Genesco Reports First Quarter Fiscal 2016 Results

05/29/15

NASHVILLE, Tenn., May 29, 2015 /PRNewswire/ -- Genesco Inc. (NYSE:GCO) today reported earnings from continuing operations for the first quarter ended May 2, 2015, of $9.9 million, or $0.42 per diluted share, compared to earnings from continuing operations of $14.1 million, or $0.60 per diluted share, for the first quarter ended May 3, 2014.  Fiscal 2016 first quarter results reflect pretax items of $3.5 million, or $0.09 per share after tax, including $0.9 million of expenses related to deferred purchase price payments in connection with the acquisition of Schuh Group Limited, which are required to be expensed as compensation because the payment is contingent upon the payees' continued employment; and $2.6 million for network intrusion expenses, asset impairment charges and other legal matters.  Fiscal 2015 first quarter results reflected pretax items of $7.7 million, or $0.21 per share after tax, including $5.7 million related to a change in accounting for bonus awards; $3.1 million of expenses related to deferred purchase price payments in connection with the acquisition of Schuh Group Limited; and $2.0 million in network intrusion expenses, asset impairment charges and other legal matters, offset by a $3.1 million gain on a lease termination.

Adjusted for the items described above in both periods, earnings from continuing operations were $12.2 million, or $0.51 per diluted share, for the first quarter of Fiscal 2016, compared to earnings from continuing operations of $19.3 million, or $0.81 per diluted share, for the first quarter of Fiscal 2015.  For consistency with Fiscal 2016's previously announced earnings expectations and with previously reported adjusted results for the prior year period, the Company believes that the disclosure of the results from continuing operations adjusted for these items will be useful to investors. A reconciliation of earnings and earnings per share from continuing operations in accordance with U.S. Generally Accepted Accounting Principles with the adjusted earnings and earnings per share numbers presented in this paragraph is set forth on Schedule B to this press release.

Net sales for the first quarter of Fiscal 2016 increased 5% to $661 million from $629 million in the first quarter of Fiscal 2015.  Comparable sales in the first quarter 2016 increased 4% for the Company with a 5% increase in the Journeys Group, a 3% increase in the Lids Sports Group, a 4% increase in the Schuh Group, and a 3% increase in the Johnston & Murphy Group.

"Our first quarter results were generally in line with our expectations," said Robert J. Dennis, chairman, president and chief executive officer of Genesco. "Our recent performance reflects solid top-line growth, with positive comparable sales in all our retail businesses, led by Journeys, where comparable sales would have been even stronger if not for product delivery delays related to the West Coast port challenges.  The year-over-year decrease in earnings reflects expected gross margin pressure from planned actions to reduce inventories in the Lids Sports Group, the growth of businesses that are primarily second-half contributors, and expenses related to the growth of our e-commerce business. 

"The second quarter is off to a good start with comparable sales through Saturday, May 23, 2015 up 7% from the same period last year.

"While our year-to-date performance is tracking close to plan, we now believe that the Lids Sports Group's turnaround will involve additional gross margin pressure and more incremental expenses than we originally planned.  Therefore, we now expect Fiscal 2016 adjusted earnings per share in the range of $4.70 to $4.80, compared to Fiscal 2015's adjusted earnings per share of $4.74, and our previously announced range of $5.10 to $5.20 for Fiscal 2016. Consistent with previous guidance, these expectations do not include expected non-cash asset impairments and other charges, which are estimated in the range of $7.7 million to $8.2 million pretax, or $0.20 to $0.22 per share, after tax, in Fiscal 2016. This guidance assumes comparable sales increases in the 3% to 4% range for the full fiscal year." A reconciliation of the adjusted financial measures cited in the guidance to their corresponding measures as reported pursuant to U.S. Generally Accepted Accounting Principles is included in Schedule B to this press release.

Conference Call and Management Commentary

The Company has posted detailed financial commentary in writing on its website, www.genesco.com, in the investor relations section. The Company's live conference call on May 29, 2015 at 7:30 a.m. (Central time), may be accessed through the Company's internet website, www.genesco.com. To listen live, please go to the website at least 15 minutes early to register, download and install any necessary software.

Cautionary Note Concerning Forward-Looking Statements

This release contains forward-looking statements, including those regarding the performance outlook for the Company and its individual businesses (including, without limitation, sales, expenses, margins and earnings) and all other statements not addressing solely historical facts or present conditions. Actual results could vary materially from the expectations reflected in these statements. A number of factors could cause differences.  These include adjustments to estimates reflected in forward-looking statements, including the timing and costs of our initiatives to improve performance in the Lids Sports Group; the timing and amount of non-cash asset impairments related to retail store fixed assets or to intangible assets of acquired businesses; the effectiveness of our omnichannel initiatives; weakness in the consumer economy; competition in the Company's markets; inability of customers to obtain credit; fashion trends that affect the sales or product margins of the Company's retail product offerings; changes in buying patterns by significant wholesale customers; bankruptcies or deterioration in financial condition of significant wholesale customers; disruptions in product supply or distribution; unfavorable trends in fuel costs, foreign exchange rates, foreign labor and material costs, and other factors affecting the cost of products; the Company's ability to continue to complete and integrate acquisitions, expand its business and diversify its product base; changes in the timing of holidays or in the onset of seasonal weather affecting period-to-period sales comparisons; and the performance of athletic teams, the participants in major sporting events such as the Super Bowl and World Series, developments with respect to certain individual athletes, and other sports-related events or changes that may affect period-to-period comparisons in the Company's Lids Sports Group retail business. Additional factors that could affect the Company's prospects and cause differences from expectations include the ability to build, open, staff and support additional retail stores and to renew leases in existing stores and control occupancy costs, and to conduct required remodeling or refurbishment on schedule and at expected expense levels; deterioration in the performance of individual businesses or of the Company's market value relative to its book value, resulting in impairments of fixed assets or intangible assets or other adverse financial consequences; unexpected changes to the market for the Company's shares; variations from expected pension-related charges caused by conditions in the financial markets; and the cost and outcome of litigation, investigations and environmental matters involving the Company. Additional factors are cited in the "Risk Factors," "Legal Proceedings" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections of, and elsewhere in, our SEC filings, copies of which may be obtained from the SEC website, www.sec.gov, or by contacting the investor relations department of Genesco via our website, www.genesco.com. Many of the factors that will determine the outcome of the subject matter of this release are beyond Genesco's ability to control or predict. Genesco undertakes no obligation to release publicly the results of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Forward-looking statements reflect the expectations of the Company at the time they are made. The Company disclaims any obligation to update such statements.

About Genesco Inc.

Genesco Inc., a Nashville-based specialty retailer, sells footwear, headwear, sports apparel and accessories in more than 2,800 retail stores and leased departments throughout the U.S., Canada, the United Kingdom and the Republic of Ireland, principally under the names Journeys, Journeys Kidz, Shi by Journeys, Schuh, Schuh Kids, Lids, Locker Room by Lids, Lids Clubhouse, Johnston & Murphy, and on internet websites www.journeys.com, www.journeyskidz.com, www.shibyjourneys.com, www.schuh.co.uk, www.johnstonmurphy.com, www.lids.com, www.lids.ca, www.lidslockerroom.com, www.lidsteamsports.com, www.lidsclubhouse.com, www.trask.com, www.suregripfootwear.com  and www.dockersshoes.com.  The Company's Lids Sports Group division operates the Lids headwear stores, the Locker Room by Lids and other team sports fan shops and single team clubhouse stores, and the Lids Team Sports team dealer business.   In addition, Genesco sells wholesale footwear under its Johnston & Murphy brand, the Trask brand, the licensed Dockers brand, SureGrip, and other brands. For more information on Genesco and its operating divisions, please visit www.genesco.com.

GENESCO INC.










Consolidated Earnings Summary









 

Three Months Ended






May 2, 


May 3,



In Thousands



2015


2014



Net sales



$    660,597


$   628,825



Cost of sales



334,264


312,881



Selling and administrative expenses*

307,433


293,337



Asset impairments and other, net

2,646


(1,111)



Earnings from operations 


16,254


23,718



Interest expense, net


645


701



Earnings from continuing operations before income taxes

15,609


23,017



Income tax expense


5,664


8,919



Earnings from continuing operations

9,945


14,098



Provision for discontinued operations, net

(67)


(125)



Net Earnings



$         9,878


$      13,973










* Includes $0.9 million and $3.1 million, respectively, in deferred payments related to the Schuh acquisition for the first quarter ended May 2, 2015 and May 3, 2014.

















Earnings Per Share Information









 

Three Months Ended






May 2, 


May 3,



In Thousands (except per share amounts)

2015


2014











Average common shares - Basic EPS

23,550


23,369











Basic earnings per share:







    Before discontinued operations

$0.42


$0.60



    Net earnings



$0.42


$0.60











Average common and common







    equivalent shares - Diluted EPS

23,775


23,692











Diluted earnings per share:







    Before discontinued operations

$0.42


$0.60



    Net earnings



$0.42


$0.59


















 


GENESCO INC.










Consolidated Earnings Summary









 

Three Months Ended






May 2,


May 3,



In Thousands



2015


2014



Sales:








    Journeys Group


$    278,632


$   262,123



    Schuh Group



78,562


81,276



    Lids Sports Group


206,329


189,266



    Johnston & Murphy Group


66,362


63,397



    Licensed Brands


30,577


32,462



    Corporate and Other


135


301



    Net Sales



$    660,597


$   628,825



Operating Income (Loss):







    Journeys Group


$      24,422


$      19,677



    Schuh Group(1)


(2,661)


(5,141)



    Lids Sports Group


(3,397)


8,137



    Johnston & Murphy Group


3,977


4,496



    Licensed Brands


3,023


3,521



    Corporate and Other(2)


(9,110)


(6,972)



   Earnings from operations


16,254


23,718



   Interest, net



645


701











Earnings from continuing operations before income taxes

15,609


23,017



Income tax expense


5,664


8,919



Earnings from continuing operations

9,945


14,098



Provision for discontinued operations, net



(67)


(125)



Net Earnings



$         9,878


$      13,973


(1) Includes $0.9 million and $3.1 million, respectively, in deferred payments related to the Schuh acquisition for the 

first quarter ended May 2, 2015 and May 3, 2014.

(2) Includes a $2.6 million charge in the first quarter of Fiscal 2016 which includes $1.8 million for network intrusion 

expenses, $0.7 million in asset impairments and $0.1 million in other legal matters.  

Includes a $1.1 million gain in the first quarter of Fiscal 2015 which includes a $3.1 million gain for a lease 

termination, partially offset by $1.2 million for network intrusion expenses and $0.8 million in asset impairments.  

 

GENESCO INC.


















Consolidated Balance Sheet









May 2, 


May 3,



In Thousands



2015


2014



Assets








Cash and cash equivalents


$      89,886


$      71,882



Accounts receivable


60,498


53,746



Inventories



636,830


587,245



Other current assets


86,487


82,912



Total current assets


873,701


795,785



Property and equipment


310,642


280,972



Goodwill and other intangibles


392,521


377,163



Other non-current assets


39,204


28,987



Total Assets



$ 1,616,068


$1,482,907



Liabilities and Equity







Accounts payable


$    222,893


$   171,026



Current portion long-term debt


12,000


7,489



Other current liabilities


187,500


142,470



Total current liabilities


422,393


320,985



Long-term debt



15,750


25,600



Pension liability


21,910


8,994



Deferred rent and other long-term liabilities

139,357


185,831



Equity



1,016,658


941,497



Total Liabilities and Equity


$ 1,616,068


$1,482,907










 


GENESCO INC.

































Retail Units Operated - Three Months Ended May 2, 2015









Balance

Acquisi-




Balance





Balance




02/01/14

tions

Open

Close


01/31/15


Open

Close


05/02/15



Journeys Group

1,168

0

34

20


1,182


4

15


1,171



    Journeys

827

0

16

9


834


2

3


833



    Underground by Journeys

117

0

0

7


110


0

6


104



    Journeys Kidz

174

0

18

3


189


2

4


187



    Shi by Journeys

50

0

0

1


49


0

2


47



Schuh Group

99

0

13

4


108


3

0


111



     Schuh UK

90

0

12

4


98


2

0


100



     Schuh Germany

0

0

0

0


0


1

0


1



     Schuh ROI

9

0

1

0


10


0

0


10



Lids Sports Group

1,133

56

218

43


1,364


6

19


1,351



Johnston & Murphy Group

168

0

8

6


170


2

0


172



    Shops

106

0

3

4


105


0

0


105



    Factory Outlets

62

0

5

2


65


2

0


67



Total Retail Units

2,568

56

273

73


2,824


15

34


2,805
















 


Comparable Sales (including same store and comparable direct sales)







Three Months Ended







May 2,

May 3, 







2015

2014



Journeys Group




5%

1%



Schuh Group




4%

-1%



Lids Sports Group




3%

1%



Johnston & Murphy Group




3%

-1%



Total Comparable Sales




4%

1%










 

Schedule B




Genesco Inc.


Adjustments to Reported Earnings from Continuing Operations


Three Months Ended May 2, 2015 and May 3, 2014












 Impact on 


 Impact on 




 3 mos 

  Diluted 

 3 mos 

  Diluted 


In Thousands (except per share amounts)


 Apr 2015 

 EPS 

 Apr 2014 

 EPS 


Earnings from continuing operations, as reported


$      9,945

$        0.42

$      14,098

$   0.60









Adjustments:  (1)







Impairment charges


487

0.02

519

0.02


Deferred payment - Schuh acquisition


937

0.04

3,102

0.13


Gain on lease termination


-

-

(1,991)

(0.09)


Change in accounting for bonus awards


-

-

3,575

0.15


Other legal matters


65

-

13

-


Network intrusion expenses


1,130

0.05

761

0.03


Higher (lower) effective tax rate


(394)

(0.02)

(783)

(0.03)









Adjusted earnings from continuing operations (2)


$     12,170

$        0.51

$      19,294

$   0.81
















(1) All adjustments are net of tax where applicable.  The tax rate for the first quarter of Fiscal 2016 is 36.5% excluding a 

    FIN 48 discrete item of less than $0.1 million.  The tax rate for the first quarter of Fiscal 2015 is 37.0% excluding a 

    FIN 48 discrete item of less than $0.1 million.  














(2) EPS reflects 23.8 and 23.7 million share count for Fiscal 2016 and 2015, which includes common stock equivalents in

     both years.














The Company believes that disclosure of earnings and earnings per share from continuing operations adjusted


for the items not reflected in the previously announced expectations will be meaningful to investors, especially


in light of the impact of such items on the results.







 

Genesco Inc.

Adjustments to Reported Operating Income 

Three Months Ended May 2, 2015 and May 3, 2014








 Three Months Ended May 2, 2015 



 Operating 

 Bonus Adj 

Adj Operating

In Thousands 


 Income 

 and Other 

Income

Journeys Group


$     24,422

$           -

$      24,422

Schuh Group*


(2,661)

937

(1,724)

Lids Sports Group


(3,397)

-

(3,397)

Johnston & Murphy Group


3,977

-

3,977

Licensed Brands


3,023

-

3,023

Corporate and Other


(9,110)

2,646

(6,464)

Total Operating Income


$     16,254

$      3,583

$      19,837






*Schuh Group adjustments include $0.9 million in deferred purchase price payments.









 Three Months Ended May 3, 2014 



 Operating 

 Bonus Adj 

Adj Operating

In Thousands 


 Income 

 and Other 

Income

Journeys Group


$     19,677

$      4,919

$      24,596

Schuh Group*


(5,141)

3,102

(2,039)

Lids Sports Group


8,137

-

8,137

Johnston & Murphy Group


4,496

25

4,521

Licensed Brands


3,521

-

3,521

Corporate and Other


(6,972)

(376)

(7,348)

Total Operating Income


$     23,718

$      7,670

$      31,388






*Schuh Group adjustments include $3.1 million in deferred purchase price payments.


 

Schedule B


Genesco Inc.

Adjustments to Forecasted Earnings from Continuing Operations

Fiscal Year Ending January 31, 2016







In Thousands (except per share amounts)


High Guidance

Low Guidance



Fiscal 2016

Fiscal 2016

Forecasted earnings from continuing operations 


$    107,805

$       4.54

$ 105,343

$       4.42







Adjustments:  (1)






Asset impairment and other charges


4,863

0.20

5,179

0.22

Deferred payment - Schuh acquisition


1,508

0.06

1,508

0.06







Adjusted forecasted earnings from continuing operations (2)

$    114,176

$       4.80

$ 112,030

$       4.70







(1) All adjustments are net of tax where applicable.  The forecasted tax rate for Fiscal 2016 is approximately 36.8% 

    excluding a FIN 48 discrete item of $0.1 million.












(2) EPS reflects 23.8 million share count for Fiscal 2016 which includes common stock equivalents.








This reconciliation reflects estimates and current expectations of future results. Actual results may vary 


materially from these expectations and estimates, for reasons including those included in the discussion 


of forward-looking statements elsewhere in this release. The Company disclaims any obligation to update 


such expectations and estimates.  






 

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SOURCE Genesco Inc.

Financial Contact: Mimi Vaughn (615) 367-7386; Media Contact: Claire S. McCall (615) 367-8283