Genesco Reports Third Quarter Fiscal 2016 Results

12/04/15

NASHVILLE, Tenn., Dec. 4, 2015 /PRNewswire/ -- Genesco Inc. (NYSE: GCO) today reported earnings from continuing operations for the third quarter ended October 31, 2015, of $32.9 million, or $1.43 per diluted share, compared to earnings from continuing operations of $28.8 million, or $1.21 per diluted share, for the third quarter ended November 1, 2014.  Fiscal 2016 third quarter results reflect pretax items of $0.2 million, or $0.00 per diluted share after tax, for network intrusion expenses and asset impairment charges, offset by $0.7 million, or $0.03 per diluted share, from a lower than normal tax rate due to the release of valuation allowances. Fiscal 2015 third quarter results reflect pretax items of $2.0 million, or $0.07 per diluted share after tax, including $1.0 million related to deferred purchase price payments in connection with the acquisition of Schuh Group Limited and $1.0 million in network intrusion expenses and asset impairment charges. They also reflect the favorable resolution of formerly uncertain tax positions taken by Schuh at the time of the acquisition, resulting in the write-off of an indemnification asset of $7.1 million and the reversal of a corresponding FIN 48 provision, with essentially no net after-tax effect on earnings for the third quarter last year.

Adjusted for the items described above in both periods, earnings from continuing operations were $32.2 million, or $1.40 per diluted share, for the third quarter of Fiscal 2016, compared to earnings from continuing operations of $30.3 million, or $1.28 per diluted share, for the third 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 third quarter of Fiscal 2016 increased 7% to $774 million from $723 million in the third quarter of Fiscal 2015.  Consolidated third quarter 2016 comparable sales, including same store sales and comparable e-commerce and catalog sales, increased 7%, with a 6% increase in the Journeys Group, a 12% increase in the Lids Sports Group, a 2% increase in the Schuh Group, and a 5% increase in the Johnston & Murphy Group. Comparable sales for the Company reflected a 6% increase in same store sales and a 25% increase in e-commerce sales.

Robert J. Dennis, chairman, president and chief executive officer of Genesco, said, "We are very pleased with the comparable sales increase we delivered in the third quarter. Our results were driven by strong full price selling combined with higher promotional activity in line with our strategy to right size the Lids Sports Group's inventory levels. The pressure on gross margins from our clearance actions offset some of the earnings upside from our solid top-line performance.

"The fourth quarter started off slowly but accelerated over the Black Friday weekend. Fourth quarter consolidated comparable sales are up 6% through December 1, 2015.

"Recent comparable sales trends have been volatile and we expect that the retail market will remain promotional through the balance of the Holiday season.  Given these factors in combination with the incremental promotional activity we now plan at Lids Sports Group through the fourth quarter to conclude its inventory reduction initiative and to position it for the freshest possible start to the next fiscal year, we are revising our full year outlook. We now expect adjusted diluted earnings per share to be in the range of $4.50 to $4.60, compared to our previously issued guidance of $4.70 to $4.80. Consistent with previous guidance, these expectations do not include expected non-cash asset impairments and other charges, estimated in the range of $6.1 million to $6.6 million pretax, or $0.17 to $0.18 per share after tax, for the full fiscal year.  These expectations also do not reflect expenses related to Schuh deferred purchase price payments as described above, which are $1.5 million, or $0.06 per diluted share, for the full year.  This guidance now assumes comparable sales increases in the 5% to 6% 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 believe that the steps we are taking now will allow the Company to realize greater earnings power next year and beyond."

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 December 4, 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 our ability to right size inventory levels 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 the Company's omnichannel initiatives; weakness in the consumer economy and retail industry; 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, the Republic of Ireland and Germany, 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 


 

Nine Months Ended 





Oct. 31,


Nov. 1,


Oct. 31,


Nov. 1,



In Thousands


2015


2014


2015


2014



Net sales


$  773,898


$  722,915


$ 2,090,020


$  1,967,214



Cost of sales


400,012


364,426


1,069,710


991,036



Selling and administrative expenses*

321,685


310,893


935,540


894,469



Asset impairments and other, net

151


1,036


3,970


1,347



Earnings from operations

52,050


46,560


80,800


80,362



Indemnification asset write-off

-


7,050


-


7,050



Interest expense, net

1,330


891


2,903


2,374



Earnings from continuing operations










    before income taxes

50,720


38,619


77,897


70,938














Income tax expense

17,865


9,869


27,504


23,322



Earnings from continuing operations

32,855


28,750


50,393


47,616














Provision for discontinued operations

(348)


(88)


(488)


(287)



Net Earnings 


$    32,507


$    28,662


$       49,905


$        47,329













*

Includes $0.0 million and $1.5 million in deferred payments related to the Schuh acquisition in the third quarter and first


nine months ended October 31, 2015, respectively, and $1.0 million and $6.3 million for the third quarter and first nine 


months ended November 1, 2014, respectively.































Earnings Per Share Information












 

Three Months Ended 


 

Nine Months Ended 





Oct. 31,


Nov. 1,


Oct. 31,


Nov. 1,



In Thousands (except per share amounts)

2015


2014


2015


2014














Average common shares - Basic EPS

22,834


23,602


23,308


23,489














Basic earnings per share:










     Before discontinued operations

$1.44


$1.22


$2.16


$2.03



     Net earnings 

$1.42


$1.21


$2.14


$2.01














Average common and common










    equivalent shares - Diluted EPS

22,917


23,760


23,436


23,691














Diluted earnings per share:










     Before discontinued operations

$1.43


$1.21


$2.15


$2.01



     Net earnings 

$1.42


$1.21


$2.13


$2.00



































        

GENESCO INC.













Consolidated Earnings Summary











 

Three Months Ended 


 

Nine Months Ended 





Oct. 31,


Nov. 1,


Oct. 31,


Nov. 1,



In Thousands


2015


2014


2015


2014



Sales:











    Journeys Group

$  321,996


$  303,781


$    847,805


$      802,742



    Schuh Group


101,644


101,959


283,410


283,005



    Lids Sports Group

246,967


220,038


675,514


608,621



    Johnston & Murphy Group

70,416


65,965


197,600


184,357



    Licensed Brands

32,599


30,981


85,118


87,735



    Corporate and Other

276


191


573


754



    Net Sales


$  773,898


$  722,915


$ 2,090,020


$  1,967,214



Operating Income (Loss):










    Journeys Group

$    38,944


$    35,047


$       72,594


$        61,544



    Schuh Group (1)

8,649


3,949


10,880


(1,389)



    Lids Sports Group

4,704


8,606


6,900


25,217



    Johnston & Murphy Group

4,637


4,505


9,460


8,577



    Licensed Brands

3,345


3,082


7,526


8,476



    Corporate and Other (2)

(8,229)


(8,629)


(26,560)


(22,063)



   Earnings from operations

52,050


46,560


80,800


80,362



   Indemnification asset write-off

-


7,050


-


7,050



   Interest, net


1,330


891


2,903


2,374



Earnings from continuing operations










    before income taxes

50,720


38,619


77,897


70,938



Income tax expense

17,865


9,869


27,504


23,322



Earnings from continuing operations

32,855


28,750


50,393


47,616














Provision for discontinued operations

(348)


(88)


(488)


(287)



Net Earnings 


$    32,507


$    28,662


$       49,905


$        47,329














(1) Includes $0.0 million and $1.5 million in deferred payments related to the Schuh acquisition in the third quarter and first


nine months ended October 31, 2015, respectively, and $1.0 million and $6.3 million for the third quarter and first nine 


months ended November 1, 2014, respectively.




















(2) Includes a $0.2 million charge in the third quarter of Fiscal 2016 which includes $0.1 million for asset impairments


and $0.1 million for network intrusion expenses.  Includes a $4.0 million charge for the first nine months of Fiscal 2016


which includes $2.1 million for network intrusion expenses, $1.8 million for asset impairments and $0.1 million for other


legal matters.  Includes a $1.0 million charge in the third quarter of Fiscal 2015 which includes $0.6 million for network  


intrusion expenses and $0.4 million for asset impairments.  Includes a $1.3 million charge for the first nine months of


Fiscal 2015 which includes $2.4 million for network intrusion expenses, $1.6 million for asset impairments and $0.6


million for other legal matters, partially offset by a $3.3 million gain on a lease termination.















       

GENESCO INC.
























Consolidated Balance Sheet



























Oct. 31,


Nov. 1,



In Thousands






2015


2014



Assets











Cash and cash equivalents





$       28,148


$        38,026



Accounts receivable





82,136


71,796



Inventories






779,895


737,577



Other current assets





96,912


83,653



Total current assets





987,091


931,052



Property and equipment





322,069


314,664



Goodwill and other intangibles





390,733


402,089



Other non-current assets





43,811


21,440



Total Assets






$ 1,743,704


$  1,669,245



Liabilities and  Equity










Accounts payable





$    270,951


$      248,782



Current portion long-term debt





15,437


35,347



Other current liabilities





148,220


200,593



Total current liabilities





434,608


484,722



Long-term debt






199,691


79,688



Pension liability





21,441


8,597



Deferred rent and other long-term liabilities





157,601


125,580



Equity






930,363


970,658



Total Liabilities and Equity





$ 1,743,704


$  1,669,245













       


GENESCO INC.











































Retail Units Operated - Nine Months Ended October 31, 2015















Balance


Acquisi-






Balance






Balance





02/01/14


tions


Open


Close


01/31/15


Open


Close


10/31/15



Journeys Group


1,168


0


34


20


1,182


20


23


1,179



    Journeys


827


0


16


9


834


9


5


838



    Underground by Journeys


117


0


0


7


110


0


10


100



    Journeys Kidz


174


0


18


3


189


11


5


195



    Shi by Journeys


50


0


0


1


49


0


3


46



Schuh Group


99


0


13


4


108


9


0


117



     Schuh UK


90


0


12


4


98


8


0


106



     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


24


41


1,347



Johnston & Murphy Group


168


0


8


6


170


7


3


174



    Shops


106


0


3


4


105


3


3


105



    Factory Outlets


62


0


5


2


65


4


0


69



Total Retail Units


2,568


56


273


73


2,824


60


67


2,817









































Retail Units Operated - Three Months Ended October 31, 2015















Balance


Acquisi-






Balance











08/01/15


tions


Open


Close


10/31/15









Journeys Group


1,171


0


11


3


1,179









    Journeys


834


0


5


1


838









    Underground by Journeys


102


0


0


2


100









    Journeys Kidz


189


0


6


0


195









    Shi by Journeys


46


0


0


0


46









Schuh Group


113


0


4


0


117









     Schuh UK


102


0


4


0


106









     Schuh Germany


1


0


0


0


1









     Schuh ROI


10


0


0


0


10









Lids Sports Group*


1,344


0


15


12


1,347









Johnston & Murphy Group


172


0


3


1


174









    Shops


104


0


2


1


105









    Factory Outlets


68


0


1


0


69









Total Retail Units


2,800


0


33


16


2,817




























* Includes 187 Locker Room by Lids in Macy's stores as of October 31, 2015.
































Comparable Sales (including same store and comparable direct sales)













 

          Three Months Ended


 

       Nine Months Ended













Oct. 31,


Nov. 1,


Oct. 31,


Nov. 1,













2015


2014


2015


2014











Journeys Group


6%


6%


5%


4%











Schuh Group


2%


0%


5%


0%











Lids Sports Group


12%


1%


8%


0%











Johnston & Murphy Group


5%


0%


6%


0%











Total Comparable Sales


7%


3%


6%


2%





























       







Schedule B

Genesco Inc.

Adjustments to Reported Earnings from Continuing Operations

Three Months Ended October 31, 2015 and November 1, 2014









 Three 

 Impact on 

 Three 

 Impact on 



 Months 

  Diluted 

 Months 

  Diluted 

In Thousands (except per share amounts)


 Oct 2015 

 EPS 

 Oct 2014 

 EPS 

Earnings from continuing operations, as reported


$     32,855

$        1.43

$      28,750

$   1.21







Adjustments:  (1)






Impairment charges


48

-

244

0.01

Deferred payment - Schuh acquisition


-

-

1,017

0.04

Indemnification asset write-off


-

-

7,050

0.30

Other legal matters


-

-

38

-

Network intrusion expenses


39

-

388

0.02

Higher (lower) effective tax rate


(749)

(0.03)

(7,185)

(0.30)







Adjusted earnings from continuing operations (2)


$     32,193

$        1.40

$      30,302

$   1.28













(1) All adjustments are net of tax where applicable.  The tax rate for the third quarter of Fiscal 2016 is 36.7% excluding a 

    FIN 48 discrete item of less than $0.1 million.  The tax rate for the third quarter of Fiscal 2015 is 36.4% excluding a 

    FIN 48 discrete item of less than $0.1 million.  











(2) EPS reflects 22.9 million and 23.8 million share count for Fiscal 2016 and 2015, respectively, 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.




























Schedule B


Genesco Inc.


Adjustments to Reported Operating Income 


Three Months Ended October 31, 2015 and November 1, 2014










 Three Months Ended October 31, 2015 




 Operating 


Adj Operating


In Thousands 


 Income 

 Other Adj 

Income


Journeys Group


$     38,944

$           -

$      38,944


Schuh Group


8,649

-

8,649


Lids Sports Group


4,704

-

4,704


Johnston & Murphy Group


4,637

-

4,637


Licensed Brands


3,345

-

3,345


Corporate and Other


(8,229)

151

(8,078)


Total Operating Income


$     52,050

$         151

$      52,201






















 Three Months Ended November 1, 2014 




 Operating 


Adj Operating


In Thousands 


 Income 

 Other Adj 

Income


Journeys Group


$     35,047

$           -

$      35,047


Schuh Group*


3,949

1,017

4,966


Lids Sports Group


8,606

-

8,606


Johnston & Murphy Group


4,505

-

4,505


Licensed Brands


3,082

-

3,082


Corporate and Other


(8,629)

1,036

(7,593)


Total Operating Income


$     46,560

$      2,053

$      48,613








*Schuh Group adjustments include $1.0 million in deferred purchase price payments.









     

Schedule B

Genesco Inc.

Adjustments to Reported Earnings from Continuing Operations

Nine Months Ended October 31, 2015 and November 1, 2014









 Nine 

 Impact on 

 Nine 

 Impact on 



 Months 

  Diluted 

 Months 

  Diluted 

In Thousands (except per share amounts)


 Oct 2015 

 EPS 

 Oct 2014 

 EPS 

Earnings from continuing operations, as reported


$     50,393

$        2.15

$      47,616

$   2.01







Adjustments:  (1)






Impairment charges


1,129

0.05

1,023

0.04

Deferred payment - Schuh acquisition


1,490

0.06

6,346

0.27

Gain on lease termination


-

-

(2,104)

(0.09)

Indemnification asset write-off


-

-

7,050

0.30

Change in accounting for bonus awards


-

-

3,575

0.15

Other legal matters


75

-

437

0.02

Network intrusion expenses


1,316

0.06

1,509

0.06

Higher (lower) effective tax rate


(1,561)

(0.07)

(7,838)

(0.33)







Adjusted earnings from continuing operations (2)


$     52,842

$        2.25

$      57,614

$   2.43













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

    FIN 48 discrete item of less than $0.1 million.  The tax rate for the first nine months of Fiscal 2015 is 36.9% excluding a 

    FIN 48 discrete item of less than $0.1 million.  










(2) EPS reflects 23.4 million and 23.7 million share count for Fiscal 2016 and 2015, respectively,  which includes common stock 

     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.




























Schedule B


Genesco Inc.


Adjustments to Reported Operating Income 


Nine Months Ended October 31, 2015 and November 1, 2014










 Nine Months Ended October 31, 2015 




 Operating 


Adj Operating


In Thousands 


 Income 

 Other Adj 

Income


Journeys Group


$     72,594

$           -

$      72,594


Schuh Group*


10,880

1,490

12,370


Lids Sports Group


6,900

-

6,900


Johnston & Murphy Group


9,460

-

9,460


Licensed Brands


7,526

-

7,526


Corporate and Other


(26,560)

3,970

(22,590)


Total Operating Income


$     80,800

$      5,460

$      86,260








*Schuh Group adjustments include $1.5 million in deferred purchase price payments.











 Nine Months Ended November 1, 2014 




 Operating 

 Bonus Adj 

Adj Operating


In Thousands 


 Income 

 and Other 

Income


Journeys Group


$     61,544

$      4,919

$      66,463


Schuh Group*


(1,389)

6,346

4,957


Lids Sports Group


25,217

-

25,217


Johnston & Murphy Group


8,577

25

8,602


Licensed Brands


8,476

-

8,476


Corporate and Other


(22,063)

2,082

(19,981)


Total Operating Income


$     80,362

$    13,372

$      93,734








*Schuh Group adjustments include $6.3 million in deferred purchase price payments.









         

Schedule B

Genesco Inc.

Adjustments to Forecasted Earnings from Continuing Operations

Fiscal Year Ending January 30, 2016







In Thousands (except per share amounts)


High Guidance

Low Guidance



Fiscal 2016

Fiscal 2016

Forecasted earnings from continuing operations 


$    100,385

$       4.37

$   97,890

$       4.26







Adjustments:  (1)






Asset impairment and other charges


3,832

0.17

4,148

0.18

Deferred payment - Schuh acquisition


1,490

0.06

1,490

0.06







Adjusted forecasted earnings from continuing operations (2)

$    105,707

$       4.60

$ 103,528

$       4.50







(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 23.0 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.  












       

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/genesco-reports-third-quarter-fiscal-2016-results-300188156.html

SOURCE Genesco Inc.

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