UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): May 30, 2014 (May 30, 2014)
GENESCO INC.
(Exact Name of Registrant as Specified in Charter)
Tennessee | 1-3083 | 62-0211340 | ||||||
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) | ||||||
1415 Murfreesboro Road Nashville, Tennessee | 37217-2895 | |||||
(Address of Principal Executive Offices) | (Zip Code) | |||||
(615) 367-7000
(Registrant’s Telephone Number, Including Area Code)
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
ITEM 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
On May 30, 2014, Genesco Inc. issued a press release announcing results of operations for the fiscal first quarter ended May 3, 2014. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
On May 30, 2014, Genesco Inc. also posted on its website, www.genesco.com, commentary by its chief financial officer on the quarterly results. A copy of the commentary is furnished as Exhibit 99.2 to this Current Report on Form 8-K.
In addition to disclosing financial results calculated in accordance with United States generally accepted accounting principles (GAAP), the press release and commentary furnished herewith contain non-GAAP financial measures, including adjusted selling, general and administrative expense, operating earnings, pretax earnings, earnings from continuing operations and earnings per share from continuing operations, as discussed in the text of the release and commentary and as detailed on the reconciliation schedule attached to the press release and commentary. For consistency and ease of comparison with Fiscal 2015’s previously announced earnings expectations and the adjusted results for the prior period announced last year, the Company believes that disclosure of the non-GAAP measures will be useful to investors.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.
(d) Exhibits
The following exhibits are furnished herewith:
Exhibit Number | Description | ||
99.1 | Press Release dated May 30, 2014, issued by Genesco Inc. | ||
99.2 | Genesco Inc. First Fiscal Quarter Ended May 3, 2014 Chief Financial Officer’s Commentary | ||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
GENESCO INC. | ||||
Date: May 30, 2014 | By: | /s/ Roger G. Sisson | ||
Name: | Roger G. Sisson | |||
Title: | Senior Vice President, Secretary and General Counsel | |||
EXHIBIT INDEX
No. | Exhibit | |||
99.1 | Press Release dated May 30, 2014 | |||
99.2 | Genesco Inc. First Fiscal Quarter Ended May 3, 2014 Chief Financial Officer’s Commentary | |||
Exhibit 99.1
Financial Contact: James S. Gulmi (615) 367-8325
Media Contact: Claire S. McCall (615) 367-8283
GENESCO REPORTS FIRST QUARTER FISCAL 2015 RESULTS
NASHVILLE, Tenn., May 30, 2014 --- Genesco Inc. (NYSE:GCO) today reported earnings from continuing operations for the first quarter ended May 3, 2014, of $14.1 million, or $0.60 per diluted share, compared to earnings from continuing operations of $14.5 million, or $0.61 per diluted share, for the first quarter ended May 4, 2013. Fiscal 2015 first quarter results reflect expenses of $7.7 million, or $0.21 per diluted share after tax, including $5.7 million related to a change in accounting for bonus awards; $3.1 million related to deferred purchase price payments in connection with the acquisition of Schuh Group Limited; and $2.0 million in network intrusion expenses, asset impairment charges and other legal matters, offset by a $3.1 million gain on a lease termination. Fiscal 2014 first quarter results reflected expenses of $10.7 million, or $0.33 per diluted share after tax, including $6.5 million associated with a change in accounting for bonus awards, $2.9 million related to deferred purchase price payments in connection with the acquisition of Schuh Group Limited, and $1.3 million for impairment charges and network intrusion expenses.
Adjusted for the items described above in both periods, earnings from continuing operations were $19.3 million, or $0.81 per diluted share, for the first quarter of Fiscal 2015, compared to earnings from continuing operations of $22.2 million, or $0.94 per diluted share, for the first quarter of Fiscal 2014. For consistency with Fiscal 2015'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 first quarter of Fiscal 2015 increased 6.3% to $629 million from $591 million in the first quarter of Fiscal 2014. Consolidated first quarter 2015 comparable sales, including same store sales and comparable e-commerce and catalog sales, increased 1%, with a 1% increase in the Journeys Group, a 1% increase in the Lids Sports Group, a 1% decrease in the Schuh Group, and a 1% decrease in the Johnston & Murphy Group.
Robert J. Dennis, chairman, president and chief executive officer of Genesco, said, “We are pleased with our performance given the choppy retail environment, combined with the lack of a meaningful, new fashion driver in the teen footwear space early in the year. We continue to expect stronger comparable sales gains and improved profitability as we move into the back half of the year.
“The second quarter is off to a solid start with comparable sales up 3% through May 24. We are encouraged by the recent pace of business and optimistic that we can build on our current momentum.
“Based on first quarter performance and current visibility, we remain comfortable with our previously announced guidance for adjusted Fiscal 2015 diluted earnings per share in the range of $5.40 to $5.55, a 6% to 9% increase over Fiscal 2014’s adjusted earnings per share of $5.09. Consistent with our previous guidance, these expectations do not include non-cash asset impairments and other charges, partially offset by a gain on a lease termination in the first quarter this year, which we estimate will be in the range of $2.6 million to $3.1 million pretax, or $0.07 to $0.08 per share, after tax, in Fiscal 2015.
Exhibit 99.1
“They also do not reflect compensation expense associated with the Schuh deferred purchase price as described above, which is currently estimated at approximately $7.2 million, or $0.30 per diluted share, for the full year. This guidance assumes a comparable sales increase in the low single digit range for the full fiscal 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.
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 May 30, 2014 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, 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 amount of required accruals related to the earn-out bonus potentially payable to Schuh management based on the achievement of certain performance objectives; the timing and amount of non-cash asset impairments related to retail store fixed assets or to intangible assets of acquired businesses; weakness in the consumer economy; 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; and changes in the timing of holidays or in the onset of seasonal weather affecting period-to-period 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 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.
Exhibit 99.1
About Genesco Inc.
Genesco Inc., a Nashville-based specialty retailer, sells footwear, headwear, sports apparel and accessories in more than 2,570 retail stores and leased departments throughout the U.S., Canada, the United Kingdom and the Republic of Ireland, principally under the names Journeys, Journeys Kidz, Shi by Journeys, Underground by Journeys, Schuh, 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 and the lids.com website, 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.
Exhibit 99.1
GENESCO INC. | ||||||||
Consolidated Earnings Summary | ||||||||
Three Months Ended | ||||||||
May 3, | May 4, | |||||||
In Thousands | 2014 | 2013 | ||||||
Net sales | $ | 628,825 | $ | 591,388 | ||||
Cost of sales | 312,881 | 292,951 | ||||||
Selling and administrative expenses* | 293,337 | 271,384 | ||||||
Asset impairments and other, net | (1,111 | ) | 1,329 | |||||
Earnings from operations | 23,718 | 25,724 | ||||||
Interest expense, net | 701 | 1,039 | ||||||
Earnings from continuing operations | ||||||||
before income taxes | 23,017 | 24,685 | ||||||
Income tax expense | 8,919 | 10,176 | ||||||
Earnings from continuing operations | 14,098 | 14,509 | ||||||
Provision for discontinued operations | (125 | ) | (99 | ) | ||||
Net Earnings | $ | 13,973 | $ | 14,410 | ||||
*Includes $3.1 million and $2.9 million, respectively, in deferred payments related to the Schuh acquisition for the first quarter ended May 3, 2014 and May 4, 2013.
Earnings Per Share Information | ||||||||
Three Months Ended | ||||||||
May 3, | May 4, | |||||||
In Thousands (except per share amounts) | 2014 | 2013 | ||||||
Preferred dividend requirements | $ | — | $ | 33 | ||||
Average common shares - Basic EPS | 23,369 | 23,295 | ||||||
Basic earnings per share: | ||||||||
From continuing operations | $ | 0.60 | $ | 0.62 | ||||
Net earnings | $ | 0.60 | $ | 0.62 | ||||
Average common and common | ||||||||
equivalent shares - Diluted EPS | 23,692 | 23,732 | ||||||
Diluted earnings per share: | ||||||||
From continuing operations | $ | 0.60 | $ | 0.61 | ||||
Net earnings | $ | 0.59 | $ | 0.61 | ||||
Exhibit 99.1
GENESCO INC. | ||||||||
Consolidated Earnings Summary | ||||||||
Three Months Ended | ||||||||
May 3, | May 4, | |||||||
In Thousands | 2014 | 2013 | ||||||
Sales: | ||||||||
Journeys Group | $ | 262,123 | $ | 257,143 | ||||
Schuh Group | 81,276 | 68,323 | ||||||
Lids Sports Group | 189,266 | 177,905 | ||||||
Johnston & Murphy Group | 63,397 | 58,425 | ||||||
Licensed Brands | 32,462 | 29,355 | ||||||
Corporate and Other | 301 | 237 | ||||||
Net Sales | $ | 628,825 | $ | 591,388 | ||||
Operating Income (Loss): | ||||||||
Journeys Group | $ | 19,677 | $ | 22,213 | ||||
Schuh Group (1) | (5,141 | ) | (4,643 | ) | ||||
Lids Sports Group | 8,137 | 10,796 | ||||||
Johnston & Murphy Group | 4,496 | 3,848 | ||||||
Licensed Brands | 3,521 | 2,921 | ||||||
Corporate and Other (2) | (6,972 | ) | (9,411 | ) | ||||
Earnings from operations | 23,718 | 25,724 | ||||||
Interest, net | 701 | 1,039 | ||||||
Earnings from continuing operations | ||||||||
before income taxes | 23,017 | 24,685 | ||||||
Income tax expense | 8,919 | 10,176 | ||||||
Earnings from continuing operations | 14,098 | 14,509 | ||||||
Provision for discontinued operations | (125 | ) | (99 | ) | ||||
Net Earnings | $ | 13,973 | $ | 14,410 | ||||
(1)Includes $3.1 million and $2.9 million, respectively, in deferred payments related to the Schuh acquisition for the first quarter ended May 3, 2014 and May 4, 2013.
(2)Includes a $1.1 million gain in the first quarter of Fiscal 2015 which includes a $3.1 million gain for a lease termination, partially offset by $1.2 million for network intrusion expenses and $0.8 million in asset impairments. Includes a $1.3 million charge in the first quarter of Fiscal 2014 which includes $1.2 million in asset impairments and $0.1 million for network intrusion expenses.
Exhibit 99.1
GENESCO INC. | |||||||
Consolidated Balance Sheet | |||||||
May 3, | May 4, | ||||||
In Thousands | 2014 | 2013 | |||||
Assets | |||||||
Cash and cash equivalents | $ | 71,882 | $ | 39,668 | |||
Accounts receivable | 53,746 | 44,194 | |||||
Inventories | 587,245 | 509,100 | |||||
Other current assets | 82,912 | 64,464 | |||||
Total current assets | 795,785 | 657,426 | |||||
Property and equipment | 280,972 | 241,534 | |||||
Other non-current assets | 406,150 | 403,114 | |||||
Total Assets | $ | 1,482,907 | $ | 1,302,074 | |||
Liabilities and Equity | |||||||
Accounts payable | $ | 171,026 | $ | 117,923 | |||
Current portion long-term debt | 7,489 | 5,576 | |||||
Other current liabilities | 142,470 | 121,614 | |||||
Total current liabilities | 320,985 | 245,113 | |||||
Long-term debt | 25,600 | 47,745 | |||||
Other long-term liabilities | 194,825 | 182,008 | |||||
Equity | 941,497 | 827,208 | |||||
Total Liabilities and Equity | $ | 1,482,907 | $ | 1,302,074 | |||
Exhibit 99.1
GENESCO INC. | |||||||||||||||||||||||
Retail Units Operated - Three Months Ended May 3, 2014 | |||||||||||||||||||||||
Balance | Acquisi- | Balance | Balance | ||||||||||||||||||||
2/2/2013 | tions | Open | Close | 2/1/2014 | Open | Close | 5/3/2014 | ||||||||||||||||
Journeys Group | 1,157 | — | 39 | 28 | 1,168 | 7 | 3 | 1,172 | |||||||||||||||
Journeys | 820 | — | 20 | 13 | 827 | 2 | 1 | 828 | |||||||||||||||
Underground by Journeys | 130 | — | — | 13 | 117 | — | — | 117 | |||||||||||||||
Journeys Kidz | 156 | — | 19 | 1 | 174 | 5 | 1 | 178 | |||||||||||||||
Shi by Journeys | 51 | — | — | 1 | 50 | — | 1 | 49 | |||||||||||||||
Schuh Group | 92 | — | 29 | 22 | 99 | 2 | 1 | 100 | |||||||||||||||
Schuh UK* | 70 | — | 29 | 9 | 90 | 2 | 1 | 91 | |||||||||||||||
Schuh ROI | 9 | — | — | — | 9 | — | — | 9 | |||||||||||||||
Schuh Concessions* | 13 | — | — | 13 | — | — | — | — | |||||||||||||||
Lids Sports Group | 1,053 | 15 | 102 | 37 | 1,133 | 19 | 18 | 1,134 | |||||||||||||||
Johnston & Murphy Group | 157 | — | 13 | 2 | 168 | 1 | 2 | 167 | |||||||||||||||
Shops | 102 | — | 6 | 2 | 106 | — | 1 | 105 | |||||||||||||||
Factory Outlets | 55 | — | 7 | — | 62 | 1 | 1 | 62 | |||||||||||||||
Total Retail Units | 2,459 | 15 | 183 | 89 | 2,568 | 29 | 24 | 2,573 | |||||||||||||||
Permanent Units* | 2,446 | 15 | 173 | 69 | 2,565 | 29 | 23 | 2,571 | |||||||||||||||
*Excludes Schuh Concessions and temporary "pop-up" locations.
Comparable Sales (including same store and comparable direct sales) | ||||||
Three Months Ended | ||||||
May 3, | May 4, | |||||
2014 | 2013 | |||||
Journeys Group | 1 | % | (2 | )% | ||
Schuh Group | (1 | )% | (11 | )% | ||
Lids Sports Group | 1 | % | (6 | )% | ||
Johnston & Murphy Group | (1 | )% | 7 | % | ||
Total Comparable Sales | 1 | % | (4 | )% | ||
Exhibit 99.1
Schedule B
Genesco Inc. | ||||||||||||
Adjustments to Reported Earnings from Continuing Operations | ||||||||||||
First Quarter Ended May 3, 2014 and May 4, 2013 | ||||||||||||
First | Impact on | First | Impact on | |||||||||
Quarter | Diluted | Quarter | Diluted | |||||||||
In Thousands (except per share amounts) | Apr 2014 | EPS | Apr 2013 | EPS | ||||||||
Earnings from continuing operations, as reported | $ | 14,098 | $ | 0.60 | $ | 14,509 | $ | 0.61 | ||||
Adjustments: (1) | ||||||||||||
Impairment charges | 519 | 0.02 | 760 | 0.04 | ||||||||
Deferred payment - Schuh acquisition | 3,102 | 0.13 | 2,851 | 0.12 | ||||||||
Gain on lease termination | (1,991 | ) | (0.09 | ) | — | — | ||||||
Change in accounting for bonus awards | 3,575 | 0.15 | 4,117 | 0.17 | ||||||||
Other legal matters | 13 | — | (13 | ) | — | |||||||
Network intrusion expenses | 761 | 0.03 | 89 | — | ||||||||
Higher (lower) effective tax rate | (783 | ) | (0.03 | ) | (66 | ) | — | |||||
Adjusted earnings from continuing operations (2) | $ | 19,294 | $ | 0.81 | $ | 22,247 | $ | 0.94 | ||||
(1) All adjustments are net of tax where applicable. The tax rate for the first quarter of Fiscal 2015is 37.0% excluding a FIN 48 discrete item of less than $0.1 million. The tax rate for the first quarter of Fiscal 2014 is 37.1% excluding a FIN 48 discrete item of less than $0.1 million.
(2) EPS reflects 23.7 million share count for both Fiscal 2015 and 2014, 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 | |||||||||
First Quarter Ended May 3, 2014 and May 4, 2013 | |||||||||
Three Months Ended May 3, 2014 | |||||||||
Operating | Bonus Adj | Adj Operating | |||||||
In Thousands | Income | and Other | Income | ||||||
Journeys Group | $ | 19,677 | $ | 4,919 | $ | 24,596 | |||
Schuh Group* | (5,141 | ) | 3,102 | (2,039 | ) | ||||
Lids Sports Group | 8,137 | — | 8,137 | ||||||
Johnston & Murphy Group | 4,496 | 25 | 4,521 | ||||||
Licensed Brands | 3,521 | — | 3,521 | ||||||
Corporate and Other | (6,972 | ) | (376 | ) | (7,348 | ) | |||
Total Operating Income | $ | 23,718 | $ | 7,670 | $ | 31,388 | |||
*Schuh Group adjustments include $3.1 million in deferred purchase price payments.
Exhibit 99.1
Schedule B
Three Months Ended May 4, 2013 | |||||||||
Operating | Bonus Adj | Adj Operating | |||||||
In Thousands | Income | and Other | Income | ||||||
Journeys Group | $ | 22,213 | $ | 1,418 | $ | 23,631 | |||
Schuh Group* | (4,643 | ) | 4,468 | (175 | ) | ||||
Lids Sports Group | 10,796 | 1,713 | 12,509 | ||||||
Johnston & Murphy Group | 3,848 | 4 | 3,852 | ||||||
Licensed Brands | 2,921 | (6 | ) | 2,915 | |||||
Corporate and Other | (9,411 | ) | 3,127 | (6,284 | ) | ||||
Total Operating Income | $ | 25,724 | $ | 10,724 | $ | 36,448 | |||
*Schuh Group adjustments include $2.9 million in deferred purchase price payments.
Genesco Inc. | ||||||||||||
Adjustments to Forecasted Earnings from Continuing Operations | ||||||||||||
Fiscal Year Ending January 31, 2015 | ||||||||||||
In Thousands (except per share amounts) | High Guidance | Low Guidance | ||||||||||
Fiscal 2015 | Fiscal 2015 | |||||||||||
Forecasted earnings from continuing operations | $ | 119,299 | $ | 5.03 | $ | 115,421 | $ | 4.87 | ||||
Adjustments: (1) | ||||||||||||
Asset impairment and other charges | 1,632 | 0.07 | 1,947 | 0.08 | ||||||||
Change in accounting for bonus awards | 3,578 | 0.15 | 3,578 | 0.15 | ||||||||
Deferred payment - Schuh acquisition | 7,228 | 0.30 | 7,228 | 0.30 | ||||||||
Adjusted forecasted earnings from continuing operations (2) | $ | 131,737 | $ | 5.55 | $ | 128,174 | $ | 5.40 | ||||
(1) All adjustments are net of tax where applicable. The forecasted tax rate for Fiscal 2015 is approximately 37.0% excluding a FIN 48 discrete item of $0.1 million.
(2) EPS reflects 23.8 million share count for Fiscal 2015 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.
Exhibit 99.2
GENESCO INC.
CHIEF FINANCIAL OFFICER’S COMMENTARY
FISCAL YEAR 2015
FIRST QUARTER ENDED MAY 3, 2014
Consolidated Results
First Quarter
Sales
First quarter net sales increased 6.3% to $629 million in Fiscal 2015 from $591 million in the first quarter of Fiscal 2014. Comparable sales for Genesco and each of its business segments, including both same store sales and comparable sales from the Company’s direct (e-commerce and catalog) businesses for the quarter, were as follows:
Comparable Sales | ||
1st Qtr | 1st Qtr | |
Same Store Sales: | FY15 | FY14 |
Journeys Group | 1% | (2)% |
Schuh Group | 0% | (14)% |
Lids Sports Group | 0% | (8)% |
Johnston & Murphy Group | 0% | 6% |
Total Genesco | 0% | (5)% |
1st Qtr | 1st Qtr | |
Comparable Direct Sales: | FY15 | FY14 |
Journeys Group | 19% | 26% |
Schuh Group | (6)% | 5% |
Lids Sports Group | 5% | 29% |
Johnston & Murphy Group | (3)% | 10% |
Total Genesco | 3% | 16% |
1st Qtr | 1st Qtr | |
Same Store and Comparable Direct Sales: | FY15 | FY14 |
Journeys Group | 1% | (2)% |
Schuh Group | (1)% | (11)% |
Lids Sports Group | 1% | (6)% |
Johnston & Murphy Group | (1)% | 7% |
Total Genesco | 1% | (4)% |
Through May 24, 2014, same store sales for May increased 2% and direct sales increased 7% on a comparable basis; and combined comparable sales increased 3%.
Exhibit 99.2
Gross Margin
First quarter gross margin was 50.2% this year compared with 50.5% last year, primarily reflecting lower gross margins in Schuh, Lids, and Licensed Brands.
SG&A
Selling and administrative expense for the first quarter increased to 46.6% of sales from 45.9% for the same period last year. Included in expenses this quarter is $3.1 million, or $0.13 per diluted share, in expense related to deferred purchase price in the Schuh acquisition. The deferred purchase price payments, totaling £25 million, are due in June 2014 and 2015 if the payees remain employed until the payment dates. As we have discussed before, because of the retention feature, U.S. GAAP requires these deferred purchase price payments to be expensed as compensation. This is a non-cash expense until the payment conditions are satisfied. Last year, expenses in the quarter included $2.9 million or $0.12 per diluted share of deferred purchase price. In addition, the quarter’s SG&A expense included $5.7 million, or $0.15 per share, recognized in connection with an amendment to the Company’s EVA Incentive Plan which removes the future service requirements for payment of “banked” bonuses, instead making them payable after five years following a Plan participant’s voluntary resignation, subject to reduction or elimination if operating results deteriorate prior to the payment date. Prior to the amendment, since a previous change in accounting for “banked” bonuses announced by the Company in the second quarter last year, the banked amounts had been expensed as they became payable and excluded from adjusted expense and earnings measures presented in our quarterly announcements. With the first quarter amendment to the Plan, the Company has recorded the one-time charge of $5.7 million, representing the total of all “banked” bonuses as of the date of the amendment, and will cease the amortization of banked amounts in future periods. Therefore, the full bonus earned in a particular year will once again be expensed in that year. Last year’s first quarter SG&A expense reflects a gain of $6.4 million, or $0.17 per diluted share, recognized in connection with the previous change in accounting for banked bonuses. Excluding the deferred purchase price expense and the effects of the bonus-related accounting changes from both periods, excluding a net gain of $1.1 million, or $0.04 per diluted share, which includes a lease termination gain partially offset by asset impairment and network intrusion expenses, from this year’s first quarter, and excluding asset impairment and network intrusion expense of $1.3 million, or $0.04 per diluted share from last year’s first quarter (collectively, the “Excluded Items”), SG&A as a percent of sales increased to 45.3% from 44.3% last year. A reconciliation of non-GAAP financial measures to the most directly comparable GAAP measure is provided in the schedule at the end of this document.
Also included in first quarter SG&A expense, but not eliminated from the adjusted expense, is $1.4 million, or $0.05 per diluted share, this year, and $1.0 million, or $0.03 per diluted share, last year, related to a contingent bonus payment provided for in the Schuh acquisition. The purchase agreement calls for a total payment of up to £28 million including payroll taxes to members of the Schuh management group payable in Fiscal 2016 if they have achieved certain earnings targets above the planned earnings on which we based our acquisition valuation. As we have discussed previously, there will be quarterly accruals for a portion of this payment, reflecting an estimate of the probability, based on Schuh’s performance, that it will be earned. We anticipate that the contingent bonus will be fully accrued by the end of the current fiscal year.
Asset Impairment and Other
The asset impairment and other gain of $1.1 million for the first quarter of Fiscal 2015 included a lease termination gain of $3.1 million for a Lids store, partially offset by network intrusion expenses of $1.2 million and asset impairments of $0.8 million. Last year’s first quarter asset impairment and other charge of $1.3 million included asset impairments of $1.2 million and network intrusion expenses of $0.1 million.
Exhibit 99.2
Operating Income
Genesco’s operating income for the first quarter was $23.7 million this year compared with $25.7 million last year. Adjusted for the Excluded Items discussed above in both periods, operating income for the first quarter was $31.4 million this year compared with $36.4 million last year. Adjusted operating margin was 5.0% of sales in the first quarter this year and 6.2% last year. A reconciliation of non-GAAP financial measures to the most directly comparable GAAP measure is provided in the schedule at the end of this document.
Interest Expense
Net interest expense for the quarter was $0.7 million, compared with $1.0 million for the same period last year.
Pretax Earnings
Pretax earnings for the quarter were $23.0 million this year and $24.7 million last year. Adjusted for the Excluded Items in both years, pretax earnings for the quarter were $30.7 million this year compared to $35.4 million last year. A reconciliation of non-GAAP financial measures to the most directly comparable GAAP measure is provided in the schedule at the end of this document.
Taxes
The effective tax rate for the quarter was 38.7% this year compared to 41.2% last year. The adjusted tax rate, reflecting the exclusion of the Excluded Items, was 37.0% this year compared to 37.1 % last year. The difference in the tax rates is due primarily to the non-deductibility of the deferred purchase price expense for U.S. tax purposes, which increases the effective tax rate on a GAAP basis.
Earnings From Continuing Operations After Taxes
Earnings from continuing operations were $14.1 million, or $0.60 per diluted share, in the first quarter this year, compared to earnings of $14.5 million, or $0.61 per diluted share, in the first quarter last year. Adjusted for the Excluded Items in both periods, first quarter earnings from continuing operations were $19.3 million, or $0.81 per diluted share this year, compared with $22.2 million, or $0.94 per diluted share, last year. A reconciliation of non-GAAP financial measures to the most directly comparable GAAP measure is provided in the schedule at the end of this document.
Segment Results
Lids Sports Group
Lids Sports Group’s sales for the first quarter increased 6.4% to $189 million from $178 million last year.
Same store sales for the quarter were flat this year compared to an 8% decrease last year. Comparable direct sales increased 5% compared to 29% last year. Comparable sales, including both same store and comparable direct sales, increased 1% this year compared to a 6% decrease last year. Through May 24, 2014, same store sales for May decreased 1%; e-commerce sales increased 15%; and combined comparable sales were flat.
The Group’s gross margin as a percent of sales decreased 110 basis points due primarily to increased promotional activity and changes in the sales mix. Adjusted SG&A expense as a percent of sales increased
Exhibit 99.2
160 basis points from 46.4% to 48.0%, due primarily to the reversal of bonus accruals in the first quarter last year and an increase in rent expense driven by square footage growth of more than 10% this year.
The Group’s first quarter adjusted operating income was $8.1 million, or 4.3% of sales, down from $12.5 million, or 7.0% of sales, last year. A reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures is posted on the Company’s website in conjunction with this document.
Journeys Group
Journeys Group’s sales for the quarter increased 1.9% to $262 million from $257 million last year.
Same store sales for the Group were up 1%, compared with a 2% decrease last year; comparable direct sales increased 19% this year and 26% last year. Combined comparable sales increased 1% this year compared with a 2% decrease last year. Through May 24, 2014, same store sales for May increased 5%; comparable direct sales increased 20%; and combined comparable sales increased 5%.
Adjusted gross margin for the Journeys Group increased 70 basis points in the quarter due primarily to lower markdowns.
The Journeys Group’s adjusted SG&A expense increased 50 basis points as a percent of sales for the first quarter, primarily due to an increase in their bonus accrual.
The Journeys Group’s adjusted operating income for the quarter was $24.6 million, or 9.4% of sales, compared to $23.6 million, or 9.2% of sales, last year. A reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures is posted on the Company’s website in conjunction with this document.
Schuh Group
Schuh Group’s sales in the first quarter were $81 million, compared to $68 million last year, an increase of 19.0%. Same store sales were flat in the quarter compared to a 14% decrease last year; direct sales decreased 6% compared to a 5% increase last year; and total comparable sales decreased by 1% compared to an 11% decrease last year. Through May 24, 2014, same store sales for May increased 1%; comparable direct sales increased 1%; and total comparable sales increased 1%.
Schuh Group’s gross margin was down 10 basis points in the quarter. Schuh Group’s adjusted SG&A expense increased 220 basis points due to the reversal of bonus accruals in the first quarter last year and a higher contingent bonus accrual in the first quarter this year compared to the same period last year.
Schuh Group’s adjusted operating loss was ($2.0) million, or (2.5%) of sales compared with ($0.2) million, or (0.3%) of sales last year. A reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures is posted on the Company’s website in conjunction with this document.
Johnston & Murphy Group
Johnston & Murphy Group’s first quarter sales increased 8.5%, to $63 million, compared to $58 million in the first quarter last year.
Johnston & Murphy’s wholesale sales increased 10% in the quarter. Same store sales were flat; direct sales decreased 3%; and combined comparable sales decreased 1% on top of a 7% increase last year. Direct sales represented about 10% of Johnston & Murphy Group’s sales this quarter. Through May 24, 2014, same store
Exhibit 99.2
sales for May increased 2%; e-commerce and catalog sales decreased 4%; and combined comparable sales increased 1%.
Johnston & Murphy’s gross margin increased 10 basis points in the quarter. Adjusted SG&A expense as a percent of sales decreased by 40 basis points, due primarily to lower incentive compensation accruals. Adjusted operating income was $4.5 million or 7.1% of sales, compared to $3.9 million, or 6.6% of sales last year. A reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures is posted on the Company’s website in conjunction with this document.
Licensed Brands
Licensed Brands’ sales increased 10.6% to $32 million in the first quarter, compared to $29 million in the first quarter last year. Gross margin was down 30 basis points, due primarily to increased closeouts and changes in product mix.
Adjusted SG&A expense as a percent of sales was down 120 basis points, due primarily to good expense control.
Adjusted operating income for the quarter was $3.5 million or 10.8% of sales, compared with $2.9 million, or 9.9% of sales last year. A reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures is posted on the Company’s website in conjunction with this document.
Corporate
Corporate expenses were $7.0 million or 1.1% of sales, compared with $9.4 million or 1.6% of sales last year. Adjusted for the applicable Excluded Items, corporate expenses were $7.3 million this year compared to $6.3 million last year, primarily due to the reversal of prior-year bonus accruals in the first quarter last year. A reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures is posted on the Company’s website in conjunction with this document.
Balance Sheet
Cash
Cash at the end of the first quarter was $72 million compared with $40 million last year. We ended the quarter with $33 million in debt, compared with $53 million last year. All of the debt at the end of the first quarter this year is U.K. debt.
Inventory
Inventories increased 15% in the first quarter on a year-over-year basis. Retail inventory per square foot increased 8%.
Equity
Equity was $941 million at quarter-end, compared with $827 million last year.
Exhibit 99.2
Capital Expenditures and Store Count
For the first quarter, capital expenditures were $19.8 million and depreciation and amortization was $17.4 million. During the quarter, we opened 29 new stores and closed 24 stores. Excluding Locker Room by Lids in Macy’s stores and two Schuh pop-up stores, we ended the quarter with 2,538 stores compared with 2,446 stores at the end of the first quarter last year, or an increase of 4%. During the quarter, we opened seven Macy’s locations. Square footage increased 6% on a year-over-year basis, including the Macy’s locations. The store count as of May 3, 2014 included:
Lids stores (including 110 stores in Canada) | 940 |
Lids Locker Room Stores | 129 |
Lids Clubhouse Stores | 32 |
Journeys Stores (including 31 Stores in Canada) | 828 |
Journeys Kidz Stores | 178 |
Shï by Journeys Stores | 49 |
Underground by Journeys Stores | 117 |
Schuh Stores including 4 Kids Stores | 98 |
Johnston & Murphy Stores and Factory Stores (including 7 stores in Canada) | 167 |
Total Stores | 2,538 |
Locker Room by Lids in Macy’s stores | 33 |
Schuh “pop up” stores | 2 |
Total Stores and Macy’s Locations | 2,573 |
Exhibit 99.2
For Fiscal 2015, we are forecasting capital expenditures of approximately $149 million and depreciation and amortization of about $74 million. Our current store openings and closing plans by chain are as follows:
Actual | Projected | Projected | Projected | Projected | ||||
Jan 2014 | New | Conversions | Closings | Jan 2015 | ||||
Journeys Group | 1,168 | 50 | (29) | 1,189 | ||||
Journeys stores (U.S.) | 796 | 20 | (10) | 806 | ||||
Journeys stores (Canada) | 31 | 5 | 0 | 36 | ||||
Journeys Kidz stores | 174 | 25 | (3) | 196 | ||||
Shï by Journeys | 50 | 0 | (1) | 49 | ||||
Underground by Journeys | 117 | 0 | (15) | 102 | ||||
Johnston & Murphy Group | 168 | 10 | (4) | 174 | ||||
Schuh Group | 96 | 15 | 0 | 111 | ||||
Schuh Stores | 92 | 12 | 0 | 104 | ||||
Schuh Kids | 4 | 3 | 0 | 7 | ||||
Lids Sports Group | 1,133 | 268 | (18) | 1,383 | ||||
Lids hat stores (U.S.) | 820 | 34 | 2 | (13) | 843 | |||
Lids hat stores (Canada) | 110 | 15 | 0 | 125 | ||||
Lids Locker Room, Locker Room by Lids in Macy’s stores & Lids Clubhouse | 203 | 219* | (2) | (5) | 415 | |||
Total Permanent Stores | 2,565 | 343* | 0 | (51) | 2,857 | |||
Schuh “pop-up” stores | 3 | 0 | 0 | (3) | 0 | |||
Total Stores | 2,568 | 343 | 0 | (54) | 2,857 | |||
*Includes 175 Locker Room by Lids in Macy’s stores
Comparable Sales Assumptions in Fiscal 2015 Guidance
Our guidance for Fiscal 2015 assumes comparable sales (including both same store sales and comparable direct sales) for the remainder of the year for each retail segment by quarter as follows:
Actual | Guidance | ||||
Q1 | Q2 | Q3 | Q4 | FY15 | |
Journeys Group | 1% | 2 - 3% | 2 - 3% | 3 - 4% | 2 - 3% |
Lids Sports Group | 1% | 0 - 1% | 0 - 1% | 0 - 1% | 0 - 1% |
Schuh Group | (1%) | 0 - 1% | 2 - 3% | 4 - 5% | 1 - 2% |
Johnston & Murphy Group | (1%) | 0 - 1% | 2 - 3% | 2 - 3% | 1 - 2% |
Total Genesco | 1% | 1 - 2% | 1 - 2% | 2 - 3% | 1 - 2% |
Exhibit 99.2
Cautionary Note Concerning Forward-Looking Statements
This presentation contains forward-looking statements, including those regarding the performance outlook for the Company and its individual businesses (including, without limitation, sales, 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 amount of required accruals related to the earn-out bonus potentially payable to Schuh management based on the achievement of certain performance objectives; the timing and amount of non-cash asset impairments related to retail store fixed assets or to intangible assets of acquired businesses; weakness in the consumer economy; 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; and changes in the timing of holidays or in the onset of seasonal weather affecting period-to-period 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 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 presentation 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.