein.

As discussed in Note 2 to the
consolidated financial statements, the Company adopted Financial Accounting
Standards Board (FASB) Interpretation No. 48,
Accounting for Uncertainties in Income Taxesin 2007.

We have also audited, in accordance
with the standards of the Public Company Accounting Oversight Board (United
States), the Company's internal control over financial reporting as of January
31, 2009, based on the criteria established inInternal ControlIntegrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission
and our report dated April 16, 2009 expressed an unqualified opinion on the
Company's internal control over financial reporting.



/s/ Deloitte & Touche
LLP

Indianapolis, IndianaApril 16, 2009

27

---

Shoe Carnival,
Inc.Consolidated Balance
Sheets(In thousands, except per share
data)

|                                                                                                 |  | January 31, |         | February 2,
|------------------------------------------------------------------------------------------------ |  | ----------- | ------- | -----------
|                                                                                                 |  | 2009        |         | 2008       
|Assets                                                                                           |  |             |         |            
|Current Assets:                                                                                  |  |             |         |            
|Cash and cash
      equivalents                                                                  |  | $           | 24,817  |            
|Accounts
      receivable                                                                        |  |             | 1,607   |            
|Merchandise
      inventories                                                                    |  |             | 189,494 |            
|Deferred income tax
      benefit                                                                |  |             | 2,305   |            
|Other                                                                                            |  |             | 4,634   |            
|Total Current
    Assets                                                                         |  |             | 222,857 |            
|Property and equipment  net                                                                     |  |             | 70,217  |            
|Total Assets                                                                                     |  | $           | 293,074 |            
|                                                                                                
|                                                                                                
|Liabilities and Shareholders Equity                                                             |  |             |         |            
|Current
    Liabilities:                                                                         |  |             |         |            
|Accounts
      payable                                                                           |  | $           | 60,320  |            
|Accrued and other
      liabilities                                                              |  |             | 11,600  |            
|Total
      Current Liabilities                                                                  |  |             | 71,920  |            
|Deferred lease
      incentives                                                                  |  |             | 5,844   |            
|Accrued rent                                                                                     |  |             | 5,331   |            
|Deferred income
      taxes                                                                      |  |             | 1,144   |            
|Deferred compensation                                                                            |  |             | 2,678   |            
|Other                                                                                            |  |             | 1,521   |            
|Total
      Liabilities                                                                          |  |             | 88,438  |            
|                                                                                                
|Shareholders Equity:                                                                            |  |             |         |            
|Common stock, $.01
      par value, 50,000 shares authorized,                                    |  |             |         |            
|13,664 and 13,670 shares issued at January 31, 2009 and February 2,
      2008                   |  |             | 137     |            
|Additional paid-in
      capital                                                                 |  |             | 67,686  |            
|Retained
      earnings                                                                          |  |             | 153,866 |            
|Treasury stock, at
      cost, 745 and 1,205 shares at January 31, 2009 and February 2,
    2008 |  |             | (17,053 | )          
|Total Shareholders
      Equity                                                                 |  |             | 204,636 |            
|Total
      Liabilities and Shareholders Equity                                                 |  | $           | 293,074 |            

See notes to consolidated financial
statements.

28

---

Shoe Carnival,
Inc.Consolidated Statements of
Income(In thousands, except per share
data)

|                                                                         |  | January 31, |         | February 2, |  | February 3,
|------------------------------------------------------------------------ |  | ----------- | ------- | ----------- |  | -----------
|Fiscal years
    ended                                                   |  | 2009        |         | 2008        |  | 2007       
|Net
      sales                                                          |  | $           | 647,572 |             |  | $          
|Cost of sales (including
      buying, distribution and occupancy costs) |  |             | 473,244 |             |  |            
|                                                                        
|Gross
      profit                                                       |  |             | 174,328 |             |  |            
|Selling, general and
      administrative expenses                       |  |             | 165,953 |             |  |            
|                                                                        
|Operating income                                                         |  |             | 8,375   |             |  |            
|Interest income                                                          |  |             | (148    | )           |  |            
|Interest expense                                                         |  |             | 153     |             |  |            
|                                                                        
|Income before income taxes                                               |  |             | 8,370   |             |  |            
|Income tax
    expense                                                   |  |             | 3,051   |             |  |            
|                                                                        
|Net
      income                                                         |  | $           | 5,319   |             |  | $          
|                                                                        
|Net
      income per share:                                              |  |             |         |             |  |            
|Basic                                                                    |  | $           | 0.43    |             |  | $          
|Diluted                                                                  |  | $           | 0.43    |             |  | $          
|                                                                        
|Average shares outstanding:                                              |  |             |         |             |  |            
|Basic                                                                    |  |             | 12,406  |             |  |            
|Diluted                                                                  |  |             | 12,492  |             |  |            

See notes to consolidated financial
statements.

29

---

Shoe Carnival,
Inc.Consolidated Statements of
Shareholders Equity(In
thousands)

|                                       |  |              |   |          |        |          |  |          |     |                 | Additional |        |   |              |   |         |   |  |   |         |   |  |   |        |   |  |  
|-------------------------------------- |  | ------------ | - | -------- | ------ | -------- |  | -------- | --- | --------------- | ---------- | ------ | - | ------------ | - | ------- | - |  | - | ------- | - |  | - | ------ | - |  | -
|                                       |  | Common Stock |   | Paid-In  |        | Retained |  | Treasury |     | Deferred Equity |            |        |   |             
|                                       |  | Issued       |   | Treasury |        | Amount   |  | Capital  |     | Earnings        |            | Stock  |   | Compensation |   | Total  
|Balance at January 28,
      2006      |  | 13,363       |   |          | (95    | )        |  | $        | 134 |                 | $          | 70,672 |   |              | $ | 112,090 |   |  | $ | (658    | ) |  | $ | (1,083 | ) |  | $
|Stock option exercises                 |  | 175          |   |          | 65     |          |  |          | 2   |                 |            | 2,154  |   |              |   |         |   |  |   | 453     |   |  |   |        |   |  |  
|Stock-based
      compensation         |  |              |   |          |        |          |  |          |     |                 |            |        |   |              |   |         |   |  |   |         |   |  |   |        |   |  |  
|income tax
      benefit               |  |              |   |          |        |          |  |          |     |                 |            | 916    |   |              |   |         |   |  |   |         |   |  |   |        |   |  |  
|Employee stock purchase                |  |              |   |          |        |          |  |          |     |                 |            |        |   |              |   |         |   |  |   |         |   |  |   |        |   |  |  
|plan
      purchases                   |  | 8            |   |          |        |          |  |          |     |                 |            | 168    |   |              |   |         |   |  |   |         |   |  |   |        |   |  |  
|Restricted stock
      awards          |  | 15           |   |          | 39     |          |  |          |     |                 |            | (446   | ) |              |   |         |   |  |   | 446     |   |  |   |        |   |  |  
|Accounting change for                  |  |              |   |          |        |          |  |          |     |                 |            |        |   |              |   |         |   |  |   |         |   |  |   |        |   |  |  
|stock-based compensation               |  |              |   |          |        |          |  |          |     |                 |            | (1,083 | ) |              |   |         |   |  |   |         |   |  |   | 1,083  |   |  |  
|Common stock
      repurchased         |  |              |   |          | (9     | )        |  |          |     |                 |            |        |   |              |   |         |   |  |   | (241    | ) |  |   |        |   |  |  
|Stock-based compensation
      expense |  |              |   |          |        |          |  |          |     |                 |            | 1,578  |   |              |   |         |   |  |   |         |   |  |   |        |   |  |  
|Net
income                             |  |              |   |          |        |          |  |          |     |                 |            |        |   |              |   | 23,764  |   |  |   |         |   |  |   |        |   |  |  
|                                      
|Balance at February 3,
      2007      |  | 13,561       |   |          | 0      |          |  |          | 136 |                 |            | 73,959 |   |              |   | 135,854 |   |  |   | 0       |   |  |   | 0      |   |  |  
|Stock option exercises                 |  | 24           |   |          | 15     |          |  |          |     |                 |            | 116    |   |              |   |         |   |  |   | 413     |   |  |   |        |   |  |  
|Stock-based
      compensation         |  |              |   |          |        |          |  |          |     |                 |            |        |   |              |   |         |   |  |   |         |   |  |   |        |   |  |  
|income tax
      benefit               |  |              |   |          |        |          |  |          |     |                 |            | 404    |   |              |   |         |   |  |   |         |   |  |   |        |   |  |  
|Employee stock purchase                |  |              |   |          |        |          |  |          |     |                 |            |        |   |              |   |         |   |  |   |         |   |  |   |        |   |  |  
|plan
      purchases                   |  | 2            |   |          | 7      |          |  |          |     |                 |            | (11    | ) |              |   |         |   |  |   | 182     |   |  |   |        |   |  |  
|Restricted stock
      awards          |  | 83           |   |          | 11     |          |  |          | 1   |                 |            | (310   | ) |              |   |         |   |  |   | 309     |   |  |   |        |   |  |  
|Common stock repurchased               |  |              |   |          | (1,238 | )        |  |          |     |                 |            |        |   |              |   |         |   |  |   | (28,499 | ) |  |   |        |   |  |  
|Stock-based compensation
      expense |  |              |   |          |        |          |  |          |     |                 |            | 1,365  |   |              |   |         |   |  |   |         |   |  |   |        |   |  |  
|Cumulative effect of                   |  |              |   |          |        |          |  |          |     |                 |            |        |   |              |   |         |   |  |   |         |   |  |   |        |   |  |  
|adoption of FIN 48                     |  |              |   |          |        |          |  |          |     |                 |            |        |   |              |   | (114    | ) |  |   |         |   |  |   |        |   |  |  
|Net
income                             |  |              |   |          |        |          |  |          |     |                 |            |        |   |              |   | 12,807  |   |  |   |         |   |  |   |        |   |  |  
|                                      
|Balance at February 2,
      2008      |  | 13,670       |   |          | (1,205 | )        |  |          | 137 |                 |            | 75,523 |   |              |   | 148,547 |   |  |   | (27,595 | ) |  |   | 0      |   |  |  
|Stock option exercises                 |  |              |   |          | 124    |          |  |          |     |                 |            | (1,462 | ) |              |   |         |   |  |   | 2,837   |   |  |   |        |   |  |  
|Stock-based
      compensation         |  |              |   |          |        |          |  |          |     |                 |            |        |   |              |   |         |   |  |   |         |   |  |   |        |   |  |  
|income tax
      benefit               |  |              |   |          |        |          |  |          |     |                 |            | 214    |   |              |   |         |   |  |   |         |   |  |   |        |   |  |  
|Employee stock purchase                |  |              |   |          |        |          |  |          |     |                 |            |        |   |              |   |         |   |  |   |         |   |  |   |        |   |  |  
|plan
      purchases                   |  |              |   |          | 16     |          |  |          |     |                 |            | (191   | ) |              |   |         |   |  |   | 356     |   |  |   |        |   |  |  
|Restricted stock
      awards          |  | (6           | ) |          | 320    |          |  |          |     |                 |            | (7,350 | ) |              |   |         |   |  |   | 7,350   |   |  |   |        |   |  |  
|Common stock repurchased               |  |              |   |          |        |          |  |          |     |                 |            |        |   |              |   |         |   |  |   | (1      | ) |  |   |        |   |  |  
|Stock-based compensation
      expense |  |              |   |          |        |          |  |          |     |                 |            | 952    |   |              |   |         |   |  |   |         |   |  |   |        |   |  |  
|Net income                             |  |              |   |          |        |          |  |          |     |                 |            |        |   |              |   | 5,319   |   |  |   |         |   |  |   |        |   |  |  
|Balance at January 31,
      2009      |  | 13,664       |   |          | (745   | )        |  | $        | 137 |                 | $          | 67,686 |   |              | $ | 153,866 |   |  | $ | (17,053 | ) |  | $ | 0      |   |  | $

See notes to consolidated financial
statements.

30

---

Shoe Carnival,
Inc.Consolidated Statements of Cash
Flows(In thousands)

|                                                                                            |  | January 31, |         | February 2, |  | February 3,
|------------------------------------------------------------------------------------------- |  | ----------- | ------- | ----------- |  | -----------
|Fiscal years
    ended                                                                      |  | 2009        |         | 2008        |  | 2007       
|Cash
      Flows From Operating Activities                                                  |  |             |         |             |  |            
|Net income                                                                                  |  | $           | 5,319   |             |  | $          
|Adjustments to
      reconcile net income to net cash provided by operating
    activities: |  |             |         |             |  |            
|Depreciation and amortization                                                               |  |             | 16,845  |             |  |            
|Stock-based compensation                                                                    |  |             | 977     |             |  |            
|Loss on retirement and impairment of assets                                                 |  |             | 2,454   |             |  |            
|Deferred income taxes                                                                       |  |             | 780     |             |  |            
|Lease incentives                                                                            |  |             | 2,038   |             |  |            
|Other                                                                                       |  |             | (2,815  | )           |  |            
|Changes in operating assets and liabilities:                                                |  |             |         |             |  |            
|Accounts receivable                                                                         |  |             | (1,196  | )           |  |            
|Merchandise inventories                                                                     |  |             | 11,287  |             |  |            
|Accounts payable and accrued liabilities                                                    |  |             | (6,195  | )           |  |            
|Other                                                                                       |  |             | 2,584   |             |  |            
|Net
      cash provided by operating activities                                             |  |             | 32,078  |             |  |            
|                                                                                           
|Cash
      Flows From Investing Activities                                                  |  |             |         |             |  |            
|Purchases of
      property and equipment                                                   |  |             | (18,204 | )           |  |            
|Proceeds from sale
      of property and equipment                                          |  |             | 3       |             |  |            
|Other                                                                                       |  |             | 0       |             |  |            
|Net
      cash used in investing activities                                                 |  |             | (18,201 | )           |  |            
|                                                                                           
|Cash
      Flow From Financing Activities                                                   |  |             |         |             |  |            
|Borrowings under
      line of credit                                                       |  |             | 6,625   |             |  |            
|Payments on line of
      credit                                                            |  |             | (6,625  | )           |  |            
|Proceeds from
      issuance of stock                                                       |  |             | 1,540   |             |  |            
|Excess tax benefits
      from stock-based compensation                                     |  |             | 224     |             |  |            
|Common stock
      repurchased                                                              |  |             | (1      | )           |  |            
|Net
      cash provided by (used in) financing activities                                   |  |             | 1,763   |             |  |            
|Net increase (decrease) in
      cash and cash equivalents                                  |  |             | 15,640  |             |  |            
|Cash
      and cash equivalents at beginning of year                                        |  |             | 9,177   |             |  |            
|                                                                                           
|Cash
      and Cash Equivalents at End of Year                                              |  | $           | 24,817  |             |  | $          
|                                                                                           
|Supplemental disclosures of cash flow
    information:                                      |  |             |         |             |  |            
|Cash paid during
      year for interest                                                    |  | $           | 151     |             |  | $          
|Cash paid during
      year for income taxes                                                |  | $           | 3,022   |             |  | $          
|Capital expenditures
      incurred but not yet paid                                        |  | $           | 1,695   |             |  | $          

See notes to consolidated financial
statements.

31

---

Shoe Carnival,
Inc.Notes to Consolidated Financial
Statements

Note 1  Organization and
Description of Business

Our consolidated financial statements
include the accounts of Shoe Carnival, Inc. and its wholly-owned subsidiaries
SCHC, Inc. and Shoe Carnival Ventures, LLC, and SCLC, Inc., a wholly-owned
subsidiary of SCHC, Inc. (collectively referred to as "we", "our" or "us"). All
significant intercompany accounts and transactions have been eliminated. Our
primary activity is the sale of footwear and related products through retail
stores operated by us primarily in the Midwest, South and Southeast regions of
the United States.

Note 2  Summary of Significant
Accounting Policies

Fiscal Year

Our fiscal year is a 52/53 week year
ending on the Saturday closest to January 31. Unless otherwise stated,
references to years 2008, 2007, and 2006 relate respectively to the fiscal years
ended January 31, 2009, February 2, 2008, and February 3, 2007. Fiscal year 2006
consisted of 53 weeks and the other fiscal years consisted of 52 weeks.

Cash and Cash
Equivalents

We had cash and equivalents of $24.8
million and $9.2 million at January 31, 2009 and February 2, 2008, respectively.
Additionally, credit and debit card receivables totaling $3.9 million and $4.1
million were included in cash equivalents at January 31, 2009 and February 2,
2008, respectively.

We consider all certificates of deposit
and other short-term investments with an original maturity date of three months
or less to be cash equivalents. As of January 31, 2009, all invested cash was
held in either a bank money market account, a U.S. Treasury investment fund, or
a bank commercial paper account. While these investments are not considered by
management to be at significant risk, they could be impacted if the underlying
financial institutions fail or are subject to other adverse conditions in the
financial markets.

The cash balances held in bank
operating accounts are covered by the Federal Deposit Insurance Corporation
("FDIC") Transaction Account Guarantee Program. Through December 31, 2009,
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.

Fair Value of Financial Instruments

Statement of Financial Accounting
Standards ("SFAS") No. 107, "Disclosures about Fair Value of Financial
Instruments," requires management to disclose the estimated fair value of
certain assets and liabilities defined by SFAS No. 107 as financial instruments.
The carrying amount of cash and cash equivalents, accounts receivable, accounts
payable and accrued and other liabilities included in the consolidated balance
sheets approximate fair value given the short-term nature of these financial
instruments.

Merchandise Inventories and Cost of
Sales

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.

32

---

Shoe Carnival,
Inc.Notes to Consolidated Financial
Statements - continued

Costs of sales includes the cost of
merchandise sold, buying, distribution, and occupancy costs, inbound freight
expense, provision for inventory obsolescence, inventory shrink and credits and
allowances from merchandise vendors in accordance with Emerging Issues Task
Force Issue No. 02-16, "Accounting by a Customer (Including a Reseller) for
Certain Consideration Received from a Vendor."

Property and
Equipment-Net

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

Long-lived assets are reviewed for
impairment whenever events or changes in circumstances indicate that full
recoverability is questionable. Factors used in the evaluation include, but are
not limited to, our plans for future operations, recent operating results and
projected cash flows. Based upon this review, we recorded non-cash impairment
charges of $2.1 million, $1.5 million and $100,000 in fiscal years 2008, 2007
and 2006, respectively.

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 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.

Deferred Lease
Incentives

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

Accrued Rent

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

Revenue Recognition

Revenue from sales of our merchandise
is recognized at the time of sale, net of sales tax. In the regular course of
business, we offer our customers sales incentives including coupons, discounts,
and free merchandise. Sales are recorded net of such incentives and returns and
allowances. If an incentive involves free merchandise, that merchandise is
recorded as a zero sale and the cost is included in cost of sales. Gift card
revenue is recognized at the time of redemption.

33

---

Shoe Carnival,
Inc.Notes to Consolidated Financial
Statements - continued

Cash Consideration Received From a
Vendor

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

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

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

Store Opening and Start-up
Costs

Non-capital expenditures, such as
advertising, payroll and supplies, incurred prior to the opening of a new store
are charged to expense in the period they are incurred. Start-up costs
associated with the new distribution center were incurred in the first quarter
of fiscal 2007 and charged to expense.

Advertising Costs

Print, radio and television
communication costs are generally expensed when incurred. Internal production
costs are expensed when incurred and external production costs are expensed in
the period the advertisement first takes place. Advertising expenses included in
selling, general and administrative expenses were $28.7 million, $34.9 million
and $32.8 million in fiscal years 2008, 2007 and 2006, respectively.

Segments of an Enterprise and
Related Information

We have identified each retail store as
individual operating segments, which have been aggregated into one reportable
business segment that offers the same principal product and service throughout
the Midwest, South and Southeast regions of the United States.

Discontinued Operations

We evaluate our store closings for
discontinued operations classification utilizing the guidance within Financial
Accounting Standards Board (the "FASB") Statement No. 144 ("SFAS No. 144"),
"Accounting for the Impairment or Disposal of Long-Lived Assets." Based on this
evaluation, we have determined that each of our stores is the lowest level at
which the operations and cash flows can be clearly distinguished, operationally
and for financial reporting purposes, from the rest of the company. Although
each of our stores, on its own, is a component of the company, there may be
cases in which we expect significant sales from store closures to transfer to
our other existing stores that we continue to operate. In these cases, we
believe the operations and cash flows from the store closures will not be
eliminated from the ongoing operations of the company, and should not be
classified as discontinued operations in accordance with the provisions of SFAS
No. 144.

34

---

Shoe Carnival,
Inc.Notes to Consolidated Financial
Statements - continued

The following table summarizes our
discontinued operations for the years ended January 31, 2009, February 2, 2008
and February 3, 2007:

(in thousands, except per
      store data)Fiscal years
    
    2008
    
    2007
    
    2006Total stores closed during year
    
    
    11
    
    
    
    5
    
    
    
    6Stores closed in which
      sales transferred to existing store locations
    
    
    4
    
    
    
    2
    
    
    
    0Discontinued operations stores(1)
    
    
    7
    
    
    
    3
    
    
    
    6Net
      sales for discontinued operations stores(1)
    
    $
    6,800
    
    
    $
    3,900
    
    
    $
    5,500Net loss for discontinued
      operations stores, net of tax(1)
    
    $
    (1,500
    )
    
    $
    (475
    )
    
    $
    (639
    )


|(1) |  | These stores are not located near
      other existing stores to facilitate transference of sales nor do we have
      significant continuing involvement in their operations after closing. We
      have not segregated the results of operations for these stores in our
      consolidated financial statements as the amounts are deemed
      immaterial.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Income Taxes

We compute income taxes using the asset
and liability method, under which deferred income taxes are provided for the
temporary differences between the financial reporting basis and the tax basis of
our assets and liabilities.

Effective February 4, 2007, we account
for uncertain tax positions in accordance with Interpretation No. 48,
"Accounting for Uncertainty in Income Taxes  an interpretation of the Financial
Accounting Standards Board (the "FASB") Statement No. 109" ("FIN 48") and report
a liability for unrecognized tax benefits resulting from uncertain tax positions
taken or expected to be taken in a tax return. We recognize interest expense and
penalties, if any, related to uncertain tax positions in income tax expense.

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 year. The following table presents a reconciliation of
our basic and diluted weighted average common shares outstanding as required by
SFAS No. 128, "Earnings Per Share":

(000s)Fiscal years
    
    2008
    
    2007
    
    2006Basic shares
    
    12,406
    
    12,922
    
    13,373Dilutive effect of stock-based
      awards
    
    86
    
    236
    
    371Diluted shares
    
    12,492
    
    13,158
    
    13,744


Options to purchase 223,600 shares of
common stock in 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. For fiscal 2007 and 2006, there were no anti-dilutive
shares.

35

---

Shoe Carnival,
Inc.Notes to Consolidated Financial
Statements - continued

Stock-Based Compensation

Effective January 29, 2006, we adopted
the fair value recognition provisions of SFAS No. 123 (revised 2004),
"Share-Based Payment" ("SFAS No. 123R"), using the modified prospective
transition method and began recognizing compensation expense for stock-based
awards based on the fair value of the awards. Stock-based awards include stock
option grants, stock appreciation rights, restricted stock grants and certain
transactions under our other stock-based compensation plans.

SFAS No. 123R requires share-based
compensation expense to be based on the following: a) fair value estimated in
accordance with the original provisions of SFAS No. 123 for unvested stock-based
awards granted prior to the adoption date; b) fair value estimated in accordance
with the provisions of SFAS No. 123R for all stock-based awards granted
subsequent to the adoption date; and c) the discount on shares sold to employees
subsequent to the adoption date, which represents the difference between the
grant date fair value and the employee purchase price. Stock-based compensation
expense is included in selling, general and administrative expense.

SFAS No. 123R requires us to apply an
estimated forfeiture rate in calculating the period expense as opposed to
recognizing forfeitures as an expense reduction as they occur, which was the
method used prior to adoption. Forfeiture estimates are adjusted periodically
based on the extent to which actual forfeitures differ, or are expected to
differ, from previous estimates. SFAS No. 123R also requires the benefit of tax
deductions in excess of the compensation cost recognized for exercised options
and restricted stock that vests to be classified as financing cash inflows
rather than operating cash inflows. This amount is shown as "Excess tax benefits
from stock-based compensation" on the consolidated statement of cash flows in
accordance with SFAS No. 123R.

New Accounting Pronouncements

In September 2006, the FASB issued SFAS
No. 157, "Fair Value Measurements" ("SFAS No. 157"). SFAS No. 157 defines fair
value, establishes a framework for measuring fair value in generally accepted
accounting principles, and expands disclosures about fair value measurements.
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 elected to defer
adoption for non-financial assets and liabilities. The adoption of SFAS No. 157
for financial assets did not have a material impact on our consolidated
financial statements. We do not believe the adoption of SFAS No. 157 for certain
non-financial assets and liabilities will have a material impact on our
consolidated financial statements.

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. SFAS No. 141R is effective
for business combinations occurring after December 31, 2008, with early
application prohibited. We do not believe the adoption of SFAS No. 141R will
have a material impact on our consolidated financial statements.

In April 2008, the FASB issued Staff
Position No. FAS 142-3, "Determination of the Useful Life of Intangible Assets"
("FSP 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 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. FSP FAS 142-3 is effective for fiscal years and interim periods
within those fiscal years, beginning on or after December 15, 2008, with early
adoption prohibited. We do not believe the adoption of FSP FAS 142-3 will have a
material impact on our consolidated financial statements.

36

---

Shoe Carnival,
Inc.Notes to Consolidated Financial
Statements - continued

Note 3  Property and Equipment-Net

The following is a summary of property
and equipment:

January 31,
    
    February 2,(000s)
    
    2009
    
    2008Furniture, fixtures and equipment
    
    $
    105,913
    
    
    $
    103,107Leasehold
      improvements
    
    
    60,319
    
    
    
    57,976Total
    
    
    166,232
    
    
    
    161,083Less accumulated
      depreciation and amortization
    
    
    (96,015
    )
    
    
    (89,397
    )Property and equipment  net
    
    $
    70,217
    
    
    $
    71,686


Note 4  Long-Term
Debt

We have an unsecured credit agreement
(the "Credit Agreement") with a bank group, which allows for both cash advances
and the issuance of letters of credit. On December 15, 2006, the Credit
Agreement was amended to extend the maturity date to April 30, 2010. The maximum
amount available under the credit facility was increased from $70 million to $95
million in an amendment on June 10, 2008.

Borrowings under the revolving credit
line are based on eligible inventory. The Credit Agreement governing the credit
facility stipulates Total Shareholders' Equity, adjusted for the effect of any
share repurchases, will not fall below that of the prior fiscal year-end, the
ratio of funded debt plus rent to EBITDA plus rent will not exceed 2.5 to 1.0,
total distributions for stock repurchases will not exceed $50.0 million and 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 requirements as of January 31, 2009. Should a
default condition be reported, the lenders may preclude additional borrowings
and call all loans and accrued interest at their discretion.

The credit facility bears interest, at
our option, at the agent banks prime rate (3.50% at January 31, 2009) minus
0.5% or LIBOR plus from 0.75% to 1.5%, depending on our achievement of certain
performance criteria. A commitment fee is charged, at our option, at 0.3% per
annum on the unused portion of the bank groups commitment or 0.15% per annum of
the total commitment. We had no outstanding long-term debt at January 31, 2009
or February 2, 2008. At January 31, 2009, we had $9.2 million of outstanding
letters of credit and $79.0 million was available to us for additional
borrowings under the credit facility.

Note 5  Leases

We lease all of our retail locations
and certain equipment under operating leases expiring at various dates through
fiscal 2022. Various lease agreements require scheduled rent increases over the
initial lease term. Rent expense for such leases is recognized on a
straight-line basis over the initial lease term beginning the earlier of the
start date of the lease or when we take possession of the property. The
difference between rent based upon scheduled monthly payments and rent expense
recognized on a straight-line basis is recorded as accrued rent. All cash
incentives received from landlords for leasehold improvements and fixturing of
stores are recorded as deferred income and amortized over the life of the lease
on a straight-line basis as a reduction of rental expense.

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

37

---

Shoe Carnival, Inc.
Notes to Consolidated Financial Statements - continued

We did not assign any store operating
leases to separate third parties during fiscal 2008. We remain liable on three
assignments of operating leases covering former store locations. These operating
leases were assigned to third parties in prior years. The assignments require us
to make payments under the lease agreements in certain events of default. The
maximum potential amount of future payments (undiscounted) that we could be
required to make under all assignments is approximately $2.3 million at January
31, 2009. One assignment remains in effect until the lease expires in fiscal
2011. Two of the assignments remain in effect until the leases expire in fiscal
year 2013. We believe that the likelihood of material liability being triggered
under these leases is remote, and no liability has been accrued for these
contingent lease obligations in our consolidated financial statements as of
January 31, 2009.

In February 2006, we sold our combined
distribution center and corporate headquarters for $7.2 million and recorded a
loss of approximately $55,000 including legal fees and associated selling costs.
We entered into a lease to continue operations in this combined facility, the
initial term of which expired on January 31, 2007. The lease provided an option
that allowed us to continue our occupancy until January 31, 2008. We exercised
this option during fiscal 2006 and leased the combined facility on a
month-to-month basis. In March and June 2007, we relinquished our rights to the
distribution center and corporate headquarters, respectively.

In February 2006, we entered into an
operating lease with an independent third-party to lease our new distribution
center. The lease has an initial term of 15 years, commencing on December 1,
2006. We have the right to extend the initial lease term for up to three
additional, successive periods of five years each.

In June 2006, we entered into an
operating lease with an independent third-party to lease our new corporate
headquarters for an initial term of 15 years, commencing on June 1, 2007. We
have the right to extend the initial lease term for up to three additional,
successive periods of five years each.

Rental expense for our operating leases
consisted of:

(000s)Fiscal years
    
    2008
    
    2007
    
    2006Rentals for real property
    
    $
    46,628
    
    $
    43,800
    
    $
    40,643Contingent rent
    
    
    50
    
    
    22
    
    
    74Equipment rentals
    
    
    393
    
    
    452
    
    
    502Total
    
    $
    47,071
    
    $
    44,274
    
    $
    41,219


Future minimum lease payments at
January 31, 2009 are as follows:

(000s)
    
    OperatingFiscal years
    
    Leases2009
    
    $
    46,2712010
    
    
    41,9832011
    
    
    36,8502012
    
    
    32,5722013
    
    
    27,136Thereafter to 2022
    
    
    78,807Total
    
    $
    263,619


38

---

Shoe Carnival,
Inc.Notes to Consolidated Financial
Statements - continued

Note 6  Income Taxes

The provision for income taxes
consisted of:

(000s)Fiscal years
    
    2008
    
    2007
    
    2006Current:Federal
    
    $
    1,825
    
    $
    6,992
    
    
    $
    15,801State
    
    
    446
    
    
    146
    
    
    
    1,531Total current
    
    
    2,271
    
    
    7,138
    
    
    
    17,332Deferred:Federal
    
    
    758
    
    
    (147
    )
    
    
    (2,188
    )State
    
    
    22
    
    
    (240
    )
    
    
    (195
    )Total deferred
    
    
    780
    
    
    (387
    )
    
    
    (2,383
    )Total provision
    
    $
    3,051
    
    $
    6,751
    
    
    $
    14,949


We realized a tax benefit of $214,000,
$404,000, and $916,000 in fiscal years 2008, 2007, and 2006, respectively, as a
result of the exercise of stock options and the vesting of restricted stock,
which is recorded in shareholders equity.

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

Fiscal years
    
    2008
    
    2007
    
    2006U.S. Federal statutory tax rate
    
    35.0
    %
    
    35.0
    %
    
    35.0
    %State and local income taxes, net of
      federal tax benefit
    
    5.6
    
    
    (0.5
    )
    
    3.4Other
    
    (4.1
    )
    
    0.0
    
    
    0.2Effective income tax rate
    
    36.5
    %
    
    34.5
    %
    
    38.6
    %


In fiscal 2008, we recorded $414,000
and $35,000 of federal and state employment related tax credits, respectively.
In fiscal 2007, we recorded $980,000 of state tax credits related to the
investment in our new distribution center. All of these credits had the effect
of reducing our effective tax rate in the respective year.

39

---

Shoe Carnival,
Inc.Notes to Consolidated Financial
Statements - continued

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

January 31,
    
    February 2,(000s)
    
    2009
    
    2008Deferred tax assets:Accrued rent
    
    $
    2,053
    
    
    $
    2,281Accrued compensation
    
    
    1,462
    
    
    
    1,768Accrued employee benefits
    
    
    1,273
    
    
    
    925Inventory
    
    
    616
    
    
    
    860Self-insurance reserves
    
    
    464
    
    
    
    0Lease incentives
    
    
    651
    
    
    
    0Unrecognized tax benefits
    
    
    487
    
    
    
    357State bonus depreciation
      addback
    
    
    193
    
    
    
    121Other
    
    
    439
    
    
    
    360Total deferred tax assets
    
    
    7,638
    
    
    
    6,672Deferred tax liabilities:Depreciation
    
    
    5,635
    
    
    
    3,511Lease incentives
    
    
    0
    
    
    
    321Capitalized costs
    
    
    842
    
    
    
    899Total deferred tax
    liabilities
    
    
    6,477
    
    
    
    4,731Net deferred tax
      asset
    
    
    1,161
    
    
    
    1,941Less
      current deferred income tax benefit
    
    
    (2,305
    )
    
    
    (2,340
    )Long-term deferred income taxes
    
    $
    (1,144
    )
    
    $
    (399
    )


As of January 31, 2009, we had
available state tax credits of $136,000 that can be carried forward for eight
years.

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

Our liability for unrecognized tax
benefits is related to tax years encompassing our fiscal years 1999 through
2008, the tax years which remain subject to examination by major tax
jurisdictions as of January 31, 2009.

40

---

Shoe Carnival,
Inc.Notes to Consolidated Financial
Statements - continued

A reconciliation of the beginning and
ending amount of unrecognized tax benefits, excluding interest and penalties, is
as follows:

(000's)Fiscal years
    
    2008
    
    2007Beginning balance
    
    $
    1,029
    
    
    $
    567Increases  tax positions in prior
      period
    
    
    0
    
    
    
    301Decreases  tax positions in prior
      period
    
    
    (20
    )
    
    
    0Gross increases  current period tax
      positions
    
    
    126
    
    
    
    161Ending balance
    
    $
    1,135
    
    
    $
    1,029


A liability of $1.6 million for
uncertain tax positions has been recognized as of January 31, 2009, of which
$1.5 million is included in Other liabilities on the consolidated balance
sheets. The liability for uncertain tax positions is comprised of $1.1 million
related to unrecognized tax positions, $326,000 related to accrued interest and
$156,000 related to accrued penalties. If our uncertain tax positions become
recognizable, the amount would reduce our effective tax rate.

During the next twelve months we expect
to effectively settle an uncertain tax position which will reduce our
unrecognized tax liability by $65,000, excluding penalties and interest. We also
expect to be audited in fiscal 2009 by a taxing authority in which uncertain tax
positions have been deemed to not be more-likely-than-not to be upheld in our
FIN 48 analysis. During the next twelve months, the amount of unrecognized tax
liabilities could be reduced by up to $108,000, excluding penalty and interest.

Prior to the adoption of FIN 48, we
recorded interest expense related to uncertain tax positions as a component of
interest expense. Upon adoption of FIN 48, we changed this policy to record such
interest expense as a component of income tax expense in the consolidated
statement of income. Penalties have historically been included as a component of
income tax expense and will continue to be recorded in this manner with the
adoption of FIN 48. During fiscal 2008, we recorded $146,000 of interest and
penalty expense related to uncertain tax positions.

Note 7  Employee Benefit
Plans

Retirement Savings
Plan

On February 24, 1994, our Board of
Directors approved the Shoe Carnival Retirement Savings Plan (the "Retirement
Plan"). The Retirement Plan is open to all employees who have been employed for
one year, are at least 21 years of age and who work at least 1,000 hours in a
defined year. The primary savings mechanism under the Retirement Plan is a
401(k) plan under which an employee may contribute up to 20% of earnings with us
matching the first 4% at a rate of 50%.

Our contributions to the participants
accounts become fully vested when the participant reaches their third
anniversary of employment with us. Contributions charged to expense were
$450,000, $447,000 and $482,000 in fiscal years 2008, 2007 and 2006,
respectively.

41

---

Shoe Carnival,
Inc.Notes to Consolidated Financial
Statements - continued

Stock Purchase Plan

On May 11, 1995, our shareholders
approved the Shoe Carnival, Inc. Employee Stock Purchase Plan (the "Stock
Purchase Plan") as adopted by our Board of Directors on February 9, 1995. The
Stock Purchase Plan reserves 300,000 shares of our common stock (subject to
adjustment for any subsequent stock splits, stock dividends and certain other
changes in the common stock) for issuance and sale to any employee who has been
employed for more than a year at the beginning of the calendar year, and who is
not a 10% owner of our stock, at 85% of the then fair market value up to a
maximum of $5,000 in any calendar year. Under the plan, 15,600, 9,200 and 7,700
shares of common stock were purchased by participants in the plan and proceeds
to us for the sale of those shares were approximately $165,000, $171,000 and
$168,000 for fiscal years 2008, 2007 and 2006, respectively. At January 31,
2009, 128,120 shares of unissued common stock were reserved for future purchase
under the Stock Purchase Plan.

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

|(000's)                                                                            |  |      |    |          |   |      |  |   |   
|---------------------------------------------------------------------------------- |  | ---- | -- | -------- | - | ---- |  | - | --
|Fiscal years                                                                       |  | 2008 |    | 2007 (1) |   | 2006
|Stock-based compensation
      expense before the recognized income tax benefit(2) |  | $    | 29 |          | $ | 30   |  | $ | 30
|Income tax benefit                                                                 |  | $    | 11 |          | $ | 12   |  | $ | 11

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

Deferred Compensation Plan

In fiscal 2000, we established a
non-qualified deferred compensation plan for certain key employees who, due to
Internal Revenue Service guidelines, cannot take full advantage of the employer
sponsored 401(k) plan. Participants in the plan elect on an annual basis to
defer, on a pre-tax basis, portions of their current compensation until
retirement, or earlier if so elected. While not required to, we can match a
portion of the employees contributions, which would be subject to vesting
requirements. The compensation deferred under this plan is credited with
earnings or losses measured by the mirrored rate of return on investments
elected by plan participants. The plan is currently unfunded. Due to the
downturn in the economy, the plan recorded a loss of $1.1 million in fiscal
2008. Compensation (income)/expense for our match and earnings on the deferred
amounts were ($977,000), $269,000 and $409,000 for fiscal years 2008, 2007 and
2006, respectively. Total deferred compensation liability at January 31, 2009
and February 2, 2008 was $2.7 million and $3.6 million, respectively.

Note 8  Stock Based
Compensation

Compensation Plan Summaries

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

42

---

Shoe Carnival,
Inc.Notes to Consolidated Financial
Statements - continued

The 1993 Plan was approved by our Board
of Directors and shareholders effective January 15, 1993, and amended at the
1997 annual meeting of shareholders. The 1993 Plan reserved 1,500,000 shares of
common stock for stock option grants (subject to adjustment for subsequent stock
splits, stock dividends and certain other changes in the common stock). On
January 14, 2003, the 1993 Plan expired. Previously issued stock options can be
exercised for up to 10 years from their date of grant. At January 31, 2009, all
outstanding stock options granted under the 1993 Plan were fully vested.

The Directors Plan was approved by our
Board of Directors on March 4, 1999. The plan reserves for issuance 25,000
shares of common stock (subject to adjustment for stock splits, stock dividends
and certain other changes to the common stock). No grants were made under this
plan in fiscal years 2006, 2007 or 2008, and it is currently the intention of
the Board of Directors not to grant stock options under this plan in the future.
At January 31, 2009, 9,000 shares of unissued common stock were reserved for
possible future grants under the Directors Plan. At January 31, 2009, all
outstanding stock options granted under the Directors Plan were fully vested.

The 2000 Plan was approved by our Board
of Directors and shareholders effective June 8, 2000. The 2000 Plan initially
reserved 1,000,000 shares of common stock for stock option and restricted stock
grants, but on June 11, 2004, the 2000 Plan was amended to increase the number
of shares reserved for issuance to 1,500,000 (subject to adjustment for
subsequent stock splits, stock dividends and certain other changes in the common
stock). On June 14, 2005, the 2000 Plan was further amended to include our
non-employee Directors as individuals eligible to receive awards; to stipulate
that the exercise price of all options granted may not be less than the fair
market value of our common stock on the date the option is granted; and to
delete the provision permitting loans to participants. On June 12, 2008, the
2000 Plan was amended to increase the number of shares reserved for issuance to
2,000,000, and to extend the term of the 2000 Plan until the later of ten years
from the date of adoption of the 2000 Plan by our shareholders or the approval
of any amendment of the 2000 Plan by our shareholders. On October 8, 2008, the
2000 Plan was further amended to modify the change in control provisions and to
provide that upon a change in control (as defined in the 2000 Plan), any shares
of restricted stock will become fully vested in the participants. At January 31,
2009, 547,084 shares of unissued common stock were reserved for future grants
under the 2000 Plan.

Stock options currently outstanding
under the 2000 Plan typically were granted such that one-third of the shares
underlying the stock options granted would vest and become fully exercisable on
each of the first three anniversaries of the date of the grant and were assigned
a 10-year term from the date of grant. Restricted stock awards issued to
employees under the 2000 Plan either vest upon the achievement of specified
levels of annual earnings per diluted share during a six-year period starting
from the grant date or were granted such that one-third of the shares would vest
on each of the first three anniversaries subsequent to the date of the grant.
For the performance-based awards, should the annual earnings per diluted share
criteria not be met within the six-year period from the grant date, any shares
still restricted will be forfeited. All restricted stock awards issued to date
to non-employee Directors vested on January 2 of the year following the year of
the grant.

43

---

Shoe Carnival, Inc.
Notes to Consolidated Financial Statements - continued

Plan Specific Activity and End of
Period Balance Summaries

Stock Options

The following table summarizes the
stock option transactions pursuant to the stock-based compensation plans for the
year ended January 31, 2009:

|                                                                                              |  |           |   |                |           |              |           | Weighted-  |           |           |    
|--------------------------------------------------------------------------------------------- |  | --------- | - | -------------- | --------- | ------------ | --------- | ---------- | --------- | --------- | ---
|                                                                                              |  |           |   |                |           |              |           | Average    |           | Aggregate
|                                                                                              |  |           |   |                | Weighted- |              | Remaining |            | Intrinsic
|                                                                                              |  | Number of |   | Average        |           | Contractual  |           | Value (in 
|                                                                                              |  | Shares    |   | Exercise Price |           | Term (Years) |           | thousands)
|Outstanding at February 2, 2008                                                               |  | 637,709   |   |                | $         | 12.40        |           |            |           |           |    
|Granted                                                                                       |  | 17,500    |   |                |           | 14.63        |           |            |           |           |    
|Forfeited or expired                                                                          |  | (5,167    | ) |                |           | 13.66        |           |            |           |           |    
|Exercised                                                                                     |  | (123,874  | ) |                |           | 11.11        |           |            |           |           |    
|Outstanding at January 31, 2009                                                               |  | 526,168   |   |                | $         | 12.77        |           | 3.38       |           | $         | 207
|Options
      outstanding at January 31, 2009,      
      net of estimated
      forfeitures |  | 520,613   |   |                | $         | 12.77        |           | 3.77       |           | $         | 207
|Exercisable at January 31, 2009                                                               |  | 487,001   |   |                | $         | 12.76        |           | 3.40       |           | $         | 207

The weighted-average fair value of
options granted was $6.44 during fiscal 2008 and $4.90 during fiscal 2007. No
options were granted during fiscal 2006. The fair value of options granted were
estimated at grant date using a Black-Scholes option-pricing model with the
following weighted-average assumptions:

Fiscal years
    
    2008
    
    2007Risk
      free interest rate
    
    3.0
    %
    
    2.8
    %Expected dividend
      yield
    
    0.0
    %
    
    0.0
    %Expected volatility
    
    45.93
    %
    
    43.91
    %Expected term
    
    5 Years
    
    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.

The following table summarizes
information regarding options exercised:

(000's)Fiscal
      years
    
    2008
    
    2007
    
    2006Total intrinsic value(1)
    
    $
    640
    
    $
    578
    
    $
    3,169Total cash
      received
    
    $
    1,375
    
    $
    529
    
    $
    2,609Associated excess income tax benefits recorded
    
    $
    224
    
    $
    203
    
    $
    839


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

44

---

Shoe Carnival,
Inc.Notes to Consolidated Financial
Statements - continued

The following table summarizes
information regarding outstanding and exercisable options at January 31, 2009:

|               |                     |             | Options Outstanding |                | Options Exercisable
|-------------- | ------------------- | ----------- | ------------------- | -------------- | -------------------
|               |                     |             | Number              |                | Weighted           
|Range of       |                     | of Options  |                     | Average        |                    
|Exercise Price |                     | Outstanding |                     | Remaining Life |                    
|$              | 4.38 
    5.75     |             | 61,162              |                | 1.84               
|$              | 8.56  12.63        |             | 109,585             |                | 4.28               
|$              | 12.67 
      16.30 |             | 197,801             |                | 4.71               
|$              | 17.12               |             | 157,620             |                | 3.17               

The following table summarizes
information regarding stock-based compensation expense for non-vested options
recognized during the fiscal years ended January 31, 2009 and February 2, 2008:

|(000's)                                                                                      |  |      |    |          |   |      |  |   |    
|-------------------------------------------------------------------------------------------- |  | ---- | -- | -------- | - | ---- |  | - | ---
|Fiscal years                                                                                 |  | 2008 |    | 2007 (1) |   | 2006
|Stock-based compensation
      expense before        the recognized
      income tax benefit |  | $    | 71 |          | $ | 67   |  | $ | 222
|Income tax benefit                                                                           |  | $    | 26 |          | $ | 26   |  | $ | 86 

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

As of January 31, 2009, there was
approximately $158,000 of unrecognized compensation related to non-vested stock
options. This cost is expected to be recognized over a weighted-average period
of approximately 2.3 years.

Restricted Stock
Awards

Restricted stock awards issued to
employees under the 2000 Plan either vest upon the achievement of specified
levels of annual earnings per diluted share during a six-year period starting
from the grant date or were granted such that one-third of the shares would vest
on each of the first three anniversaries subsequent to the date of the grant.
For the performance-based awards, should the annual earnings per diluted share
criteria not be met within the six-year period from the grant date, any shares
still restricted will be forfeited. All restricted stock awards issued to date
to non-employee Directors vested on January 2 of the year following the year of
grant. The fair value of restricted stock awards is determined based on the
number of shares granted and the quoted closing price of our common stock on the
date of grant.

The following table summarizes the
restricted share transactions pursuant to the 2000 Plan for fiscal 2008:

Weighted-Number of
    
    Average GrantShares
    
    Date Fair ValueNon-vested at February 2, 2008
    
    130,154
    
    
    $
    27.61Granted
    
    320,850
    
    
    
    11.38Vested
    
    (4,450
    )
    
    
    14.48Forfeited
    
    (12,320
    )
    
    
    20.13Non-vested at January 31, 2009
    
    434,234
    
    
    $
    15.97


The total fair value at grant date of
previously non-vested stock awards that vested during fiscal 2008, 2007, and
2006 was $64,000, $871,000 and $859,000, respectively. The weighted-average
grant date fair value of stock awards granted during fiscal 2007 and fiscal 2006
were $29.24 and $23.30, respectively.

45

---

Shoe Carnival,
Inc.Notes to Consolidated Financial
Statements - continued

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

|(000's)                                                                                     |  |      |     |          |   |       |  |   |      
|------------------------------------------------------------------------------------------- |  | ---- | --- | -------- | - | ----- |  | - | -----
|Fiscal years                                                                                |  | 2008 |     | 2007 (1) |   | 2006 
|Stock-based compensation
      expense before       the recognized
      income tax benefit |  | $    | 852 |          | $ | 1,268 |  | $ | 1,327
|Income tax benefit                                                                          |  | $    | 311 |          | $ | 492   |  | $ | 502  

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

As of January 31, 2009, there was
approximately $3.5 million of unrecognized compensation expense remaining
related to both the performance-based and service-based non-vested stock awards.
The cost is expected to be recognized over a weighted average period of
approximately 3.2 years. This incorporates the current assumptions of the
estimated requisite service period required to achieve the designated
performance conditions for performance-based stock awards.

Cash-Settled Stock Appreciation
Rights (SARs)

Cash-settled stock appreciation rights
(SARs) were granted to certain employees in 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.
123R, cash-settled SARs are classified as Other liabilities on the consolidated
balance sheet as of January 31, 2009.

The following table summarizes the SARs
activity for the year ended January 31, 2009:

|                                |  |           |  |                |      |              | Weighted-
|------------------------------- |  | --------- |  | -------------- | ---- | ------------ | ---------
|                                |  |           |  |                |      |              | Average  
|                                |  |           |  | Weighted-      |      | Remaining   
|                                |  | Number of |  | Average        |      | Contractual 
|                                |  | Shares    |  | Exercise Price |      | Term (Years)
|Outstanding at February 2, 2008 |  | 0         |  | $              | 0.00 |              |          
|Granted                         |  | 157,000   |  |                | 9.72 |              |          
|Forfeited or expired            |  | 0         |  |                | 0.00 |              |          
|Exercised                       |  | 0         |  |                | 0.00 |              |          
|Outstanding at January 31, 2009 |  | 157,000   |  | $              | 9.72 |              | 4.88     
|                                |  |           |  |                |      |              |          
|Exercisable at January 31, 2009 |  | 0         |  | $              | 0.00 |              | 0.00     

46

---

Shoe Carnival, Inc.Notes to Consolidated Financial
Statements - continued

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 SARs granted was $2.24 as of January 31, 2009. The fair value was
estimated using a trinomial lattice model with the following assumptions:

2008Risk free interest rate yield curve
    
    0.15% - 1.85%Expected
      dividend yield
    
    0.0%Expected volatility
    
    54.27%Maximum
      life
    
    4.88
    YearsExercise multiple
    
    1.75Maximum
      payout
    
    $9.72Employee exit rate
    
    2.2% - 9.0%


As of January 31, 2009, there was
approximately $324,000 in unrecognized compensation expense related to
non-vested SARs.

Note 9  Business
Risk

We purchase merchandise from over 150
footwear vendors. In fiscal 2008, two suppliers each accounted for approximately
10%, or more, of our purchases and together accounted for approximately 34% of
our purchases. A loss of any of our key suppliers in certain product categories
could have a material adverse effect on our business. As is common in the
industry, we do not have any long-term contracts with suppliers.

Note 10  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, captionedSDI Industries, Inc.
(Claimant and Counter-Respondent) v. Shoe Carnival, Inc. (Respondent and
Counterclaimant), in which SDI seeks payment
of $1.2 million of unpaid retainage, $700,000 for services it has not yet
billed, plus additional interest and legal fees. The retainage was withheld from
progress billings for work performed on our new distribution center and is
recorded in accrued and other liabilities and fixed assets in our consolidated
financial statements. On or about May 21, 2008, we filed a Counterclaim and
Response in this matter, denying SDI's claim, and seeking monetary damages of
more than $3.0 million. We contend that SDI breached our contract with SDI
("Contract") due to their failure to deliver our distribution center's material
handling system pursuant to the specifications of the Contract. The hearing
before the arbitration panel is currently scheduled for July 2009.

Although the investment we made in the
new 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 are tentatively 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 11  Other Related Party
Transactions

Our Chairman and principal shareholder
and his son are members of LC Footwear, LLC. They also were shareholders of PL
Footwear, Inc., which during December 2007 became a wholly owned subsidiary of
LC Footwear, LLC. We purchase name brand merchandise from LC Footwear, LLC, and
PL Footwear, Inc. serves as an import agent for us. PL Footwear, Inc. represents
us on a commission basis in dealings with shoe factories in mainland China,
where most of our private label shoes are manufactured.

47

---

Shoe Carnival, Inc.Notes to Consolidated Financial
Statements - continued

Purchases made from LC Footwear, LLC
were $513,000 in fiscal 2008 and $56,000 in fiscal 2007. There were no purchases
made from LC Footwear, LLC in fiscal 2006. Commissions paid to PL Footwear, Inc.
were $894,000, $892,000 and $1.2 million in fiscal years 2008, 2007 and 2006,
respectively.

Note 12  Quarterly Results
(Unaudited)

Quarterly results are determined in
accordance with the accounting policies used for annual data and include certain
items based upon estimates for the entire year. All fiscal quarters in 2008 and
2007 include results for 13 weeks. The following table summarizes results for
fiscal 2008 and fiscal 2007:

(In thousands, except per share data)

|                                     | First   |         | Second  |   | Third   |  | Fourth 
|------------------------------------ | ------- | ------- | ------- | - | ------- |  | -------
|2008                                 | Quarter |         | Quarter |   | Quarter |  | Quarter
|Net sales                            | $       | 162,119 |         | $ | 158,480 |  | $      
|Gross
      profit                   |         | 47,080  |         |   | 42,146  |  |        
|Operating income                     |         | 7,757   |         |   | 1,485   |  |        
|Net
      income                     |         | 4,784   |         |   | 977     |  |        
|Net income per share  Basic         | $       | 0.39    |         | $ | 0.08    |  | $      
|Net income per
      share  Diluted | $       | 0.38    |         | $ | 0.08    |  | $      

|                                     | First   |         | Second  |   | Third   |  | Fourth 
|------------------------------------ | ------- | ------- | ------- | - | ------- |  | -------
|2007                                 | Quarter |         | Quarter |   | Quarter |  | Quarter
|Net sales                            | $       | 165,653 |         | $ | 154,805 |  | $      
|Gross
      profit                   |         | 49,791  |         |   | 40,247  |  |        
|Operating income                     |         | 10,466  |         |   | 129     |  |        
|Net
      income                     |         | 7,327   |         |   | 167     |  |        
|Net income per share  Basic         | $       | 0.54    |         | $ | 0.01    |  | $      
|Net income per
      share  Diluted | $       | 0.53    |         | $ | 0.01    |  | $      

48

---

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

|                                               | Balance at |       | Charged to     |   | Credited to     |  | Balance at  
|---------------------------------------------- | ---------- | ----- | -------------- | - | --------------- |  | ------------
|Descriptions                                   | Beginning  |       | Cost
      and |   | Costs
      and |  | End
      of
|(In
      thousands)                           | of Period  |       | Expenses       |   | Expenses        |  | Period      
|Year ended February 3, 2007                    |            |       |                |   |                 |  |             
|Reserve for
      sales returns and allowances | $          | 144   |                | $ | 59,461          |  | $           
|Inventory reserve                              | $          | 3,300 |                | $ | 700             |  | $           
|                                              
|Year ended February 2, 2008                    |            |       |                |   |                 |  |             
|Reserve for
      sales returns and allowances | $          | 90    |                | $ | 60,940          |  | $           
|Inventory reserve                              | $          | 3,450 |                | $ | 950             |  | $           
|                                              
|Year ended January 31, 2009                    |            |       |                |   |                 |  |             
|Reserve for
      sales returns and allowances | $          | 97    |                | $ | 61,167          |  | $           
|Inventory reserve                              | $          | 4,100 |                | $ | 650             |  | $           

ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE

There have been no changes in or
disagreements with our independent registered public accounting firm on
accounting or financial disclosures.

ITEM 9A.CONTROLS AND PROCEDURES

Managements Report on Internal
Control Over Financial Reporting

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

- Pertain to the maintenance of records that in
  reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;
- Provide reasonable assurance that transactions are
  recorded as necessary to permit preparation of financial statements in
  accordance with generally accepted accounting principles, and that receipts
  and expenditures of the company are being made only in accordance with
  authorizations of management and directors of the company; and
- Provide reasonable assurance regarding prevention
  or timely detection of unauthorized acquisition, use or disposition of the companys assets that could have a
  material effect on the financial statements.

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

49

---

Management assessed the effectiveness
of the company's internal control over financial reporting as of January 31,
2009. In making this assessment, management used the criteria set forth by the
Committee of Sponsoring Organizations ("COSO") of the Treadway Commission in
Internal Control-Integrated Framework. Based on its assessment, management
believes that the company's internal control over financial reporting was
effective as of January 31, 2009.

The company's internal control over
financial reporting as of January 31, 2009 has been audited by its independent
registered public accounting firm, Deloitte & Touche LLP, as stated in their
report which is included herein.

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

Our Chief Executive Officer and Chief
Financial Officer have concluded, based on their evaluation as of January 31,
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.

There have been no changes in our
internal control over financial reporting that occurred during the fourth
quarter ended January 31, 2009, that have materially affected, or are reasonably
likely to materially affect, our internal control over financial reporting.

50

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REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders
Shoe Carnival, Inc., Evansville, Indiana

We have audited the internal control
over financial reporting of Shoe Carnival, Inc. and subsidiaries (the Company)
as of January 31, 2009, based oncriteria established inInternal ControlIntegrated Frameworkissued by the Committee of Sponsoring Organizations of the
Treadway Commission. The Company's management is responsible for maintaining
effective internal control over financial reporting and for its assessment of
the effectiveness of internal control over financial reporting, included in the
accompanying Managements Report on Internal Control Over Financial Reporting.
Our responsibility is to express an opinion on the Company's internal control
over financial reporting based on our audit.

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

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

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

In our opinion, the Company maintained,
in all material respects, effective internal control over financial reporting as
of January 31, 2009, based on the criteria established inInternal ControlIntegrated Frameworkissued by the Committee of Sponsoring Organizations of the
Treadway Commission.

We have also audited, in accordance
with the standards of the Public Company Accounting Oversight Board (United
States), the consolidated financial statements and financial statement schedule
as of and for the year ended January 31, 2009 of the Company and our report
dated April 16, 2009, expressed an unqualified opinion on those financial
statements and financial statement schedule and included an explanatory
paragraph regarding the Companys adoption of Financial Accounting Standards
Board (FASB) Interpretation No. 48, Accounting
for Uncertainties in Income Taxes.

/s/ Deloitte & Touche LLP

Indianapolis, Indiana April 16,
2009

51

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ITEM 9B.OTHER INFORMATION

None.

52

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PART III

ITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by this Item
concerning our Directors, nominees for Director, Code of Ethics, designation of
the Audit Committee financial expert and identification of the Audit Committee,
and concerning any disclosure of delinquent filers under Section 16(a) of the
Exchange Act, is incorporated herein by reference to our definitive Proxy
Statement for the 2009 Annual Meeting of Shareholders, to be filed with the
Securities and Exchange Commission pursuant to Regulation 14A within 120 days
after the end of our last fiscal year. Information concerning our executive
officers is included under the caption "Executive Officers of the Company" at
the end of PART I of this annual report. Such information is incorporated herein
by reference, in accordance with General Instruction G(3) to Form 10-K and
Instruction 3 to Item 401(b) of Regulation S-K.

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

ITEM 11.EXECUTIVE COMPENSATION

The information required by this Item
concerning remuneration of our officers and Directors and information concerning
material transactions involving such officers and Directors and Compensation
Committee interlocks, including the Compensation Committee Report and the
Compensation Discussion and Analysis, is incorporated herein by reference to our
definitive Proxy Statement for the 2009 Annual Meeting of Shareholders which
will be filed pursuant to Regulation 14A within 120 days after the end of our
last fiscal year.

|ITEM 12. |  | SECURITY OWNERSHIP OF CERTAIN
      BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
      MATTERS
|-------- |  | ----------------------------------------------------------------------------------------------------------

The information required by this Item
concerning the stock ownership of management, five percent beneficial owners and
securities authorized for issuance under equity compensation plans is
incorporated herein by reference to our definitive Proxy Statement for the 2009
Annual Meeting of Shareholders which will be filed pursuant to Regulation 14A
within 120 days after the end of our last fiscal year.

ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE

The information required by this Item
concerning certain relationships and related transactions and the independence
of our Directors is incorporated herein by reference to our definitive Proxy
Statement for the 2009 Annual Meeting of Shareholders which will be filed
pursuant to Regulation 14A within 120 days after the end of our last fiscal
year.

ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this Item
concerning principal accountant fees and services is incorporated herein by
reference to our definitive Proxy Statement for the 2009 Annual Meeting of
Shareholders which will be filed pursuant to Regulation 14A within 120 days
after the end of our last fiscal year.

53

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PART IV

ITEM 15.EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

| | 1. |  | Financial
      Statements:                                                                                                                                                                               
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   
| |    |  | The following
      financial statements of Shoe Carnival, Inc. are set forth in PART II, ITEM
      8 of this report:                                                                                    
| |   
| |    |  | Report of Independent
      Registered Public Accounting Firm                                                                                                                                             
| |   
| |    |  | Consolidated Balance
      Sheets at January 31, 2009 and February 2, 2008                                                                                                                                
| |   
| |    |  | Consolidated
      Statements of Income for the years ended January 31, 2009, February 2,
      2008, and February 3, 2007                                                                                
| |   
| |    |  | Consolidated
      Statements of Shareholders Equity for the years ended January 31, 2009,
      February 2, 2008, and February 3, 2007                                                                  
| |   
| |    |  | Consolidated
      Statements of Cash Flows for the years ended January 31, 2009, February 2,
      2008, and February 3, 2007                                                                            
| |   
| |    |  | Notes to Consolidated
      Financial Statements                                                                                                                                                          
| |   
| | 2. |  | Financial Statement
      Schedule:                                                                                                                                                                       
| |   
| |    |  | The following
      financial statement schedule of Shoe Carnival, Inc. is set forth in PART
      II, ITEM 8 of this report.                                                                             
| |   
| |    |  | Schedule II Valuation
      and Qualifying Accounts                                                                                                                                                       
| |   
| | 3. |  | Exhibits:                                                                                                                                                                                                 
| |   
| |    |  | A list of exhibits
      required to be filed as part of this report is set forth in the Index to
      Exhibits, which immediately precedes such exhibits, and is incorporated
      herein by reference.

54

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SIGNATURES

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

|Shoe Carnival, Inc.
|-------------------
|                   
|Date:April 16, 2009
|                   
|                   

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

|Signature                |  | Title                                                                  |  | Date                
|------------------------ |  | ---------------------------------------------------------------------- |  | --------------------
|/s/ J. Wayne Weaver      |  | Chairman of the
      Board and Director                               |  | April 16,
      2009
|J. Wayne
      Weaver    |  |                                                                        |  |                     
|                        
|/s/ Mark L. Lemond       |  | President, Chief
      Executive Officer and Director                  |  | April 16,
      2009
|Mark L.
      Lemond     |  | (Principal
      Executive Officer)                                    |  |                     
|                        
|/s/ William E. Bindley   |  | Director                                                               |  | April 16,
      2009
|William E.
      Bindley |  |                                                                        |  |                     
|                        
|/s/ Gerald W. Schoor     |  | Director                                                               |  | April 16,
      2009
|Gerald W.
      Schoor   |  |                                                                        |  |                     
|                        
|/s/ Kent A. Kleeberger   |  | Director                                                               |  | April 16,
      2009
|Kent A.
      Kleeberger |  |                                                                        |  |                     
|                        
|/s/ W. Kerry Jackson     |  | Executive Vice
      President - Chief Financial Officer and Treasurer |  | April 16,
      2009
|W. Kerry
      Jackson   |  | (Principal Financial and
      Accounting Officer)                     |  |                     

55

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INDEX TO EXHIBITS

|        |  |                                                                                                                                                                                                                                                                                                                         |  | Incorporated by Reference
      To |  |        
|------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------- |  | -------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                         |  |                                    |  |        
|No.     |  | Description                                                                                                                                                                                                                                                                                                             |  | Form                               |  | Exhibit
|3-A     |  | Restated Articles of
      Incorporation of Registrant                                                                                                                                                                                                                                                                  |  | 10-K                               |  | 3-A    
|        |  |                                                                                                                                                                                                                                                                                                                         |  |                                    |  |        
|3-B     |  | By-laws of Registrant, as amended
      to date                                                                                                                                                                                                                                                                         |  | 8-K                                |  | 3-B    
|        |  |                                                                                                                                                                                                                                                                                                                         |  |                                    |  |        
|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                               |  | 4(I)   
|        |  |                                                                                                                                                                                                                                                                                                                         |  |                                    |  |        
|        |  | (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                               |  | 4(II)  
|        |  |                                                                                                                                                                                                                                                                                                                         |  |                                    |  |        
|        |  | (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                               |  | 4(III) 
|        |  |                                                                                                                                                                                                                                                                                                                         |  |                                    |  |        
|        |  | (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                               |  | 4(IV)  
|        |  |                                                                                                                                                                                                                                                                                                                         |  |                                    |  |        
|        |  | (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                               |  | 4(V)   
|        |  |                                                                                                                                                                                                                                                                                                                         |  |                                    |  |        
|        |  | (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                               |  | 4(VI)  
|        |  |                                                                                                                                                                                                                                                                                                                         |  |                                    |  |        
|        |  | (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                               |  | 4(VII) 
|        |  |                                                                                                                                                                                                                                                                                                                         |  |                                    |  |        
|        |  | (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                                |  | 4(VIII)

56

---

INDEX TO EXHIBITS -
Continued

|        |  |                                                                                                                                                                                                                                    |  | Incorporated by Reference
      To |  |        
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------- |  | -------
|Exhibit |  |                                                                                                                                                                                                                                    |  |                                    |  |        
|No.     |  | Description                                                                                                                                                                                                                        |  | Form                               |  | Exhibit
|        |  | (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                                |  | 4(IX)  
|        |  |                                                                                                                                                                                                                                    |  |                                    |  |        
|        |  | (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                                |  | 4(X)   
|        |  |                                                                                                                                                                                                                                    |  |                                    |  |        
|        |  | (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                               |  | 4(XI)  
|        |  |                                                                                                                                                                                                                                    |  |                                    |  |        
|10-A    |  | Lease, dated as of February 8,
      2006, by and between Registrant and Big-Shoe Properties, LLC                                                                                                                                  |  | 10-K                               |  | 10-A   
|        |  |                                                                                                                                                                                                                                    |  |                                    |  |        
|10-B*   |  | 2006 Executive Incentive
      Compensation Plan                                                                                                                                                                                   |  | 8-K                                |  | 10-B   
|        |  |                                                                                                                                                                                                                                    |  |                                    |  |        
|10-C*   |  | Form of Award Agreement for
      restricted stock granted under the Shoe Carnival, Inc. 2000 Stock Option
      and Incentive Plan                                                                                                |  | 8-K                                |  | 10-C   
|        |  |                                                                                                                                                                                                                                    |  |                                    |  |        
|10-D    |  | Lease, dated as of June 22, 2006,
      by and between the Registrant and Outback Holdings, LLC                                                                                                                                    |  | 8-K                                |  | 10-D   
|        |  |                                                                                                                                                                                                                                    |  |                                    |  |        
|10-E*   |  | 1993 Stock Option and Incentive
      Plan of Registrant, as amended                                                                                                                                                               |  | 10-Q                               |  | 10-E   
|        |  |                                                                                                                                                                                                                                    |  |                                    |  |        
|10-G*   |  | Outside Directors Stock Option
      Plan                                                                                                                                                                                          |  | S-8                                |  | 4.4    
|        |  |                                                                                                                                                                                                                                    |  |                                    |  |        
|10-H*   |  | Summary Compensation
      Sheet                                                                                                                                                                                                   |  |                                    |  |        
|        |  |                                                                                                                                                                                                                                    |  |                                    |  |        
|10-I    |  | Non-competition Agreement dated
      as of January 15, 1993, between Registrant and J. Wayne Weaver                                                                                                                               |  | S-1                                |  | 10-I   
|        |  |                                                                                                                                                                                                                                    |  |                                    |  |        
|10-L*   |  | Employee Stock Purchase Plan of
      Registrant, as amended                                                                                                                                                                       |  | 10-Q                               |  | 10-L   
|        |  |                                                                                                                                                                                                                                    |  |                                    |  |        
|10-M*   |  | Form of Notice of Grant of Stock
      Options and Option Agreement for incentive stock options granted under the
      Registrant's 2000 Stock Option and Incentive Plan                                                          |  | 8-K                                |  | 10-A   
|        |  |                                                                                                                                                                                                                                    |  |                                    |  |        
|10-N*   |  | Form of Notice of Grant of Stock
      Options and Option Agreement for non-qualified stock options granted under
      the Registrants 2000 Stock Option and Incentive Plan                                                      |  | 8-K                                |  | 10-B   
|        |  |                                                                                                                                                                                                                                    |  |                                    |  |        
|10-O*   |  | 2000 Stock Option and Incentive
      Plan of Registrant, as amended                                                                                                                                                               |  | 10-Q                               |  | 10-O   

57

---

INDEX TO EXHIBITS -
Continued

|        |  |                                                                                                                                                                                                               |  | Incorporated by Reference
      To |  |        
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------- |  | -------
|Exhibit |  |                                                                                                                                                                                                               |  |                                    |  |        
|No.     |  | Description                                                                                                                                                                                                   |  | Form                               |  | Exhibit
|10-S*   |  | Amended and Restated Employment
      and Noncompetition Agreement dated December 11, 2008, between Registrant
      and Mark L. Lemond                                                                       |  | 8-K                                |  | 10-S   
|        |  |                                                                                                                                                                                                               |  |                                    |  |        
|10-T*   |  | Amended and Restated Employment
      and Noncompetition Agreement dated December 11, 2008, between Registrant
      and Timothy Baker                                                                        |  | 8-K                                |  | 10-T   
|        |  |                                                                                                                                                                                                               |  |                                    |  |        
|10-U*   |  | Amended and Restated Employment
      and Noncompetition Agreement dated December 11, 2008, between Registrant
      and Clifton E. Sifford                                                                   |  | 8-K                                |  | 10-U   
|        |  |                                                                                                                                                                                                               |  |                                    |  |        
|10-V*   |  | Amended and Restated Employment
      and Noncompetition Agreement dated December 11, 2008, between Registrant
      and W. Kerry Jackson                                                                     |  | 8-K                                |  | 10-V   
|        |  |                                                                                                                                                                                                               |  |                                    |  |        
|10-W*   |  | Shoe Carnival, Inc. Deferred
      Compensation Plan                                                                                                                                                          |  | 8-K                                |  | 10-W   
|        |  |                                                                                                                                                                                                               |  |                                    |  |        
|21      |  | A list of subsidiaries of Shoe
      Carnival, Inc                                                                                                                                                            |  |                                    |  |        
|        |  |                                                                                                                                                                                                               |  |                                    |  |        
|23      |  | Written consent of Deloitte &
      Touche LLP                                                                                                                                                                |  |                                    |  |        
|        |  |                                                                                                                                                                                                               |  |                                    |  |        
|31.1    |  | Certification of Chief Executive
      Officer Pursuant to Rule 13a- 14(a)/15d-14(a) of the Securities Exchange
      Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act
      of 2002 |  |                                    |  |        
|        |  |                                                                                                                                                                                                               |  |                                    |  |        
|31.2    |  | Certification of Chief Financial
      Officer Pursuant to Rule 13a- 14(a)/15d-14(a) of the Securities Exchange
      Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act
      of 2002 |  |                                    |  |        
|        |  |                                                                                                                                                                                                               |  |                                    |  |        
|32.1    |  | Certification of Chief Executive
      Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
      906 of the Sarbanes-Oxley Act of 2002                                                 |  |                                    |  |        
|        |  |                                                                                                                                                                                                               |  |                                    |  |        
|32.2    |  | Certification of Chief Financial
      Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
      906 of the Sarbanes-Oxley Act of 2002                                                 |  |                                    |  |        

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

58

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