Genesco Reports Second Quarter Fiscal 2008 Results
- Company Reports Loss of $0.13 Per Share Before Discontinued Operations,
Including Merger-Related Expenses, Asset Impairment Charges and
Store Closing Costs of Approximately $0.13 Per Share -
NASHVILLE, Tenn., Aug. 30 /PRNewswire-FirstCall/ -- Genesco Inc. (NYSE: GCO) today reported a loss before discontinued operations of $2.9 million, or $0.13 per diluted share, for the second quarter ended August 4, 2007. Results for the quarter included $5.5 million pretax, or approximately $0.13 per diluted share, in expenses related to the Company's proposed merger with a subsidiary of The Finish Line Inc., retail store asset impairment charges and costs related to the previously announced decision to close certain underperforming stores, primarily in the Underground Station Group. For the second quarter ended July 29, 2006, earnings before discontinued operations were $5.9 million, or $0.24 per diluted share. Net sales for the second quarter of fiscal 2008 increased 8% to $328 million, compared to $304 million for the second quarter of fiscal 2007.
Genesco Chairman and Chief Executive Officer Hal N. Pennington said, "Our second quarter results were affected by the combination of a later start to back-to-school, later sales tax holidays in Texas and Florida and a generally challenging retail environment, especially in footwear. While back-to-school season is still in progress, we are encouraged by the improving trend in sales for the third quarter to date.
"Net sales in the Journeys Group increased 8% to approximately $148 million in the second quarter, while same store sales declined 7%. The shift in sales tax holidays in Texas and Florida from the second quarter last year to the third quarter this year had an especially pronounced effect on the Journeys Group, since approximately 16% of Journeys stores are located in those two states. Journeys' same store sales in Texas and Florida decreased 13% and 20%, respectively, in the quarter. We expect the Journeys business for the balance of the year to benefit from the later back-to-school and tax holiday sales and from more pronounced competitive merchandising advantages in the fall and holiday seasons, and are pleased with the week-to-week improvement in comparable sales thus far in the quarter: Journeys Group's same store sales have improved from a 10% decline in the first week in August, to a 3% increase in the second week, to a 9% increase for the week most recently ended, for a 1% increase for the month to date.
"Net sales in the Hat World Group increased 15% to approximately $90 million, while same store sales declined 2% in the second quarter, primarily due to fewer store-wide promotions compared to last year, ongoing challenges in the urban market and the back-to-school and tax holiday shift. Hat World's core business, particularly Major League Baseball products, performed well during the quarter and the Canadian business remains strong across the board. Through the third week of fiscal August, same store sales for the Hat World Group increased 4%.
"Net sales for the Underground Station Group, which includes the remaining Jarman stores, were $25 million, and same store sales declined 23%, in line with our expectations for the quarter. Same store sales again reflected the weak urban market, a difficult Nike comparison, and continued softness in the athletic category. Additionally, the tax holiday shift exacerbated the comparison, as 21% of Underground Station stores are located in Texas and Florida. For the first three weeks of August, same store sales in the Underground Station Group declined 20%. We expect Underground Station to benefit in the second half from new merchandising strategies for the fall and from easier comparisons with last year, as Nike's significance to last year's sales progressively diminishes and overall comparisons moderate.
"Johnston & Murphy Group's net sales increased 9% to approximately $46 million in the second quarter. Wholesale sales rose 18%, same store sales for the shops were up 5% and operating margin increased 200 basis points to 7.9%, reflecting continuing strength across Johnston & Murphy's product lines. For the first three weeks of August, same store sales increased 7%.
"Second quarter sales of Licensed Brands increased 18% to approximately $19 million, and operating margin increased 370 basis points to 12%. The Dockers Footwear product continued to perform well in the volume moderate channel and its business with the specialty shoe chains was strong."
The Company said that because of its merger agreement with a subsidiary of The Finish Line, Inc., it does not expect to issue specific guidance with respect to sales and earnings expectations for the balance of the year.
This release contains forward-looking statements, including those regarding the performance outlook for the Company and its individual businesses, the proposed merger with a subsidiary of The Finish Line, Inc., 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 uncertainty regarding the effect and timing of the Company's proposed merger with a subsidiary of The Finish Line, Inc., weakness in consumer demand for products sold by the Company, fashion trends that affect the sales or product margins of the Company's retail product offerings, changes in the timing of holidays or in the onset of seasonal weather affecting period to period sales comparisons, changes in buying patterns by significant wholesale customers, disruptions in product supply or distribution, further unfavorable trends in foreign exchange rates and other factors affecting the cost of products, and competition in the Company's markets. Additional factors that could affect the Company's prospects and cause differences from expectations include the ability to open, staff and support additional retail stores on schedule and at acceptable expense levels and to renew leases in existing stores on schedule and at acceptable expense levels, the ability to negotiate acceptable lease terminations and otherwise to execute the store closing plan referred to in this release on schedule and at expected expense levels, variations from expected pension-related charges caused by conditions in the financial markets, and the outcome of litigation and environmental matters involving the Company. Forward-looking statements reflect the expectations of the Company at the time they are made. The Company disclaims any obligation to update such statements.
The Company's live conference call on August 30, 2007, 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.
Genesco Inc., a Nashville-based specialty retailer, sells footwear, headwear and accessories in more than 2,100 retail stores in the United States and Canada, principally under the names Journeys, Journeys Kidz, Shi by Journeys, Johnston & Murphy, Underground Station, Hatworld, Lids, Hat Shack, Hat Zone, Head Quarters and Cap Connection, and on internet websites www.journeys.com , www.journeyskidz.com , www.shibyjourneys.com , www.undergroundstation.com , www.johnstonmurphy.com , www.lids.com and www.lidskids.com . The Company also sells footwear at wholesale under its Johnston & Murphy brand and under the licensed Dockers brand. Additional information on Genesco and its operating divisions may be accessed at its website www.genesco.com.
GENESCO INC.
Consolidated Earnings Summary
Three Months Ended Six Months Ended
August 4, July 29, August 4, July 29,
In Thousands 2007 2006 2007 2006
Net sales $327,977 $304,301 $662,628 $619,319
Cost of sales 164,358 150,911 327,165 304,560
Selling and administrative
expenses 166,059 140,619 325,132 282,485
Restructuring and other, net 158 480 6,753 589
Earnings (loss) from operations (2,598) 12,291 3,578 31,685
Interest expense, net 3,000 2,160 5,402 4,074
Earnings (loss) before income
taxes from continuing operations (5,598) 10,131 (1,824) 27,611
Income tax expense (benefit) (2,658) 4,187 (1,087) 11,001
Earnings (loss) from continuing
operations (2,940) 5,944 (737) 16,610
Provision for discontinued
operations (1,225) - (1,225) (189)
Net Earnings (Loss) $(4,165) $5,944 $(1,962) $16,421
Earnings Per Share Information
Three Months Ended Six Months Ended
In Thousands (except per August 4, July 29, August 4, July 29,
share amounts) 2007 2006 2007 2006
Preferred dividend requirements $54 $64 $118 $128
Average common shares - Basic EPS 22,415 22,988 22,403 23,015
Basic earnings (loss) per share:
Before discontinued operations ($0.13) $0.26 ($0.04) $0.72
Net earnings (loss) ($0.19) $0.26 ($0.09) $0.71
Average common and common
equivalent shares - Diluted EPS 22,415 27,340 22,403 27,388
Diluted earnings (loss) per share:
Before discontinued operations ($0.13) $0.24 ($0.04) $0.65
Net earnings (loss) ($0.19) $0.24 ($0.09) $0.64
GENESCO INC.
Consolidated Earnings Summary
Three Months Ended Six Months Ended
August 4, July 29, August 4, July 29,
In Thousands 2007 2006 2007 2006
Sales:
Journeys Group $148,091 $136,669 $304,012 $278,169
Underground Station Group 24,520 30,917 54,330 70,873
Hat World Group 90,460 78,506 169,304 149,194
Johnston & Murphy Group 45,657 41,916 91,951 85,947
Licensed Brands 19,059 16,116 42,588 34,915
Corporate and Other 190 177 443 221
Net Sales $327,977 $304,301 $662,628 $619,319
Operating Income (Loss):
Journeys Group $983 $7,935 $11,800 $21,086
Underground Station Group (4,893) (1,747) (7,061) 658
Hat World Group 7,418 8,617 10,070 14,624
Johnston & Murphy Group 3,612 2,484 8,082 5,307
Licensed Brands 2,281 1,335 5,360 3,064
Corporate and Other* (11,999) (6,333) (24,673) (13,054)
Earnings (loss) from
operations (2,598) 12,291 3,578 31,685
Interest, net 3,000 2,160 5,402 4,074
Earnings (loss) before income
taxes from continuing operations (5,598) 10,131 (1,824) 27,611
Income tax expense (benefit) (2,658) 4,187 (1,087) 11,001
Earnings (loss) from continuing
operations (2,940) 5,944 (737) 16,610
Provision for discontinued
operations (1,225) - (1,225) (189)
Net Earnings (Loss) $(4,165) $5,944 $(1,962) $16,421
* Includes $0.2 million of other charges in the second quarter of Fiscal
2008 which includes $0.4 million of retail asset impairments offset by a
$0.2 million excise tax refund and includes $6.8 million of other
charges in the first six months of Fiscal 2008 of which $6.7 million is
asset impairments related to underperforming stores, primarily in the
Underground Station Group, and $0.3 million for lease terminations
offset by a $0.2 million excise tax refund. Includes $0.5 million and
$0.6 million of other charges in the second quarter and six months of
Fiscal 2007, respectively, primarily for asset impairments. The second
quarter and six months of Fiscal 2008 also includes $5.4 million in
expenses related to the Company's proposed merger with a subsidiary of
The Finish Line Inc.
GENESCO INC.
Consolidated Balance Sheet
August 4, July 29,
In Thousands 2007 2006
Assets
Cash and cash equivalents $22,129 $19,360
Accounts receivable 22,154 19,293
Inventories 347,574 331,439
Other current assets 54,610 31,313
Total current assets 446,467 401,405
Property and equipment 236,154 204,419
Other non-current assets 171,948 156,285
Total Assets $854,569 $762,109
Liabilities and Shareholders' Equity
Accounts payable $119,727 $144,954
Other current liabilities 56,374 55,212
Total current liabilities 176,101 200,166
Long-term debt 188,220 129,250
Other long-term liabilities 86,271 76,173
Shareholders' equity 403,977 356,520
Total Liabilities and Shareholders'
Equity $854,569 $762,109
GENESCO INC.
Retail Units Operated -- Six Months Ended August 4, 2007
Balance Acquisi-
01/28/06 tions Open Conv Close
Journeys Group 761 96 0 4
Journeys 710 61 0 3
Journeys Kidz 50 24 0 1
Shi by Journeys 1 11 0 0
Underground Station Group 229 11 0 17
Underground Station 180 11 3 1
Jarman Retail 49 0 (3) 16
Hat World Group 641 49 104 0 9
Johnston & Murphy Group 142 13 0 7
Shops 107 7 0 5
Factory Outlets 35 6 0 2
Total Retail Units 1,773 49 224 0 37
Balance Balance
02/03/07 Open Conv Close 8/04/2007
Journeys Group 853 58 0 2 909
Journeys 768 23 0 2 789
Journeys Kidz 73 18 0 0 91
Shi by Journeys 12 17 0 0 29
Underground Station Group 223 1 0 5 219
Underground Station 193 1 1 2 193
Jarman Retail 30 0 (1) 3 26
Hat World Group 785 51 0 7 829
Johnston & Murphy Group 148 6 0 0 154
Shops 109 4 0 0 113
Factory Outlets 39 2 0 0 41
Total Retail Units 2,009 116 0 14 2,111
Retail Units Operated -- Three Months Ended August 4, 2007
Balance Balance
05/05/07 Open Conv Close 8/04/2007
Journeys Group 884 25 0 0 909
Journeys 777 12 0 0 789
Journeys Kidz 84 7 0 0 91
Shi by Journeys 23 6 0 0 29
Underground Station Group 223 0 0 4 219
Underground Station 195 0 0 2 193
Jarman Retail 28 0 0 2 26
Hat World Group 809 25 0 5 829
Johnston & Murphy Group 152 2 0 0 154
Shops 112 1 0 0 113
Factory Outlets 40 1 0 0 41
Total Retail Units 2,068 52 0 9 2,111
Constant Store Sales
Three Months Ended Six Months Ended
August 4, July 29, August 4, July 29,
2007 2006 2007 2006
Journeys Group -7% 5% -2% 3%
Underground Station Group -23% -6% -22% -5%
Underground Station -25% -5% -24% -3%
Jarman Retail -12% -11% -13% -10%
Hat World Group -2% 0% -3% 0%
Johnston & Murphy Group 5% -3% 4% -1%
Shops 5% -2% 4% 0%
Factory Outlets 6% -6% 6% -3%
Total Constant Store Sales -6% 1% -4% 1%
SOURCE Genesco Inc.
-0- 08/30/2007
/CONTACT: Financial, James S. Gulmi, +1-615-367-8325, or Media, Claire S.
McCall, +1-615-367-8283, both of Genesco Inc./
/Company News On-Call: http://www.prnewswire.com/comp/352750.html /
/Web site: http://www.genesco.com /
(GCO)
CO: Genesco Inc.
ST: Tennessee
IN: REA FAS TEX
SU: ERN CCA
TP-JK
-- CLTH011 --
5409 08/30/2007 07:30 EDT http://www.prnewswire.com