10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended July 30, 2022

 

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. 1-3083

Genesco Inc.

(Exact name of registrant as specified in its charter)

 

Tennessee

 

62-0211340

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

 

535 Marriott Drive

 

37214

Nashville,

Tennessee

 

(Zip Code)

(Address of principal executive offices)

 

 

 

Registrant's telephone number, including area code: (615) 367-7000

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $1.00 par value

GCO

New York Stock Exchange

 

 

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. Yes No

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). Yes No

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:

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

Emerging growth company

 

 

 

 

 

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 No

As of August 26, 2022, there were 13,069,101 shares of the registrant's common stock outstanding.

 


 

INDEX

 

 

 

Part I. Financial Information

 

Item 1. Financial Statements:

 

Condensed Consolidated Balance Sheets - July 30, 2022, January 29, 2022 and July 31, 2021

4

Condensed Consolidated Statements of Operations - Three and Six Months ended July 30, 2022 and July 31, 2021

5

Condensed Consolidated Statements of Comprehensive Income - Three and Six Months ended July 30, 2022 and July 31, 2021

6

Condensed Consolidated Statements of Cash Flows - Six Months ended July 30, 2022 and July 31, 2021

7

Condensed Consolidated Statements of Equity - Three and Six Months ended July 30, 2022 and July 31, 2021

8

Notes to Condensed Consolidated Financial Statements

9

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

16

Item 3. Quantitative and Qualitative Disclosures about Market Risk

24

Item 4. Controls and Procedures

24

Part II. Other Information

25

Item 1. Legal Proceedings

25

Item 1A. Risk Factors

25

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

25

Item 6. Exhibits

26

Signature

27

 

 

 

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"), impacts of the Russia-Ukraine war, 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; our ability to meet our sustainability, stewardship, emission and diversity, equity and inclusion related ESG projections, goals and commitments; 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

 

July 30, 2022

 

 

January 29, 2022

 

 

July 31, 2021

 

Current Assets:

 

 

 

 

 

 

 

 

 

Cash

 

$

44,939

 

 

$

320,525

 

 

$

304,039

 

Accounts receivable, net of allowances of $5,335 at July 30, 2022,

 

 

 

 

 

 

 

 

 

   $4,656 at January 29, 2022 and $4,440 at July 31, 2021

 

 

42,782

 

 

 

39,509

 

 

 

31,872

 

Inventories

 

 

507,236

 

 

 

278,200

 

 

 

326,477

 

Prepaids and other current assets

 

 

99,455

 

 

 

71,564

 

 

 

91,554

 

Total current assets

 

 

694,412

 

 

 

709,798

 

 

 

753,942

 

Property and equipment, net

 

 

220,742

 

 

 

216,308

 

 

 

202,711

 

Operating lease right of use assets

 

 

491,412

 

 

 

543,789

 

 

 

610,188

 

Goodwill

 

 

38,523

 

 

 

38,556

 

 

 

38,787

 

Other intangibles

 

 

27,506

 

 

 

29,855

 

 

 

31,063

 

Deferred income taxes

 

 

4,519

 

 

 

1,466

 

 

 

 

Other noncurrent assets

 

 

22,606

 

 

 

22,327

 

 

 

21,929

 

Total Assets

 

 

1,499,720

 

 

 

1,562,099

 

 

 

1,658,620

 

Liabilities and Equity

 

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

 

 

Accounts payable

 

 

226,779

 

 

 

152,484

 

 

 

186,593

 

Current portion - operating lease liabilities

 

 

135,571

 

 

 

145,088

 

 

 

156,562

 

Other accrued liabilities

 

 

80,266

 

 

 

134,156

 

 

 

134,407

 

Total current liabilities

 

 

442,616

 

 

 

431,728

 

 

 

477,562

 

Long-term debt

 

 

48,872

 

 

 

15,679

 

 

 

20,022

 

Long-term operating lease liabilities

 

 

413,416

 

 

 

471,878

 

 

 

524,857

 

Other long-term liabilities

 

 

34,283

 

 

 

40,346

 

 

 

48,082

 

Total liabilities

 

 

939,187

 

 

 

959,631

 

 

 

1,070,523

 

Commitments and contingent liabilities

 

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

 

 

 

Non-redeemable preferred stock

 

 

818

 

 

 

827

 

 

 

828

 

Common equity:

 

 

 

 

 

 

 

 

 

Common stock, $1 par value:

 

 

 

 

 

 

 

 

 

Authorized: 80,000,000 shares

 

 

 

 

 

 

 

 

 

 Issued common stock

 

 

13,557

 

 

 

14,256

 

 

 

15,597

 

Additional paid-in capital

 

 

298,010

 

 

 

291,444

 

 

 

286,298

 

Retained earnings

 

 

307,929

 

 

 

350,206

 

 

 

336,659

 

Accumulated other comprehensive loss

 

 

(41,924

)

 

 

(36,408

)

 

 

(33,428

)

Treasury shares, at cost (488,464 shares)

 

 

(17,857

)

 

 

(17,857

)

 

 

(17,857

)

Total equity

 

 

560,533

 

 

 

602,468

 

 

 

588,097

 

Total Liabilities and Equity

 

$

1,499,720

 

 

$

1,562,099

 

 

$

1,658,620

 

 

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)

 

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

July 30, 2022

 

 

July 31, 2021

 

 

July 30, 2022

 

 

July 31, 2021

 

Net sales

 

$

535,332

 

 

$

555,183

 

 

$

1,056,080

 

 

$

1,093,878

 

Cost of sales

 

 

281,018

 

 

 

282,661

 

 

 

550,322

 

 

 

563,694

 

Gross margin

 

 

254,314

 

 

 

272,522

 

 

 

505,758

 

 

 

530,184

 

Selling and administrative expenses

 

 

245,103

 

 

 

252,551

 

 

 

488,584

 

 

 

492,016

 

Asset impairments and other, net

 

 

129

 

 

 

7,070

 

 

 

(154

)

 

 

9,740

 

Operating income

 

 

9,082

 

 

 

12,901

 

 

 

17,328

 

 

 

28,428

 

Other components of net periodic benefit cost

 

 

50

 

 

 

56

 

 

 

148

 

 

 

17

 

Interest expense, net

 

 

405

 

 

 

617

 

 

 

702

 

 

 

1,346

 

Earnings from continuing operations before income taxes

 

 

8,627

 

 

 

12,228

 

 

 

16,478

 

 

 

27,065

 

Income tax expense

 

 

976

 

 

 

1,354

 

 

 

3,858

 

 

 

7,297

 

Earnings from continuing operations

 

 

7,651

 

 

 

10,874

 

 

 

12,620

 

 

 

19,768

 

Gain (loss) from discontinued operations, net of tax

 

 

(8

)

 

 

63

 

 

 

(30

)

 

 

47

 

Net Earnings

 

$

7,643

 

 

$

10,937

 

 

$

12,590

 

 

$

19,815

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per common share:

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

0.60

 

 

$

0.76

 

 

$

0.98

 

 

$

1.38

 

Discontinued operations

 

 

0.00

 

 

 

0.00

 

 

 

0.00

 

 

 

0.00

 

Net earnings

 

$

0.60

 

 

$

0.76

 

 

$

0.98

 

 

$

1.38

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per common share:

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

0.59

 

 

$

0.74

 

 

$

0.96

 

 

$

1.35

 

Discontinued operations

 

 

0.00

 

 

 

0.01

 

 

 

(0.01

)

 

 

0.00

 

Net earnings

 

$

0.59

 

 

$

0.75

 

 

$

0.95

 

 

$

1.35

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

12,813

 

 

 

14,339

 

 

 

12,887

 

 

 

14,313

 

Diluted

 

 

13,009

 

 

 

14,611

 

 

 

13,189

 

 

 

14,657

 

 

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)

 

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

July 30, 2022

 

 

July 31, 2021

 

 

July 30, 2022

 

 

July 31, 2021

 

Net earnings

 

$

7,643

 

 

$

10,937

 

 

$

12,590

 

 

$

19,815

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

Postretirement liability adjustments, net of tax

 

 

13

 

 

 

21

 

 

 

63

 

 

 

(23

)

Foreign currency translation adjustments

 

 

(1,712

)

 

 

152

 

 

 

(5,579

)

 

 

1,654

 

Total other comprehensive income (loss)

 

 

(1,699

)

 

 

173

 

 

 

(5,516

)

 

 

1,631

 

Comprehensive Income

 

$

5,944

 

 

$

11,110

 

 

$

7,074

 

 

$

21,446

 

 

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)

 

 

 

Six Months Ended

 

 

 

July 30, 2022

 

 

July 31, 2021

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

Net earnings

 

$

12,590

 

 

$

19,815

 

Adjustments to reconcile net earnings to net cash provided by (used in)

 

 

 

 

 

 

operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

21,229

 

 

 

21,634

 

Deferred income taxes

 

 

(3,075

)

 

 

(9,994

)

Impairment of long-lived assets

 

 

542

 

 

 

1,824

 

Share-based compensation expense

 

 

6,788

 

 

 

3,967

 

Other

 

 

413

 

 

 

375

 

Changes in working capital and other assets and liabilities, net of
   acquisitions/dispositions:

 

 

 

 

 

 

Accounts receivable

 

 

(3,753

)

 

 

66

 

Inventories

 

 

(234,018

)

 

 

(34,614

)

Prepaids and other current assets

 

 

(28,510

)

 

 

38,742

 

Accounts payable

 

 

71,258

 

 

 

36,681

 

Other accrued liabilities

 

 

(46,638

)

 

 

57,009

 

Other assets and liabilities

 

 

(21,037

)

 

 

(9,730

)

Net cash provided by (used in) operating activities

 

 

(224,211

)

 

 

125,775

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

Capital expenditures

 

 

(29,005

)

 

 

(19,545

)

Proceeds from asset sales

 

 

 

 

 

9

 

Other

 

 

 

 

 

74

 

Net cash used in investing activities

 

 

(29,005

)

 

 

(19,462

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

Borrowings under revolving credit facility

 

 

62,000

 

 

 

23,363

 

Payments on revolving credit facility

 

 

(27,375

)

 

 

(36,854

)

Shares repurchased related to share repurchase plan

 

 

(56,329

)

 

 

 

Shares repurchased related to taxes for share-based awards

 

 

(3,875

)

 

 

(4,076

)

Change in overdraft balances

 

 

4,841

 

 

 

(517

)

Other

 

 

2

 

 

 

(35

)

Net cash used in financing activities

 

 

(20,736

)

 

 

(18,119

)

Effect of foreign exchange rate fluctuations on cash

 

 

(1,634

)

 

 

754

 

Net increase (decrease) in cash

 

 

(275,586

)

 

 

88,948

 

Cash at beginning of period

 

 

320,525

 

 

 

215,091

 

Cash at end of period

 

$

44,939

 

 

$

304,039

 

Supplemental information:

 

 

 

 

 

 

Interest paid

 

$

504

 

 

$

1,256

 

Income taxes paid (refunded)

 

 

25,718

 

 

 

(29,485

)

Cash paid for amounts included in measurement of operating lease liabilities

 

 

101,687

 

 

 

96,248

 

Operating lease assets obtained in exchange for new operating lease liabilities

 

 

41,137

 

 

 

64,884

 

 

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)

 

 

Non-
Redeemable
Preferred
Stock

 

Common
Stock

 

Additional
Paid-In
Capital

 

Retained
Earnings

 

Accumulated
Other
Comprehensive
Loss

 

Treasury
Shares

 

Total
Equity

 

Balance January 30, 2021

$

1,009

 

$

15,438

 

$

282,308

 

$

320,920

 

$

(35,059

)

$

(17,857

)

$

566,759

 

Net earnings

 

 

 

 

 

 

 

8,878

 

 

 

 

 

 

8,878

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

1,458

 

 

 

 

1,458

 

Share-based compensation expense

 

 

 

 

 

1,912

 

 

 

 

 

 

 

 

1,912

 

Other

 

(181

)

 

6

 

 

176

 

 

 

 

 

 

 

 

1

 

Balance May 1, 2021

 

828

 

 

15,444

 

 

284,396

 

 

329,798

 

 

(33,601

)

 

(17,857

)

 

579,008

 

Net earnings

 

 

 

 

 

 

 

10,937

 

 

 

 

 

 

10,937

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

173

 

 

 

 

173

 

Share-based compensation expense