Genesco Reports Second Quarter Results
Genesco President and Chief Executive Officer Hal N. Pennington said, "A challenging retail environment, particularly impacting Journeys in the last two weeks of July, affected our results for the quarter. As we head into our key back-to-school selling season and look toward the holiday season, we are encouraged about our prospects for the remainder of the year.
"Net sales in the Journeys division increased by 13.1% during the quarter to $91.7 million and same store sales declined 3%, primarily because of a lower average selling price related to consumer product preference changes. Same store sales in pairs rose 4.5%, despite a slowdown in mall traffic during the last two weeks of the quarter. Because same store sales have improved since the beginning of August, we are confident that the July fall off was a temporary aberration. While we expect lower average selling prices to continue to be a factor at Journeys in the near term, as we move into the second half of the year our ability to offset the price issues should improve."
Pennington continued, "Once again, the Jarman Group outperformed expectations for the quarter. Net sales increased 31.5% to $30.2 million and same store sales rose 20% for the total division, with Jarman up 20% and Underground Station up 19%. These results represent our fourth consecutive quarter of sequentially improving same store sales. As the new management team has implemented product and merchandising initiatives as well as operational disciplines, the business has experienced a significant turnaround. We feel very good about the progress we have made at Underground Station in particular, and believe we have the right elements in place to expand this concept.
"Johnston & Murphy continues to be a work in progress. Net sales were $39.5 million for the quarter and same store sales declined 2%. Our wholesale business was primarily impacted by a highly promotional department store environment. Low levels of inventory also resulted in the inability to fill some orders. The second half of the year will see the introduction at retail of Johnston & Murphy's new extension of its product line. We are encouraged by the initial response, as the backlog of unfilled orders is up from last year. Despite the ongoing challenges in the marketplace, we are confident that Johnston & Murphy's brand equity remains strong and we are committed to serving the Johnston & Murphy customer.
"Finally, Dockers Footwear's sales were $13.4 million compared to $17.9 million in the same quarter last year. New product initiatives in the quarter last year resulted in unusually rapid sales growth, which made for a difficult comparison. This year we also experienced lower than expected reorders with one of our major accounts as it transitioned to new fall offerings. Finally, we saw certain sales planned for the second quarter shift into the third quarter because of a lack of inventory. As we move forward, comparisons get easier and, with the backlog of unfilled orders up compared to last year, we are enthusiastic about our prospects in the back half of the year."
The forward-looking statements in this release involve a number of risks and uncertainties. Actual results could be materially different. The factors that could cause materially different results include, among other factors: lower than expected consumer demand for the Company's products, whether caused by weakness in the overall economy, consumer reactions to unexpected events or changes in fashions or tastes that the Company fails to anticipate or respond appropriately to; greater than anticipated pricing pressure from product mix changes or competition; changes in buying patterns by significant wholesale customers; disruptions in product supply or distribution, including the impact of opening a new distribution center; the inability to adjust inventory levels to sales and changes in business strategies by the Company's competitors; the inability to open, staff and support additional retail stores on schedule and at acceptable expense levels; and the outcome of litigation and environmental matters involving the Company. Forward-looking statements reflect the expectations of the Company at the time they are made. The Company disclaims any obligation to update such statements.
The Company's live conference call on August 21, 2002, at 8:30 a.m. (Central time), may be accessed through the Company's internet website, www.genesco.com. The Company expects to discuss results from the second quarter and its current expectations for the third quarter and fiscal year ending February 1, 2003, during the call. To listen live, please go to the website at least 15 minutes early to register, download and install any necessary software. A replay will be available shortly after the call for 14 days.
Genesco, based in Nashville, sells footwear and accessories in more than 960 retail stores in the U.S., principally under the names Journeys, Journeys Kidz, Johnston & Murphy, Jarman and Underground Station, and on internet websites www.journeys.com and www.johnstonmurphy.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 Six Months Ended
August 3, August 4, August 3, August 4,
In Thousands 2002 2001* 2002 2001*
Net sales $ 174,842 $ 166,483 $ 365,435 $ 338,145
Cost of sales 91,991 88,242 192,436 178,063
Selling and administrative
expenses 74,666 66,744 149,892 133,700
Restructuring credit(1) -- (269) -- (269)
Earnings from operations before
interest 8,185 11,766 23,107 26,651
Interest expense, net 1,922 1,888 3,594 3,423
Pretax earnings 6,263 9,878 19,513 23,228
Income tax expense 2,300 3,695 7,348 8,707
Net Earnings $ 3,963 $ 6,183 $ 12,165 $ 14,521
Earnings Per Share Information
Three Months Ended Six Months Ended
August 3, August 4, August 3, August 4,
In Thousands (except per share
amounts) 2002 2001 2002 2001
Preferred dividend
requirements $ 74 $ 73 $ 148 $ 147
Average common shares -
Basic EPS 21,914 21,962 21,895 21,904
Basic net earnings per share $ 0.18 $ 0.28 $ 0.55 $ 0.66
Average common and common
equivalent shares - Diluted
EPS 22,416 27,455 27,318 27,383
Diluted net earnings per
share $ 0.17 $ 0.26 $ 0.51 $ 0.60
(1) Adjustment to Nautica closedown provision including a $0.1 million
reversal of inventory write-down.
* Certain amounts have been reclassified to conform to current
presentation.
GENESCO INC.
Consolidated Earnings Summary
Three Months Ended Six Months Ended
August 3, August 4, August 3, August 4,
In Thousands 2002 2001 2002 2001
Sales:
Journeys $ 91,681 $ 81,047 $ 183,155 $ 161,395
Jarman 30,183 22,956 63,382 48,027
Johnston & Murphy 39,541 42,733 81,906 84,300
Licensed Brands(1) 13,437 19,747 36,992 44,423
Net Sales $ 174,842 $ 166,483 $ 365,435 $ 338,145
Pretax Earnings (Loss):
Journeys $ 7,497 $ 9,330 $ 15,700 $ 19,405
Jarman 1,153 (1,032) 3,803 (101)
Johnston & Murphy 1,365 4,532 5,472 8,658
Licensed Brands(2) 1,325 2,055 4,112 4,990
Corporate and Other (2,702) (2,938) (5,527) (6,120)
Nonrecurring charges(3) (453) (181) (453) (181)
Operating income 8,185 11,766 23,107 26,651
Interest, net 1,922 1,888 3,594 3,423
Total Pretax Earnings 6,263 9,878 19,513 23,228
Income tax expense 2,300 3,695 7,348 8,707
Net Earnings $ 3,963 $ 6,183 $ 12,165 $ 14,521
(1) Includes Nautica sales of $1.8 million and $6.0 million for the second
quarter and six months of Fiscal 2002.
(2) Includes Nautica operating losses of $0.3 million and $0.6 million for
the second quarter and six months of Fiscal 2002.
(3) Includes professional fees and severance charges in the second quarter
and six months of Fiscal 2003 and litigation and severance charges in
the second quarter and six months of Fiscal 2002 offset by an
adjustment to the Nautica closedown provision of $0.3 million.
GENESCO INC.
Consolidated Balance Sheet
August 3, August 4,
In Thousands 2002 2001
Assets
Cash and short-term investments $ 32,214 $ 24,513
Accounts receivable 16,785 27,053
Inventories 202,062 182,216
Other current assets 19,552 26,665
Total current assets 270,613 260,447
Plant, equipment and capital
leases 128,617 95,971
Other non-current assets 20,432 19,987
Non-currrent assets of
discontinued operations* 499 605
Total Assets $ 420,161 $ 377,010
Liabilities and Shareholders'
Equity
Total current liabilities 118,204 103,899
Long-term debt 103,271 103,272
Other long-term liabilities 23,979 11,198
Shareholders' equity 174,707 158,641
Total Liabilities and
Shareholders' Equity $ 420,161 $ 377,010
* Non-current assets of discontinued operations include Volunteer Leather.
GENESCO INC.
Retail Units Operated - Six Months Ended August 3, 2002
Balance Balance
02/02/02 Open Conversions Close 08/03/02
Journeys Group 533 54 0 1 586
Journeys 519 40 0 1 558
Journeys Kidz 14 14 0 0 28
Jarman Group 227 6 0 4 229
Jarman Retail 130 0 (1) 3 126
Underground Station 97 6 1 1 103
Johnston & Murphy 148 1 0 0 149
Shops 116 1 0 0 117
Factory Outlets 32 0 0 0 32
Total Retail Units 908 61 0 5 964
Retail Units Operated - Three Months Ended August 3, 2002
Balance Balance
05/04/02 Open Conversions Close 08/03/02
Journeys Group 564 22 0 0 586
Journeys 543 15 0 0 558
Journeys Kidz 21 7 0 0 28
Jarman Group 228 1 0 0 229
Jarman Retail 126 0 0 0 126
Underground Station 102 1 0 0 103
Johnston & Murphy 148 1 0 0 149
Shops 116 1 0 0 117
Factory Outlets 32 0 0 0 32
Total Retail Units 940 24 0 0 964
Constant Store Sales
Three Months Ended Six Months Ended
August 3, August 4, August 3, August 4,
2002 2001 2002 2001
Journeys -3% 1% -3% 6%
Jarman Group 20% -11% 19% -7%
Jarman Retail 20% -12% 20% -9%
Underground Station 19% -4% 17% 1%
Johnston & Murphy -2% -9% 0% -9%
Shops -1% -9% -1% -9%
Factory Outlets -4% -6% 2% -10%
Total Constant Store Sales 1% -3% 2% 0%
SOURCE Genesco Inc.
CONTACT: financial, James S. Gulmi, +1-615-367-8325, or media, Claire S.
McCall, +1-615-367-8283, both of Genesco Inc.
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URL: http://www.journeys.com
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