Genesco Inc. Reports Fiscal 2020 Fourth Quarter and Full Year Results

NASHVILLE, Tenn., March 12, 2020 /PRNewswire/ --

Fourth Quarter Fiscal 2020 Financial Summary

• Net sales were $678 million
• Comparable sales increased 1%
• GAAP EPS from continuing operations increased to $2.49 vs. $1.53 last year, up 63%
• Non-GAAP EPS from continuing operations increased to $3.09¹ vs. $2.18 last year, up 42%

Fiscal 2020 Financial Summary

• Net sales were $2.2 billion
• Comparable sales increased 3%
• GAAP EPS from continuing operations increased to $3.94 vs. $2.63 last year, up 50%
• Non-GAAP EPS from continuing operations increased to $4.58¹ vs. $3.28 last year, up 40%

Genesco Inc. (NYSE: GCO) today reported GAAP earnings from continuing operations per diluted share of $2.49 for the three months ended February 1, 2020, compared to earnings from continuing operations per diluted share of $1.53 in the fourth quarter last year.  Adjusted for the Excluded Items in both periods, the Company reported fourth quarter earnings from continuing operations per diluted share of $3.09, compared to earnings from continuing operations per diluted share of $2.18 last year.

GAAP earnings from continuing operations per diluted share were $3.94 for the year ended February 1, 2020, compared to earnings from continuing operations per diluted share of $2.63 for the year ended February 2, 2019.  Adjusted for the Excluded Items in both periods, the Company reported Fiscal 2020 earnings from continuing operations per diluted share of $4.58, compared to earnings from continuing operations per diluted share of $3.28 for Fiscal 2019.

Mimi E. Vaughn, Genesco President and Chief Executive Officer, said, "Fiscal 2020, which marked our first year as a footwear focused company, was filled with many notable successes and important accomplishments. We delivered strong results, building on the turnaround in profitability that began in fiscal 2019.  This included positive consolidated comparable sales growth in every quarter, even as we faced more challenging comparisons, and positive store comps for the year. Positive comps combined with gross margin expansion, cost reduction efforts and share repurchase activity, helped fuel a 40% year-over-year increase in adjusted earnings per share. In addition, we made an accretive acquisition late in the year that advances our go-forward strategy to build the branded side of our business and provides Genesco with another growth vehicle as we embark upon this exciting new chapter in our Company's history.     

"The first quarter has started slowly for our U.S. footwear businesses which have experienced challenging traffic trends early in the new fiscal year due in part to unseasonably warm weather in many parts of the country. We have also seen store traffic affected in tourist destinations both in the U.K. and U.S. and in our airport locations due to the impact on travel from the Coronavirus. Despite these near-term headwinds, we are confident in the strategic course we have set for Genesco. With a very healthy balance sheet, we have the flexibility to invest for growth and new capabilities in our current businesses, pursue new growth opportunities and return cash to our shareholders."

Fourth Quarter Review
Net sales for the fourth quarter of Fiscal 2020 were flat at $678 million compared to the fourth quarter of Fiscal 2019. Excluding the impact of lower exchange rates this year, revenue was still flat for the quarter.  Comparable sales increased 1%, with stores down 2% and direct up 19%. Direct-to-consumer sales were 16.6% of total retail sales for the quarter, compared to 13.7% last year.

Fourth quarter gross margin this year was 46.9%, up 20 basis points, compared with 46.7% last year. The increase as a percentage of sales reflects decreased markdowns for Journeys Group, more full-price selling for Schuh Group, partially offset by increased markdowns at Johnston & Murphy retail.

Selling and administrative expense as a percentage of sales for the fourth quarter this year was 38.5%, down 40 basis points, compared to 38.9% of sales for the same period last year.  Adjusted selling and administrative expenses were flat for the fourth quarter this year.  Expenses reflect lower bonus expense and improved rent, offset by increased marketing expense.

Genesco's GAAP operating income for the fourth quarter was $45.3 million, or 6.7% of sales this year, compared with $50.6 million, or 7.5% of sales last year.  Adjusted for the Excluded Items in both periods, operating income for the fourth quarter was $59.3 million, or 8.8% of sales this year, compared with $58.5 million, or 8.7% of sales last year. 

The effective tax rate for the quarter was 21.0% in Fiscal 2020 compared to 40.6% last year.  The adjusted tax rate, reflecting Excluded Items, was 25.3% in Fiscal 2020 compared to 27.5% last year.  The lower adjusted tax rate for this year reflects ­­­­­­­­­­­­­­­­­­the benefit of additional income taxed at lower jurisdictional statutory tax rates, partially offset by a reduction in U.S. federal tax credits.

GAAP earnings from continuing operations were $35.5 million in the fourth quarter of Fiscal 2020, compared to $29.7 million in the fourth quarter last year.  Adjusted for the Excluded Items in both periods, fourth quarter earnings from continuing operations were $44.1 million, or $3.09 per share, in Fiscal 2020, compared to $42.4 million, or $2.18 per share, last year.      

Full Year Review
Net sales for Fiscal 2020 were flat at $2.2 billion compared to Fiscal 2019. Excluding the impact of lower exchange rates this year, revenue increased 1% for the year.   Comparable sales increased 3%, with stores up 1% and direct up 18%. Direct-to-consumer sales were 12.6% of total retail sales for the year compared to 10.8% last year.

Fiscal 2020 gross margin this year was 48.4%, up 60 basis points, compared with 47.8% last year. The increase as a percentage of sales reflects decreased markdowns for Journeys Group, better margins on sale-price product for Schuh Group and improved wholesale margins for Johnston & Murphy.

Selling and administrative expense as a percentage of sales for the year was flat at 44.0% compared to the same period last year.  Adjusted selling and administrative expense was up 20 basis points for the year compared to the same period last year.  The increase reflects increased marketing expenses, partially offset by lower rent expenses.

Genesco's GAAP operating income for Fiscal 2020 was $83.3 million, or 3.8% of sales, compared with $81.8 million, or 3.7% of sales last year.  Adjusted for the Excluded Items in both periods, operating income was $99.2 million, or 4.5% of sales this year, compared with $90.7 million, or 4.1% of sales last year. 

The effective tax rate was 25.1% in Fiscal 2020 compared to 34.5% last year.  The adjusted tax rate, reflecting Excluded Items, was 26.9% in Fiscal 2020 compared to 27.1% last year.  The lower adjusted tax rate for this year reflects ­­­­­­­­­­­­­­­­­­the benefit of additional income taxed at lower jurisdictional statutory tax rates, partially offset by a reduction in U.S. federal tax credits.

GAAP earnings from continuing operations were $61.8 million in Fiscal 2020, compared to $51.2 million in Fiscal 2019.  Adjusted for the Excluded Items in both periods, earnings from continuing operations were $71.8 million, or $4.58 per share, in Fiscal 2020, compared to $64.0 million, or $3.28 per share, last year.

Cash, Borrowings and Inventory
Cash and cash equivalents at February 1, 2020, were $81.4 million, compared with $167.4 million at February 2, 2019.   Total debt at the end of the fourth quarter of Fiscal 2020 was $14.4 million compared with $65.7 million at the end of last year's fourth quarter, a decrease of 78%. Inventories were flat in the fourth quarter of Fiscal 2020 on a year-over-year basis.   

Capital Expenditures and Store Activity
For the fourth quarter, capital expenditures were $8 million, which consisted of $5 million related to store remodels and new stores and $3 million related to direct to consumer, omnichannel, information technology, distribution center and other projects. Depreciation and amortization was $12 million.  During the quarter, the Company opened three new stores and closed 15 stores.  The Company ended the quarter with 1,480 stores compared with 1,512 stores at the end of the fourth quarter last year, or a decrease of 2%.  Square footage was down 2% on a year-over-year basis.

Share Repurchases
For the fourth quarter of Fiscal 2020, the Company did not repurchase any shares.  Since late December 2018 through the end of Fiscal 2020, the Company has spent approximately $235 million repurchasing over 5.5 million shares across three authorizations totaling $325 million, including a new $100 million authorization announced in late September 2019. 

Fiscal 2021 Outlook  
For Fiscal 2021, the Company expects:

• Total sales to increase 3% to 6% including sales from the recent Togast acquisition.
• Comparable sales to be down 1% to up 2%,  and
• Adjusted diluted earnings per share from continuing operations in the range of $4.90 to $5.40 with an expectation that earnings for the year will be near the midpoint of the range. ²

Access the conference call for details regarding guidance assumptions.

Conference Call and Summary Financial Presentation and Guidance
The Company has posted detailed financial commentary and a supplemental financial presentation of fourth quarter results on its website, www.genesco.com, in the investor relations section.  The Company's live conference call on March 12, 2020, at 7:30 a.m. (Central time), may be accessed through the Company's 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.

Safe Harbor Statement  
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 and projections 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 any share repurchases by the Company; the imposition of tariffs on products imported by the Company or its vendors as well as the ability and costs to move production of products in response to tariffs; the Company's 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, and other factors affecting the cost of products; the effects of the British decision to exit the European Union and other sources of weakness in the U.K. market; the effectiveness of the Company's omnichannel initiatives; costs associated with changes in minimum wage and overtime requirements; wage pressure in the U.S. and the U.K.; weakness in the consumer economy and retail industry; competition and fashion trends in the Company's markets; weakness in shopping mall traffic; risks related to the potential for terrorist events; risks related to public health and safety events, including for example, the COVID-19 coronavirus outbreak which began in 2019; changes in buying patterns by significant wholesale customers; the Company's ability to continue to complete and integrate acquisitions, expand its business and diversify its product base; 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 the ability to open additional retail stores and to renew leases in existing stores and control or lower occupancy costs, and to conduct required remodeling or refurbishment on schedule and at expected expense levels; the Company's ability to eliminate stranded costs associated with dispositions; the Company's ability to realize anticipated cost savings, including rent savings; 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, 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 the Company's shares or for the retail sector in general; costs and reputational harm as a result of disruptions in the Company's 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 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 and accessories in more than 1,475 retail stores throughout the U.S., Canada, the United Kingdom and the Republic of Ireland, principally under the names Journeys, Journeys Kidz, Little Burgundy, Schuh, Schuh Kids,  Johnston & Murphy, and on internet websites www.journeys.com, www.journeyskidz.com, www.journeys.ca, www.littleburgundyshoes.com, www.schuh.co.uk, www.johnstonmurphy.com, www.johnstonmurphy.ca,  www.trask.com, and www.dockersshoes.com.  In addition, Genesco sells wholesale footwear under its Johnston & Murphy brand, the Trask brand, the licensed Dockers brand, the licensed Levi's brand, the licensed Bass brand, and other brands. For more information on Genesco and its operating divisions, please visit www.genesco.com.

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¹ Excludes a charge for pension plan settlement, acquisition expenses and asset impairments, partially offset by a gain on the sale of the Lids headquarters building, a gain on lease terminations and a gain related to Hurricane Maria, net of tax effect in the fourth quarter and year of Fiscal 2020 ("Excluded Items").  A reconciliation of earnings and earnings per share from continuing operations in accordance with U.S. Generally Accepted Accounting Principles ("GAAP") with the adjusted earnings and earnings per share numbers is set forth on Schedule B to this press release. The Company believes that disclosure of earnings and earnings per share from continuing operations and operating income 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.

² A reconciliation of the adjusted financial measures cited in the guidance to their corresponding measures as reported pursuant to GAAP is included in Schedule B to this press release.