EXHIBIT 99.1
Financial Contact: James S. Gulmi (615) 367-8325
Media Contact: Claire S. McCall (615) 367-8283
GENESCO REPORTS FOURTH QUARTER AND FISCAL 2005 RESULTS
--COMPANY REPORTS DILUTED EPS BEFORE DISCONTINUED OPERATIONS
OF $0.97 FOR FOURTH QUARTER, $1.93 FOR FISCAL YEAR--
--ANNOUNCES LEASE ACCOUNTING REVIEW--
--RAISES FISCAL 2006 GUIDANCE--
NASHVILLE, Tenn., March 3, 2005 - Genesco Inc. (NYSE: GCO) today reported
earnings before discontinued operations of $25.5 million, or $0.97 per diluted
share, for the fourth quarter ended January 29, 2005. Earnings before
discontinued operations were $17.8 million, or $0.71 per diluted share, for the
fourth quarter ended January 31, 2004. Net sales for the fourth quarter of
fiscal 2005 increased 40% to $352.8 million compared to $252.7 million for the
fourth quarter of fiscal 2004.
For the fiscal year ended January 29, 2005, the Company reported
earnings before discontinued operations of $48.6 million, or $1.93 per diluted
share. Earnings before discontinued operations were $29.6 million, or $1.26 per
diluted share, for the previous year. Earnings reflected favorable tax provision
adjustments of $0.5 million, or $0.02 per diluted share, in the fourth quarter
of fiscal 2005 and $1.0 million, or $0.04 per diluted share, for the full year.
Net sales for fiscal 2005 increased 33% to $1.1 billion compared to $837.4
million for fiscal 2004. Reported results for the fourth quarter and fiscal year
ended January 29, 2005, are preliminary, unaudited and subject to adjustment
pending completion of the Company's review of its accounting for certain aspects
of retail store leases, discussed below, and of year-end audit procedures.
Genesco Chairman, President and Chief Executive Officer Hal N.
Pennington, said, "Our better than expected fourth quarter performance was
driven by ongoing improvements in all of our businesses, validating the
strategic initiatives we put in place early last year. These results, our
confidence in our direction as a company, and the positive tone of the business
at the beginning
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of the new fiscal year have raised our expectations for fiscal 2006.
"Net sales at Journeys increased 8% to approximately $164 million in
the fourth quarter, same store sales rose 4% and footwear unit comps increased
6%. Fashion athletic, skateboard, and eurocasual styles, all categories we
consider to be particularly strong for Journeys, accounted for much of the
quarter's gains, and we expect them to remain strong in the first half of fiscal
2006.
"Same store sales at the Underground Station Group, which includes the
Jarman stores, rose 3% during the quarter. We were particularly pleased with the
Underground Station stores which posted a 5% gain in same store sales, primarily
driven by continued increases in average selling prices. Throughout the year we
implemented a number of product, merchandising and operational changes to
improve this business and it is encouraging to see improved results.
"Hat World registered another strong quarter, with total sales up 17%
and same store sales up 6%, due to increased demand for core sports product, as
well as ongoing strength in the fashion and branded cap businesses. Given the
flexible retail opportunities that exist for Hat World, not only in malls, but
in airports, outlets, kiosks and street locations, we continue to be confident
about Hat World's significant growth potential. We plan to open 90 new Hat World
and Lids locations in fiscal 2006 and we believe we can ultimately grow this
business from the 552 locations at year-end to more than 900 U.S. locations.
"We were also very pleased with Johnston & Murphy's fourth quarter
results. Net sales increased to $44 million, same store sales rose 3% and
operating margin increased 420 basis points to 8%. Our focus has been on
profitable sales and margin improvement. We now look to further enhance the
Johnston & Murphy brand name and to grow sales by increasing our investment in
marketing and advertising beginning in the first quarter.
"Dockers Footwear's sales rose 10% during the quarter to approximately
$13.5 million, with an operating margin of 6.5%. For the full year, operating
margin was 9.6%. While we still have work to do, we are pleased with the
direction of the Dockers Footwear business."
CONVERTIBLE SUBORDINATED DEBENTURES
The Company noted that the earnings per share for the fourth quarter
and fiscal 2005 as well as the prior-year periods, reflect the
previously-announced effect of accounting changes
2
requiring that the shares underlying its 4 1/8% Convertible Subordinated
Debentures due 2023 be included in diluted shares outstanding. The Company also
noted that the Debentures became convertible on January 31, 2005. The
convertibility of the Debentures was contingent on the shares of the Company's
common stock closing at or above $26.54 for 10 of the last 30 trading days in
the immediately preceding fiscal quarter. The contingency was satisfied in
January. The Debentures are convertible at the rate of 45.2080 shares of common
stock for each $1,000 in principal amount of Debentures.
REVIEW OF LEASE ACCOUNTING
The staff of the Securities and Exchange Commission has recently
announced interpretations of certain issues involving the accounting treatment
of retail store leases which differ in some respects from the Company's
historical accounting treatment. The Company believes that these interpretations
affect the Company's classification of certain items on the balance sheets and
statements of cash flows related to accounting for construction allowances
received from landlords for the relevant periods. These interpretations may also
affect the Company's analysis of impairments of fixed assets and the
amortization of leasehold improvements in a limited number of stores and result
in a slight lengthening of the period over which rent expense is amortized under
all leases. The Company does not believe that any of the changes will affect net
cash flow for any period. The Company is currently assessing the quantitative
effect of changes to its accounting treatment required by the interpretations.
If such changes are material to the financial statements for any of fiscal years
2002 through 2004 or for any quarter in fiscal 2005, restatement of such periods
will be required. If the changes are immaterial for all such periods and in the
aggregate, they will be corrected in the fourth quarter ended January 29, 2005.
A fourth quarter correction or restatement would result in changes to the
preliminary results reported in this release.
FISCAL 2006 OUTLOOK
Genesco also stated that it is revising upward its fiscal 2006
guidance. The Company now expects sales in the range of approximately $1.26
billion to $1.28 billion and diluted earnings per share in the range of $2.14 to
$2.18 for the year.
Pennington concluded, "Fiscal 2005 was an outstanding year for Genesco
on many different
3
levels. Strategically, we see the acquisition of Hat World as having given us
another powerful growth vehicle with significant expansion opportunities.
Operationally, we effectively responded to market conditions and implemented a
series of changes that we believe helped to enhance our platform and better
position us for the future. Financially, we consistently outperformed
expectations in every quarter throughout the year. We are encouraged about what
lies ahead and remain committed to further capitalizing on our leadership
position in the marketplace."
FACTORS POTENTIALLY AFFECTING FORWARD-LOOKING STATEMENTS
This release contains forward-looking statements, including those
regarding the Company's sales and earnings outlook and all other statements not
addressing solely historical facts or present conditions. Because the results
discussed in this release are preliminary, unaudited and subject to adjustment,
they also represent the Company's current expectations as to the data that will
be reported in the Company's audited financial statements (without giving effect
to the impact of any changes regarding the Company's lease accounting), and also
constitute forward-looking statements. Actual results could vary materially from
the expectations reflected in these statements. A number of factors could cause
differences, including adjustments due to certain events occurring between the
date of this release and the filing of the Company's annual report on Form 10-K,
the impact of lease changes, and adjustments or corrections to reported data
occurring in the course of the completion of the audit of the Company's fiscal
2005 financial statements. Moreover, factors including weakness in consumer
demand for products sold by the Company, fashion trends that affect the sales or
product margins of the Company's retail product offerings, changes in the timing
of holidays or in the onset of seasonal weather affecting period to period sales
comparisons, changes in buying patterns by significant wholesale customers,
disruptions in product supply or distribution, further unfavorable trends in
foreign exchange rates and other factors affecting the cost of products, changes
in business strategies by the Company's competitors (including pricing and
promotional discounts), the ability to open, staff and support additional retail
stores on schedule and at acceptable expense levels and to renew leases in
existing stores on schedule and at acceptable expense levels, variations from
expected pension-related charges caused by conditions in the financial markets,
and the outcome of litigation and environmental matters involving the Company,
4
could also cause differences from current expectations. Forward-looking
statements reflect the expectations of the Company at the time they are made.
The Company disclaims any obligation to update such statements.
CONFERENCE CALL
The Company's live conference call on March 3, 2005, 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.
Genesco Inc., a Nashville-based specialty retailer, sells footwear,
headwear and accessories in more than 1,600 retail stores in the United States
and Canada, principally under the names Journeys, Journeys Kidz, Johnston &
Murphy, Underground Station, Hatworld, Lids, Hat Zone, Cap Factory, Head
Quarters and Cap Connection, and on internet websites www.journeys.com ,
www.journeyskidz.com , www.undergroundstation.com , www.johnstonmurphy.com,
www.lids.com, www.hatworld.com, and www.lidscyo.com. The Company also sells
footwear at wholesale under its Johnston & Murphy brand and under the licensed
Dockers brand. Additional information on Genesco and its operating divisions may
be accessed at its website www.genesco.com.
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GENESCO INC.
CONSOLIDATED EARNINGS SUMMARY
===================================================================================================================================
Fourth Quarter Fiscal Year Ended
----------------------------- ------------------------------------
In Thousands 2005 2004 2005 2004
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Net sales $ 352,818 $ 252,672 $ 1,112,681 $ 837,379
Cost of sales 177,669 134,603 561,597 448,601
Selling and administrative expenses 130,939 89,324 461,535 332,674
Restructuring and other, net 570 1,040 1,197 901
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Earnings from operations before interest and other 43,640 27,705 88,352 55,203
Loss on early retirement of debt -- -- -- 2,581
Interest expense, net 3,046 1,598 10,962 7,289
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EARNINGS BEFORE INCOME TAXES FROM
CONTINUING OPERATIONS 40,594 26,107 77,390 45,333
Income tax expense 15,110 8,347 28,778 15,715
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Earnings from continuing operations 25,484 17,760 48,612 29,618
Provision for discontinued operations, net 250 (888) (211) (888)
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NET EARNINGS $ 25,734 $ 16,872 $ 48,401 $ 28,730
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EARNINGS PER SHARE INFORMATION
===================================================================================================================================
Fourth Quarter Fiscal Year Ended
------------------------------ ----------------------------------
In Thousands (except per share amounts) 2005 2004 2005 2004
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Preferred dividend requirements $ 73 $ 73 $ 292 $ 294
Average common shares - Basic EPS 22,326 21,721 22,008 21,742
Basic earnings per share:
Before discontinued operations $1.14 $0.81 $2.20 $1.35
Net earnings $1.15 $0.77 $2.19 $1.31
Average common and common
equivalent shares - Diluted EPS 26,833 25,997 26,377 24,399
Diluted earnings per share:
Before discontinued operations $0.97 $0.71 $1.93 $1.26
Net earnings $0.98 $0.67 $1.92 $1.23
===================================================================================================================================
GENESCO INC.
CONSOLIDATED EARNINGS SUMMARY
===================================================================================================================================
Fourth Quarter Fiscal Year Ended
------------------------------- ----------------------------------
In Thousands 2005 2004 2005 2004
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Sales:
Journeys $ 163,931 $ 151,128 $ 521,942 $ 468,919
Underground Station Group 50,175 47,521 148,039 147,812
Hat World 80,752 -- 216,270 --
Johnston & Murphy 44,389 41,727 162,599 160,095
Dockers 13,471 12,241 63,508 60,274
Corporate and Other 100 55 323 279
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NET SALES $ 352,818 $ 252,672 $1,112,681 $ 837,379
===================================================================================================================================
Pretax Earnings (Loss):
Journeys $ 26,993 $ 26,065 $ 60,290 $ 54,823
Underground Station Group 6,103 4,975 7,010 8,156
Hat World 13,955 -- 30,722 --
Johnston & Murphy 3,530 1,589 9,022 4,018
Dockers 880 943 6,075 4,548
Corporate and Other* (7,821) (5,867) (24,767) (16,342)
- -----------------------------------------------------------------------------------------------------------------------------------
Operating income 43,640 27,705 88,352 55,203
Loss on early retirement of debt -- -- -- 2,581
Interest, net 3,046 1,598 10,962 7,289
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TOTAL PRETAX EARNINGS 40,594 26,107 77,390 45,333
Income tax expense 15,110 8,347 28,778 15,715
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Earnings from continuing operations 25,484 17,760 48,612 29,618
Provision for discontinued operations 250 (888) (211) (888)
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NET EARNINGS $ 25,734 $ 16,872 $ 48,401 $ 28,730
===================================================================================================================================
* Includes $0.6 million and $1.2 million of other charges for asset impairment
and lease terminations in the fourth quarter and year of Fiscal 2005 offset
by a $0.6 million pension curtailment gain in Fiscal 2005. Includes
impairment of $2.8 million and litigation of $0.1 million offset by $1.8
million excess restructuring provision in the fourth quarter and year of
Fiscal 2004.
GENESCO INC.
CONSOLIDATED BALANCE SHEET
================================================================================================================
JANUARY 29, January 31,
In Thousands 2005 2004
- ----------------------------------------------------------------------------------------------------------------
ASSETS
Cash and cash equivalents $ 60,068 $ 81,549
Accounts receivable 17,906 12,515
Inventories 207,197 167,234
Other current assets 25,934 22,468
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Total current assets 311,105 283,766
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Property and equipment 152,591 121,667
Other non-current assets 160,652 24,754
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TOTAL ASSETS $ 624,348 $ 430,187
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LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $ 65,599 $ 47,921
Current portion - long-term debt -- --
Other current liabilities 75,977 44,521
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Total current liabilities 141,576 92,442
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Long-term debt 161,250 86,250
Other long-term liabilities 45,952 35,897
Shareholders' equity 275,570 215,598
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 624,348 $ 430,187
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GENESCO INC.
RETAIL UNITS OPERATED - TWELVE MONTHS ENDED JANUARY 29, 2005
===================================================================================================================================
BALANCE ACQUISI- BALANCE
01/31/04 TIONS OPEN CONVERSIONS CLOSE 01/29/05
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Journeys Group 665 37 0 7 695
Journeys 625 35 0 6 654
Journeys Kidz 40 2 0 1 41
Underground Station Group 233 21 0 25 229
Underground Station 137 21 12 5 165
Jarman Retail 96 0 (12) 20 64
Hat World 0 503 55 0 6 552
Johnston & Murphy 148 7 0 13 142
Shops 115 3 0 11 107
Factory Outlets 33 4 0 2 35
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Total Retail Units 1,046 503 120 0 51 1,618
===================================================================================================================================
RETAIL UNITS OPERATED - THREE MONTHS ENDED JANUARY 29, 2005
=====================================================================================================================
BALANCE BALANCE
10/30/04 OPEN CONVERSIONS CLOSE 01/29/05
- ---------------------------------------------------------------------------------------------------------------------
Journeys Group 687 11 0 3 695
Journeys 646 10 0 2 654
Journeys Kidz 41 1 0 1 41
Underground Station Group 231 6 0 8 229
Underground Station 158 6 3 2 165
Jarman Retail 73 0 (3) 6 64
Hat World 543 12 0 3 552
Johnston & Murphy 142 3 0 3 142
Shops 106 3 0 2 107
Factory Outlets 36 0 0 1 35
- ---------------------------------------------------------------------------------------------------------------------
Total Retail Units 1,603 32 0 17 1,618
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CONSTANT STORE SALES
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Three Months Ended Twelve Months Ended
------------------------------- -------------------------------
JANUARY 29, January 31, JANUARY 29, January 31,
2005 2004 2005 2004
- ---------------------------------------------------------------------------------------------------------------------
Journeys 4% 0% 5% -1%
Underground Station/Jarman Group 3% -8% -3% -6%
Underground Station 5% -7% -2% -1%
Jarman Retail -2% -9% -6% -11%
Johnston & Murphy 3% -1% 3% -1%
Shops 3% -3% 2% -3%
Factory Outlets 4% 9% 4% 4%
- ---------------------------------------------------------------------------------------------------------------------
Total Constant Store Sales 4% -2% 3% -2%
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Hat World 6% --
April 1, 2004 - January 29, 2005 11% --
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