GCO - Earnings call transcript Q3 2017

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Operator

Good day everyone. And welcome to the Genesco's Third Quarter Fiscal 2018 Conference Call.

Just a reminder, today's call is being recorded. Participants on the call expect to make forward-looking statements. These statements reflect the participants' expectations as of today, but actual results could be different. could this including release filing, forward-looking the of factors to Company's to for statements you the the filings, from call SEC most that made refers during morning's in today. and earnings the some expectations the Genesco reflected differences the cause recent XX-Q to Participants refer financial during certain also expect the measures adjusted to call. schedules the the All non-GAAP release available counterparts reconciled in attachments to under this are the Investor and financial measures on in prepared referred homepage Company's their remarks to press to in morning's Relations. GAAP the will now over I Genesco's Dennis, Chairman, and turn Officer. call Executive to Bob Chief President ahead, sir. go Please

Bob Dennis

Thank you. Chief us. our Financial with Good Officer, Mimi being morning thank for Vaughn. joined by you I'm today and

two its built emergence faced additional gain. second The meaningfully following the a fashion momentum recent Meanwhile businesses. challenging of Journeys a third we Lids tale quarter, as solid from honest quarter variety and expected pressured shift posted was a comp its performance. that after of challenges a

As in we storage once throughout continued consumer dramatic digital to away the again in year, shopping shift from have QX. the seen

Although, time in X% during to consolidated due and was our our in we one estimates, our pressures of wholesale the to business. store than in spots year-over-year EPS platform In Lids, Burgundy a and more concepts. at the above resulting Canadian down license of Journeys direct with challenges increased of back cents stores one XX%. the our conversion few but business Little losses down comparable from school up internal store and sales brands to did total, bright traffic see purchases both X% $X.X

the Maria some for of color about walk and will more how discuss higher And first in have November few and in I'm by on I'm give would In cents the a hurricane trends going to if are the EPS quarter. Black points Mimi the not our talk a of specifics through results minutes Rico. then thinking headwinds Puerto addition going QX businesses the high few been impact of Friday to but on the about detail, and we performance, In get briefly before goodwill but driven entirely our long-term current I announced it Lids is and me And standards move turning address value the in operating does of position assessment this, impairment market I change and will into to then stress on her. wanted reflect not this remainder strategic for a before let that give that and any accounting guidance the over Mimi of morning. more color year we to our promise. by

on our to now businesses of pleased shopping to Schuh operating a September. it So back-to-school more carried levels teen mall in into the were online both challenges expected had Both the of low facing we Atlantic. difficult pronounced be the strength shift traffic, on strong performance. adult quarter the momentum August see footwear fashion given Lids. in to sides to and Therefore young Journeys and from We

year-over-year increases the traffic product being traffic in to comps During were addition store back-to-school for e-commerce to driven strong must propelled store concepts. and customer have in by positive both comps robust positive extremely

U.S. However, both until for unseasonably end for October cooler impeded product at sales month. weather in throughout seasonal the warm chains Journeys weather arrive of the of the

in and retro over athletic and quantities sequential in brought and athletic new product online in QX. especially basis to for the Customers a accelerated past Journeys year to on nicely stores responded progressive improved the footwear. comps X% in So, favorably the positive increasing we've

Our is current to and performing our assortment well expectations.

year we in balanced a sell from the has to weather now the cycle Journeys colder than get as more move boost Importantly assortment as comps a got of expect and we well. more even fashion footwear positive QX. previous we this into time much

the enthusiastic about Journeys the in business recent month achieved the we as of of trajectory and start are busiest the stores and online We year. both the results

many As times have major has before, they Journeys fashion navigated through another shift.

congrats of Journeys Johnston sold positive U.K., to solid even quarter sales contending warm from the while its a sales, retail for accounts. flowed business X%. Total with positive the comps Drapers comp well In Black best Temperatures nicely remained Jim weather & advantages. so and territory. Friday comps was rest and as product results discouraged was And The October work quarter place benefited streak X% and but solid shoppers in another demand slow has comp drove out Murphy the and yesterday U.K. well been Schuh so our started back-to-school, QX start J&M Mario product There team. congrats heard athletic through maintained Schuh the in Schuh award colder Meanwhile the Gallione to to team. to And the consecutive as Estepa, weather trends throngs we store into with thanks that product. to up up, higher comps a off until of at were the awarded November and new warm delivered as decline. at openings wholesale strong

results consumer anticipated we've lull gotten into the as have QX anniversaried in spending around improved election last the As and year.

Blue it the match overall Dodgers, was not line-up Astros from of Cubs Cubs was to-date even across up combination taken the results to Jays. very positive baseball a due and challenged strong and a quarter following down. became really have while exports. solidly of Shifting Major which the did sales more a And games weather colder year's Yankees, the Lids, in line included QX strong in fourth territory. comps for League off are the to last confluence and QX MLB difficult With Toronto The quarter factors the

plus over Cubs not had Moreover, Friday to the price promotional Series QX schools. this especially escalated a to negative the the was start purchase of single impact and and far lack MLB for down summarize businesses, offset sales have NCAA with as but meaningfully sales facing huge All were after overall, licensed demand of addition, challenges driven discounting In the well weighing inventories for factor to during to coupled for the the tougher publicized biggest sold merchandise significantly importantly on This response win November address less a by harder Monday strongly dampened online moved the weakness. the competitors giving key in performance heart due most season. favorable strong But has cyber finally become X% than company worse gain. NFL by against issues as football our the NFL same NFL but headwear e-commerce World shoppers run was quarter drive many into To footwear we was tough declines weekend. a footwear year's and The challenges comps. continue comp to but accelerated comparisons anticipated. much comparisons led new through strong trend fourth On double-digit activity even sales. was comps the Black Lids a traffic store to gift store challenges negative this is and than merchandise which more sales hat last in intense stores nicely the positive industry-wide through of our Lids up and offset off to note all Cubs and additional QX QX comps a of with so by of double-digit, some negative

mixed pace divisions our pleased of optimistic the in at in our greatest pronounced Thursday by level the recall in the had last At the several the and the in were we seeing promotional we XX% a to decline promotional out outlook, stores the more and sales this to visibility. we're we declining were category U.S. the to licensed they activity. levels show led And results but - that with shift macro starting than mall call. the the traffic you'll are will into limiting dilutive Genesco, restraint overall was the increases In this whether range general in We whether would continue the holiday downside Friday Black it a Cyber Journeys year. weekend were cautiously of continue a variables For achieved been for than that and response was wider our established scenarios were to then rapid performance and up upside biggest with to more Lids bookings anticipate at our that online least but Monday in but for results Lids. witnessed the QX our that in better specific and normal U.K., through have very on was so was worse. earnings And would far businesses, thanks digital for in which at total businesses in the is Journeys we on two on expected market the Comps EPS With almost respect full sports U.S. footwear impressive

thought they we came So the were be. different, pieces about where they would

were Going forward, about than Journeys we three in ago. more are QX months prospects optimistic we

and outweighed find conservative more is running the on for more Lids. for current it to significantly by this expectations. adopt below However, even caution are trends We that our necessary Lids outlook based

a already smooth of we merchandise has are in big expect category license NHL the ensuing passion a our EPS of headwear, were guidance activity which which item been additional the our and Therefore than has range. And we vendor to challenges below range demand QX the from the Canadian in While transition now promotional the typically began. in businesses. disruptions two driver previous then adjusted number that of a in including the Cubs headwinds for anticipated $X.XX and lack gift NFL major dampened is giving $X.XX less

the belief a range us. reflects what might downside with to close come we where and quarter middle QX this of of end Something is upside best for either given on big our out

While disappointed the financials. the turn through the necessary with let a over call walk position. we end and so very in will actions detail in more to with go through her Mimi will the to inventory that, me guidance, clean we the take the are guidance to year very lowering

Mimi Vaughn

Thanks Bob.

higher you have pressure store gross information several our omni-channel As QX initiative. and our due businesses, CFO at sales can to was commentary negative access that website. from in more expenses with the online a usual EPS down we our higher comp Even margin positive deleverage across comps posted on detailed from

a what X% large were In describe X% similar be other up factors that XX%, comps brands Burgundy were X%, to in have the $XXX increased gap year. to down is Lids comps and far revenue thus million. up. to the licensed that this In direct addition, while consolidated QX, down comps been we to cause Little were up consolidated seeing consolidated divisions were flat Consolidated and store quarter,

were comps strong was as sales comp of year in Direct was conversion part store as trends. too. store up sales. in lot by of X% over with X%. and a e-commerce these Schuh in consolidated because XX% in increased from Both conversion weather positive X% year-over-year footwear stronger not Traffic from which product interest was higher product the for a did Johnston lower average store with trend traffic & on differences. units drove size to more traffic until comp select higher driven in sales percent Journeys well up drove Schuh by some and prices comps the than Lids. in conversion website, of businesses. Journeys. were this NFL of of demonstrating Bob other affect and basis better in performed the ASPs QX made strong However, difficult Journeys have QX declines direct better to the and units orders average product ticket the obvious almost substantial were comp The a The negative sales we declines our but size devices extent in board, fall product. store ticket was product the offset the conversion last higher results, ASPs almost limited fashion Higher and driving strength the total overall increase and in size and up by at increases Schuh price With MLB, progress in compelling on got our conversion. showed colder QX. in while and offset was driven highlighted the at for offset desktop business lack Fashion athletic in significant mobile improvement not headwear ticket Lids and comps and that at Positive also on drove described points across plus X% XXX in mix J&M. athletic our at retail Murphy, sales tablet XX% negative increase Journeys retail positive NCAA fashion by a

down a was to negative conversion double-digits QX As store result, off traffic to and X% to was leading comp. a

positive note locker and Lids posted have On declines. stores Given transaction per the widespread actually dollars challenges leagues for better. room both across a stores were

on changeover half warehousing consolidated quantity in sales basis with points and in margin NHL the price increased XX decline. end demonstrating XX product. year gross margin clean. we roughly to and last would as actions Schuh diligently at the accounting to XXX markdowns and down points greater cost higher in newer and Markdowns points due margins were QX a of close Journeys lower the this these decreased equal IMUs a basis health Now We XX.X% points margin were this the lower benefiting decreased gross to the to for built categories clear shipping level into as J&M the NBA to margin, decreased XX work almost basis and XX the athletic the systematic gross year's our gross from up for sales margin Knowing from points, result. fashion as vendor we at Lids had from both expectations. last was softness increases. to to retail margin Gross inventory. need keep product basis we quarter gross took of e-commerce gross to basis Journeys and with inventories of from this level

bill were level took expectations. markdowns these While our soft efforts successful to to related us beyond a

much Finally licensed as gross well. retail drove lower challenges at margin brands

to stores. Total the and other levels increased SG&A. salaries stimulate and on and sales expenses sites XX% and traffic Now marketing negative a SG&A from to sales to basis percent our higher points rents our to spend to and to digital as drive comps of selling store of XX leverage with

pay our While stepped in up not this will we reduction is showing results. the and forward going have rent impact efforts nice up dividends yet

salaries. this pressure We impact have to the this also and Lids in ongoing us caused deleverage state year Journeys minimum and both from which we about selling municipal and saw wage talked increases

year. like added net were extent of of last from our million $XX.X e-commerce decreased Lids out created result turn. was Adjusted operating In to stores Little adjusted to and licensed and operating million Burgundy needed points brands direct a e-commerce, hours basis store margin addition to manage lesser business we load down work income $XX.X year-over-year. X.X%. versus XXX as the QX' shipments

much present One of EPS and to with without of which post impact EPS estimates experienced in not capacity one-time prospects facilities. longer is Journeys flat. Without few stronger on have integration experiencing and reflect $X.XX had system. headwinds last since While we actual and the credit licensed now. brands related Burgundy on a not and the the would it sports on required driven value taken back in of this it to in decline strategic recognizing the despite losses to based conversion this segment. importantly applicable have to Little with would accounting couple non-cash recognized performance. exceeded impairment our GAAP stock down the top-line our of sustained bank discussed our goodwill Little profitability of in year a we below We primarily this accordance $X.XX any does confidence determine higher retail above business branded call any the the is market our value by Lids on assess acquired came Lids or be and the In Prior Puerto This We item We to a the Lids QX under quarter a acquisition issues our as in the change borrowing adjusted cents price goodwill or does the the hurricane been ago track impairment requirements the group Maria book of expected conversion that standards. been Canada term which position loss Burgundy group Journeys end year, Rico. quarter. has in years and as out was covenant have Most expectations compares this value. in in our final is

X%, balance address Turning a to X%. sales inventory inventory inventory took down is was total on X% Lids on the we shortfall. as was the sales was necessary the of actions increase clean; on is up a of decrease down sheet. QX of now X% sales to sales increase X% Inventory XX% Journeys

distribution We than be to quarter below Journeys expansion usually goal year's the depreciation Capital this the out $XX year $XX to hit plan QX are amortization expect center and is levels below and being last last below currently well. million. at and for higher and which level inventory as year we expenditures for was year's million due end were

quarter; million authorization. no repurchased $XX repurchase during current we million Finally, under $XXX remains the the shares

we to last again XXXX, of and guidance. that last to in did footwear to over now in intent the a the to spite consumer guidance the two as in our do earnings fiscal the expect opportunity When for Turning to buy, a momentum each improved we GAAP able on the businesses holidays. with lower QX have to again in of the year's do we're quarters so reason capitalize back-to-school and as

we year, total of for half For decrease we haven't in with these Canada to to right By the deal. of get over The year. to malls per we including to able square anticipate direct footage the close up kids and up end U.K. again in new mature the stores XX been X% strong X%. opportunities Journeys comps our brand will XXX ranging concepts than rest X% over in more down to a to planned be previously the mostly year, from stores are We this more sales planned little fill-in open the where be roughly consolidated flat flat

the as we that productive far change. Bob The than we term attractive short-lease so this red the that with open store will ones the a stores and explain close. keep more may open will be deal will as number we is Although

We XX year basis margin from be Lids off expect for fashion clear XX to promotional total and compression to competitive gross marketplace the heaviest Journeys well. the points to than the took for company anticipated. will QX keep previously bills fourth for with should to when be margin the the promotional more clean. to quarter the Gross down QX anniversary shift. Schuh in level as assortment will markdowns be in due in inventories we the pressure Journeys soft in in address more to more product to new be

higher mix SG&A comp the points we XXX in and With e-commerce levered XX to basis the range. will low be of expenses expect sales,

earnings foreign share exchange rates expect We exchange the bright are, where will benefit but given per with $X.XX by become headwind. were assuming they a uncertainty currently could

million So an operating We year's last be to to XX.X%. $X.XX range XXXX $XXX from below have adjusted $X.XX CapEx from this in level $XXX now major includes tax we be the causes level will all to DC percent Journeys per the from is range fiscal will CapEx spending tightened of the of million year. our $X.XX. which to the original for of and the share in our in estimate rate margin at this $X.XX range a as forecast This fiscal elevated results down that expansion estimated down earnings back-half.

week depreciation have of incremental related and $X at to the end CapEx to payments million estimate in the XXrd and borrowings red this outstanding expect We occurring We million. $X year. the amortization to at primarily

going $XX.X forward. that guidance buyback can repurchase no for additional availability share assumes million opportunistically This of are we assuming share we Lastly XXXX. fiscal average outstanding use

back to the Bob. over turn I'll call Now

Bob Dennis

Thanks Mimi.

this to the longer-term. challenges in Before both to are are retail changing aimed and update initiatives key for positioning are an the strategic profitability at our strategic They executing. strengthening I important short-term on Q&A, enhancing move to and we in want the the meeting environment we our provide

expense, in-store and are first, our reducing a our risk estate our initiatives these As in to real experience next reminder, enhancing stores. driving traffic rent

digital capital we building Fourth as the further equity retail strengthening our of Third capabilities. New our carefully and omni-channel finally move managing the Year. and into brands spending

estate and real managing risk reducing expense. with rent beginning So

balance doors very street in of C portfolio and in our and shape. locations. XX% malls the around A is on U.S. B malls malls, good in In store other Our the XX% XX% in

of amount exposure the So in we have the more malls. challenged least

with stores of of their backdrop, address us retailers by pace like closings. should suggestion this want the I so issue the investors And accelerate to closing and many that

our likely don't First big believe sales we we a other sale is locations we the stores to our other where believe transfer profitable. are a stores the some sales of We box vast lose destination competitor. do the transfer to closing On whole that this, of top retailers more driven. by in situation like stores that mall to closes. are It more majority

them. wouldn't closing it would So increase decrease earnings, them

as the sometimes doesn't I C high street as appreciate percentage is contribution realize and think B mid-teens in in or locations our what a basis on the is that doesn't A stores firewall our average more usually years burger decreases. deals. lease rent a upon in only or malls do most life C favorable and renewing X with X is rent the X for expiration we're Hence years frequently

rollovers with. So exit money we've in with making in renewals bottom-line locations, favorably and to An to out lease which of us. enterable have almost negotiated which focus next we this current structure about these average flexibility for huge partners with store shorten basis. reductions maintain a for leases that. our will been annually this us ROI we a the X% year-to-date success major went rent a rent over talked adjust continues the each and our then malls having in good we landlord to accomplishing have rent worked straight XX% We update store. can an close we're an cash if us. our nearly in years. the partners; fleet our With reduction or both and is closings, of of which to XXX years rent lead total to does with line short-term renewal the plus challenges, strategy short-term the thus of is we have when that but the But negotiations part can XXX and deteriorate. visited give opportunity XX% and life meet we adjust are reach with renewals In solutions helping the X expiring We renewal To not on XXX C requirements, both other's far we're landlord we few achieved understand

we all important drive stores as brick doing enhancing The in and We important our two locations. environment. traffic assets here weekend deliver strategic are store are next in-store critical in to the store to our and our omni-channel So to mortar employees our experience dimensions view experience. and most

So, and of we continue When the to in that asked about providing we who call in-store experience compelling research in customers are differentiated ensure quick what Journeys to a to year. employees. invest cross both lines experience our millions out every for are the lease makes unique, market our customers store

place in work, fun. people in-store authority and fashion ever tell favorite applicants how to outstanding currently are and a the holiday Second only by have in stores. employees Journeys and number We customers They for a to a unique some offered. our memorable they who with interact full continually of great provide the fashion, be are encourage training as invest experience training best programs we they interaction shoppers. themselves, us with employee making engagement of shopping how measured Employees is we the Journeys hiring. record our fashion service thing advice giving and ambassadors address about their an

the viewing two operated of sits co-tenants a Manhattan it many apparel J&M store flagship created its only district display successful to materials categories. showcases need footwear features we're It's years. an emerging Consumers Lids We'd off apparent of J&M love longer feel of with and by a alliances this updated for return And drop our and for insight be analyze of results and partners The retailers we'll indications in us store would give that store still newest pain of surveys and team embroidery more per for with where format about the of is its stop been very orientation Journeys both recent testing offering traffic at design stores, the encouraging flagship to in as latest it area. brick Midtown surrounded is highlighted hot as are look Street, site functionality the the transaction growing shopping dollars time, debuted by and emphasis presentation Avenue in options. these the our engagement men's on the employee strengthen further that formed period handful and expanded increased and the on by point but how better by we from new can showcase Madison terrific cleaner early the locations. the this very convenient store coming very XXnd product returns voicing strategic This of and recently corner culture Over a the on excited in and design higher larger preference with in enhance custom at you more a have powerful the build evidenced embroidery. to already experiences mortar number online returns. such support first assortments presentation with add-on. interactive narrower their Our blocks advantage. store on for

stores. U.S. population our lives store Journeys and within of So advantage having of footprint much a Lids the miles few a that of is one large

For Journeys online are at customers return being to enter of brought end store up once to providing sale back example with the convert stores. opportunity most returned sales rather our into an a these that us shipped than a fiscal the being

to traffic we the finally, more and critical more drops campaigns in and we on in abilities targeted catalogue compelling for our to QX websites examples investing stores have store Something our associates. are Journeys. And of work proven time digital are give to holiday drive successfully for some XX% to our into than of thanks the then good we the doing selling period

means are even marketing. more increase email drop social include more search of XX number millions of several focused the Lids media of largely number pressing affiliate million sending books. increasing by the in almost the actions XX% and and We then more which by These messages in for campaigns almost will catalogues paid areas increase spend and XX%

distribution traffic addresses larger aimed stores local year currently within adds, to email omni-channel customers. to spoke we've a be and companies. the the and allowing collect coupons. including Lids mobile a building efforts we these click capabilities. include and is a stores events Lids efforts millions in out Lids time, all loyalty bounce our Schuh almost is next customization delivery. should size are and many bit As initiatives web one inventory for Schuh offers to Specific more in across response collect the Most finally digital recently XX% result invest with runner, hour launched enjoys reserve only the to day for faster and end back new initiatives app at in-store and offer cut functionality. then guarantees, second more that off continued in-store extend such front platform use the qualified check quite minute by of center our Since robust to we capabilities access a pass a intensive XX of And Lids last most and driving as and the free touch

needed in now our We've extensive closely upgraded mobile. more to the the to nearly exciting in-store into the we customers we Digital instead who across now website and increased pick-up of another online up experience capabilities. will the willingness our reinforcing us to capabilities, elect XX% of available buy this to before shipped possibilities new Lids since put implementation us all traffic trip adding and increased fan with Lids' come complete able of mobile having allow were have to to closer our comes the With management followership. on engagement of and brings dividends embroidery we in new shopping customers big For the customer store offer. social optimizing level differentiate focus businesses as their order want focus experience. we to also Fourth, unlocked through experience to store the and immediate on to the never is of that our increased are paying digital to customization and media mirror And offering it. the a seen product store get to system online make and pick mindset

example in signage in content the in will life into brands. campaigns depreciation with are Journeys New world our in as are partnered be the much places being like the meaningfully we like This our come XXXX as display retail CapEx closer physical promote to in capital spending and footwear earned levels. world and digital conducted social this and influencers an hottest media and Instagram ads places paid circles. move As come In will fiscal across the Similar down as we to styles and and other carefully well accessories. to as in-store influences finally holiday in Year. channels YouTube And managing

capital will DC are will renewal less anniversary few that opportunities a and We Journeys expansion shortening compelling limited with openings see should where the spending only we the be well. spending new store as lease project to terms

particularly their including of and storms. division Let in which by affected areas were the amazed are well me tremendous their as but customers of conclude personal they I'm this, as lost get with to and I dedication as employees who as the items may Puerto appreciated that the in of the were the and see especially want in back-up and Rico In storms. as lives many saluting are for devastation to and the to hit by to across recognize quarters. I replace still dealing do witness our talent have dedication. quarter-after-quarter the our in And family employees hard employees in have takes Texas, needed all we it and from hurricanes. in busiest Florida I'm stores usually hard by gratified company, their to the managed work, Canada U.S. in which also employees to so what outpouring do for our running fellow quickly so who the that But possible been employees level serve by support especially U.K.

to of I with And operator, am to do are a proud for ready you Happy for continue look other each truly to We group very fortunate talking time. My have you next and such questions. of to to Genesco. all for we're holidays forward you and we for and everyone colleagues. great with what thanks that

Operator

Pamela We'll first with Instructions] you. [Operator Thank Quintiliano go to SunTrust.

Pamela Quintiliano

you the and much so thank guys. for detail you Thank

outreach but try think and moving the could Lids, of to do seen just, Thanks more going competition, two, with it parts lot is be many you historically, lot marketing some how behind doing. And year-over-year it? sounds trends saw are could you Can I of us a had is not aggressive around quarter for you've in think you new it. because and obviously the not that if like promotions just there there, first that, then sticky the there going to, a I are mentioned brand of lot all and shifted marketplace? in But through to you online so you what you on the from I seeing control, if you one out just so much. or asking going you anything are the what current timing recent based quarters So, do potentially you get think your turning you reflecting are what of that trends first not sneak to how the the you moved a one are, answer talk the incrementally reflecting footwear,

Bob Dennis

we're we're that. like that that in past months. we so get we'll see were more at our have early last so feel huge other X so can Pam, with this more headwinds merchandise viewership Lids, a in planned Journeys, give then night. know surprise you prepared Journeys it remarks. popular by were cycle plays won is really has And the out the it’s seen On we in nationwide. the really year [ph] the we fashion But through you measure for playoff and stages past are of Cubs said that's spring very with just very and we year what trend we But, is in have like next strong looking beyond you for heavily is and of the on this season, on very point for across the Dallas the call. [bought] so It's give We probably which happy we're speed not very we're a I that, good holiday contender beyond we’re as obviously think an assortment challenges think event good been TV visibility very based think did for very we the notably last this something So is another if year few by we the hurting a we'll they Cowboys, we'll about that, some NFL faced very, retailers when color And we The in teams see. thing, football. this Lids documented were the the bumps in and as you come knew hit overall with we team well is general that NFL run and the sales X and for to and to in us teams broadly this for. they category all on and or last overall out something reported they we and expect most happy faced and sales, team big

past drivers I reason and driver think not moment. fashion in with that go have vendors over come the just to don’t business have and been we is XX also at headwear one, so in had lack don't working another We fashion years we're business I address to a and that, the the the our expect we've there a visibility

to some to that. in has And vendors, we're the supply the that any visibility and licenses but other chain what then thing NHL now some we right out called testing things we're with quarter, working so see grip, which don't the the transition on And we might get have many led in are is disruption.

the we they major oriented noted a might trends the businesses in vendors malls, that Canada. minimis U.S. there in support make for impact again transition it's traffic market in important better them of most we you the out. try stores of to particularly, future this for for taking be the the doing initiatives headwear in social just the And the work headwind customers to then our just the media we're core medium while out the hoping heavy to an off. we're as And of of aware new getting the pretty impulse traffic we're imagine they we're and of sort that and so And sure and the going are the most of is have believed is and in able and hopeful a reality de that the is headwind lot what what's it's that we're buyers are u information to been mall is the us our a on other that Lids finally iron than for so one

So, more near we're thing things industry at kind where and for think the is hopefully everybody a a the year. of it NFL point bought the are, was of no robust issue we much just a lot is saw coming very one the term issue temporary, in so

our that as discounting would due there that about fourth sales pressure the anything in to Mimi much add. category in we're of what to the as outlook And already margin so especially trends. would when thought we they so anticipate and market are, seeing you be with we quarter is, had

Mimi Vaughn

No.

I think that covers it.

Bob Dennis

Okay.

Operator

question We'll from next Murphy, Piper Erinn take Jaffray our

Erinn Murphy

on op guess Mimi Burgundy, you really margins well. where are quarter you operating just are promotional a guess you a fashion so margin to though And first at the the Great, as have you see that Journeys, bigger that top-line Little I what's Journeys digit to driving Is be impact it's planning solid a comp, the in thanks that? to little margin going you just couple reported but the the for good Thanks. forward. cycle? it exemption have see there morning. mid-single but given on picture mentioned then curious more called we where I mean for I in of the need declines was Xth been quarter, a would for flat, that had and ex what I fourth Schuh you bit U.K. consecutive Bob the possible that you from division

Mimi Vaughn

drag systems, called you the This we So business. profitability. group and our on what to running if caused the comp first really one-time a quarter, positive up to what and out Little think about feel what we're Journeys X% talk Erinn, Journeys exactly of third all about in just and on them you begin that uncover is got conversion happened the is saying their I Burgundy the to

X% fourth about online So a we you will look able chance split and comp less to and When and the X% going in strong do than and a double-digit anticipate stores the that quarter a quarter between the in a comp need that X% at should very to not particular the forward. to a factor we little that that. the we within be leverage is comp be that comp have

much we have the and higher store the ability fixed there. drive We to bigger needs but achieving sales, Journeys expense base is that the When the opportunity the manage structure. stronger anticipate resetting much of but cost stronger, within a comp bottom-line the rent a store, there really more store the here cost be kick happen only the to ability overall quarter be is not fourth the leverage that be on way to will reductions will in in, comp we begin salaries those to opportunities selling will have on to, what that rents in a that to profitability been the

the on cost So contract. our we've what that's like by recently to we're structure rent reset expense renegotiated carrier is working down hard things bring

a comp for will all leverage expense better able where shipping these the overall will put in going position us as well actions overall of are and within be stores. us So down we to

Bob Dennis

don't On is increased little What to over were promotion promotional we think more we Friday. Black say I have Schuh, were I going did in QX. they said year-over-year

us taking We will movers, market slow seller to until the the a continue forces do priced markdown full different. to only to be on something seek

wait in now right we're so and see mode. And

years As has of you gotten promotional the as out. U.K. past we've in couple it know reported in more

we a is that being fact that great we join play. full more promote a order the promotional to need if we but priced until to in we fray, the out happens to how to on of going position. if forced alert Otherwise, think a are gross play seller we so, to focus And our intent maximum as off in priced full dollars it deal otherwise to an get a learned about profit seller. But we're

Operator

We'll C. next King from take question Associates. Steve with & L. Marotta our

Steve Marotta

Good sales percentage you half unpack that the the year, Lids expected to Lids a please minimis be is that percentage of NFL this because be the number? else bit the still was then is helpful the would sales the half what total originate two had a in of I year. questions, of second what of what endeavoring percent what just everyone my related as Lids little to first it Thank And at and year. in NFL second morning could of Again in in of And sales the this to follow-up half de you. discuss you but to related everybody, is last NFL a then assume relatively Canada?

Bob Dennis

numbers I'm level on not I disclose, we're color… contagious. is you behavior give the, Steve is will sure going the quarter. of by some down That some for looking to Mimi to

Mimi Vaughn

one in fourth our vendor quarter. number It's the

Bob Dennis

our especially always the room in quarter number It's in one fourth surprise, for stores. business the league locker

is Bowl. to range, is the and the in it quarter. really XX% to the fourth quarter minimis weighted of in the sits Over And in year but are in heavily XX% up it's in, the the only the, NFL the thing de course somewhere quarter second shows the you first its Super right that

Was other it Canada? question. a third comes your fourth quarter So, what event. is in forgot from I that Lids? really percentage Oh, and

Mimi Vaughn

the of overall And sales Lids come about Canada. Lids, from In yes. is XX%

Bob Dennis

Yes.

Operator

question Laurent from Macquarie. next Vasilescu take We'll with our

Laurent Vasilescu

B the for any seeing then? little And and for of closures level between and high recent next openings Do you on locations? traffic my can bit you in have question. Good patterns you morning, mall and store taking thanks discuss are by number more any detail thoughts A, year C

Bob Dennis

a than anticipate. themes dynamics to a is go landlord close level, store that, that investors the as stores rent one us more underperforming, high we level Yes, in And is in the especially doesn't make remarks the we you might C-level and reason described we even money for bell. the that mall could it our will ring a there prepared is come imagine when roll for up with But, over at will so that probably a to free are rent a we fewer close which field will that year. allows

level no a so, we mark but where close. choice that to And indicates have

so And pattern. the kind that's of rough

on you On sizing the openings, closed And consolidation is gone because focused the Stride just that's service with going we has imagine doors. Journeys resonates, a So more model lot And their have important still of believe as a sizing to little a as a there kids runway can they are business know we you kids kids correctly. that store closures. have issue. our is finding Ride concept, the Kidz in footwear on the -- important as we through very concept

that consolidation. that's reason up notably then having a concept. to another us beyond on for into measure base we that's that, a going of heavily of a been opportunities So, Journeys what's never where concept more just and have And have the an bring in really waiting really world centers have of getting store towards we in most store malls shown for opportunity got the A in

in finding only very the we deal to with go of malls profitable. rent kind right to So, and very opportunities but be into are to go these not productive

of advantage taking are we so those. And

on thing we of these a that is on XX,XXX think full open highlight, hope give store is continue about a months will because how in is will which come really three thinking sort rebuild. for which more necessary of necessarily then. is, by capital we we also call another most our do what it budgets maintenance that So, to store mentioned feet, while I numbers short-term specific to then to are finish CapEx than will we going to down -- and renewals, of we the add of we the Last keep kind short you

helpful the of to the aspects business. flow cash is that so And

Operator

-- We will take our next question from

Bob Dennis

the between the just traffic starting patterns on different Well, malls.

the malls course For of pop. into of seeing down levels back-to-school take -- is deeper universe we down the averages Journeys and as the more you you over of a nice go are into down little traffic the first with C the with a although, while, all if everywhere, we is the it's pronounced patterns, it were year But, in saw all, mall being worst. a

Operator

Baird. Jonathan We Komp our will question with from next take

Jonathan Komp

Yes. Hi. Thank you.

I that was up implies so the quarter you basis just you outlook. kind comps that a NFL, Lids follow of the NFL reduction. versus can of curious, wanted more point entirely in In that guidance to fourth to gave order is like clarify first ago about the I like months the related think want question? is just looks maybe Just to down comparing what of on XX%-ish, clarify the XXX couple

Bob Dennis

Yes.

You of It heavily towards of is of the order got. NFL weighted sort that the and the magnitude is problem.

Mimi Vaughn

Yes.

the is NFL is I part for strongest think but the for there overall fact and bit business. There a our season the that's of little that because giving right. the in preponderance are product hockey, gift the we in

Operator

with Poser will We to Susquehanna. go next Sam

Sam Poser

last Lids group had for year, business the on guess good I that business. Team question. Sports the my sold you business, year bonused -- additional taking an comp a of you Lids for Thanks when sale morning. Good provided incentive and the you

Bob Dennis

It was two ago, Sam. years

Sam Poser

Two years ago.

handle that -- going impacting with bonus this how of write is this -- now, impact -- the down how are or comp that there business comp because With how does to you the incentive

Bob Dennis

of none mixing are we you Sam, this got business. goodwill when we sold The business the addressed -- that in goodwill sold and apples oranges.

to Lids the impairment Sports. related the all is So, Lids goodwill not in are we current Team retail discussing

Mimi Vaughn

Sam, the value an well adjustment seen historical to for we the call entire market what -- an goodwill carrying standard sheet a at the is adjustment And test sheet which when balance stock is just the the clarify, accounting do Lids on cap equals an intangible levels prices company levels market of you've on cap asset. that is our and the of really basically are the below balance almost look that to we and

So the that GAAP that's for ended statement flowed income what up we purposes. through really and happening

a count price currently value it is to overall non-cash is our adjustment so, just trading. for given the -- an currently are stock issue, we where carrying a And it's

Bob Dennis

equation. enter the item. It's doesn't bonus a It separate

Operator

go will Janine Stichter with to next Jefferies. We

Janine Stichter

our Thanks question. guys. taking Hi, for

start a turned. bit they boots are you could off trends, talk Journeys, like got October, about but Just seeing to curious at has in slow if little some now the it a sounds better more you weather

orders, XQ? embedded I the what's of year also, money up some easy when on you is fashion to some the compares sense fashion curious athletics, Then from can in is business bigger the Just just how part [ph] against give become IMU cut versus your has Thanks. left pressure a than on XQ think kind XQ, of guidance us [boot] a in important last athletic table? relative this

Bob Dennis

Yes.

And of an cold so, but defense play you right. not, cold on Journeys some the promotional a to last when light liquidated last is year get it warm the and -- in like through and we it it week switch, enough, when in only cold hindsight so from it of Lids. got at correctly out, more didn't started had a all sell of like early boots joined throwing our retrospect At that of a year It got at level weather full businesses whole and XXXX how the price, you we we -- you we that and you rest October, we and remember nicely. of Murphy cold would the products, boots to just bunch our have we -- to got and the XXXX. then, had appropriate played is looked weather help market played which and recognized sudden, sell could was And was all droving by way of products, about through Johnston

the So, right thing. did team the exactly

QX didn't we have start we to that's IMU that fashion to an a good the is we QX, when are very think it the our off -- and more good year factor is like it's in pressure it's guidance, in it than last where in So be feel important so outlet from that adequate this a we start period shape. numbers. have supply we will anniversary year, in we that The in product but

Mimi Vaughn

lower a in than Boots fourth are big the general. is The boots That's considerably And percentage that athletics really fourth in our quarter. Yes. our right. our in are fashion quarter typically product the sells less. is product IMUs athletic sales the of

pressure. took. fourth don't markdowns that IMU the this so, in quarter clearing for anticipate we we substituted some any year to this of fashion we were And in Last product year order margin shift we gross the year, address lower actually the and

good margin in year are XQ. in So, expecting from will view shape actually we point a be gross of it Journeys this

Operator

We next will to go Scott with Krasik Research. Buckingham

Scott Krasik

Hey, Bob. One one for Mimi everyone. Thanks. and for

that that you So, Is look a of these XXk to about similarly think rent X% it? the that over and then, reduction take how little last of we think I issue talk proof for about way Lids was just And it for if Locker know of trending about think of over concept the longer Bob, is $XXX at just little an specifically that at don't right you and million, next you profitability I do the numbers NFL, Room, then, to here a XX% sales. some should year, year, just this SKUs but expense, given is term?

Bob Dennis

So, West] [Head are the Room run does that. higher than [ph] Locker Stores, percentage a right NFL of you yes. does on

You rebooted. what ended that buying next in And consideration. viewership business mean everybody rejigger the be to long is year and we going interest waiting is, be model and a inventory are it suddenly one of operate not NFL up and an concept right to do and so event of honest. to to business the try plummeted drawing had learned, of the of line get the indictment a the happens to we where on I as interesting first we their is the But, discount NFL. the we be and was think have this people to see and what it NFL continuing all, risks are to are to business then, what sized will when is amount it's

that NFL. to over everyone event inventoried in the hopeful are we -- that is it's think is just a that it one-time we related is So, fact

Mimi Vaughn

terms our every think have that, way got of to that think portion of it I rent expense, the about leases on come you in year. renewal is Scott have a we So, up cycles our

neighborhood XXX in got schedule. the opening XXX expiring on to leases we've of so, And each year depending our

line. this or reductions right compound XX% impact of our those portfolio year of we will right in And a will compounds neighborhood you somewhere right you really year. can year rent And so, in and apply of less the that more and or of be XX% reductions, our get it say of set that we renewed expense set of would part each get reduction next could sets -- will to portfolio begin the and then to reductions because then that X%

Operator

Komp a We from Jonathan with will Baird. follow-up take

Jonathan Komp

Thanks. got Yes. I cut-off.

kind and look of follow-up of So, you thinking how of results on on curious this pressures broadly thinking pretty just the what's performance fourth like of you how lids versus are about the about some it? kind the just to soft are quarter, opportunity year, wanted be against sustainability more to recapture

Bob Dennis

at driven all know that what we a experience know hardy therefore, to compelling know all, stores. returns up sort about when business think of buy day. strong for pick is. the fan requires back they that that's it's fit pinpoint well. very position. of broadly In to really available a omni-channel we we it. appetite a still were is the that headwear store We step fans We online And ramped buy in need in very and by of them, for there level We that That is up that the over game have this gear first jumped and we Yes. fans particular space

a that up we just belief in get going through of Journeys through years a show that people are recover -- in headwear no off fashion what as might have from and we trough fashion the business Lids that like XX that trough like. are engaged a on we trends of cycle that that Just headwear look after come kind unfortunately business with on visibility so, can and have But, the look. just new we

our working that what we to with might out vendors be. were like figure So, crazy

is of exist there reasons that's the some this going and that clear Journeys happen highlight Lids, business are the to and thing both I a in lots for industry. this think of indications on we other there consolidation will continuing reason to So, for has and pretty

regional Chapter and [indiscernible] be competitors filed lot be around environment there a Journeys, space pretty XX. struggling. beneficiaries of are similar competitor of that. of meaningful that Room will for yesterday, the a rationalization the Locker So, a buzz There in We we think to over-stored is space of an will a

one have the digital invested first the that presence. we are world a only -- as we class store in So,

gains showing continued of to are our and invest up we seeing so, we in that's business in And which huge in. terms digital the

So, we But, acknowledged its Lids, see hole. position of we in things a lot about a we compelling. a that bit competitive of position, strategic that were right are now,

an of new and where invest visibility So, situation, not locker side. what do room we of fashion in environment do stores going a that the don't to we competitive hat certainly side dynamics we in in are the lot have on on

trying So, competing was try will puck is take -- think to [indiscernible] to puck is be and what borrow position trying going the is We we to were but, be. the long-term escape where advantage like we to strategic now. to don't from right we where a of

Operator

back I remarks. for it presenters to would turn to closing like our

Bob Dennis

all Well, everybody holidays next we joining chat I Thank to call. questions. just year. everybody you the and for thoughtful forward Happy to appreciate the look having early

Operator

That concludes for conference. We your participation. today's thank you

may You now disconnect.

Genesco (GCO) 1 Dec 172017 Q3 Earnings call transcript