Genesco Reports First Quarter Fiscal 2010 Results

May 28, 2009 at 7:34 AM EDT

NASHVILLE, Tenn., May 28 /PRNewswire-FirstCall/ -- Genesco Inc. (NYSE: GCO) today reported a loss from continuing operations for the first quarter ended May 2, 2009, of $5.6 million, or $0.30 per diluted share, compared to earnings from continuing operations of $129.4 million, or $5.14 per diluted share, for the first quarter ended May 3, 2008. Fiscal 2010 first quarter earnings reflected pretax charges of $11 million, or $0.47 per diluted share, related to a loss on the early retirement of debt in connection with the exchange of $56.4 million of convertible notes for common stock announced in April 2009 as well as fixed asset impairments, lease terminations, litigation settlements and a higher effective tax rate. In addition, the first quarter reflected higher interest costs due to the adoption of FSP APB 14-1, or "APB 14-1," a new accounting standard applicable to the Company's convertible debt. Fiscal 2009 first quarter earnings included a gain on merger related litigation and a lower effective tax rate, partially offset by charges associated with merger related expenses, asset impairment and lease terminations and other legal matters. Fiscal 2009 earnings also include a restatement of interest expense required by the adoption of APB 14-1, which required retroactive application resulting in higher interest costs.

Adjusted for the listed items in both periods, earnings from continuing operations were $3.5 million, or $0.17 per diluted share, for the first quarter of Fiscal 2010, compared to $3.8 million, or $0.17 per diluted share, for the first quarter of Fiscal 2009. Because of the magnitude of the merger-related litigation settlement in the previous year's results and for consistency with Fiscal 2010's previously announced earnings expectations, which did not reflect the listed items, the Company believes that disclosure of earnings from continuing operations adjusted for those items will be useful to investors. A reconciliation of the adjusted financial measures to their corresponding measures as reported pursuant to U.S. Generally Accepted Accounting Principles is included in Schedule B to this press release.

Net sales for the first quarter of Fiscal 2010 increased 4% to $370 million from $357 million in the first quarter of Fiscal 2009. Comparable store sales in the first quarter of Fiscal 2010 increased by 2%. The Journeys Group's comparable store sales for the quarter rose by 3%, the Hat World Group's increased by 7%, Underground Station's comps declined by 5%, and Johnston & Murphy Retail's fell by 18%.

Robert J. Dennis, president and chief executive officer of Genesco, said, "Given the current economic environment, we are pleased with our better than expected performance in the first quarter. Our ability to deliver these results in such turbulent times highlights the benefits of our diversified operating model and the strength and experience of our management team. Both the Journeys Group and Hat World posted strong comparable store sales and operating earnings increases during the quarter. Licensed brands sales were also solid, up 15%. However, Johnston & Murphy and Underground Station remained weak for the first quarter.

"As we reported on our last release, sales in February were strong, and as expected, March comps were weaker due to the Easter offset. We experienced a sales rebound in the first half of April, then business slowed again and comparable store sales through May 25 were down 9%. We believe that May comparisons are particularly challenging due in part to last year's stimulus checks.

"We continue to focus aggressively on inventory management, as year-over year inventories were up 5% and inventories per square foot increased only 2% for the quarter. In addition, our financial position remains solid as we recently converted $56.4 million of convertible notes into common stock and our cash flow remains strong."

Outlook

Dennis also discussed the Company's outlook for Fiscal 2010. "Based on our strong first quarter results, we are now slightly more comfortable with our previously announced baseline earnings scenario of $1.70 to $1.80 per share for the year. While we remain somewhat cautious in our outlook given the recent choppiness in sales trends, approximately 80% of our earnings normally come in the second half of the year and we believe that we are well-positioned from a merchandising perspective as we head into the summer and back-to-school selling season."

Dennis concluded, "While we are cognizant of the recent lack of a strong sales trend and we are carefully monitoring our business, there are a number of things happening in the marketplace that are encouraging to us in the longer term. Industry rationalization, real-estate flexibility on rents, lower remodeling requirements and increased accessibility to attractive malls at compelling terms all represent meaningful benefits to us and we are fully committed to capitalizing on all the opportunities that lie ahead."

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, 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, continuing weakness in the consumer economy, 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 materials costs, and other factors affecting the cost of products, competition in the Company's markets and changes in the timing of holidays or in the onset of seasonal weather affecting periodtoperiod sales comparisons. 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 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 our shares, variations from expected pension-related charges caused by conditions in the financial markets, and the 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.

Conference Call

The Company's live conference call on May 28, 2009, 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.

About Genesco Inc.

Genesco Inc., a Nashville-based specialty retailer, sells footwear, headwear and accessories in more than 2,225 retail stores in the United States and Canada, principally under the names Journeys, Journeys Kidz, Shi by Journeys, Johnston & Murphy, Underground Station, Hatworld, Lids, Hat Shack, Hat Zone, Head Quarters and Cap Connection, and on internet websites www.journeys.com, www.journeyskidz.com, www.shibyjourneys.com, www.undergroundstation.com, www.johnstonmurphy.com, www.dockersshoes.com, and www.lids.com. The Company also sells footwear at wholesale under its Johnston & Murphy brand and under the licensed Dockers brand. Additional information on Genesco and its operating divisions may be accessed at its website www.genesco.com.


                                    GENESCO INC.

      Consolidated Earnings Summary
      =============================
                                             Three Months Ended
                                             ------------------
                                                           Restated
                                         May 2,              May 3,
      In Thousands                        2009                2008
      ------------                        ----                ----
      Net sales                       $370,366            $356,935
      Cost of sales                    181,144             175,540
      Selling and administrative
       expenses                        181,369             180,046
      Restructuring and other, net       4,973            (201,838)
      -----------------                  -----            --------
      Earnings from operations           2,880             203,187
      Loss on early retirement of debt   5,119                   -
      Interest expense, net              3,083               2,945
      ---------------------              -----               -----
      (Loss) earnings before income
       taxes from continuing
       operations                       (5,322)            200,242
      Income tax expense                   281              70,802
      ------------------                   ---              ------
      (Loss) earnings from continuing
       operations                       (5,603)            129,440
      Provision for discontinued
       operations, net                    (159)                (93)
      ----------------                    ----                 ---
      Net (Loss) Earnings              $(5,762)           $129,347
      ===================              =======            ========

      Earnings Per Share Information
      ==============================
                                             Three Months Ended
                                             ------------------
                                                           Restated
                                         May 2,              May 3,
      In Thousands (except
       per share amounts)                 2009                2008
      --------------------                ----                ----
      Preferred dividend requirements      $50                 $49

      Average common shares - Basic EPS 18,852              21,050

      Basic earnings (loss) per share:
          Before discontinued
           operations                   $(0.30)              $6.15
          Net (loss) earnings           $(0.31)              $6.14

      Average common and common
          equivalent shares -
           Diluted EPS                  18,852              25,371

      Diluted earnings (loss) per share:
          Before discontinued
           operations                   $(0.30)              $5.14
          Net (loss) earnings           $(0.31)              $5.14


                                    GENESCO INC.

      Consolidated Earnings Summary
      =============================
                                             Three Months Ended
                                             ------------------
                                                           Restated
                                         May 2,              May 3,
      In Thousands                        2009                2008
      ------------                        ----                ----
      Sales:
          Journeys Group              $176,847            $168,762
          Underground Station Group     26,728              29,004
          Hat World Group               98,804              87,737
          Johnston & Murphy Group       39,330              46,571
          Licensed Brands               28,551              24,748
          Corporate and Other              106                 113
          -----------------                ---                 ---
          Net Sales                   $370,366            $356,935
          =============               ========            ========
      Operating Income (Loss):
          Journeys Group                $5,513              $5,298
          Underground Station Group       (450)               (981)
          Hat World Group                6,524               3,725
          Johnston & Murphy Group          157               3,683
          Licensed Brands                3,617               3,555
          Corporate and Other*         (12,481)            187,907
          -----------------            -------             -------
         Earnings from operations        2,880             203,187
         Loss on early retirement of
          debt                           5,119                   -
         Interest, net                   3,083               2,945
         ----------------                -----               -----

      (Loss) earnings before income
       taxes from continuing
       operations                       (5,322)            200,242

      Income tax expense                   281              70,802
      ------------------                   ---              ------
      (Loss) earnings from continuing
       operations                       (5,603)            129,440
      Provision for discontinued
       operations, net                    (159)                (93)
      ----------------                    ----                 ---
      Net (Loss) Earnings              $(5,762)           $129,347
      ===================              =======            ========


    *Includes a $5.0 million charge in the first quarter of Fiscal 2010
     which includes $4.5 million in asset impairments, $0.4 million for
     other legal matters and $0.1 million for lease terminations.

    Includes $201.8 million credit in the first quarter of Fiscal 2009 of
    which $204.1 million were proceeds as a result of the settlement of
    merger-related litigation with The Finish Line and its investment bankers
    offset by $1.2 million in asset impairments, $0.8 million for other legal
    matters and $0.3 million for lease terminations.  The first quarter of
    Fiscal 2009 also included $7.2 million of merger-related expenses.


                                    GENESCO INC.

      Consolidated Balance Sheet
      ==========================
                                                           Restated
                                         May 2,              May 3,
      In Thousands                        2009                2008
      ------------                        ----                ----
      Assets
      Cash and cash equivalents        $16,690             $16,480
      Restricted
       investment in Finish
       Line Stock                            -              29,075
      Accounts receivable               28,417              26,532
      Inventories                      298,733             284,873
      Other current assets              54,711              43,202
      --------------------              ------              ------
      Total current assets             398,551             400,162
      --------------------             -------             -------
      Property and equipment           233,751             250,756
      Other non-current assets         182,811             169,963
      ------------------               -------             -------
      Total Assets                    $815,113            $820,881
      ============                    ========            ========
      Liabilities and Shareholders'
       Equity
      Accounts payable                 $80,604             $71,684
      Other current liabilities         63,020             152,898
      -------------                     ------             -------
      Total current liabilities        143,624             224,582
      -------------                    -------             -------
      Long-term debt                    51,648              79,037
      Other long-term liabilities      110,244              79,808
      Shareholders' equity             509,597             437,454
      --------------------             -------             -------
      Total Liabilities and
       Shareholders' Equity           $815,113            $820,881
      ==================              ========            ========



                                    GENESCO INC.


        Retail Units Operated - Three Months Ended May 2, 2009
        ======================================================
                       Balance              Balance             Balance
                      02/02/08 Open Close  01/31/09 Open Close 05/02/09

        Journeys Group     967   50     5     1,012    8     2    1,018
           Journeys        805   16     5       816    4     2      818
           Journeys Kidz   115   26     -       141    4     -      145
           Shi by Journeys  47    8     -        55    -     -       55
        Underground Station
         Group             192    -    12       180    -     3      177
        Hat World Group    862   43    20       885    5    10      880
        Johnston & Murphy
         Group             154    9     6       157    4     -      161
           Shops           113    6     5       114    3     -      117
           Factory Outlets  41    3     1        43    1     -       44
        Total Retail
         Units           2,175  102    43     2,234   17    15    2,236



        Constant Store Sales
        ====================
                                           Three Months Ended
                                           ------------------
                                       May 2,              May 3,
                                        2009                2008
                                        ----                ----
        Journeys Group                    3%                  0%
        Underground Station Group        -5%                  9%
        Hat World Group                   7%                  4%
        Johnston & Murphy Group         -18%                 -2%
        -----------------------         ---                  --
        Total Constant Store Sales        2%                  2%
        ==========================        =                   =



                                  Genesco Inc.
                                   Schedule B
         Adjustments to Reported (Loss) Earnings from Continuing Operations
                       Three Months Ended May 2, 2009 and May 3, 2008

                                  3 mos     Impact      3 mos     Impact
        In Thousands (except     May 2009    on EPS    May 2008    on EPS
         per share amounts)    ----------  --------  ----------  --------

        (Loss) earnings from
         continuing operations,
         as reported               (5,603)   $(0.30)    129,440     $5.14

        Adjustments:  (1)
        Settlement of merger-
         related litigation             -         -    (122,649)    (4.84)
        Merger-related expenses         -         -       4,351      0.17
        Impairment & lease
         termination charges        2,769      0.12         901      0.04
        Other legal matters           238      0.01         451      0.02
        Loss on early retirement
         of debt                    3,061      0.13           -         -
        Convertible debt interest
         restatement (APB 14-1)       491      0.02         452         -
        Higher (lower)
         effective tax rate         2,533      0.11      (9,179)    (0.36)
        Effect of change in share
         count from going to a
         profit from a loss             -      0.08           -         -

                                   ------     -----      ------     -----
        Adjusted earnings
         from continuing
         operations (2)            $3,489     $0.17      $3,767     $0.17
                                   ------     -----      ------     -----


    (1) All adjustments are net of tax.  The tax rate for the first quarter
        Of Fiscal 2010 is 40.2% excluding FIN 48 discrete interest.
        The tax rate for the first quarter of Fiscal 2009 before the impact
        of the settlement of merger-related litigation and deductibility of
        prior year merger-related expenses is 39.9% excluding FIN 48
        discrete interest.

    (2) Reflects 23.3 million share count for Fiscal 2010 and 25.3 million
        share count for Fiscal 2009 which includes convertible shares and
        common stock equivalents.

    The Company believes that disclosure of earnings and earnings per
    share from continuing operations on a pro forma basis adjusted for the
    items not reflected in the previously announced expectations will be
    meaningful to investors, in light of the impact of changes in
    effective tax rates and other items not reflected in those
    expectations.



                                   Genesco Inc.
                                   Schedule B
           Adjustments to Forecasted Earnings from Continuing Operations
                        Fiscal Year Ending January 30, 2010

    Baseline Scenario                High Guidance      Low Guidance
    In Thousands (except per          Fiscal 2010        Fiscal 2010
     share amounts)
    Forecasted earnings from
     continuing operations       $26,264    $1.21    $22,519    $1.11

    Adjustments:  (1)
    Convertible debt interest
     restatement (APB 14-1)        1,022        -      1,022        -
    Impairment, other legal
     matters and lease
     termination charges           8,151     0.35      8,151     0.35
    Loss on early retirement
     of debt                       3,061     0.13      3,061     0.13
    Higher effective tax rate      2,533     0.11      2,533     0.11
    Adjusted forecasted
     Earnings from
     continuing operations(2)    $41,031    $1.80    $37,286    $1.70


    (1) All adjustments are net of tax.  The forecasted tax rate for
        Fiscal 2010 for the baseline scenario is 40.8%.

    (2) Reflects 23.5 million share count for Fiscal 2010 which includes
        convertible shares and 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.


SOURCE  Genesco, Inc.

    -0-                           05/28/2009
    /CONTACT:  Financial Contact: James S. Gulmi, +1-615-367-8325, or Media
Contact: Claire S. McCall, +1-615-367-8283, both of Genesco Inc./
    /Web Site:  http://www.genesco.com /
    (GCO)

CO:  Genesco, Inc.

ST:  Tennessee
IN:  REA FAS
SU:  ERN ERP CCA

PR
-- CL23216 --
9116 05/28/2009 07:32 EDT http://www.prnewswire.com

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