Genesco Reports Third Quarter Fiscal 2016 Results

Dec 04, 2015, 06:59 ET from Genesco Inc.

NASHVILLE, Tenn., Dec. 4, 2015 /PRNewswire/ -- Genesco Inc. (NYSE: GCO) today reported earnings from continuing operations for the third quarter ended October 31, 2015, of $32.9 million, or $1.43 per diluted share, compared to earnings from continuing operations of $28.8 million, or $1.21 per diluted share, for the third quarter ended November 1, 2014.  Fiscal 2016 third quarter results reflect pretax items of $0.2 million, or $0.00 per diluted share after tax, for network intrusion expenses and asset impairment charges, offset by $0.7 million, or $0.03 per diluted share, from a lower than normal tax rate due to the release of valuation allowances. Fiscal 2015 third quarter results reflect pretax items of $2.0 million, or $0.07 per diluted share after tax, including $1.0 million related to deferred purchase price payments in connection with the acquisition of Schuh Group Limited and $1.0 million in network intrusion expenses and asset impairment charges. They also reflect the favorable resolution of formerly uncertain tax positions taken by Schuh at the time of the acquisition, resulting in the write-off of an indemnification asset of $7.1 million and the reversal of a corresponding FIN 48 provision, with essentially no net after-tax effect on earnings for the third quarter last year.

Adjusted for the items described above in both periods, earnings from continuing operations were $32.2 million, or $1.40 per diluted share, for the third quarter of Fiscal 2016, compared to earnings from continuing operations of $30.3 million, or $1.28 per diluted share, for the third 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 third quarter of Fiscal 2016 increased 7% to $774 million from $723 million in the third quarter of Fiscal 2015.  Consolidated third quarter 2016 comparable sales, including same store sales and comparable e-commerce and catalog sales, increased 7%, with a 6% increase in the Journeys Group, a 12% increase in the Lids Sports Group, a 2% increase in the Schuh Group, and a 5% increase in the Johnston & Murphy Group. Comparable sales for the Company reflected a 6% increase in same store sales and a 25% increase in e-commerce sales.

Robert J. Dennis, chairman, president and chief executive officer of Genesco, said, "We are very pleased with the comparable sales increase we delivered in the third quarter. Our results were driven by strong full price selling combined with higher promotional activity in line with our strategy to right size the Lids Sports Group's inventory levels. The pressure on gross margins from our clearance actions offset some of the earnings upside from our solid top-line performance.

"The fourth quarter started off slowly but accelerated over the Black Friday weekend. Fourth quarter consolidated comparable sales are up 6% through December 1, 2015.

"Recent comparable sales trends have been volatile and we expect that the retail market will remain promotional through the balance of the Holiday season.  Given these factors in combination with the incremental promotional activity we now plan at Lids Sports Group through the fourth quarter to conclude its inventory reduction initiative and to position it for the freshest possible start to the next fiscal year, we are revising our full year outlook. We now expect adjusted diluted earnings per share to be in the range of $4.50 to $4.60, compared to our previously issued guidance 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 $6.1 million to $6.6 million pretax, or $0.17 to $0.18 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 now assumes comparable sales increases in the 5% to 6% 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.

Dennis concluded, "While we are disappointed with our reduced outlook, we believe that the steps we are taking now will allow the Company to realize greater earnings power next year and beyond."

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 December 4, 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 our ability to right size inventory levels 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 the Company's omnichannel initiatives; weakness in the consumer economy and retail industry; 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 more than 2,800 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, 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 

 

Nine Months Ended 

Oct. 31,

Nov. 1,

Oct. 31,

Nov. 1,

In Thousands

2015

2014

2015

2014

Net sales

$  773,898

$  722,915

$ 2,090,020

$  1,967,214

Cost of sales

400,012

364,426

1,069,710

991,036

Selling and administrative expenses*

321,685

310,893

935,540

894,469

Asset impairments and other, net

151

1,036

3,970

1,347

Earnings from operations

52,050

46,560

80,800

80,362

Indemnification asset write-off

-

7,050

-

7,050

Interest expense, net

1,330

891

2,903

2,374

Earnings from continuing operations

    before income taxes

50,720

38,619

77,897

70,938

Income tax expense

17,865

9,869

27,504

23,322

Earnings from continuing operations

32,855

28,750

50,393

47,616

Provision for discontinued operations

(348)

(88)

(488)

(287)

Net Earnings 

$    32,507

$    28,662

$       49,905

$        47,329

*

Includes $0.0 million and $1.5 million in deferred payments related to the Schuh acquisition in the third quarter and first

nine months ended October 31, 2015, respectively, and $1.0 million and $6.3 million for the third quarter and first nine 

months ended November 1, 2014, respectively.

Earnings Per Share Information

 

Three Months Ended 

 

Nine Months Ended 

Oct. 31,

Nov. 1,

Oct. 31,

Nov. 1,

In Thousands (except per share amounts)

2015

2014

2015

2014

Average common shares - Basic EPS

22,834

23,602

23,308

23,489

Basic earnings per share:

     Before discontinued operations

$1.44

$1.22

$2.16

$2.03

     Net earnings 

$1.42

$1.21

$2.14

$2.01

Average common and common

    equivalent shares - Diluted EPS

22,917

23,760

23,436

23,691

Diluted earnings per share:

     Before discontinued operations

$1.43

$1.21

$2.15

$2.01

     Net earnings 

$1.42

$1.21

$2.13

$2.00

        

GENESCO INC.

Consolidated Earnings Summary

 

Three Months Ended 

 

Nine Months Ended 

Oct. 31,

Nov. 1,

Oct. 31,

Nov. 1,

In Thousands

2015

2014

2015

2014

Sales:

    Journeys Group

$  321,996

$  303,781

$    847,805

$      802,742

    Schuh Group

101,644

101,959

283,410

283,005

    Lids Sports Group

246,967

220,038

675,514

608,621

    Johnston & Murphy Group

70,416

65,965

197,600

184,357

    Licensed Brands

32,599

30,981

85,118

87,735

    Corporate and Other

276

191

573

754

    Net Sales

$  773,898

$  722,915

$ 2,090,020

$  1,967,214

Operating Income (Loss):

    Journeys Group

$    38,944

$    35,047

$       72,594

$        61,544

    Schuh Group (1)

8,649

3,949

10,880

(1,389)

    Lids Sports Group

4,704

8,606

6,900

25,217

    Johnston & Murphy Group

4,637

4,505

9,460

8,577

    Licensed Brands

3,345

3,082

7,526

8,476

    Corporate and Other (2)

(8,229)

(8,629)

(26,560)

(22,063)

   Earnings from operations

52,050

46,560

80,800

80,362

   Indemnification asset write-off

-

7,050

-

7,050

   Interest, net

1,330

891

2,903

2,374

Earnings from continuing operations

    before income taxes

50,720

38,619

77,897

70,938

Income tax expense

17,865

9,869

27,504

23,322

Earnings from continuing operations

32,855

28,750

50,393

47,616

Provision for discontinued operations

(348)

(88)

(488)

(287)

Net Earnings 

$    32,507

$    28,662

$       49,905

$        47,329

(1) Includes $0.0 million and $1.5 million in deferred payments related to the Schuh acquisition in the third quarter and first

nine months ended October 31, 2015, respectively, and $1.0 million and $6.3 million for the third quarter and first nine 

months ended November 1, 2014, respectively.

(2) Includes a $0.2 million charge in the third quarter of Fiscal 2016 which includes $0.1 million for asset impairments

and $0.1 million for network intrusion expenses.  Includes a $4.0 million charge for the first nine months of Fiscal 2016

which includes $2.1 million for network intrusion expenses, $1.8 million for asset impairments and $0.1 million for other

legal matters.  Includes a $1.0 million charge in the third quarter of Fiscal 2015 which includes $0.6 million for network  

intrusion expenses and $0.4 million for asset impairments.  Includes a $1.3 million charge for the first nine months of

Fiscal 2015 which includes $2.4 million for network intrusion expenses, $1.6 million for asset impairments and $0.6

million for other legal matters, partially offset by a $3.3 million gain on a lease termination.

       

GENESCO INC.

Consolidated Balance Sheet

Oct. 31,

Nov. 1,

In Thousands

2015

2014

Assets

Cash and cash equivalents

$       28,148

$        38,026

Accounts receivable

82,136

71,796

Inventories

779,895

737,577

Other current assets

96,912

83,653

Total current assets

987,091

931,052

Property and equipment

322,069

314,664

Goodwill and other intangibles

390,733

402,089

Other non-current assets

43,811

21,440

Total Assets

$ 1,743,704

$  1,669,245

Liabilities and  Equity

Accounts payable

$    270,951

$      248,782

Current portion long-term debt

15,437

35,347

Other current liabilities

148,220

200,593

Total current liabilities

434,608

484,722

Long-term debt

199,691

79,688

Pension liability

21,441

8,597

Deferred rent and other long-term liabilities

157,601

125,580

Equity

930,363

970,658

Total Liabilities and Equity

$ 1,743,704

$  1,669,245

       

GENESCO INC.

Retail Units Operated - Nine Months Ended October 31, 2015

Balance

Acquisi-

Balance

Balance

02/01/14

tions

Open

Close

01/31/15

Open

Close

10/31/15

Journeys Group

1,168

0

34

20

1,182

20

23

1,179

    Journeys

827

0

16

9

834

9

5

838

    Underground by Journeys

117

0

0

7

110

0

10

100

    Journeys Kidz

174

0

18

3

189

11

5

195

    Shi by Journeys

50

0

0

1

49

0

3

46

Schuh Group

99

0

13

4

108

9

0

117

     Schuh UK

90

0

12

4

98

8

0

106

     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

24

41

1,347

Johnston & Murphy Group

168

0

8

6

170

7

3

174

    Shops

106

0

3

4

105

3

3

105

    Factory Outlets

62

0

5

2

65

4

0

69

Total Retail Units

2,568

56

273

73

2,824

60

67

2,817

Retail Units Operated - Three Months Ended October 31, 2015

Balance

Acquisi-

Balance

08/01/15

tions

Open

Close

10/31/15

Journeys Group

1,171

0

11

3

1,179

    Journeys

834

0

5

1

838

    Underground by Journeys

102

0

0

2

100

    Journeys Kidz

189

0

6

0

195

    Shi by Journeys

46

0

0

0

46

Schuh Group

113

0

4

0

117

     Schuh UK

102

0

4

0

106

     Schuh Germany

1

0

0

0

1

     Schuh ROI

10

0

0

0

10

Lids Sports Group*

1,344

0

15

12

1,347

Johnston & Murphy Group

172

0

3

1

174

    Shops

104

0

2

1

105

    Factory Outlets

68

0

1

0

69

Total Retail Units

2,800

0

33

16

2,817

* Includes 187 Locker Room by Lids in Macy's stores as of October 31, 2015.

Comparable Sales (including same store and comparable direct sales)

 

          Three Months Ended

 

       Nine Months Ended

Oct. 31,

Nov. 1,

Oct. 31,

Nov. 1,

2015

2014

2015

2014

Journeys Group

6%

6%

5%

4%

Schuh Group

2%

0%

5%

0%

Lids Sports Group

12%

1%

8%

0%

Johnston & Murphy Group

5%

0%

6%

0%

Total Comparable Sales

7%

3%

6%

2%

       

Schedule B

Genesco Inc.

Adjustments to Reported Earnings from Continuing Operations

Three Months Ended October 31, 2015 and November 1, 2014

 Three 

 Impact on 

 Three 

 Impact on 

 Months 

  Diluted 

 Months 

  Diluted 

In Thousands (except per share amounts)

 Oct 2015 

 EPS 

 Oct 2014 

 EPS 

Earnings from continuing operations, as reported

$     32,855

$        1.43

$      28,750

$   1.21

Adjustments:  (1)

Impairment charges

48

-

244

0.01

Deferred payment - Schuh acquisition

-

-

1,017

0.04

Indemnification asset write-off

-

-

7,050

0.30

Other legal matters

-

-

38

-

Network intrusion expenses

39

-

388

0.02

Higher (lower) effective tax rate

(749)

(0.03)

(7,185)

(0.30)

Adjusted earnings from continuing operations (2)

$     32,193

$        1.40

$      30,302

$   1.28

(1) All adjustments are net of tax where applicable.  The tax rate for the third quarter of Fiscal 2016 is 36.7% excluding a 

    FIN 48 discrete item of less than $0.1 million.  The tax rate for the third quarter of Fiscal 2015 is 36.4% excluding a 

    FIN 48 discrete item of less than $0.1 million.  

(2) EPS reflects 22.9 million and 23.8 million share count for Fiscal 2016 and 2015, 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.

Schedule B

Genesco Inc.

Adjustments to Reported Operating Income 

Three Months Ended October 31, 2015 and November 1, 2014

 Three Months Ended October 31, 2015 

 Operating 

Adj Operating

In Thousands 

 Income 

 Other Adj 

Income

Journeys Group

$     38,944

$           -

$      38,944

Schuh Group

8,649

-

8,649

Lids Sports Group

4,704

-

4,704

Johnston & Murphy Group

4,637

-

4,637

Licensed Brands

3,345

-

3,345

Corporate and Other

(8,229)

151

(8,078)

Total Operating Income

$     52,050

$         151

$      52,201

 Three Months Ended November 1, 2014 

 Operating 

Adj Operating

In Thousands 

 Income 

 Other Adj 

Income

Journeys Group

$     35,047

$           -

$      35,047

Schuh Group*

3,949

1,017

4,966

Lids Sports Group

8,606

-

8,606

Johnston & Murphy Group

4,505

-

4,505

Licensed Brands

3,082

-

3,082

Corporate and Other

(8,629)

1,036

(7,593)

Total Operating Income

$     46,560

$      2,053

$      48,613

*Schuh Group adjustments include $1.0 million in deferred purchase price payments.

     

Schedule B

Genesco Inc.

Adjustments to Reported Earnings from Continuing Operations

Nine Months Ended October 31, 2015 and November 1, 2014

 Nine 

 Impact on 

 Nine 

 Impact on 

 Months 

  Diluted 

 Months 

  Diluted 

In Thousands (except per share amounts)

 Oct 2015 

 EPS 

 Oct 2014 

 EPS 

Earnings from continuing operations, as reported

$     50,393

$        2.15

$      47,616

$   2.01

Adjustments:  (1)

Impairment charges

1,129

0.05

1,023

0.04

Deferred payment - Schuh acquisition

1,490

0.06

6,346

0.27

Gain on lease termination

-

-

(2,104)

(0.09)

Indemnification asset write-off

-

-

7,050

0.30

Change in accounting for bonus awards

-

-

3,575

0.15

Other legal matters

75

-

437

0.02

Network intrusion expenses

1,316

0.06

1,509

0.06

Higher (lower) effective tax rate

(1,561)

(0.07)

(7,838)

(0.33)

Adjusted earnings from continuing operations (2)

$     52,842

$        2.25

$      57,614

$   2.43

(1) All adjustments are net of tax where applicable.  The tax rate for the first nine months of Fiscal 2016 is 36.5% excluding a 

    FIN 48 discrete item of less than $0.1 million.  The tax rate for the first nine months of Fiscal 2015 is 36.9% excluding a 

    FIN 48 discrete item of less than $0.1 million.  

(2) EPS reflects 23.4 million and 23.7 million share count for Fiscal 2016 and 2015, respectively,  which includes common stock 

     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.

Schedule B

Genesco Inc.

Adjustments to Reported Operating Income 

Nine Months Ended October 31, 2015 and November 1, 2014

 Nine Months Ended October 31, 2015 

 Operating 

Adj Operating

In Thousands 

 Income 

 Other Adj 

Income

Journeys Group

$     72,594

$           -

$      72,594

Schuh Group*

10,880

1,490

12,370

Lids Sports Group

6,900

-

6,900

Johnston & Murphy Group

9,460

-

9,460

Licensed Brands

7,526

-

7,526

Corporate and Other

(26,560)

3,970

(22,590)

Total Operating Income

$     80,800

$      5,460

$      86,260

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

 Nine Months Ended November 1, 2014 

 Operating 

 Bonus Adj 

Adj Operating

In Thousands 

 Income 

 and Other 

Income

Journeys Group

$     61,544

$      4,919

$      66,463

Schuh Group*

(1,389)

6,346

4,957

Lids Sports Group

25,217

-

25,217

Johnston & Murphy Group

8,577

25

8,602

Licensed Brands

8,476

-

8,476

Corporate and Other

(22,063)

2,082

(19,981)

Total Operating Income

$     80,362

$    13,372

$      93,734

*Schuh Group adjustments include $6.3 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 

$    100,385

$       4.37

$   97,890

$       4.26

Adjustments:  (1)

Asset impairment and other charges

3,832

0.17

4,148

0.18

Deferred payment - Schuh acquisition

1,490

0.06

1,490

0.06

Adjusted forecasted earnings from continuing operations (2)

$    105,707

$       4.60

$ 103,528

$       4.50

(1) All adjustments are net of tax where applicable.  The forecasted tax rate for Fiscal 2016 is approximately 36.8% 

    excluding a FIN 48 discrete item of $0.1 million.

(2) EPS reflects 23.0 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.



RELATED LINKS

http://www.genesco.com