UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the transition period from to |
Commission File No.
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
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(Zip Code) |
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(Address of principal executive offices) |
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Registrant's telephone number, including area code: (
Former address:
Securities registered pursuant to Section 12(b) of the Act:
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Name of each exchange on which registered |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such report), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer; an accelerated filer; a non-accelerated filer; a smaller reporting company; or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes
As of May 27, 2022, there were
INDEX
2
cautionary notice regarding forward-looking statements
Statements in this Quarterly Report on Form 10-Q include certain forward-looking statements, which include statements regarding our intent, belief or expectations and all statements other than those made solely with respect to historical fact. Actual results could differ materially from those reflected by the forward-looking statements in this Quarterly Report on Form 10-Q and a number of factors may adversely affect the forward-looking statements and our future results, liquidity, capital resources or prospects. These include, but are not limited to, risks related to public health and safety issues, including, for example, risks related to the ongoing novel coronavirus ("COVID-19") pandemic; disruptions to our business, sales, supply chain and financial results; the level of consumer spending on our merchandise and interest in our brands and in general, the level and timing of promotional activity necessary to maintain inventories at appropriate levels; our ability to pass on price increases to our customers; the timing and amount of any share repurchases by us; risks related to doing business internationally, including the manufacturing of a portion of our products in China; the imposition of tariffs on products imported by us or our vendors as well as the ability and costs to move production of products in response to tariffs; our ability to obtain from suppliers products that are in-demand on a timely basis and effectively manage disruptions in product supply or distribution; unfavorable trends in fuel costs, foreign exchange rates, foreign labor and material costs; a disruption in shipping or increase in cost of our imported products, and other factors affecting the cost of products; our dependence on third-party vendors and licensors for the products we sell; the effects of the withdrawal of the United Kingdom ("U.K.") from the European Union ("Brexit") and other sources of market weakness in the U.K. and the Republic of Ireland (the “ROI”); the effectiveness of our omnichannel initiatives; costs associated with changes in minimum wage and overtime requirements; wage pressure in the U.S. and the U.K.; labor shortages; the effects of inflation, including our ability to pass increased cost on to consumers; effects resulting from wars and other military operations; the evolving regulatory landscape related to our use of social media; the establishment and protection of our intellectual property; weakness in the consumer economy and retail industry; competition and fashion trends in our markets, including trends with respect to the popularity of casual and dress footwear; weakness in shopping mall traffic; any failure to increase sales at our existing stores, given our high fixed expense cost structure, and in our e-commerce businesses; risks related to the potential for terrorist events; changes in buying patterns by significant wholesale customers; changes in consumer preferences; our ability to continue to complete and integrate acquisitions; our ability to expand our business and diversify our product base; impairment of goodwill in connection with acquisitions; payment related risks that could increase our operating cost, expose us to fraud or theft, subject us to potential liability and disrupt our business; retained liabilities associated with divestitures of businesses including potential liabilities under leases as the prior tenant or as a guarantor of certain leases; and changes in the timing of holidays or in the onset of seasonal weather affecting period-to-period sales comparisons. Additional factors that could cause differences from expectations include our ability to open additional retail stores, renew leases in existing stores, control or lower occupancy costs, to conduct required remodeling or refurbishment on schedule and at expected expense levels; realize anticipated cost savings, including rent savings; realize any anticipated tax benefits, and achieve expected digital gains and gain market share; deterioration in the performance of individual businesses or of our market value relative to our book value, resulting in impairments of fixed assets, operating lease right of use assets or intangible assets or other adverse financial consequences and the timing and amount of such impairments or other consequences; unexpected changes to the market for our shares or for the retail sector in general; costs and reputational harm as a result of disruptions in our business or 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 that involve us. For a full discussion of risk factors, see Item 1A, "Risk Factors".
Readers are cautioned not to place undue reliance on forward-looking statements as such statements speak only as of the date they were made and involve risks and uncertainties that could cause actual events or results to differ materially from the events or results described in the forward-looking statements. The most important factors which could cause our actual results to differ from our forward-looking statements are set forth in our description of risk factors in Item 1A contained in our Annual Report on Form 10-K for the fiscal year ended January 29, 2022, which should be read in conjunction with the forward-looking statements in this Quarterly Report on Form 10-Q. Forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update any forward-looking statement.
The events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. As a result, our actual results may differ materially from the results contemplated by these forward-looking statements.
We maintain a website at www.genesco.com where investors and other interested parties may obtain, free of charge, press releases and other information as well as gain access to our periodic filings with the Securities and Exchange Commission (“SEC”). The information contained on this website should not be considered to be a part of this or any other report filed with or furnished to the SEC.
3
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Genesco Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands, except share amounts)
Assets |
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April 30, 2022 |
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January 29, 2022 |
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May 1, 2021 |
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Current Assets: |
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Cash and cash equivalents |
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$ |
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$ |
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$ |
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Accounts receivable, net of allowances of $ |
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$ |
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Inventories |
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Prepaids and other current assets |
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Total current assets |
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Property and equipment, net |
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Operating lease right of use assets |
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Goodwill |
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Other intangibles |
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Deferred income taxes |
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Other noncurrent assets |
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Total Assets |
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Liabilities and Equity |
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Current Liabilities: |
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Accounts payable |
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Current portion - operating lease liabilities |
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Other accrued liabilities |
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Total current liabilities |
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Long-term debt |
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Long-term operating lease liabilities |
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Other long-term liabilities |
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Total liabilities |
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Equity |
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Non-redeemable preferred stock |
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Common equity: |
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Common stock, $ |
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Authorized: |
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Issued common stock |
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Additional paid-in capital |
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Retained earnings |
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Accumulated other comprehensive loss |
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( |
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Treasury shares, at cost ( |
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Total equity |
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Total Liabilities and Equity |
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$ |
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$ |
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$ |
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The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.
4
Genesco Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
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Three Months Ended |
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April 30, 2022 |
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May 1, 2021 |
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Net sales |
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$ |
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$ |
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Cost of sales |
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Gross margin |
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Selling and administrative expenses |
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Asset impairments and other, net |
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Operating income |
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Other components of net periodic benefit cost (income) |
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Interest expense (net of interest income of $ |
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Earnings from continuing operations before income taxes |
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Income tax expense |
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Earnings from continuing operations |
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Loss from discontinued operations, net of tax |
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Net Earnings |
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$ |
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$ |
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Basic earnings per common share: |
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Continuing operations |
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$ |
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$ |
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Discontinued operations |
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Net earnings |
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$ |
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$ |
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Diluted earnings per common share: |
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Continuing operations |
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$ |
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$ |
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Discontinued operations |
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Net earnings |
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$ |
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$ |
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Weighted average shares outstanding: |
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Basic |
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Diluted |
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The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.
5
Genesco Inc. and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income
(In thousands)
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Three Months Ended |
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April 30, 2022 |
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May 1, 2021 |
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Net earnings |
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$ |
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$ |
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Other comprehensive income (loss): |
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Postretirement liability adjustments, net of tax |
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( |
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Foreign currency translation adjustments |
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Total other comprehensive income (loss) |
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( |
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Comprehensive Income |
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$ |
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$ |
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The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.
6
Genesco Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands)
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Three Months Ended |
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April 30, 2022 |
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May 1, 2021 |
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CASH FLOWS FROM OPERATING ACTIVITIES: |
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Net earnings |
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$ |
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$ |
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Adjustments to reconcile net earnings to net cash provided by (used in) |
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operating activities: |
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Depreciation and amortization |
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Deferred income taxes |
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( |
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Impairment of long-lived assets |
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Share-based compensation expense |
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Other |
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Changes in working capital and other assets and liabilities, net of |
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Accounts receivable |
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( |
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( |
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Inventories |
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( |
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( |
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Prepaids and other current assets |
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( |
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Accounts payable |
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Other accrued liabilities |
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( |
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Other assets and liabilities |
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( |
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( |
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Net cash provided by (used in) operating activities |
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( |
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CASH FLOWS FROM INVESTING ACTIVITIES: |
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Capital expenditures |
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( |
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( |
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Net cash used in investing activities |
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( |
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( |
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CASH FLOWS FROM FINANCING ACTIVITIES: |
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Borrowings under revolving credit facility |
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Payments on revolving credit facility |
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( |
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( |
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Shares repurchased related to share repurchase plan |
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( |
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Change in overdraft balances |
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( |
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Other |
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( |
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( |
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Net cash provided by (used in) financing activities |
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( |
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Effect of foreign exchange rate fluctuations on cash |
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( |
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Net increase (decrease) in cash and cash equivalents |
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( |
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Cash and cash equivalents at beginning of period |
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Cash and cash equivalents at end of period |
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$ |
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$ |
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Supplemental information: |
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Interest paid |
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$ |
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$ |
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Income taxes paid |
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Cash paid for amounts included in measurement of operating lease liabilities |
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Operating lease assets obtained in exchange for new operating lease liabilities |
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The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.
7
Genesco Inc. and Subsidiaries
Condensed Consolidated Statements of Equity
(In thousands)
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Non- |
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Common |
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Additional |
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Retained |
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Accumulated |
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Treasury |
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Total |
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Balance January 30, 2021 |
$ |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Net earnings |
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— |
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— |
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— |
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— |
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— |
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Other comprehensive income |
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— |
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— |
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— |
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— |
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— |
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Share-based compensation expense |
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— |
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— |
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— |
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— |
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— |
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Other |
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( |
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— |
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— |
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— |
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Balance May 1, 2021 |
$ |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Non- |
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Common |
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Additional |
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Retained |
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Accumulated |
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Treasury |
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Total |
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Balance January 29, 2022 |
$ |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Net earnings |
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— |
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— |
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— |
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— |
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— |
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Other comprehensive loss |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Share-based compensation expense |
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— |
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— |
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— |
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— |
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— |
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Restricted stock issuance |
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— |
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( |
) |
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— |
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— |
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— |
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— |
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Shares repurchased |
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— |
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( |
) |
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— |
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( |
) |
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— |
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— |
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( |
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Other |
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( |
) |
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( |
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— |
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— |
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— |
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Balance April 30, 2022 |
$ |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
( |
) |
$ |
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The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.
8
Genesco Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited)
Note 1
Summary of Significant Accounting Policies
Basis of Presentation
The Condensed Consolidated Financial Statements and Notes contained in this report are unaudited but reflect all adjustments, including normal recurring adjustments, necessary for a fair presentation of the results for the interim periods of the fiscal year ending January 28, 2023 ("Fiscal 2023") and of the fiscal year ended January 29, 2022 ("Fiscal 2022"). All subsidiaries are consolidated in the Condensed Consolidated Financial Statements. All significant intercompany transactions and accounts have been eliminated. The results of operations for any interim period are not necessarily indicative of results for the full year. The Condensed Consolidated Financial Statements and the related Notes have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and footnotes required by U.S. Generally Accepted Accounting Principles (“GAAP”) for complete financial statements. The Condensed Consolidated Balance Sheet as of January 29, 2022 has been derived from the audited financial statements at that date. These Condensed Consolidated Financial Statements should be read in conjunction with our Consolidated Financial Statements and Notes for Fiscal 2022, which are contained in our Annual Report on Form 10-K as filed with the SEC on March 23, 2022.
Nature of Operations
Genesco Inc. and its subsidiaries (collectively the "Company", "Genesco," "we", "our", or "us") business includes the sourcing and design, marketing and distribution of footwear and accessories through retail stores in the U.S., Puerto Rico and Canada primarily under the Journeys®, Journeys Kidz®, Little Burgundy® and Johnston & Murphy® banners and under the Schuh® banner in the United Kingdom (“U.K.”) and the Republic of Ireland (“ROI”); through catalogs and e-commerce websites including the following: journeys.com, journeyskidz.com, journeys.ca, littleburgundyshoes.com, schuh.co.uk, schuh.ie, schuh.eu, johnstonmurphy.com, johnstonmurphy.ca, nashvillewarehouse.com and dockersshoes.com and at wholesale, primarily under our Johnston & Murphy brand, the licensed Levi's® brand, the licensed Dockers® brand, the licensed G.H. Bass® brand and other brands that we license for footwear. At April 30, 2022, we operated
During the three months ended April 30, 2022 and May 1, 2021, we operated
Cash and Cash Equivalents
There were cash equivalents of $
Selling and Administrative Expenses
Wholesale costs of distribution are included in selling and administrative expenses on the Condensed Consolidated Statements of Operations in the amount of $
Retail occupancy costs recorded in selling and administrative expense were $
Advertising Costs
Advertising costs were $
9
Genesco Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited)
Note 1
Summary of Significant Accounting Policies, Continued
Vendor Allowances
Vendor reimbursements of cooperative advertising costs recognized as a reduction of selling and administrative expenses were $
COVID-19 Pandemic
The COVID-19 pandemic has created significant public health concerns as well as economic disruption, uncertainty, and volatility which may negatively affect our business operations. As a result, if the pandemic persists or worsens, our accounting estimates and assumptions could be impacted in subsequent interim reports and upon final determination at year-end, and it is reasonably possible such changes could be significant.
New Accounting Pronouncements
We do not currently have any new accounting pronouncements pending adoption.
Note 2
Goodwill and Other Intangible Assets
The changes in the carrying amount of goodwill by segment were as follows:
(In thousands) |
|
Journeys |
|
|
Licensed |
|
|
Total |
|
|||
Balance, January 29, 2022 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Effect of foreign currency exchange rates |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Balance, April 30, 2022 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Other intangibles by major classes were as follows:
|
|
Trademarks |
|
Customer Lists |
|
|
Other |
|
|
Total |
|
||||||||||||||||||||
(In thousands) |
|
Apr. 30, 2022 |
|
|
Jan. 29, |
|
Apr. 30, 2022 |
|
|
Jan. 29, |
|
|
Apr. 30, 2022 |
|
|
Jan. 29, |
|
|
Apr. 30, 2022 |
|
|
Jan. 29, |
|
||||||||
Gross other intangibles |
|
$ |
|
|
$ |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
Accumulated amortization |
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
||
Net Other Intangibles |
|
$ |
|
|
$ |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
Note 3
Asset Impairments and Other Charges
We recorded a pretax gain of $
We recorded pretax charges of $
10
Genesco Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited)
Note 4
Inventories and Other Current Accrued Liabilities
Inventory
(In thousands) |
|
April 30, 2022 |
|
|
January 29, 2022 |
|
||
Wholesale finished goods |
|
$ |
||||||