Financial Contact: Mimi E. Vaughn (615) 367-7386
Media Contact: Claire S. McCall (615) 367-8283
GENESCO REPORTS FIRST QUARTER FISCAL 2017 RESULTS
NASHVILLE, Tenn., May 26, 2016 --- 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.
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| | | | | | | | |
| 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 | | (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) | | 2016 |
| | 2015 |
|
| | | | | |
| Average common shares - Basic EPS | | 20,815 |
| | 23,550 |
|
| | | | | |
| Basic earnings per share: | | | | |
| From continuing 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: | | | | |
| From continuing 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 | | (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.
(2)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 a $1.8 million charge for network intrusion expenses, $0.7 million in asset impairments and $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 |
|
| | 1/31/2015 |
| | tions |
| | Open |
| | Close |
| | 1/30/2016 |
| | Open |
| | Close |
| | 4/30/2016 |
|
| Journeys Group | 1,182 |
| | 37 |
| | 29 |
| | 26 |
| | 1,222 |
| | 5 |
| | 7 |
| | 1,220 |
|
| Journeys | 834 |
| | — |
| | 13 |
| | 5 |
| | 842 |
| | 4 |
| | 5 |
| | 841 |
|
| Underground by Journeys | 110 |
| | — |
| | — |
| | 12 |
| | 98 |
| | — |
| | 1 |
| | 97 |
|
| Journeys Kidz | 189 |
| | — |
| | 16 |
| | 5 |
| | 200 |
| | 1 |
| | — |
| | 201 |
|
| Shi by Journeys | 49 |
| | — |
| | — |
| | 3 |
| | 46 |
| | — |
| | 1 |
| | 45 |
|
| Little Burgundy | — |
| | 37 |
| | — |
| | 1 |
| | 36 |
| | — |
| | — |
| | 36 |
|
| Schuh Group | 108 |
| | — |
| | 17 |
| | — |
| | 125 |
| | 1 |
| | 2 |
| | 124 |
|
| Schuh UK | 98 |
| | — |
| | 15 |
| | — |
| | 113 |
| | 1 |
| | 2 |
| | 112 |
|
| Schuh Germany | — |
| | — |
| | 2 |
| | — |
| | 2 |
| | — |
| | — |
| | 2 |
|
| Schuh ROI | 10 |
| | — |
| | — |
| | — |
| | 10 |
| | — |
| | — |
| | 10 |
|
| Lids Sports Group | 1,364 |
| | — |
| | 27 |
| | 59 |
| | 1,332 |
| | 3 |
| | 18 |
| | 1,317 |
|
| Johnston & Murphy Group | 170 |
| | — |
| | 8 |
| | 5 |
| | 173 |
| | 1 |
| | 2 |
| | 172 |
|
| Shops | 105 |
| | — |
| | 3 |
| | 5 |
| | 103 |
| | 1 |
| | 2 |
| | 102 |
|
| Factory Outlets | 65 |
| | — |
| | 5 |
| | — |
| | 70 |
| | — |
| | — |
| | 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 |
| First Quarter Ended April 30, 2016 and May 2, 2015 |
| | | | | |
| | First | Impact on | First | Impact on |
| | Quarter | Diluted | Quarter | 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 both 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 |
| First Quarter 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 |
|
Schedule B
|
| | | | | | | | | |
| | | | |
| | 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.
|
| | | | | | | | | | | | |
| 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.
