Value-priced footwear retailer Shoe Carnival Inc has managed to increase first quarter sales as bargains and warm weather brought customers its stores, but lower margins meant profit fell 14.6%.

For the three months to 2 May, net earnings slipped to $4.1m, or $0.33 per share, from $4.8m, or $0.38 per share, in the prior year.

Aggressive liquidation of non-athletic women's shoes pushed down merchandise margins by 1.3%, the company said.

Sales for the quarter were up 3.2% to $167.3m from $162.1m, while comparable store sales fell 0.3%.

"Sales of our athletic footwear, including both children's and adult, recorded a mid-single digit increase," said CEO Mark Lemond.

He added: "As we look forward, we recognise that our targeted moderate income customer will continue to be impacted by the economic downturn and sales within the retail sector may continue to experience downward pressure."

"Therefore, we will continue to manage our business conservatively, maintaining tight control over both our inventories and our cost structure."

Shoe Carnival, which operates a chain of 313 stores, expects to open 15 new shops in fiscal 2009 and close ten stores.