MRO Magazine

Genesco Reports First Quarter Fiscal 2017 Results


May 26, 2016
By PRN NewsWire

NASHVILLE, Tenn., May 26, 2016 /PRNewswire/ — Genesco Inc. (NYSE: GCO) today reported earnings from continuing operations for the first quarter ended April 30, 2016, of $10.6 million, or $0.50 per diluted share, compared to earnings from continuing operations of $9.9 million, or $0.42 per diluted share, for the first quarter ended May 2, 2015. Fiscal 2017 first quarter results reflect a pretax charge of $3.6 million, or $0.12 per diluted share after tax, including $3.4 million of asset impairment charges and $0.2 million in other legal matters. Fiscal 2016 first quarter results reflect pretax items of $3.5 million, or $0.09 per share after tax, including $0.9 million of expenses related to deferred purchase price payments in connection with the acquisition of Schuh Group Limited, which were required to be expensed as compensation because the payment was contingent upon the payees’ continued employment; and $2.6 million for network intrusion expenses, asset impairment charges and other legal matters.

Adjusted for the items described above in both periods, earnings from continuing operations were $13.0 million, or $0.62 per diluted share, for the first quarter of Fiscal 2017, compared to earnings from continuing operations of $12.2 million, or $0.51 per diluted share, for the first quarter of Fiscal 2016. For consistency with Fiscal 2017’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 2017 decreased 2% to $649 million from $661 million in the first quarter of Fiscal 2016, primarily reflecting the divestiture of the Lids Team Sports business in January 2016. Consolidated first quarter 2017 comparable sales, including same store sales and comparable e-commerce and catalog sales, increased 1%, with a 1% increase in the Journeys Group, a 2% increase in the Lids Sports Group, a 5% decrease in the Schuh Group, and a 6% increase in the Johnston & Murphy Group. Comparable sales for the Company reflected a 1% increase in same store sales and e-commerce sales were flat.

“We are pleased with the increase in first quarter profitability, which exceeded our expectations, driven by a significantly better performance from the Lids Sports Group,” said Robert J. Dennis, chairman, president and chief executive officer of Genesco. “While overall comparable sales were at the lower end of our projected range, this was more than offset by a meaningful improvement in gross margin.

“Early second quarter comparable sales accelerated versus the first quarter, prior to the offset last week for Memorial Day, which was a week earlier last year. Comparable sales for the three weeks through Saturday, May 21, 2016, were up 1% from the same period last year. We do not consider the period to be indicative of top line performance for the full quarter because of this Memorial Day offset.

“Based on our first quarter performance, we are reiterating our full year outlook taking into account some external headwinds pressuring sales and expenses. We still expect adjusted diluted earnings per share for the fiscal year ending January 28, 2017, in the range of $4.80 to $4.90, which represents a 12% to 14% increase over Fiscal 2016’s adjusted earnings per share of $4.29.” These expectations do not include expected non-cash asset impairments and other charges, estimated in the range of $9.8 million to $10.3 million pretax, or $0.30 to $0.31 per share after tax, for the full fiscal year. This guidance assumes comparable sales increases in the 1% to 2% range for the full 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.

The Company also announced that its board of directors has replaced the remaining $11 million balance of a previous $100 million repurchase program authorized in January 2016 with a new authorization to repurchase up to $100 million of common stock. The program is intended to be implemented through purchases made from time to time using a variety of methods, which may include open market purchases, private transactions, block trades, or otherwise, or by any combination of such methods, in accordance with SEC and other applicable legal requirements. The program does not obligate the Company to acquire any particular amount of common stock and it may be suspended or discontinued at any time in the Company’s discretion. The Company repurchased a total of 1.1 million shares of common stock in the first quarter of Fiscal 2017 at a total cost of approximately $73 million and an average price of $66.75 per share.

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 26, 2016 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, expenses, 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 level and timing of promotional activity necessary to maintain inventories at appropriate levels; the timing and amount of non-cash asset impairments related to retail store fixed assets and intangible assets of acquired businesses; the effectiveness of the Company’s omnichannel initiatives; the level of chargebacks from credit card issuers for fraudulent purchases or other reasons; weakness in the consumer economy and retail industry; competition in the Company’s markets; 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 or the inability of wholesale customers or consumers to obtain credit; 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; changes in the timing of holidays or in the onset of seasonal weather affecting period-to-period sales comparisons; and the performance of athletic teams, the participants in major sporting events such as the Super Bowl and World Series, developments with respect to certain individual athletes, and other sports-related events or changes that may affect period-to-period comparisons in the Company’s Lids Sports Group retail business. 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.

About Genesco Inc.

Genesco Inc., a Nashville-based specialty retailer, sells footwear, headwear, sports apparel and accessories in more than 2,830 retail stores and leased departments throughout the U.S., Canada, the United Kingdom, the Republic of Ireland and Germany, principally under the names Journeys, Journeys Kidz, Shi by Journeys, Schuh, Schuh Kids, Little Burgundy, 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.littleburgundyshoes.com, www.johnstonmurphy.com, www.lids.com, www.lids.ca, www.lidslockerroom.com, www.lidsclubhouse.com, http://shop.neweracap.com/ , www.trask.com, www.suregripfootwear.com and www.dockersshoes.com. The Company’s Lids Sports Group division operates the Lids headwear stores, the Locker Room by Lids and other team sports fan shops and single team clubhouse stores. In addition, Genesco sells wholesale footwear under its Johnston & Murphy brand, the Trask brand, the licensed Dockers brand, G.H. Bass & Co., SureGrip, and other brands. For more information on Genesco and its operating divisions, please visit www.genesco.com.

GENESCO INC. Consolidated Earnings Summary ================= Three Months Ended —————— Apr. 30, May 2, In Thousands 2016 2015 ———— —- —- Net sales $648,793 $660,597 Cost of sales 319,096 334,264 Selling and administrative expenses* 308,243 307,433 Asset impairments and other, net 3,557 2,646 —————— —– —– Earnings from operations 17,897 16,254 Interest expense, net 1,137 645 ————- —– — Earnings from continuing operations before income taxes 16,760 15,609 Income tax expense 6,196 5,664 ———– —– —– Earnings from continuing operations 10,564 9,945 Provision for discontinued operations, net (154) (67) —————- —- — Net Earnings $10,410 $9,878 ============ ======= ====== * Includes $0.9 million in deferred payments related to the Schuh acquisition for the first quarter ended May 2, 2015. Earnings Per Share Information =================== Three Months Ended —————— Apr. 30, May 2, In Thousands (except per share amounts) 2015 2015 —————— —- —- Average common shares -Basic EPS 20,815 23,550 Basic earnings per share: Before discontinued operations $0.51 $0.42 Net earnings $0.50 $0.42 Average common and common equivalent shares – Diluted EPS 20,990 23,775 Diluted earnings per share: Before discontinued operations $0.50 $0.42 Net earnings $0.50 $0.42

GENESCO INC. Consolidated Earnings Summary ================= Three Months Ended —————— Apr. 30, May 2, In Thousands 2016 2015 ———— —- —- Sales: Journeys Group $294,221 $278,632 Schuh Group 75,670 78,562 Lids Sports Group 179,376 206,329 Johnston & Murphy Group 69,975 66,362 Licensed Brands 29,466 30,577 Corporate and Other 85 135 —————- — — Net Sales $648,793 $660,597 ========= ======== ======== Operating Income (Loss): Journeys Group $19,620 $24,422 Schuh Group(1) (2,661) (2,661) Lids Sports Group 6,037 (3,397) Johnston & Murphy Group 4,842 3,977 Licensed Brands 1,853 3,023 Corporate and Other(2) (11,794) (9,110) —————- ——- —— Earnings from operations 17,897 16,254 Interest, net 1,137 645 ————- —– — Earnings from continuing operations before income taxes 16,760 15,609 Income tax expense 6,196 5,664 ———– —– —– Earnings from continuing operations 10,564 9,945 Provision for discontinued operations, net (154) (67) ————————— —- — Net Earnings $10,410 $9,878 ============ ======= ====== (1) Includes $0.9 million in deferred payments related to the Schuh acquisition for the first quarter ended May 2, 2015. Includes a $3.6 million charge in the first quarter of Fiscal 2017 which includes $3.4 million for asset impairments and $0.2 million in other legal matters. Includes a $2.6 million charge in the first quarter of Fiscal 2016 which includes $1.8 million for network intrusion expenses, $0.7 million in asset impairments and (2) $0.1 million in other legal matters.

GENESCO INC. Consolidated Balance Sheet ============= Apr. 30, May 2, In Thousands 2016 2015 ———— —- —- Assets Cash and cash equivalents $42,750 $89,886 Accounts receivable 52,813 60,498 Inventories 551,282 636,830 Other current assets 88,545 86,487 ————– —— —— Total current assets 735,390 873,701 ————– ——- ——- Property and Equipment 321,068 310,642 Goodwill and other intangibles 379,172 392,520 Other non- current assets 46,646 39,025 ———– —— —— Total Assets $1,482,276 $1,615,888 ============ ========== ========== Liabilities and Equity Accounts payable $166,954 $222,893 Current portion long- term debt 14,631 12,000 Other current liabilities 129,428 187,500 ————– ——- ——- Total current liabilities 311,013 422,393 ————– ——- ——- Long-term debt 101,273 15,570 Pension liability 9,660 21,910 Deferred rent and other long-term liabilities 154,644 139,357 Equity 905,686 1,016,658 —— ——- ——— Total Liabilities and Equity $1,482,276 $1,615,888 ============ ========== ==========

GENESCO INC. Retail Units Operated – Three Months Ended April 30, 2016 ========================================================= Balance Acquisi- Balance Balance 01/31/15 tions Open Close 01/30/16 Open Close 04/30/16 ——– —– —- —– ——– —- —– ——– Journeys Group 1,182 37 29 26 1,222 5 7 1,220 Journeys 834 0 13 5 842 4 5 841 Underground by Journeys 110 0 0 12 98 0 1 97 Journeys Kidz 189 0 16 5 200 1 0 201 Shi by Journeys 49 0 0 3 46 0 1 45 Little Burgundy 0 37 0 1 36 0 0 36 Schuh Group 108 0 17 0 125 1 2 124 Schuh UK 98 0 15 0 113 1 2 112 Schuh Germany 0 0 2 0 2 0 0 2 Schuh ROI 10 0 0 0 10 0 0 10 Lids Sports Group 1,364 0 27 59 1,332 3 18 1,317 Johnston & Murphy Group 170 0 8 5 173 1 2 172 Shops 105 0 3 5 103 1 2 102 Factory Outlets 65 0 5 0 70 0 0 70 Total Retail Units 2,824 37 81 90 2,852 10 29 2,833 ================== ===== === === === ===== === === ===== Comparable Sales (including same store and comparable direct sales) ================================================================== Three Months Ended —————— Apr. 30, May 2, 2016 2015 —- —- Journeys Group 1% 5% Schuh Group -5% 4% Lids Sports Group 2% 3% Johnston & Murphy Group 6% 3% Total Comparable Sales 1% 4% ====================== === ===

Schedule B Genesco Inc. Adjustments to Reported Earnings from Continuing Operations Three Months Ended April 30, 2016 and May 2, 2015 Impact on Impact on 3 mos Diluted 3 mos Diluted In Thousands (except per share amounts) Apr 2016 EPS Apr 2015 EPS ——– — ——– — Earnings from continuing operations, as reported $10,564 $0.50 $9,945 $0.42 Adjustments: (1) Impairment charges 2,205 0.11 487 0.02 Deferred payment – Schuh acquisition – – 937 0.04 Other legal matters 57 – 65 – Network intrusion expenses 21 – 1,130 0.05 Higher (lower) effective tax rate 106 0.01 (394) (0.02) Adjusted earnings from continuing operations (2) $12,953 $0.62 $12,170 $0.51 ——- —– ——- —– (1) All adjustments are net of tax where applicable. The tax rate for the first quarter of Fiscal 2017 is 35.8% excluding a FIN 48 discrete item of less than $0.1 million. The tax rate for the first quarter of Fiscal 2016 is 36.5% excluding a FIN 48 discrete item of less than $0.1 million. (2) EPS reflects 21.0 and 23.8 million share count for Fiscal 2017 and 2016, 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 Three Months Ended April 30, 2016 and May 2, 2015 Three Months Ended April 30, 2016 ——————————— Operating Adj Operating In Thousands Income Other Adj Income —— ——— —— Journeys Group $19,620 $ – $19,620 Schuh Group (2,661) – (2,661) Lids Sports Group 6,037 – 6,037 Johnston & Murphy Group 4,842 – 4,842 Licensed Brands 1,853 – 1,853 Corporate and Other (11,794) 3,557 (8,237) ——- —– —— Total Operating Income $17,897 $3,557 $21,454 ——- —— ——- Three Months Ended May 2, 2015 —————————— Operating Adj Operating In Thousands Income Other Adj Income —— ——— —— Journeys Group $24,422 $ – $24,422 Schuh Group* (2,661) 937 (1,724) Lids Sports Group (3,397) – (3,397) Johnston & Murphy Group 3,977 – 3,977 Licensed Brands 3,023 – 3,023 Corporate and Other (9,110) 2,646 (6,464) —— —– —— Total Operating Income $16,254 $3,583 $19,837 ——- —— ——- *Schuh Group adjustments include $0.9 million in deferred purchase price payments.

Schedule B Genesco Inc. Adjustments to Forecasted Earnings from Continuing Operations Fiscal Year Ending January 28, 2017 In Thousands (except per share amounts) High Guidance Low Guidance Fiscal 2017 Fiscal 2017 ———– ———– Forecasted earnings from continuing operations $94,665 $4.60 $92,183 $4.49 Adjustments: (1) Asset impairment and other charges 6,153 0.30 6,468 0.31 —– —- —– —- Adjusted forecasted earnings from continuing operations (2) $100,818 $4.90 $98,651 $4.80 ——– —– ——- —– (1) All adjustments are net of tax where applicable. The forecasted tax rate for Fiscal 2017 is approximately 36.9%. (2) EPS reflects 20.6 million share count for Fiscal 2017 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.

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Genesco Inc.

CONTACT: Financial Contact: Mimi Vaughn, (615) 367-7386; Media Contact:Claire S. McCall (615) 367-8283

Web site: http://www.genesco.com/