Genesco Reports First Quarter Fiscal 2017 Results

05/26/16

NASHVILLE, Tenn., May 26, 2016 /PRNewswire/ -- Genesco Inc. (NYSE: GCO) today reported earnings from continuing operations for the first quarter ended April 30, 2016, of $10.6 million, or $0.50 per diluted share, compared to earnings from continuing operations of $9.9 million, or $0.42 per diluted share, for the first quarter ended May 2, 2015.  Fiscal 2017 first quarter results reflect a pretax charge of $3.6 million, or $0.12 per diluted share after tax, including $3.4 million of asset impairment charges and $0.2 million in other legal matters.  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 were required to be expensed as compensation because the payment was contingent upon the payees' continued employment; and $2.6 million for network intrusion expenses, asset impairment charges and other legal matters. 

Adjusted for the items described above in both periods, earnings from continuing operations were $13.0 million, or $0.62 per diluted share, for the first quarter of Fiscal 2017, compared to earnings from continuing operations of $12.2 million, or $0.51 per diluted share, for the first quarter of Fiscal 2016.  For consistency with Fiscal 2017'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 2017 decreased 2% to $649 million from $661 million in the first quarter of Fiscal 2016, primarily reflecting the divestiture of the Lids Team Sports business in January 2016.  Consolidated first quarter 2017 comparable sales, including same store sales and comparable e-commerce and catalog sales, increased 1%, with a 1% increase in the Journeys Group, a 2% increase in the Lids Sports Group, a 5% decrease in the Schuh Group, and a 6% increase in the Johnston & Murphy Group. Comparable sales for the Company reflected a 1% increase in same store sales and e-commerce sales were flat.

"We are pleased with the increase in first quarter profitability, which exceeded our expectations, driven by a significantly better performance from the Lids Sports Group," said Robert J. Dennis, chairman, president and chief executive officer of Genesco. "While overall comparable sales were at the lower end of our projected range, this was more than offset by a meaningful improvement in gross margin.

"Early second quarter comparable sales accelerated versus the first quarter, prior to the offset last week for Memorial Day, which was a week earlier last year. Comparable sales for the three weeks through Saturday, May 21, 2016, were up 1% from the same period last year.  We do not consider the period to be indicative of top line performance for the full quarter because of this Memorial Day offset.

"Based on our first quarter performance, we are reiterating our full year outlook taking into account some external headwinds pressuring sales and expenses. We still expect adjusted diluted earnings per share for the fiscal year ending January 28, 2017, in the range of $4.80 to $4.90, which represents a 12% to 14% increase over Fiscal 2016's adjusted earnings per share of $4.29." These expectations do not include expected non-cash asset impairments and other charges, estimated in the range of $9.8 million to $10.3 million pretax, or $0.30 to $0.31 per share after tax, for the full fiscal year.  This guidance assumes comparable sales increases in the 1% to 2% range for the full 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.

The Company also announced that its board of directors has replaced the remaining $11 million balance of a previous $100 million repurchase program authorized in January 2016 with a new authorization to repurchase up to $100 million of common stock.  The program is intended to be implemented through purchases made from time to time using a variety of methods, which may include open market purchases, private transactions, block trades, or otherwise, or by any combination of such methods, in accordance with SEC and other applicable legal requirements.  The program does not obligate the Company to acquire any particular amount of common stock and it may be suspended or discontinued at any time in the Company's discretion.  The Company repurchased a total of 1.1 million shares of common stock in the first quarter of Fiscal 2017 at a total cost of approximately $73 million and an average price of $66.75 per share.   

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 26, 2016 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 level and timing of promotional activity necessary to maintain inventories at appropriate levels;  the timing and amount of non-cash asset impairments related to retail store fixed assets and intangible assets of acquired businesses; the effectiveness of the Company's omnichannel initiatives; the level of chargebacks from credit card issuers for fraudulent purchases or other reasons; weakness in the consumer economy and retail industry; competition in the Company's markets; 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 or the inability of wholesale customers or consumers to obtain credit; 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 2,830 retail stores and leased departments throughout the U.S., Canada, the United Kingdom, the Republic of Ireland and Germany, principally under the names Journeys, Journeys Kidz, Shi by Journeys, Schuh, Schuh Kids, Little Burgundy, 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.littleburgundyshoes.com, www.johnstonmurphy.com, www.lids.com, www.lids.ca, www.lidslockerroom.com, www.lidsclubhouse.com, http://shop.neweracap.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.   In addition, Genesco sells wholesale footwear under its Johnston & Murphy brand, the Trask brand, the licensed Dockers brand, G.H. Bass & Co., 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






Apr. 30,


May 2,



In Thousands



2016


2015



Net sales



$    648,793


$   660,597



Cost of sales



319,096


334,264



Selling and administrative expenses*

308,243


307,433



Asset impairments and other, net

3,557


2,646



Earnings from operations 


17,897


16,254



Interest expense, net


1,137


645



Earnings from continuing operations before income taxes

16,760


15,609



Income tax expense


6,196


5,664



Earnings from continuing operations

10,564


9,945



Provision for discontinued operations, net

(154)


(67)



Net Earnings



$      10,410


$        9,878










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










Earnings Per Share Information









 

Three Months Ended






Apr. 30, 


May 2,



In Thousands (except per share amounts)

2015


2015











Average common shares - Basic EPS

20,815


23,550











Basic earnings per share:







    Before discontinued operations

$0.51


$0.42



    Net earnings



$0.50


$0.42











Average common and common







    equivalent shares - Diluted EPS

20,990


23,775











Diluted earnings per share:







    Before discontinued operations

$0.50


$0.42



    Net earnings



$0.50


$0.42


















 

 

GENESCO INC.










Consolidated Earnings Summary









 

Three Months Ended






Apr. 30,


May 2,



In Thousands



2016


2015



Sales:








    Journeys Group


$    294,221


$   278,632



    Schuh Group



75,670


78,562



    Lids Sports Group


179,376


206,329



    Johnston & Murphy Group


69,975


66,362



    Licensed Brands


29,466


30,577



    Corporate and Other


85


135



    Net Sales



$    648,793


$   660,597



Operating Income (Loss):







    Journeys Group


$      19,620


$      24,422



    Schuh Group(1)


(2,661)


(2,661)



    Lids Sports Group


6,037


(3,397)



    Johnston & Murphy Group


4,842


3,977



    Licensed Brands


1,853


3,023



    Corporate and Other(2)


(11,794)


(9,110)



   Earnings from operations


17,897


16,254



   Interest, net



1,137


645











Earnings from continuing operations before income taxes

16,760


15,609



Income tax expense


6,196


5,664



Earnings from continuing operations

10,564


9,945



Provision for discontinued operations, net



(154)


(67)



Net Earnings



$      10,410


$        9,878










(1)

Includes $0.9 million in deferred payments related to the Schuh acquisition for the first quarter ended May 2, 2015.

(2)

Includes a $3.6 million charge in the first quarter of Fiscal 2017 which includes $3.4 million for asset impairments and $0.2 million in other legal matters.  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.




 

 

GENESCO INC.


















Consolidated Balance Sheet









Apr. 30,


May 2,



In Thousands



2016


2015



Assets








Cash and cash equivalents


$      42,750


$      89,886



Accounts receivable


52,813


60,498



Inventories



551,282


636,830



Other current assets


88,545


86,487



Total current assets


735,390


873,701



Property and Equipment


321,068


310,642



Goodwill and other intangibles


379,172


392,520



Other non-current assets


46,646


39,025



Total Assets



$ 1,482,276


$1,615,888



Liabilities and Equity







Accounts payable


$    166,954


$   222,893



Current portion long-term debt


14,631


12,000



Other current liabilities


129,428


187,500



Total current liabilities


311,013


422,393



Long-term debt



101,273


15,570



Pension liability


9,660


21,910



Deferred rent and other long-term liabilities

154,644


139,357



Equity



905,686


1,016,658



Total Liabilities and Equity


$ 1,482,276


$1,615,888


 

 


GENESCO INC.

































Retail Units Operated - Three Months Ended April 30, 2016








Balance

Acquisi-




Balance





Balance




01/31/15

tions

Open

Close


01/30/16


Open

Close


04/30/16


Journeys Group

1,182

37

29

26


1,222


5

7


1,220


    Journeys

834

0

13

5


842


4

5


841


    Underground by Journeys

110

0

0

12


98


0

1


97


    Journeys Kidz

189

0

16

5


200


1

0


201


    Shi by Journeys

49

0

0

3


46


0

1


45


    Little Burgundy

0

37

0

1


36


0

0


36


Schuh Group

108

0

17

0


125


1

2


124


     Schuh UK

98

0

15

0


113


1

2


112


     Schuh Germany

0

0

2

0


2


0

0


2


     Schuh ROI

10

0

0

0


10


0

0


10


Lids Sports Group

1,364

0

27

59


1,332


3

18


1,317


Johnston & Murphy Group

170

0

8

5


173


1

2


172


    Shops

105

0

3

5


103


1

2


102


    Factory Outlets

65

0

5

0


70


0

0


70


Total Retail Units

2,824

37

81

90


2,852


10

29


2,833






























Comparable Sales (including same store and comparable direct sales)











Three Months Ended












Apr. 30,


May 2, 












2016


2015








Journeys Group




1%


5%








Schuh Group




-5%


4%








Lids Sports Group




2%


3%








Johnston & Murphy Group




6%


3%








Total Comparable Sales




1%


4%







 

 






Schedule B







Genesco Inc.

Adjustments to Reported Earnings from Continuing Operations

Three Months Ended April 30, 2016 and May 2, 2015 










 Impact on 


 Impact on 



 3 mos 

  Diluted 

 3 mos 

  Diluted 

In Thousands (except per share amounts)


Apr 2016 

 EPS 

Apr 2015 

EPS 

Earnings from continuing operations, as reported


$     10,564

$        0.50

$       9,945

$   0.42







Adjustments:  (1)






Impairment charges


2,205

0.11

487

0.02

Deferred payment - Schuh acquisition


-

-

937

0.04

Other legal matters


57

-

65

-

Network intrusion expenses


21

-

1,130

0.05

Higher (lower) effective tax rate


106

0.01

(394)

(0.02)







Adjusted earnings from continuing operations (2)


$     12,953

$        0.62

$      12,170

$   0.51













(1) All adjustments are net of tax where applicable.  The tax rate for the first quarter of Fiscal 2017 is 35.8% excluding a FIN 48 discrete item of less than $0.1 million.  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.  







(2) EPS reflects 21.0 and 23.8 million share count for Fiscal 2017 and 2016, 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 April 30, 2016 and May 2, 2015 










 Three Months Ended April 30, 2016 




 Operating 


Adj Operating


In Thousands 


 Income 

 Other Adj 

Income


Journeys Group


$     19,620

$           -

$      19,620


Schuh Group


(2,661)

-

(2,661)


Lids Sports Group


6,037

-

6,037


Johnston & Murphy Group


4,842

-

4,842


Licensed Brands


1,853

-

1,853


Corporate and Other


(11,794)

3,557

(8,237)


Total Operating Income


$     17,897

$      3,557

$      21,454
















 Three Months Ended May 2, 2015 




 Operating 


Adj Operating


In Thousands 


 Income 

 Other Adj 

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.








 

 






Schedule B


Genesco Inc.


Adjustments to Forecasted Earnings from Continuing Operations


Fiscal Year Ending January 28, 2017









In Thousands (except per share amounts)


High Guidance

Low Guidance




Fiscal 2017

Fiscal 2017


Forecasted earnings from continuing operations 


$     94,665

$       4.60

$   92,183

$       4.49









Adjustments:  (1)







Asset impairment and other charges


6,153

0.30

6,468

0.31









Adjusted forecasted earnings from continuing operations (2)

$    100,818

$       4.90

$   98,651

$       4.80









(1) All adjustments are net of tax where applicable.  The forecasted tax rate for Fiscal 2017 is approximately 36.9%.









(2) EPS reflects 20.6 million share count for Fiscal 2017 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.  















 

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/genesco-reports-first-quarter-fiscal-2017-results-300275464.html

SOURCE Genesco Inc.

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