Genesco Reports Third Quarter Fiscal 2017 Results

12/02/16

NASHVILLE, Tenn., Dec. 2, 2016 /PRNewswire/ -- Genesco Inc. (NYSE: GCO) today reported earnings from continuing operations for the third quarter ended October 29, 2016, of $25.9 million, or $1.30 per diluted share, compared to earnings from continuing operations of $32.9 million, or $1.43 per diluted share, for the third quarter ended October 31, 2015.  Fiscal 2017 third quarter results reflect pretax items of $0.6 million, or $0.02 per diluted share after tax, for asset impairment charges, offset by $0.8 million, or $0.04 per diluted share, from a lower than normal tax rate due to the release of tax reserves and other items. 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.        

Adjusted for the items described above in both periods, earnings from continuing operations were $25.5 million, or $1.28 per diluted share, for the third quarter of Fiscal 2017, compared to earnings from continuing operations of $32.2 million, or $1.40 per diluted share, for the third 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 third quarter of Fiscal 2017 decreased 8% to $711 million from $774 million in the third quarter of Fiscal 2016, reflecting the sale of the Lids Team Sports business in the fourth quarter of last year and a decrease of approximately 3% in sales from businesses operated during both periods.  Consolidated third quarter 2017 comparable sales, including same store sales and comparable e-commerce and catalog sales, decreased 3%, with an 8% decrease in the Journeys Group, a 2% increase in the Lids Sports Group, flat comparable sales in the Schuh Group, and a 1% increase in the Johnston & Murphy Group. Comparable sales for the Company reflected a 4% decrease in same store sales and a 7% increase in e-commerce sales.

Robert J. Dennis, chairman, president and chief executive officer of Genesco, said, "Consolidated comparable sales for the third quarter came in ahead of our expectations, thanks to better than expected sales at the Lids Sports Group and Schuh Group.  Our top-line performance, effective management of selling costs, and share repurchases made during the quarter allowed us to deliver earnings per share ahead of expectations.  We were able to offset some of the bottom line pressure caused by negative expense leverage on lower sales versus last year through gross margin expansion, primarily a significant increase in the Lids Sports Group.

"Fourth quarter consolidated comparable sales were -2% through November 29, 2016.  The strong positive impact of the World Series on the Lids Sports Group's sales has offset weaker comps in the rest of our businesses so far during the quarter.  While we expect the Cubs' victory to continue to drive sales through the balance of the quarter, it will have less impact than the gains immediately following the Series.

"Our outlook going forward takes into account the better than expected third quarter performance and positive effect of the World Series win.  This is offset, primarily by expectations for a more challenging fourth quarter at Journeys due to unseasonably warmer weather that has hurt sales and the continued impact of the fashion shift that began to affect Journeys' sales in the second quarter.   Thus, we are reiterating expectations for adjusted diluted earnings per share for the fiscal year ending January 28, 2017, in the range of $3.80 to $4.00."  Consistent with previous guidance, these expectations do not include expected non-cash asset impairments and other charges, net of the gain on a litigation settlement and gain on the sale of Lids Team Sports, estimated in the range of a $1.8 million pretax gain to a $0.8 million pretax charge, or $(0.06) to $0.03 per share after tax, for the full fiscal year.  This guidance assumes a comparable sales decrease in the 2% to 3% 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 the headwinds for Journeys are likely to continue in the near term, we have made purchase commitments for spring product that reflect the shift in fashion, which we believe should reverse the negative trend.  Beyond that, we remain confident in the strategic positioning of all our retail businesses and believe that the Company's long-term competitive advantages will drive improved profitability and greater shareholder value."

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 2, 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 


Nine Months Ended 



Oct. 29,


Oct. 31,


Oct. 29,


Oct. 31,


In Thousands

2016


2015


2016


2015


Net sales

$

710,822


$

773,898


$

1,985,172


$

2,090,020


Cost of sales

355,187


400,012


985,103


1,069,710


Selling and administrative expenses*

314,698


321,685


925,603


935,540


Asset impairments and other, net

589


151


(3,799)


3,970


Earnings from operations

40,348


52,050


78,265


80,800


Gain on sale of Lids Team Sports

-


-


(2,485)


-


Interest expense, net

1,488


1,330


3,931


2,903


Earnings from continuing operations









    before income taxes

38,860


50,720


76,819


77,897



Income tax expense

12,912


17,865


25,803


27,504


Earnings from continuing operations

25,948


32,855


51,016


50,393



Provision for discontinued operations

(53)


(348)


(133)


(488)


Net Earnings 

$

25,895


$

32,507


$

50,883


$

49,905


*

Includes $1.5 million in deferred payments related to the Schuh acquisition in the first nine months ended


October 31, 2015.

 

 


Earnings Per Share Information



 

Three Months Ended 


 

Nine Months Ended 



Oct. 29,


Oct. 31,


Oct. 29,


Oct. 31,


In Thousands (except per share amounts)

2016


2015


2016


2015











Average common shares - Basic EPS

19,912


22,834


20,307


23,308











Basic earnings per share:









     Before discontinued operations

$1.30


$1.44


$2.51


$2.16


     Net earnings 

$1.30


$1.42


$2.51


$2.14











Average common and common









    equivalent shares - Diluted EPS

19,962


22,917


20,399


23,436











Diluted earnings per share:









     Before discontinued operations

$1.30


$1.43


$2.50


$2.15


     Net earnings 

$1.30


$1.42


$2.49


$2.13










 

 

GENESCO INC.













Consolidated Earnings Summary












Three Months Ended 


Nine Months Ended 





Oct. 29,


Oct. 31,


Oct. 29,


Oct. 31,



In Thousands


2016


2015


2016


2015



Sales:











    Journeys Group

$  314,159


$  321,996


$    860,514


$      847,805



    Schuh Group


90,087


101,644


262,717


283,410



    Lids Sports Group

200,279


246,967


568,567


675,514



    Johnston & Murphy Group

72,115


70,416


207,241


197,600



    Licensed Brands

34,058


32,599


85,624


85,118



    Corporate and Other

124


276


509


573



    Net Sales


$  710,822


$  773,898


$ 1,985,172


$  2,090,020



Operating Income (Loss):










    Journeys Group

$    25,656


$    38,944


$       49,757


$        72,594



    Schuh Group (1)

6,615


8,649


9,647


10,880



    Lids Sports Group

8,173


4,704


21,342


6,900



    Johnston & Murphy Group

4,922


4,637


12,019


9,460



    Licensed Brands

2,689


3,345


4,776


7,526



    Corporate and Other (2)

(7,707)


(8,229)


(19,276)


(26,560)



   Earnings from operations

40,348


52,050


78,265


80,800



  Gain on sale of Lids Team Sports

-


-


(2,485)


-



   Interest, net


1,488


1,330


3,931


2,903



Earnings from continuing operations










    before income taxes

38,860


50,720


76,819


77,897



Income tax expense

12,912


17,865


25,803


27,504



Earnings from continuing operations

25,948


32,855


51,016


50,393














Provision for discontinued operations

(53)


(348)


(133)


(488)



Net Earnings 


$    25,895


$    32,507


$       50,883


$        49,905














(1) Includes $1.5 million in deferred payments related to the Schuh acquisition in the first nine months ended



October 31, 2015.





















(2) Includes a $0.6 million charge in the third quarter of Fiscal 2017 for asset impairments.  Includes a $3.8 million gain


for the first nine 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 $5.0 million for asset impairments and $0.1 million for other legal matters.













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.  










 

 

GENESCO INC.
























Consolidated Balance Sheet



























Oct. 29,


Oct. 31,



In Thousands






2016


2015



Assets











Cash and cash equivalents





$       30,520


$        28,148



Accounts receivable





55,109


82,136



Inventories






719,975


779,895



Other current assets





88,969


96,912



Total current assets





894,573


987,091



Property and equipment





321,780


322,069



Goodwill and other intangibles





355,512


390,733



Other non-current assets





24,559


43,447



Total Assets






$ 1,596,424


$  1,743,340



Liabilities and  Equity










Accounts payable





$    247,282


$      270,951



Current portion long-term debt





12,172


15,437



Other current liabilities





112,826


148,220



Total current liabilities





372,280


434,608



Long-term debt






214,076


199,327



Pension liability





9,283


21,441



Deferred rent and other long-term liabilities





135,052


157,601



Equity






865,733


930,363



Total Liabilities and Equity





$ 1,596,424


$  1,743,340


 

 


GENESCO INC.











































Retail Units Operated - Nine Months Ended October 29, 2016















Balance


Acquisi-






Balance






Balance





01/31/15


tions


Open


Close


01/30/16


Open


Close


10/29/16



Journeys Group


1,182


37


29


26


1,222


32


17


1,237



    Journeys


834


0


13


5


842


13


8


847



    Underground by Journeys


110


0


0


12


98


0


2


96



    Journeys Kidz


189


0


16


5


200


19


1


218



    Shi by Journeys


49


0


0


3


46


0


6


40



    Little Burgundy


0


37


0


1


36


0


0


36



Schuh Group


108


0


17


0


125


5


4


126



Lids Sports Group*


1,364


0


27


59


1,332


13


78


1,267



Johnston & Murphy Group


170


0


8


5


173


6


3


176



    Shops


105


0


3


5


103


4


2


105



    Factory Outlets


65


0


5


0


70


2


1


71



Total Retail Units


2,824


37


81


90


2,852


56


102


2,806


 

 


Retail Units Operated - Three Months Ended October 29, 2016








Balance


Acquisi-






Balance




07/30/16


tions


Open


Close


10/29/16


Journeys Group


1,230


0


15


8


1,237


    Journeys


846


0


4


3


847


    Underground by Journeys


96


0


0


0


96


    Journeys Kidz


208


0


11


1


218


    Shi by Journeys


44


0


0


4


40


    Little Burgundy


36


0


0


0


36


Schuh Group


126


0


1


1


126


Lids Sports Group*


1,275


0


6


14


1,267


Johnston & Murphy Group


174


0


2


0


176


    Shops


104


0


1


0


105


    Factory Outlets


70


0


1


0


71


Total Retail Units


2,805


0


24


23


2,806














* Includes 151 Locker Room by Lids in Macy's stores as of October 29, 2016.






 

 


Comparable Sales (including same store and comparable direct sales)




Three Months Ended


Nine Months Ended




Oct. 29,


Oct. 31,


Oct. 29,


Oct. 31,




2016


2015


2016


2015


Journeys Group


-8%


6%


-4%


5%


Schuh Group


0%


2%


-2%


5%


Lids Sports Group


2%


12%


1%


8%


Johnston & Murphy Group


1%


5%


3%


6%


Total Comparable Sales


-3%


7%


-1%


6%

 

 

Schedule B


Genesco Inc.

Adjustments to Reported Earnings from Continuing Operations

Three Months Ended October 29, 2016 and October 31, 2015





















 Three Months Ended 



 October 29, 2016 


 October 31, 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



$     25,948

$         1.30



$      32,855

$     1.43










Pretax adjustments:









Impairment charges


$          579

383

0.02


$            82

48

-

Network intrusion expenses


10

6

-


69

39

-

Total adjustments


$          589

389

0.02


$          151

87

-










Resolution of income tax matters and other items



(789)

(0.04)



(749)

(0.03)

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



$     25,548

$         1.28



$      32,193

$     1.40







.












(1) The adjusted tax rate for the third quarter of Fiscal 2017 is 35.2% excluding a FIN 48 discrete item of less than $0.1 million.  The adjusted tax rate for

      the third quarter of Fiscal 2016 is 36.7% excluding a FIN 48 discrete item of less than $0.1 million.














(2) EPS reflects 20.0 and 22.9 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 October 29, 2016 and October 31, 2015








 Three Months Ended October 29, 2016 



 Operating 


Adj Operating

In Thousands 


 Income 

 Other Adj 

Income

Journeys Group


$      25,656

$           -

$      25,656

Schuh Group


6,615

-

6,615

Lids Sports Group


8,173

-

8,173

Johnston & Murphy Group


4,922

-

4,922

Licensed Brands


2,689

-

2,689

Corporate and Other


(7,707)

589

(7,118)

Total Operating Income


$      40,348

$         589

$      40,937













 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

 

 

 

Schedule B


Genesco Inc.

Adjustments to Reported Earnings from Continuing Operations

Nine Months Ended October 29, 2016 and October 31, 2015





















 Nine Months Ended 



 October 29, 2016 


 October 31, 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



$  51,016

$           2.50



$      50,393

$        2.15










Pretax adjustments:









Impairment charges


$      5,032

3,253

0.16


$       1,779

1,129

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


(8,921)

(5,750)

(0.28)


2,073

1,316

0.06

Total adjustments


$     (6,284)

(4,042)

(0.20)


$       5,460

4,010

0.17










Resolution of income tax matters and other items



(1,555)

(0.07)



(1,561)

(0.07)

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

$  45,419

$           2.23



$      52,842

$        2.25



















(1) The adjusted tax rate for the first nine months of Fiscal 2017 is 35.4% excluding a FIN 48 discrete item of $0.2 million.  The adjusted 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.











(2) EPS reflects 20.4 and 23.4 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 

Nine Months Ended October 29, 2016 and October 31, 2015








 Nine Months Ended October 29, 2016 



 Operating 


Adj Operating

In Thousands 


 Income 

 Other Adj 

Income

Journeys Group


$    49,757

$            -

$       49,757

Schuh Group


9,647

-

9,647

Lids Sports Group


21,342

-

21,342

Johnston & Murphy Group


12,019

-

12,019

Licensed Brands


4,776

-

4,776

Corporate and Other


(19,276)

(3,799)

(23,075)

Total Operating Income


$    78,265

$   (3,799)

$       74,466













 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.

 

 

 

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 


$     81,747

$       4.06

$   75,998

$       3.77







Adjustments:  (1)






Gain on sale of Lids Team Sports


(1,593)

(0.08)

(1,593)

(0.08)

Pension settlement


962

0.05

1,923

0.10

Asset impairment and other charges*


(553)

(0.03)

169

0.01













Adjusted forecasted earnings from continuing operations (2)

$     80,563

$       4.00

$   76,497

$       3.80







*Includes a $9.0 million litigation settlement gain in the second quarter this year.










(1) All adjustments are net of tax where applicable.  The forecasted tax rate for Fiscal 2017 is approximately 35.9%.







(2) EPS reflects 20.2 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-third-quarter-fiscal-2017-results-300372086.html

SOURCE Genesco Inc.

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