GENESCO INC. NASHVILLE, Tenn., Aug. 28, 2014 /PRNewswire/ -- Genesco Inc. (NYSE: GCO) today reported earnings from continuing operations for the second quarter ended August 2, 2014, of $4.8 million, or $0.20 per diluted share, compared to earnings from continuing operations of $8.5 million, or $0.36 per diluted share, for the second quarter ended August 3, 2013. Fiscal 2015 second quarter results reflect expenses of $3.6 million, or $0.14 per diluted share after tax, including $2.2 million related to deferred purchase price payments in connection with the acquisition of Schuh Group Limited; and $1.4 million in network intrusion expenses, asset impairment charges and other legal matters. Fiscal 2014 second quarter results reflected expenses of $6.6 million, or $0.20 per diluted share after tax, including $5.9 million associated with a change in accounting for bonus awards, $2.8 million related to deferred purchase price payments in connection with the acquisition of Schuh Group Limited, and $1.2 million for other legal matters, network intrusion expenses and impairment charges, partially offset by a net gain of $3.3 million on the termination of the lease of a New York City Journeys store location.
Adjusted for the items described above in both periods, earnings from continuing operations were $8.0 million, or $0.34 per diluted share, for the second quarter of Fiscal 2015, compared to earnings from continuing operations of $13.2 million, or $0.56 per diluted share, for the second 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 second quarter of Fiscal 2015 increased 7.1% to $615 million from $575 million in the second quarter of Fiscal 2014. Consolidated second quarter 2015 comparable sales, including same store sales and comparable e-commerce and catalog sales, increased 2%, with a 5% increase in the Journeys Group, a 2% decrease in the Lids Sports Group, a 1% increase in the Schuh Group, and a 2% increase in the Johnston & Murphy Group.
Robert J. Dennis, chairman, president and chief executive officer of Genesco, said, "We are disappointed with our second quarter earnings performance. Solid comparable sales gains and a strong topline performance in our direct businesses were not enough to offset a sales and gross margin shortfall versus plan at the Lids Sports Group. The third quarter is off to a solid start, with consolidated comparable sales for the Company up 4% through August 23, 2014."
Dennis also discussed the Company's updated outlook. "Based on our second quarter performance and slightly lower expectations for the balance of the year at Lids, we now expect adjusted Fiscal 2015 diluted earnings per share in the range of $5.10 to $5.20, or from flat to a 2% increase over Fiscal 2014's adjusted earnings per share of $5.09, down from our previously issued guidance of $5.40 to $5.55. 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 $3.2 million to $3.7 million pretax, or $0.08 to $0.10 per share, after tax, in Fiscal 2015. These expectations also do not reflect a $5.7 million, or $0.15 per diluted share, change in the first quarter related to the change in accounting for bonus awards. Finally, the expected earnings per share do not reflect compensation expense associated with the Schuh deferred purchase price as described above, which is currently estimated at approximately $7.4 million, or $0.31 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.
Dennis concluded, "We continue to believe our longer-term future is compelling based on the strength of our brands and the numerous omnichannel initiatives that are helping fortify their strategic positions."
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 August 28, 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, 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 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; the effectiveness of our omnichannel initiatives, 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.
About Genesco Inc.
Genesco Inc., a Nashville-based specialty retailer, sells footwear, headwear, sports apparel and accessories in more than 2,670 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, Schuh Kids, 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, 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.
GENESCO INC.
Consolidated Earnings Summary
=============================
Three Months Ended Six Months Ended
------------------ ----------------
Aug. 2, Aug. 3, Aug. 2, Aug. 3,
In Thousands 2014 2013 2014 2013
------------ ---- ---- ---- ----
Net sales $615,474 $574,746 $1,244,299 $1,166,134
Cost of sales 313,729 291,938 626,610 584,889
Selling and administrative expenses* 290,239 274,420 583,576 545,804
Asset impairments and other, net 1,422 (7,140) 311 (5,811)
-------------------------------- ----- ------ --- ------
Earnings from operations 10,084 15,528 33,802 41,252
Interest expense, net 782 1,140 1,483 2,179
--------------------- --- ----- ----- -----
Earnings from continuing operations
before income taxes 9,302 14,388 32,319 39,073
Income tax expense 4,534 5,923 13,453 16,099
------------------ ----- ----- ------ ------
Earnings from continuing operations 4,768 8,465 18,866 22,974
Provision for discontinued
operations (74) (125) (199) (224)
--------------------------- --- ---- ---- ----
Net Earnings $4,694 $8,340 $18,667 $22,750
============ ====== ====== ======= =======
* Includes $2.2 million and $5.3 million in deferred payments related to the Schuh acquisition in the second
quarter and first
six months ended August 2, 2014, respectively, and $2.8 million and $5.7 million for the second quarter and
first six months
ended August 3, 2013, respectively.
Earnings Per Share Information
==============================
Three Months Ended Six Months Ended
------------------ ----------------
Aug. 2, Aug. 3, Aug. 2, Aug. 3,
In Thousands (except per share
amounts) 2014 2013 2014 2013
------------------------------ ---- ---- ---- ----
Preferred dividend requirements $ - $ - $ - $33
Average common shares - Basic EPS 23,496 23,274 23,432 23,284
Basic earnings per share:
Before discontinued operations $0.20 $0.36 $0.81 $0.99
Net earnings $0.20 $0.36 $0.80 $0.98
Average common and common
equivalent shares - Diluted EPS 23,622 23,523 23,657 23,627
Diluted earnings per share:
Before discontinued operations $0.20 $0.36 $0.80 $0.97
Net earnings $0.20 $0.35 $0.79 $0.96
GENESCO INC.
Consolidated Earnings Summary
=============================
Three Months Ended Six Months Ended
------------------ ----------------
Aug. 2, Aug. 3, Aug. 2, Aug. 3,
In Thousands 2014 2013 2014 2013
------------ ---- ---- ---- ----
Sales:
Journeys Group $236,838 $222,471 $498,961 $479,614
Schuh Group 99,770 82,109 181,046 150,432
Lids Sports Group 199,317 192,456 388,583 370,361
Johnston & Murphy Group 54,995 53,258 118,392 111,683
Licensed Brands 24,292 23,869 56,754 53,224
Corporate and Other 262 583 563 820
------------------- --- --- --- ---
Net Sales $615,474 $574,746 $1,244,299 $1,166,134
========= ======== ======== ========== ==========
Operating Income (Loss):
Journeys Group $6,820 $1,717 $26,497 $23,930
Schuh Group (1) (197) (1,433) (5,338) (6,076)
Lids Sports Group 8,474 12,725 16,611 23,521
Johnston & Murphy Group (424) 1,751 4,072 5,599
Licensed Brands 1,873 1,471 5,394 4,392
Corporate and Other (2) (6,462) (703) (13,434) (10,114)
---------------------- ------ ---- ------- -------
Earnings from operations 10,084 15,528 33,802 41,252
Interest, net 782 1,140 1,483 2,179
------------- --- ----- ----- -----
Earnings from continuing operations
before income taxes 9,302 14,388 32,319 39,073
Income tax expense 4,534 5,923 13,453 16,099
------------------ ----- ----- ------ ------
Earnings from continuing operations 4,768 8,465 18,866 22,974
Provision for discontinued
operations (74) (125) (199) (224)
--------------------------- --- ---- ---- ----
Net Earnings $4,694 $8,340 $18,667 $22,750
============ ====== ====== ======= =======
(1) Includes $2.2 million and $5.3 million in deferred payments related to the Schuh acquisition in the
second quarter and first
six months ended August 2, 2014, respectively, and $2.8 million and $5.7 million for the second quarter and
first six months
ended August 3, 2013, respectively.
(2) Includes a $1.4 million charge in the second quarter of Fiscal 2015 which includes $0.6 million for
network intrusion
expenses, $0.4 million for asset impairments and $0.6 million for other legal matters, partially offset by
a $0.2 million gain
for a lease termination. Includes a $0.3 million charge for the first six months of Fiscal 2015 which
includes a $3.3 million
gain on a lease termination, partially offset by $1.8 million for network intrusion expenses, $1.2 million
for asset impairments
and $0.6 million for other legal matters. Includes $7.1 million income in the second quarter of Fiscal
2014 which includes an
$8.3 million gain on a lease termination, partially offset by a $0.5 million charge for other legal matters, a $0.5 million charge
for network intrusion expenses and a $0.2 million charge for asset impairments. Includes $5.8 million
income for the first
six months of Fiscal 2014 which includes an $8.3 million gain on a lease termination, partially offset by
$1.4 million for asset
impairments, $0.6 million for network intrusion expenses and $0.5 million for
other legal matters.
GENESCO INC.
Consolidated
Balance Sheet
=============
Aug. 2, Aug. 3,
In Thousands 2014 2013
------------ ---- ----
Assets
Cash and cash
equivalents $59,303 $46,027
Accounts
receivable 54,142 50,188
Inventories 669,388 628,074
Other current
assets 96,414 84,943
-------------- ------ ------
Total current
assets 879,247 809,232
-------------- ------- -------
Property and
equipment 296,407 244,589
Other non-
current
assets 405,183 403,528
----------- ------- -------
Total Assets $1,580,837 $1,457,349
============ ========== ==========
Liabilities
and Equity
Accounts
payable $237,777 $244,752
Current
portion long-
term debt 29,284 5,313
Other current
liabilities 172,991 134,717
-------------- ------- -------
Total current
liabilities 440,052 384,782
-------------- ------- -------
Long-term debt 47,083 67,813
Other long-
term
liabilities 148,411 171,562
Equity 945,291 833,192
------ ------- -------
Total
Liabilities
and Equity $1,580,837 $1,457,349
============ ========== ==========
GENESCO INC.
Retail Units Operated - Six Months Ended August 2, 2014
=======================================================
Balance Acquisi- Balance Acquisi- Balance
02/02/13 tions Open Close 02/01/14 tions Open Close 08/02/14
-------- ----- ---- ----- -------- ----- ---- ----- --------
Journeys Group 1,157 0 39 28 1,168 0 12 8 1,172
Journeys 820 0 20 13 827 0 5 3 829
Underground by Journeys 130 0 0 13 117 0 0 2 115
Journeys Kidz 156 0 19 1 174 0 7 2 179
Shi by Journeys 51 0 0 1 50 0 0 1 49
Schuh Group 92 0 29 22 99 0 4 4 99
Schuh UK* 70 0 29 9 90 0 4 4 90
Schuh ROI 9 0 0 0 9 0 0 0 9
Schuh Concessions* 13 0 0 13 0 0 0 0 0
Lids Sports Group** 1,053 15 102 37 1,133 19 101 20 1,233
Johnston & Murphy Group 157 0 13 2 168 0 6 4 170
Shops 102 0 6 2 106 0 2 2 106
Factory Outlets 55 0 7 0 62 0 4 2 64
Total Retail Units 2,459 15 183 89 2,568 19 123 36 2,674
================== ===== === === === ===== === === === =====
Permanent Units* 2,446 15 173 69 2,565 19 123 33 2,674
=============== ===== === === === ===== === === === =====
Retail Units Operated - Three Months Ended August 2, 2014
=========================================================
Balance Acquisi- Balance
05/03/14 tions Open Close 08/02/14
-------- ----- ---- ----- --------
Journeys Group 1,172 0 5 5 1,172
Journeys 828 0 3 2 829
Underground by Journeys 117 0 0 2 115
Journeys Kidz 178 0 2 1 179
Shi by Journeys 49 0 0 0 49
Schuh Group 100 0 2 3 99
Schuh UK 91 0 2 3 90
Schuh ROI 9 0 0 0 9
Lids Sports Group** 1,134 19 82 2 1,233
Johnston & Murphy Group 167 0 5 2 170
Shops 105 0 2 1 106
Factory Outlets 62 0 3 1 64
Total Retail Units 2,573 19 94 12 2,674
================== ===== === === === =====
Permanent Units* 2,571 19 94 10 2,674
=============== ===== === === === =====
* Excludes Schuh Concessions and temporary "pop-up" locations.
**Includes 95 Locker Room by Lids in Macy's stores as of
August 2, 2014.
Comparable Sales (including same store and comparable direct
sales)
=============================================================
Six Months Ended
Three Months Ended
------------------
Aug. 2, Aug. 3, Aug. 2, Aug. 3,
2014 2013 2014 2013
---- ---- ---- ----
Journeys Group 5% -1% 3% -1%
Schuh Group 1% -7% 0% -9%
Lids Sports Group -2% -3% -1% -4%
Johnston & Murphy Group 2% 7% 1% 7%
Total Comparable Sales 2% -2% 1% -3%
====================== === === === ===
Schedule B
Genesco Inc.
Adjustments to Reported Earnings from Continuing Operations
Three Months Ended August 2, 2014 and August 3, 2013
Three Impact on Three Impact on
Months Diluted Months Diluted
In Thousands (except per share amounts) Jul 2014 EPS Jul 2013 EPS
-------- --- -------- ---
Earnings from continuing operations, as reported $4,768 $0.20 $8,465 $0.36
Adjustments: (1)
Impairment charges 260 0.01 133 0.01
Deferred payment - Schuh acquisition 2,227 0.09 2,851 0.12
Gain on lease termination (113) - (2,077) (0.09)
Change in accounting for bonus awards - - 3,698 0.16
Other legal matters 386 0.02 315 0.01
Network intrusion expenses 360 0.02 271 0.01
Higher (lower) effective tax rate 129 - (466) (0.02)
Adjusted earnings from continuing operations (2) $8,017 $0.34 $13,190 $0.56
------ ----- ------- -----
(1) All adjustments are net of tax where applicable. The tax rate for the second quarter of
Fiscal 2015 is 37.9% excluding a FIN 48 discrete item of less than $0.1 million. The tax rate for
the second quarter of Fiscal 2014 is 36.9% excluding a FIN 48 discrete item of less than $0.1
million.
(2) EPS reflects 23.6 and 23.5 million share count for Fiscal 2015 and 2014, respectively, 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 August 2, 2014 and August
3, 2013
Three Months Ended August 2,
2014
-----------------------------
Operating Bonus Adj Adj Operating
In Thousands Income and Other Income
------ --------- ------
Journeys Group $6,820 $ - $6,820
Schuh Group* (197) 2,227 2,030
Lids Sports Group 8,474 - 8,474
Johnston & Murphy Group (424) - (424)
Licensed Brands 1,873 - 1,873
Corporate and Other (6,462) 1,422 (5,040)
------ ----- ------
Total Operating Income $10,084 $3,649 $13,733
------- ------ -------
*Schuh Group adjustments include
$2.2 million in deferred purchase
price payments.
Three Months Ended August 3,
2013
-----------------------------
Operating Bonus Adj Adj Operating
In Thousands Income and Other Income
------ --------- ------
Journeys Group $1,717 $4,642 $6,359
Schuh Group* (1,433) 4,224 2,791
Lids Sports Group 12,725 (37) 12,688
Johnston & Murphy Group 1,751 9 1,760
Licensed Brands 1,471 2 1,473
Corporate and Other (703) (2,284) (2,987)
---- ------ ------
Total Operating Income $15,528 $6,556 $22,084
------- ------ -------
*Schuh Group adjustments include
$2.8 million in deferred purchase
price payments.
Schedule B
Genesco Inc.
Adjustments to Reported Earnings from Continuing Operations
Six Months Ended August 2, 2014 and August 3, 2013
Six Impact on Six Impact on
Months Diluted Months Diluted
In Thousands (except per share amounts) Jul 2014 EPS Jul 2013 EPS
-------- --- -------- ---
Earnings from continuing operations, as reported $18,866 $0.80 $22,974 $0.97
Adjustments: (1)
Impairment charges 779 0.03 893 0.04
Deferred payment - Schuh acquisition 5,329 0.22 5,702 0.24
Gain on lease termination (2,104) (0.09) (2,077) (0.09)
Change in accounting for bonus awards 3,575 0.15 7,815 0.33
Other legal matters 399 0.02 302 0.01
Network intrusion expenses 1,121 0.05 360 0.02
Higher (lower) effective tax rate (654) (0.03) (532) (0.02)
Adjusted earnings from continuing operations (2) $27,311 $1.15 $35,437 $1.50
------- ----- ------- -----
(1) All adjustments are net of tax where applicable. The tax rate for the first six months of Fiscal
2015 is 37.3% excluding a
FIN 48 discrete item of less than $0.1 million. The tax rate for the first six months of Fiscal 2014
is 37.0% excluding a
FIN 48 discrete item of less than $0.1 million.
(2) EPS reflects 23.7 and 23.6 million share count for Fiscal 2015 and 2014, respectively, 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
Six Months Ended August 2, 2014 and August 3,
2013
Six Months Ended August 2, 2014
-------------------------------
Operating Bonus Adj Adj Operating
In Thousands Income and Other Income
------ --------- ------
Journeys Group $26,497 $4,919 $31,416
Schuh Group* (5,338) 5,329 (9)
Lids Sports Group 16,611 - 16,611
Johnston & Murphy Group 4,072 25 4,097
Licensed Brands 5,394 - 5,394
Corporate and Other (13,434) 1,046 (12,388)
------- ----- -------
Total Operating Income $33,802 $11,319 $45,121
------- ------- -------
*Schuh Group adjustments include
$5.3 million in deferred purchase
price payments.
Six Months Ended August 3, 2013
-------------------------------
Operating Bonus Adj Adj Operating
In Thousands Income and Other Income
------ --------- ------
Journeys Group $23,930 $6,060 $29,990
Schuh Group* (6,076) 8,692 2,616
Lids Sports Group 23,521 1,676 25,197
Johnston & Murphy Group 5,599 13 5,612
Licensed Brands 4,392 (4) 4,388
Corporate and Other (10,114) 843 (9,271)
------- --- ------
Total Operating Income $41,252 $17,280 $58,532
------- ------- -------
*Schuh Group adjustments include
$5.7 million in deferred purchase
price payments.
Schedule B
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 $110,174 $4.66 $107,491 $4.54
Adjustments: (1)
Asset impairment and other charges 1,983 0.08 2,296 0.10
Change in accounting for bonus awards 3,575 0.15 3,575 0.15
Deferred payment - Schuh acquisition 7,380 0.31 7,380 0.31
----- ---- ----- ----
Adjusted forecasted earnings from continuing
operations (2) $123,112 $5.20 $120,742 $5.10
-------- ----- -------- -----
(1) All adjustments are net of tax where applicable. The forecasted tax rate for Fiscal 2015 is
approximately 37.3%
excluding a FIN 48 discrete item of $0.1 million.
(2) EPS reflects 23.7 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.
SOURCE Genesco Inc.
