Genesco Reports Second Quarter Fiscal 2016 Results

News provided by

Genesco Inc.

Sep 03, 2015, 07:25 ET

NASHVILLE, Tenn., Sept. 3, 2015 /PRNewswire/ -- Genesco Inc. (NYSE: GCO) today reported earnings from continuing operations for the second quarter ended August 1, 2015, of $7.6 million, or $0.32 per diluted share, compared to earnings from continuing operations of $4.8 million, or $0.20 per diluted share, for the second quarter ended August 2, 2014.  Fiscal 2016 second quarter results reflect pretax items of $1.8 million, or $0.04 per share after tax, including $0.6 million of expenses related to deferred purchase price payments in connection with the acquisition of Schuh Group Limited, which are required to be expensed as compensation because the payment is contingent upon the payees' continued employment; and $1.2 million for asset impairment charges and network intrusion expenses.  Fiscal 2015 second quarter results reflected pretax items of $3.6 million, or $0.14 per share after tax, including $2.2 million of expenses 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. 

Adjusted for the items described above in both periods, earnings from continuing operations were $8.5 million, or $0.36 per diluted share, for the second quarter of Fiscal 2016, compared to $8.0 million, or $0.34 per diluted share, for the second quarter of Fiscal 2015.   For consistency with Fiscal 2016'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 2016 increased 7% to $656 million from $615 million in the second quarter of Fiscal 2015.  Comparable sales in the second quarter of 2016 increased 7% for the Company, with a 4% increase in the Journeys Group, an 8% increase in the Lids Sports Group, an 8% increase in the Schuh Group, and a 10% increase in the Johnston & Murphy Group. Comparable sales for the Company reflected a 5% increase in same store sales and a 26% increase in e-commerce sales.

"The second quarter saw strong comparable sales growth despite the later start to the back-to-school selling season," said Robert J. Dennis, chairman, president and chief executive officer of Genesco. "Our top-line performance helped offset expected gross margin pressure from our continued efforts to right size the Lids Sports Group's inventory levels.

"The third quarter is off to a strong start in spite of a later Labor Day, aided by the ramp up in the start of school in many areas of the country and the corresponding tax free shopping periods. Comparable sales for the month of August increased 6%.

"Based on our second quarter results and start to the third quarter balanced with some uncertainty around the extent of gross margin pressure that will be necessary to complete the right-sizing of the Lids Sports Group's inventory, we are reiterating our outlook for Fiscal 2016, which calls for adjusted earnings per share in the range of $4.70 to $4.80. Consistent with previous guidance, these expectations do not include expected non-cash asset impairments and other charges, estimated in the range of $8.1 million to $8.6 million pretax, or $0.22 to $0.23 per share after tax, for the full fiscal year. These expectations also do not reflect expenses related to Schuh deferred purchase price payments as described above, which are $1.5 million, or $0.06 per diluted share, for the full year. This guidance assumes comparable sales increases in the 4% to 5% 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.

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 September 3, 2015 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 timing, costs and effectiveness of our initiatives to improve performance in the Lids Sports Group; 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; 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 2,800 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, 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. 1,

Aug. 2,

Aug. 1,

Aug. 2,

In Thousands

2015

2014

2015

2014

Net sales

$  655,525

$  615,474

$ 1,316,122

$  1,244,299

Cost of sales

335,434

313,729

669,698

626,610

Selling and administrative expenses*

306,422

290,239

613,855

583,576

Asset impairments and other, net

1,173

1,422

3,819

311

Earnings from operations

12,496

10,084

28,750

33,802

Interest expense, net

928

782

1,573

1,483

Earnings from continuing operations








    before income taxes

11,568

9,302

27,177

32,319












Income tax expense

3,975

4,534

9,639

13,453

Earnings from continuing operations

7,593

4,768

17,538

18,866












Provision for discontinued operations

(73)

(74)

(140)

(199)

Net Earnings 

$      7,520

$      4,694

$       17,398

$        18,667











*

Includes $0.6 million and $1.5 million in deferred payments related to the Schuh acquisition in the second quarter and first six months ended August 1, 2015, respectively, and $2.2 million and $5.3 million for the second quarter and first six months ended August 2, 2014, respectively.






















Earnings Per Share Information









Three Months Ended 

Six Months Ended 



Aug. 1,

Aug. 2,

Aug. 1,

Aug. 2,

In Thousands (except per share amounts)

2015

2014

2015

2014












Average common shares - Basic EPS

23,538

23,496

23,544

23,432












Basic earnings per share:








     Before discontinued operations

$0.32

$0.20

$0.74

$0.81

     Net earnings 

$0.32

$0.20

$0.74

$0.80












Average common and common








    equivalent shares - Diluted EPS

23,616

23,622

23,695

23,657












Diluted earnings per share:








     Before discontinued operations

$0.32

$0.20

$0.74

$0.80

     Net earnings 

$0.32

$0.20

$0.73

$0.79

































GENESCO INC.










Consolidated Earnings Summary









Three Months Ended 

Six Months Ended 



Aug. 1,

Aug. 2,

Aug. 1,

Aug. 2,

In Thousands

2015

2014

2015

2014

Sales:









    Journeys Group

$  247,177

$  236,838

$    525,809

$      498,961

    Schuh Group

103,204

99,770

181,766

181,046

    Lids Sports Group

222,218

199,317

428,547

388,583

    Johnston & Murphy Group

60,822

54,995

127,184

118,392

    Licensed Brands

21,942

24,292

52,519

56,754

    Corporate and Other

162

262

297

563

    Net Sales

$  655,525

$  615,474

$ 1,316,122

$  1,244,299

Operating Income (Loss):








    Journeys Group

$      9,228

$      6,820

$       33,650

$        26,497

    Schuh Group (1)

4,892

(197)

2,231

(5,338)

    Lids Sports Group

5,593

8,474

2,196

16,611

    Johnston & Murphy Group

846

(424)

4,823

4,072

    Licensed Brands

1,158

1,873

4,181

5,394

    Corporate and Other (2)

(9,221)

(6,462)

(18,331)

(13,434)

   Earnings from operations

12,496

10,084

28,750

33,802

   Interest, net

928

782

1,573

1,483

Earnings from continuing operations








    before income taxes

11,568

9,302

27,177

32,319

Income tax expense

3,975

4,534

9,639

13,453

Earnings from continuing operations

7,593

4,768

17,538

18,866












Provision for discontinued operations

(73)

(74)

(140)

(199)

Net Earnings 

$      7,520

$      4,694

$       17,398

$        18,667












(1) Includes $0.6 million and $1.5 million in deferred payments related to the Schuh acquisition in the second quarter and first six months ended August 1, 2015, respectively, and $2.2 million and $5.3 million for the second quarter and first six months ended August 2, 2014, respectively.










(2) Includes a $1.2 million charge in the second quarter of Fiscal 2016 which includes $1.0 million for asset impairments and $0.2 million for network intrusion expenses.  Includes a $3.8 million charge for the first six months of Fiscal 2016 which includes $2.0 million for network intrusion expenses, $1.7 million for asset impairments and $0.1 million for other legal matters.  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, offset by $1.8 million for network intrusion expenses, $1.2 million for asset impairments and $0.6 million for other legal matters.




















GENESCO INC.





















Consolidated Balance Sheet
























Aug. 1,

Aug. 2,

In Thousands




2015

2014

Assets









Cash and cash equivalents



$       48,997

$        59,303

Accounts receivable



58,385

54,142

Inventories




734,803

669,388

Other current assets



99,836

96,414

Total current assets



942,021

879,247

Property and equipment



310,415

296,407

Goodwill and other intangibles



393,155

379,925

Other non-current assets



38,710

25,258

Total Assets




$ 1,684,301

$  1,580,837

Liabilities and  Equity








Accounts payable



$    271,021

$      237,777

Current portion long-term debt



18,764

29,284

Other current liabilities



135,986

172,991

Total current liabilities



425,771

440,052

Long-term debt




94,694

47,083

Pension liability



21,686

8,793

Deferred rent and other long-term liabilities



146,135

139,618

Equity




996,015

945,291

Total Liabilities and Equity



$ 1,684,301

$  1,580,837











GENESCO INC.

Retail Units Operated - Six Months Ended August 1, 2015












Balance

Acquisi-




Balance




Balance




02/01/14

tions

Open

Close

01/31/15

Open

Close

08/01/15


Journeys Group

1,168

0

34

20

1,182

9

20

1,171


    Journeys

827

0

16

9

834

4

4

834


    Underground by Journeys

117

0

0

7

110

0

8

102


    Journeys Kidz

174

0

18

3

189

5

5

189


    Shi by Journeys

50

0

0

1

49

0

3

46


Schuh Group

99

0

13

4

108

5

0

113


     Schuh UK

90

0

12

4

98

4

0

102


     Schuh Germany

0

0

0

0

0

1

0

1


     Schuh ROI

9

0

1

0

10

0

0

10


Lids Sports Group*

1,133

56

218

43

1,364

9

29

1,344


Johnston & Murphy Group

168

0

8

6

170

4

2

172


    Shops

106

0

3

4

105

1

2

104


    Factory Outlets

62

0

5

2

65

3

0

68


Total Retail Units

2,568

56

273

73

2,824

27

51

2,800






















Retail Units Operated - Three Months Ended August 1, 2015








Balance

Acquisi-




Balance




05/02/15

tions

Open

Close

08/01/15


Journeys Group

1,171

0

5

5

1,171


    Journeys

833

0

2

1

834


    Underground by Journeys

104

0

0

2

102


    Journeys Kidz

187

0

3

1

189


    Shi by Journeys

47

0

0

1

46


Schuh Group

111

0

2

0

113


     Schuh UK

100

0

2

0

102


     Schuh Germany

1

0

0

0

1


     Schuh ROI

10

0

0

0

10


Lids Sports Group*

1,351

0

3

10

1,344


Johnston & Murphy Group

172

0

2

2

172


    Shops

105

0

1

2

104


    Factory Outlets

67

0

1

0

68


Total Retail Units

2,805

0

12

17

2,800
















* Includes 184 Locker Room by Lids in Macy's stores as of August 1, 2015.






Comparable Sales (including same store and comparable direct sales)





 

          Three Months Ended

 

       Six Months Ended





Aug. 1,

Aug. 2,

Aug. 1,

Aug. 2,





2015

2014

2015

2014



Journeys Group

4%

5%

5%

3%



Schuh Group

8%

1%

6%

0%



Lids Sports Group

8%

-2%

6%

-1%



Johnston & Murphy Group

10%

2%

6%

1%



Total Comparable Sales

7%

2%

6%

1%

Schedule B


Genesco Inc.

Adjustments to Reported Earnings from Continuing Operations

Three Months Ended August 1, 2015 and August 2, 2014






 Three 

 Impact on 

 Three 

 Impact on 

 Months 

  Diluted 

 Months 

  Diluted 

In Thousands (except per share amounts)

 Jul 2015 

 EPS 

 Jul 2014 

 EPS 

Earnings from continuing operations, as reported

$      7,593

$        0.32

$       4,768

$   0.20




Adjustments:  (1)




Impairment charges

594

0.03

260

0.01

Deferred payment - Schuh acquisition

553

0.02

2,227

0.09

Gain on lease termination

-

-

(113)

-

Other legal matters

10

-

386

0.02

Network intrusion expenses

147

0.01

360

0.02

Higher (lower) effective tax rate

(417)

(0.02)

129

-




Adjusted earnings from continuing operations (2)

$      8,480

$        0.36

$       8,017

$   0.34










(1) All adjustments are net of tax where applicable.  The tax rate for the second quarter of Fiscal 2016 is 36.0% excluding a FIN 48 discrete item of less than $0.1 million.  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.  




(2) EPS reflects 23.6 million share count for Fiscal 2016 and 2015, 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 1, 2015 and August 2, 2014








 Three Months Ended August 1, 2015 


 Operating 

Adj Operating

In Thousands 

 Income 

 Other Adj 

Income

Journeys Group

$      9,228

$           -

$       9,228

Schuh Group*

4,892

553

5,445

Lids Sports Group

5,593

-

5,593

Johnston & Murphy Group

846

-

846

Licensed Brands

1,158

-

1,158

Corporate and Other

(9,221)

1,173

(8,048)

Total Operating Income

$     12,496

$      1,726

$      14,222






*Schuh Group adjustments include $0.6 million in deferred purchase price payments.









 Three Months Ended August 2, 2014 


 Operating 

Adj Operating

In Thousands 

 Income 

 Other Adj 

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.

Schedule B


Genesco Inc.

Adjustments to Reported Earnings from Continuing Operations

Six Months Ended August 1, 2015 and August 2, 2014






 Six 

 Impact on 

 Six 

 Impact on 

 Months 

  Diluted 

 Months 

  Diluted 

In Thousands (except per share amounts)

 Jul 2015 

 EPS 

 Jul 2014 

 EPS 

Earnings from continuing operations, as reported

$     17,538

$        0.74

$      18,866

$   0.80




Adjustments:  (1)




Impairment charges

1,081

0.05

779

0.03

Deferred payment - Schuh acquisition

1,490

0.06

5,329

0.22

Gain on lease termination

-

-

(2,104)

(0.09)

Change in accounting for bonus awards

-

-

3,575

0.15

Other legal matters

75

-

399

0.02

Network intrusion expenses

1,277

0.05

1,121

0.05

Higher (lower) effective tax rate

(812)

(0.03)

(654)

(0.03)




Adjusted earnings from continuing operations (2)

$     20,649

$        0.87

$      27,311

$   1.15










(1) All adjustments are net of tax where applicable.  The tax rate for the first six months of Fiscal 2016 is 36.3% excluding a FIN 48 discrete item of less than $0.1 million.  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.  




(2) EPS reflects 23.7 million share count for Fiscal 2016 and 2015, 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 1, 2015 and August 2, 2014








 Six Months Ended August 1, 2015 


 Operating 

Adj Operating

In Thousands 

 Income 

 Other Adj 

Income

Journeys Group

$     33,650

$           -

$      33,650

Schuh Group*

2,231

1,490

3,721

Lids Sports Group

2,196

-

2,196

Johnston & Murphy Group

4,823

-

4,823

Licensed Brands

4,181

-

4,181

Corporate and Other

(18,331)

3,819

(14,512)

Total Operating Income

$     28,750

$      5,309

$      34,059






*Schuh Group adjustments include $1.5 million in deferred purchase price payments.








 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.

Schedule B


Genesco Inc.

Adjustments to Forecasted Earnings from Continuing Operations

Fiscal Year Ending January 30, 2016




In Thousands (except per share amounts)

High Guidance

Low Guidance

Fiscal 2016

Fiscal 2016

Forecasted earnings from continuing operations 

$    106,464

$       4.52

$ 103,789

$       4.41




Adjustments:  (1)




Asset impairment and other charges

5,116

0.22

5,432

0.23

Deferred payment - Schuh acquisition

1,490

0.06

1,490

0.06




Adjusted forecasted earnings from continuing operations (2)

$    113,070

$       4.80

$ 110,711

$       4.70




(1) All adjustments are net of tax where applicable.  The forecasted tax rate for Fiscal 2016 is approximately 36.7% 

    excluding a FIN 48 discrete item of $0.1 million.










(2) EPS reflects 23.5 million share count for Fiscal 2016 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.