Genesco Reports Second Quarter Fiscal 2017 Results

09/01/16

NASHVILLE, Tenn., Sept. 1, 2016 /PRNewswire/ -- Genesco Inc. (NYSE: GCO) today reported earnings from continuing operations for the second quarter ended July 30, 2016, of $14.5 million, or $0.72 per diluted share, compared to earnings from continuing operations of $7.6 million, or $0.32 per diluted share, for the second quarter ended August 1, 2015.  Fiscal 2017 second quarter results reflect a pretax gain of $10.4 million, or $0.38 per diluted share after tax, including an $8.9 million gain on network intrusion expenses as a result of a litigation settlement and a $2.5 million gain on the sale of Lids Team Sports, partially offset by $1.0 million for asset impairment charges. Fiscal 2016 second quarter results reflect pretax items of $1.8 million, or $0.04 per share after tax, including $0.6 million of expenses related to deferred purchase price payments in connection with the acquisition of Schuh Group Limited, which was required to be expensed as compensation because the payment was contingent upon the payees' continued employment; and $1.2 million for asset impairment charges and network intrusion expenses.

Adjusted for the items described above in both periods, earnings from continuing operations were $6.9 million, or $0.34 per diluted share, for the second quarter of Fiscal 2017, compared to earnings from continuing operations of $8.5 million, or $0.36 per diluted share, for the second 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 second quarter of Fiscal 2017 decreased 4.6% to $626 million from $656 million in the second quarter of Fiscal 2016, reflecting the divestiture of the Lids Team Sports business in the fourth quarter of Fiscal 2016.  Consolidated second quarter Fiscal 2017 comparable sales, including same store sales and comparable e-commerce and catalog sales, decreased 1%, with a 4% decrease in the Journeys Group, flat comps at Lids Sports Group, a 1% decrease in the Schuh Group, and a 3% increase in the Johnston & Murphy Group. Comparable sales for the Company reflected a 2% decrease in same store sales and a 1% decrease in e-commerce sales.

Robert J. Dennis, Genesco Chariman, President and Chief Executive Officer, said, "Our comparable sales were challenged during the second quarter particularly in July with the emergence of a fashion rotation at Journeys. We experienced a sudden shift away from many of the core styles that have fueled Journeys' strong performances in recent years. We were able to offset the effect this headwind had on our bottom line through a meaningful improvement in Lids Sports Group and continued strength at Johnston & Murphy combined with share repurchases over the past year."

"The third quarter is off to a difficult start driven largely by the impact of the fashion shift at Journeys during the height of the back to school season and challenges at Schuh.  Comparable sales for the third quarter through Saturday, August 27, 2016, are down (5%) from the same period last year.

"Based on our comparable sales trend and expectations for sustained challenges due to the fashion rotation at Journeys and conditions at Schuh, we are lowering our full year outlook. We now expect adjusted diluted earnings per share for the fiscal year ending January 28, 2017, in the range of $3.80 to $4.00, compared to our previously issued guidance range of $4.80 to $4.90."  These expectations do not include expected non-cash asset impairments and other charges including the gain on a litigation settlement and gain on the sale of Lids Team Sports in the second quarter this year, estimated in the range of a $1.2 million pretax gain to a $3.0 million pretax charge, or $(0.04) to $0.09 per share after tax, for the full fiscal year. This guidance assumes a comparable sales decrease in the low single digit 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.

Dennis concluded, "While we are disappointed with our reduced outlook, we are confident that the Journeys' team will be able to leverage their experience and strong vendor relationships to ensure Journeys emerges from this current cycle with leading, trend right merchandise assortments."

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 September 1, 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; costs associated with changes in minimum wage and overtime requirements; the level of chargebacks from credit card users 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; weakness in shopping mall traffic and challenges to the viability of malls where the Company operates stores, related to planned closings of department stores or other factors; 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 effects of the British decision to exit the European Union, including potential effects on consumer demand, currency exchange rates, and the supply chain; 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 businesses. 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; disruptions in the Company's information technology systems either by security breaches and incidents or by potential problems associated with the implementation of new or upgraded systems;  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, 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


Six Months Ended


Jul. 30,


Aug. 1,


Jul. 30,


Aug. 1,

In Thousands

2016


2015


2016


2015

Net sales

$

625,557


$

655,525


$

1,274,350


$

1,316,122

Cost of sales

310,820


335,434


629,916


669,698

Selling and administrative expenses*

302,662


306,422


610,905


613,855

Asset impairments and other, net

(7,945)


1,173


(4,388)


3,819

Earnings from operations

20,020


12,496


37,917


28,750

Gain on sale of Lids Team Sports

(2,485)


-


(2,485)


-

Interest expense, net

1,306


928


2,443


1,573

Earnings from continuing operations








    before income taxes

21,199


11,568


37,959


27,177


Income tax expense

6,695


3,975


12,891


9,639

Earnings from continuing operations

14,504


7,593


25,068


17,538


Provision for discontinued operations

74


(73)


(80)


(140)

Net Earnings

$

14,578


$

7,520


$

24,988


$

17,398


*Includes $0.6 million and $1.5 million in deferred payments related to the Schuh acquisition in the second quarter and first

six months ended August 1, 2015, respectively.


Earnings Per Share Information


Three Months Ended


Six Months Ended


Jul. 30,


Aug. 1,


Jul. 30,


Aug. 1,

In Thousands (except per share amounts)

2016


2015


2016


2015









Average common shares - Basic EPS

20,195


23,538


20,505


23,544


Basic earnings per share:








     Before discontinued operations

$0.72


$0.32


$1.22


$0.74

     Net earnings

$0.72


$0.32


$1.22


$0.74


Average common and common








    equivalent shares - Diluted EPS

20,244


23,616


20,617


23,695


Diluted earnings per share:








     Before discontinued operations

$0.72


$0.32


$1.22


$0.74

     Net earnings

$0.72


$0.32


$1.21


$0.73






Consolidated Earnings Summary


Three Months Ended


Six Months Ended


Jul. 30,


Aug. 1,


Jul. 30,


Aug. 1,

In Thousands

2016


2015


2016


2015

Sales:









    Journeys Group

$

252,134


$

247,177


$

546,355


$

525,809

    Schuh Group

96,960


103,204


172,630


181,766

    Lids Sports Group

188,912


222,218


368,288


428,547

    Johnston & Murphy Group

65,151


60,822


135,126


127,184

    Licensed Brands

22,100


21,942


51,566


52,519

    Corporate and Other

300


162


385


297

    Net Sales

$

625,557


$

655,525


$

1,274,350


$

1,316,122

Operating Income (Loss):








    Journeys Group

$

4,481


$

9,228


$

24,101


$

33,650

    Schuh Group (1)

5,693


4,892


3,032


2,231

    Lids Sports Group

7,132


5,593


13,169


2,196

    Johnston & Murphy Group

2,255


846


7,097


4,823

    Licensed Brands

234


1,158


2,087


4,181

    Corporate and Other (2)

225


(9,221)


(11,569)


(18,331)

   Earnings from operations

20,020


12,496


37,917


28,750

  Gain on sale of Lids Team Sports

(2,485)


-


(2,485)


-

   Interest, net

1,306


928


2,443


1,573

Earnings from continuing operations








    before income taxes

21,199


11,568


37,959


27,177

Income tax expense

6,695


3,975


12,891


9,639

Earnings from continuing operations

14,504


7,593


25,068


17,538









Provision for discontinued operations

74


(73)


(80)


(140)

Net Earnings

$

14,578


$

7,520


$

24,988


$

17,398









(1) Includes $0.6 million and $1.5 million in deferred payments related to the Schuh acquisition in the second quarter and

first six months ended August 1, 2015, respectively.


(2) Includes a $7.9 million gain in the second quarter of Fiscal 2017 which includes an $8.9 million gain for network

intrusion expenses as a result of a litigation settlement, partially offset by $1.0 million for asset impairments. Includes a

$4.4 million gain for the first six months of Fiscal 2017 which includes an $8.9 million gain for network intrusion expenses

as a result of a litigation settlement, partially offset by $4.4 million for asset impairments and $0.1 million for other legal matters.


Includes a $1.2 million charge in the second quarter of Fiscal 2016 which includes $1.0 million for asset impairments

and $0.2 million for network intrusion expenses.  Includes a $3.8 million charge for the first six months of Fiscal 2016

which includes $2.0 million for network intrusion expenses, $1.7 million for asset impairments and $0.1 million for other

legal matters. 






Consolidated Balance Sheet



Jul. 30,


Aug. 1,

In Thousands

2016


2015

Assets




Cash and cash equivalents

$

41,466


$

48,997

Accounts receivable

46,469


58,385

Inventories

663,708


734,803

Other current assets

97,527


99,836

Total current assets

849,170


942,021

Property and equipment

321,231


310,415

Goodwill and other intangibles

366,186


393,155

Other non-current assets

44,726


38,297

Total Assets

$

1,581,313


$

1,683,888

Liabilities and  Equity




Accounts payable

$

269,371


$

271,021

Current portion long-term debt

10,620


18,764

Other current liabilities

127,714


135,986

Total current liabilities

407,705


425,771

Long-term debt

124,981


94,281

Pension liability

9,487


21,686

Deferred rent and other long-term liabilities

152,221


146,135

Equity

886,919


996,015

Total Liabilities and Equity

$

1,581,313


$

1,683,888

 

 



GENESCO INC.

















































Retail Units Operated - Six Months Ended July 30, 2016

















Balance


Acquisi-






Balance






Balance







01/31/15


tions


Open


Close


01/30/16


Open


Close


07/30/16





Journeys Group


1,182


37


29


26


1,222


17


9


1,230





    Journeys


834


0


13


5


842


9


5


846





    Underground by Journeys


110


0


0


12


98


0


2


96





    Journeys Kidz


189


0


16


5


200


8


0


208





    Shi by Journeys


49


0


0


3


46


0


2


44





    Little Burgundy


0


37


0


1


36


0


0


36





Schuh Group


108


0


17


0


125


4


3


126





Lids Sports Group*


1,364


0


27


59


1,332


7


64


1,275





Johnston & Murphy Group


170


0


8


5


173


4


3


174





    Shops


105


0


3


5


103


3


2


104





    Factory Outlets


65


0


5


0


70


1


1


70





Total Retail Units


2,824


37


81


90


2,852


32


79


2,805















































Retail Units Operated - Three Months Ended July 30, 2016

















Balance


Acquisi-






Balance













04/30/16


tions


Open


Close


07/30/16











Journeys Group


1,220


0


12


2


1,230











    Journeys


841


0


5


0


846











    Underground by Journeys


97


0


0


1


96











    Journeys Kidz


201


0


7


0


208











    Shi by Journeys


45


0


0


1


44











    Little Burgundy


36


0


0


0


36











Schuh Group


124


0


3


1


126











Lids Sports Group*


1,317


0


4


46


1,275











Johnston & Murphy Group


172


0


3


1


174











    Shops


102


0


2


0


104











    Factory Outlets


70


0


1


1


70











Total Retail Units


2,833


0


22


50


2,805
































* Includes 150 Locker Room by Lids in Macy's stores as of July 30, 2016.




































Comparable Sales (including same store and comparable direct sales)















Three Months Ended


Six Months Ended















Jul. 30,


Aug. 1,


Jul. 30,


Aug. 1,















2016


2015


2016


2015













Journeys Group


-4%


4%


-1%


5%













Schuh Group


-1%


8%


-3%


6%













Lids Sports Group


0%


8%


1%


6%













Johnston & Murphy Group


3%


10%


4%


6%













Total Comparable Sales


-1%


7%


0%


6%











 

 

Schedule B


Genesco Inc.

Adjustments to Reported Earnings from Continuing Operations

Three Months Ended July 30, 2016 and August 1, 2015




 Three Months Ended 


 July 30, 2016 


 August 1, 2015 



 Net of 

 Per Share 



 Net of 

 Per Share 

In Thousands (except per share amounts)

 Pretax 

 Tax 

 Amounts 


 Pretax 

 Tax 

 Amounts 

Earnings from continuing operations, as reported


$

14,504

$

0.72



$

7,593

$

0.32









Pretax adjustments:








Impairment charges

$

1,018

665

0.03


$

931

594

0.03

Deferred payment - Schuh acquisition

-

-

-


553

553

0.02

Sale of Lids Team Sports

(2,485)

(1,602)

(0.08)


-

-

-

Other legal matters

-

-

-


16

10

-

Network intrusion expenses

(8,963)

(5,777)

(0.29)


226

147

0.01

Total adjustments

$

(10,430)

(6,714)

(0.34)


$

1,726

1,304

0.06









Resolution of income tax matters


(872)

(0.04)



(417)

(0.02)

Adjusted earnings from continuing operations (1) and (2)


$

6,918

$

0.34



$

8,480

$

0.36



(1) The adjusted tax rate for the second quarter of Fiscal 2017 is 35.0% excluding a FIN 48 discrete item of $0.1 million.  The adjusted tax rate for

      the second quarter of Fiscal 2016 is 36.0% excluding a FIN 48 discrete item of less than $0.1 million.


(2)  EPS reflects 20.2 and 23.6 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 July 30, 2016 and August 1, 2015




 Three Months Ended July 30, 2016 



 Operating 


Adj Operating


In Thousands 

 Income 

 Other Adj 

Income


Journeys Group

$

4,481

$

-

$

4,481


Schuh Group

5,693

-

5,693


Lids Sports Group

7,132

-

7,132


Johnston & Murphy Group

2,255

-

2,255


Licensed Brands

234

-

234


Corporate and Other

225

(7,945)

(7,720)


Total Operating Income

$

20,020

$

(7,945)

$

12,075













 Three Months Ended August 1, 2015 



 Operating 


Adj Operating


In Thousands 

 Income 

 Other Adj 

Income


Journeys Group

$

9,228

$

-

$

9,228


Schuh Group*

4,892

553

5,445


Lids Sports Group

5,593

-

5,593


Johnston & Murphy Group

846

-

846


Licensed Brands

1,158

-

1,158


Corporate and Other

(9,221)

1,173

(8,048)


Total Operating Income

$

12,496

$

1,726

$

14,222



*Schuh Group adjustments include $0.6 million in deferred purchase price payments.

 

 

Schedule B


Genesco Inc.

Adjustments to Reported Earnings from Continuing Operations

Six Months Ended July 30, 2016 and August 1, 2015




 Six Months Ended 


 July 30, 2016 


 August 1, 2015 



 Net of 

 Per Share 



 Net of 

 Per Share 

In Thousands (except per share amounts)

 Pretax 

 Tax 

 Amounts 


 Pretax 

 Tax 

 Amounts 

Earnings from continuing operations, as reported


$

25,068

$

1.22



$

17,538

$

0.74


Pretax adjustments:








Impairment charges

$

4,453

2,870

0.14


$

1,697

1,081

0.05

Deferred payment - Schuh acquisition

-

-

-


1,490

1,490

0.06

Sale of Lids Team Sports

(2,485)

(1,602)

(0.08)


-

-

-

Other legal matters

90

57

-


118

75

-

Network intrusion expenses

(8,931)

(5,756)

(0.28)


2,004

1,277

0.05

Total adjustments

$

(6,873)

(4,431)

(0.22)


$

5,309

3,923

0.16


Resolution of income tax matters


(766)

(0.04)



(812)

(0.03)

Adjusted earnings from continuing operations (1) and (2)


$

19,871

$

0.96



$

20,649

$

0.87



(1) The adjusted tax rate for the first six months of Fiscal 2017 is 35.6% excluding a FIN 48 discrete item of $0.2 million.  The adjusted tax

      rate for the first six months of Fiscal 2016 is 36.3% excluding a FIN 48 discrete item of less than $0.1 million.


(2)  EPS reflects 20.6 and 23.7 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 


Six Months Ended July 30, 2016 and August 1, 2015




 Six Months Ended July 30, 2016 



 Operating 


Adj Operating


In Thousands 

 Income 

 Other Adj 

Income


Journeys Group

$

24,101

$

-

$

24,101


Schuh Group

3,032

-

3,032


Lids Sports Group

13,169

-

13,169


Johnston & Murphy Group

7,097

-

7,097


Licensed Brands

2,087

-

2,087


Corporate and Other

(11,569)

(4,388)

(15,957)


Total Operating Income

$

37,917

$

(4,388)

$

33,529





 Six Months Ended August 1, 2015 



 Operating 


Adj Operating


In Thousands 

 Income 

 Other Adj 

Income


Journeys Group

$

33,650

$

-

$

33,650


Schuh Group*

2,231

1,490

3,721


Lids Sports Group

2,196

-

2,196


Johnston & Murphy Group

4,823

-

4,823


Licensed Brands

4,181

-

4,181


Corporate and Other

(18,331)

3,819

(14,512)


Total Operating Income

$

28,750

$

5,309

$

34,059



*Schuh Group adjustments include $1.5 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 

$

82,259

$

4.04

$

75,686

$

3.71






Adjustments:  (1)





Gain on sale of Lids Team Sports

(1,580)

(0.08)

(1,580)

(0.08)

Pension settlement

636

0.03

2,544

0.12

Asset impairment and other charges*

211

0.01

927

0.05











Adjusted forecasted earnings from continuing operations (2)

$

81,526

$

4.00

$

77,577

$

3.80


*Includes $8.9 million gain for network intrusion expenses related to a litigation settlement in the second quarter this year.


(1) All adjustments are net of tax where applicable.  The forecasted tax rate for Fiscal 2017 is approximately 36.4%.


(2) EPS reflects 20.4 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-second-quarter-fiscal-2017-results-300321383.html

SOURCE Genesco Inc.

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