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Genesco Reports Third Quarter Fiscal 2014 Results

NASHVILLE, Tenn., Dec. 6, 2013 /PRNewswire/ -- Genesco Inc. (NYSE:GCO) today reported earnings from continuing operations for the third quarter ended November 2, 2013, of $27.8 million, or $1.18 per diluted share, compared to earnings from continuing operations of $42.2 million, or $1.76 per diluted share, for the third quarter ended October 27, 2012.  Fiscal 2014 third quarter results reflect pretax items of $8.5 million, or $0.25 per diluted share after tax, including $4.0 million of expenses related to the change in accounting for deferred bonuses under the Company's EVA Incentive Plan announced by the Company in September 2013, $3.0 million of expenses related to deferred purchase price payments in connection with the acquisition of Schuh Group Limited which are required to be expensed as compensation because the payment is contingent upon the payees' continued employment, and $1.5 million for network intrusion expenses, asset impairment charges and other legal matters. Fiscal 2013 third quarter results reflect net pretax items of $1.5 million, or $0.08 per diluted share after tax, including a reduction in expenses of $1.8 million related to the change in accounting for deferred bonuses under the EVA Incentive Plan offset by compensation expense related to deferred purchase price payments in connection with the acquisition of Schuh Group Limited, asset impairments and other legal matters, decreased by tax rate adjustments of $0.40 per diluted share.

Adjusted for the items described above in both periods, earnings from continuing operations were $33.8 million, or $1.43 per diluted share, for the third quarter of Fiscal 2014, compared to earnings from continuing operations of $34.5 million, or $1.44 per diluted share, for the third quarter of Fiscal 2013.  For consistency with Fiscal 2014's previously announced earnings expectations and with previously reported adjusted results for the prior year period, the Company believes that the disclosure of the results from continuing operations adjusted for these items will be useful to investors. A reconciliation of earnings and earnings per share from continuing operations in accordance with U.S. Generally Accepted Accounting Principles with the adjusted earnings and earnings per share numbers presented in this paragraph is set forth on Schedule B to this press release.

Net sales for the third quarter of Fiscal 2014 increased 0.3% to $666.3 million from $664.5 million in the third quarter of Fiscal 2013.  Comparable store sales in the third quarter of Fiscal 2014 decreased by 1% for the Company, with a 5% increase in the Lids Sports Group, a 2% decrease in the Journeys Group, a 10% decrease in the Schuh Group, and a 7% increase in the Johnston & Murphy Group.  

Robert J. Dennis, Genesco chairman, president and chief executive officer, said, "As we expected, easier comparisons in our U.S.-based retail businesses as the third quarter progressed allowed for a modest improvement in consolidated comparable sales relative to recent quarters and overall results in line with our expectations.

"Comparable sales for the fourth quarter to date through Tuesday, December 3, were flat.  Because the retail environment remains somewhat choppy and the calendar shifts make meaningful comparisons difficult, we are adopting a slightly more cautious outlook for the balance of the year.

"We now expect adjusted diluted earnings per share to be in the range of $5.10 to $5.20, compared to Fiscal 2013's adjusted earnings per share of $5.06. Consistent with our previous guidance, these expectations do not include non-cash asset impairments, network intrusion expenses and other legal matters or the net gain on a Journeys New York City store lease termination reported in the second quarter.  We estimate that these items will be in the range of $1.0 million to $2.0 million pretax, or $0.03 to $0.05 per share, after tax, in Fiscal 2014. They also do not reflect compensation expense associated with the Schuh deferred purchase price as described above, which is currently estimated at approximately $11.5 million, or $0.49 per diluted share, or expense related to the change in accounting for the Company's EVA Incentive Plan bonus accruals, which we believe could range as high as $14.1 million pretax, or $0.37 per share, after tax, for the full year. This guidance assumes a comparable sales decrease in the low single digit range for the full fiscal year, including a low single digit increase in the fourth quarter." 

A reconciliation of the adjusted financial measures cited in the guidance to their corresponding measures as reported pursuant to U.S. Generally Accepted Accounting Principles is included in Schedule B to this press release.

Dennis concluded, "We continue to focus on successfully navigating the current headwinds while staying the course on our long-term strategic direction. We recently updated our 5-year plan and now expect annual sales to hit $3.9 billion and operating margins to be approximately 9% to 9.5% by Fiscal 2018. We remain confident in our strategic position and our ability to achieve our growth targets and generate increased value for our shareholders."

Conference Call and Management Commentary
The Company has posted detailed financial commentary in writing on its website, www.genesco.com, in the investor relations section. The Company's live conference call on December 6, 2013 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, earnings, expenses and operating margins), 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 amount of required accruals related to the earn-out bonus potentially payable to Schuh management based on the achievement of certain performance objectives; the expense related to the change in accounting for the Company's EVA Incentive Plan bonus accruals; the costs of responding to and liability in connection with the network intrusion announced in December 2010; the timing and amount of non-cash asset impairments, potentially including fixed assets in retail stores and intangible assets of acquired businesses; weakness in the consumer economy; competition in the Company's markets; inability of customers to obtain credit; fashion trends that affect the sales or product margins of the Company's retail product offerings; changes in buying patterns by significant wholesale customers; bankruptcies or deterioration in financial condition of significant wholesale customers; disruptions in product supply or distribution; unfavorable trends in fuel costs, foreign exchange rates, foreign labor and material costs, and other factors affecting the cost of products; the Company's ability to continue to complete and integrate acquisitions, expand its business and diversify its product base; and changes in the timing of holidays or in the onset of seasonal weather affecting period-to-period sales comparisons. 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 maintain reductions in occupancy costs achieved in recent lease negotiations, 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; disruptions in the Company's information technology systems either by security breaches and incidents or by potential problems associated with the implementation of new or upgraded systems; and the 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 2,525 retail stores and leased departments throughout the U.S., Canada, the United Kingdom and the Republic of Ireland, principally under the names Journeys, Journeys Kidz, Shi by Journeys, Underground by Journeys, Schuh, Lids, Lids Locker Room, Johnston & Murphy, and on internet websites www.journeys.com, www.journeyskidz.com, www.shibyjourneys.com, www.undergroundbyjourneys.com, www.schuh.co.uk, www.johnstonmurphy.com,  www.lids.com,  www.lids.ca, www.lidslockerroom.com, www.lidsteamsports.com, www.lidsclubhouse.com , www.suregripfootwear.com and www.dockersshoes.com.  The Company's Lids Sports Group division operates the Lids headwear stores and the lids.com website, the Locker Room by Lids and other team sports fan shops and single team clubhouse stores, and the Lids Team Sports team dealer business.   In addition, Genesco sells wholesale footwear under its Johnston & Murphy brand, the licensed Dockers brand, SureGrip, and other brands. For more information on Genesco and its operating divisions, please visit www.genesco.com.

 

 

GENESCO INC.













Consolidated Earnings Summary












Three Months Ended 


Nine Months Ended 





Nov. 2,


Oct. 27, 


Nov. 2,


Oct. 27, 



In Thousands


2013


2012


2013


2012



Net sales


$  666,332


$  664,458


$ 1,832,466


$  1,808,124



Cost of sales


334,171


330,046


919,060


893,747



Selling and administrative expenses*

283,702


279,847


829,506


806,425



Asset impairments and other, net

1,480


357


(4,331)


896



Earnings from operations

46,979


54,208


88,231


107,056



Interest expense, net

1,190


1,301


3,369


3,625



Earnings from continuing operations










    before income taxes

45,789


52,907


84,862


103,431














Income tax expense

17,993


10,686


34,092


29,447



Earnings from continuing operations

27,796


42,221


50,770


73,984














Provision for discontinued operations

(46)


(94)


(270)


(312)



Net Earnings 


$    27,750


$    42,127


$       50,500


$        73,672













*

Includes $3.0 million and $8.7 million in deferred payments related to the Schuh acquisition in the third quarter and first


nine months ended November 2, 2013, respectively, and $3.0 million and $8.9 million for the third quarter and first nine 


months ended October 27, 2012, respectively.









Earnings Per Share Information












Three Months Ended 


Nine Months Ended 





Nov. 2,


Oct. 27, 


Nov. 2,


Oct. 27, 



In Thousands (except per share amounts)

2013


2012


2013


2012



Preferred dividend requirements

$               -


$            33


$              33


$             114














Average common shares - Basic EPS

23,329


23,584


23,299


23,653














Basic earnings per share:










     Before discontinued operations

$1.19


$1.79


$2.18


$3.12



     Net earnings 

$1.19


$1.78


$2.17


$3.11














Average common and common










    equivalent shares - Diluted EPS

23,604


23,996


23,619


24,121














Diluted earnings per share:










     Before discontinued operations

$1.18


$1.76


$2.15


$3.07



     Net earnings 

$1.18


$1.76


$2.14


$3.05













 

GENESCO INC.















Consolidated Earnings Summary













Three Months Ended 


Nine Months Ended 






Nov. 2,


Oct. 27, 


Nov. 2,


Oct. 27, 




In Thousands


2013


2012


2013


2012




Sales:












    Journeys Group

$  281,093


$  300,718


$    760,707


$      773,997




    Schuh Group


92,556


92,250


242,988


243,718




    Lids Sports Group

199,154


185,737


569,515


550,752




    Johnston & Murphy Group

61,689


53,079


173,372


152,771




    Licensed Brands

31,630


32,450


84,854


85,972




    Corporate and Other

210


224


1,030


914




    Net Sales


$  666,332


$  664,458


$ 1,832,466


$  1,808,124




Operating Income (Loss):











    Journeys Group

$    32,268


$    38,456


$       56,198


$        67,651




    Schuh Group (1)

1,945


3,602


(4,131)


1,713




    Lids Sports Group

11,996


18,057


35,517


56,785




    Johnston & Murphy Group

4,833


3,149


10,432


8,950




    Licensed Brands

4,112


3,731


8,504


8,530




    Corporate and Other (2)

(8,175)


(12,787)


(18,289)


(36,573)




   Earnings from operations

46,979


54,208


88,231


107,056




   Interest, net


1,190


1,301


3,369


3,625




Earnings from continuing operations











    before income taxes

45,789


52,907


84,862


103,431




Income tax expense

17,993


10,686


34,092


29,447




Earnings from continuing operations

27,796


42,221


50,770


73,984
















Provision for discontinued operations

(46)


(94)


(270)


(312)




Net Earnings 


$    27,750


$    42,127


$       50,500


$        73,672
















(1) Includes $3.0 million and $8.7 million in deferred payments related to the Schuh acquisition in the third quarter and first


nine months ended November 2, 2013, respectively, and $3.0 million and $8.9 million for the third quarter and first nine 


months ended October 27, 2012, respectively.
















(2) Includes a $1.5 million charge in the third quarter of Fiscal 2014 which includes $0.8 million for network intrusion 



expenses, $0.4 million for asset impairments and $0.3 million for other legal matters. Includes $4.3 million income for the 


first nine months of Fiscal 2014 which includes an $8.3 million gain on a lease termination, partially offset by $1.8 million 


for asset impairments, $1.4 million for network intrusion expenses and $0.8 million for other legal matters.  Includes a $0.4 


million charge in the third quarter of Fiscal 2013 which includes $0.3 million for asset impairments and $0.1 million for other 


legal matters and includes a $0.9 million charge in the first nine months of Fiscal 2013 which includes $0.7 million for asset


impairments, $0.1 million for network intrusion expenses and $0.1 million for other legal matters. 

 

 

GENESCO INC.
























Consolidated Balance Sheet



























Nov. 2,


Oct. 27, 



In Thousands






2013


2012



Assets











Cash and cash equivalents





$       32,250


$        39,890



Accounts receivable





64,235


61,006



Inventories






694,256


600,251



Other current assets





78,820


65,629



Total current assets





869,561


766,776



Property and equipment





268,985


239,499



Other non-current assets





407,257


419,347



Total Assets






$ 1,545,803


$  1,425,622



Liabilities and  Equity










Accounts payable





$    265,067


$      219,826



Other current liabilities





144,920


158,395



Total current liabilities





409,987


378,221



Long-term debt






92,361


86,296



Other long-term liabilities





181,857


172,182



Equity






861,598


788,923



Total Liabilities and Equity





$ 1,545,803


$  1,425,622


 

 


GENESCO INC.















































Retail Units Operated - Nine Months Ended November 2, 2013















Balance


Acquisi-






Balance


Acquisi-






Balance





01/28/12


tions


Open


Close


02/02/13


tions


Open


Close


11/02/13



Journeys Group


1,154


0


32


29


1,157


0


23


19


1,161



    Journeys


812


0


22


14


820


0


12


9


823



    Underground by Journeys


137


0


0


7


130


0


0


9


121



    Journeys Kidz


152


0


9


5


156


0


11


1


166



    Shi by Journeys


53


0


1


3


51


0


0


0


51



Schuh Group


78


0


16


2


92


0


25


20


97



     Schuh UK*


56


0


15


1


70


0


25


8


87



     Schuh ROI


8


0


1


0


9


0


0


0


9



     Schuh Concessions*


14


0


0


1


13


0


0


12


1



Lids Sports Group


1,002


33


47


29


1,053


7


77


23


1,114



Johnston & Murphy Group


153


0


9


5


157


0


10


2


165



    Shops


103


0


4


5


102


0


5


2


105



    Factory Outlets


50


0


5


0


55


0


5


0


60



Total Retail Units


2,387


33


104


65


2,459


7


135


64


2,537



Permanent Units*










2,446


7


125


46


2,532



Retail Units Operated - Three Months Ended November 2, 2013







Balance


Acquisi-






Balance





08/03/13


tions


Open


Close


11/02/13



Journeys Group


1,159


0


5


3


1,161



    Journeys


822


0


2


1


823



    Underground by Journeys


123


0


0


2


121



    Journeys Kidz


163


0


3


0


166



    Shi by Journeys


51


0


0


0


51



Schuh Group


95


0


6


4


97



     Schuh UK


84


0


6


3


87



     Schuh ROI


9


0


0


0


9



     Schuh Concessions


2


0


0


1


1



Lids Sports Group


1,071


0


49


6


1,114



Johnston & Murphy Group


163


0


2


0


165



    Shops


104


0


1


0


105



    Factory Outlets


59


0


1


0


60



Total Retail Units


2,488


0


62


13


2,537



Permanent Units*


2,479


0


62


9


2,532
















* Excludes Schuh Concessions, which are expected to close this year and temporary "pop-up" locations.


Comparable Sales (including same store and comparable direct sales)





 Three Months Ended


Nine Months Ended





Nov. 2,


Oct. 27,


Nov. 2,


Oct. 27,





2013


2012


2013


2012



Journeys Group


-2%


8%


-2%


9%



Schuh Group


-10%


9%


-9%


9%



Lids Sports Group


5%


-5%


-1%


0%



Johnston & Murphy Group


7%


8%


7%


5%



Total Comparable Sales


-1%


5%


-2%


6%


 

Schedule B


Genesco Inc.

Adjustments to Reported Earnings from Continuing Operations

Third Quarter Ended November 2, 2013 and October 27, 2012















 Third 

 Impact on 

 Third 

 Impact on 



 Quarter 

  Diluted 

 Quarter 

  Diluted 

In Thousands (except per share amounts)


 Oct 2013 

 EPS 

 Oct 2012 

 EPS 

Earnings from continuing operations, as reported


$     27,796

$        1.18

$      42,221

$   1.76







Adjustments:  (1)






Impairment charges


215

0.01

179

0.01

Deferred payment - Schuh acquisition


2,949

0.12

2,971

0.12

Change in accounting for bonus awards


2,541

0.11

(1,160)

(0.05)

Other legal matters


169

0.01

46

-

Network intrusion expenses


536

0.02

-

-

Higher (lower) effective tax rate


(382)

(0.02)

(9,786)

(0.40)







Adjusted earnings from continuing operations (2)


$     33,824

$        1.43

$      34,471

$   1.44













(1) All adjustments are net of tax where applicable.  The tax rate for the third quarter of Fiscal 2014 is 37.6%

    excluding a FIN 48 discrete item of less than $0.1 million.  The tax rate for the third quarter of Fiscal 2013 is 

    36.6% excluding a FIN 48 discrete item of less than $0.1 million.








(2) EPS reflects 23.6 million and 24.0 million share count for Fiscal 2014 and 2013, respectively, which includes 

     common stock equivalents in both years.







The Company believes that disclosure of earnings and earnings per share from continuing operations adjusted

for the items not reflected in the previously announced expectations will be meaningful to investors, especially

in light of the impact of such items on the results.

 

 

Genesco Inc.

Adjustments to Reported Operating Income

Third Quarter Ended November 2, 2013 and October 27, 2012








 Three Months Ended November 2, 2013 



 Operating 

 Bonus Adj 

Adj Operating

In Thousands 


 Income 

 and Other 

Income

Journeys Group


$     32,268

$         968

$      33,236

Schuh Group*


1,945

3,903

5,848

Lids Sports Group


11,996

-

11,996

Johnston & Murphy Group


4,833

10

4,843

Licensed Brands


4,112

4

4,116

Corporate and Other


(8,175)

3,598

(4,577)

Total Operating Income


$     46,979

$      8,483

$      55,462






*Schuh Group adjustments include $3.0 million in deferred purchase price payments.









 Three Months Ended October 27, 2012 



 Operating 

 Bonus Adj 

Adj Operating

In Thousands 


 Income 

 and Other 

Income

Journeys Group


$     38,456

$     (1,383)

$      37,073

Schuh Group*


3,602

2,078

5,680

Lids Sports Group


18,057

516

18,573

Johnston & Murphy Group


3,149

9

3,158

Licensed Brands


3,731

(7)

3,724

Corporate and Other


(12,787)

285

(12,502)

Total Operating Income


$     54,208

$      1,498

$      55,706






*Schuh Group adjustments include $3.0 million in deferred purchase price payments.


 

Schedule B


Genesco Inc.

Adjustments to Reported Earnings from Continuing Operations

Nine Months Ended November 2, 2013 and October 27, 2012










 Impact on 


 Impact on 



 9 mos 

  Diluted 

 9 mos 

  Diluted 

In Thousands (except per share amounts)


 Oct 2013 

 EPS 

 Oct 2012 

 EPS 

Earnings from continuing operations, as reported


$     50,770

$        2.15

$      73,984

$   3.07







Adjustments:  (1)






Impairment charges


1,108

0.05

456

0.02

Deferred payment - Schuh acquisition


8,651

0.36

8,854

0.37

Gain on lease termination


(2,077)

(0.09)

-

-

Change in accounting for bonus awards


10,319

0.44

(1,088)

(0.05)

Other legal matters


471

0.02

46

-

Network intrusion expenses


896

0.04

65

-

Higher (lower) effective tax rate


(877)

(0.04)

(11,922)

(0.49)







Adjusted earnings from continuing operations (2)


$     69,261

$        2.93

$      70,395

$   2.92













(1) All adjustments are net of tax where applicable.  The tax rate for the first nine months of Fiscal 2014 is 37.3%

    excluding a FIN 48 discrete item of $0.1 million.  The tax rate for the first nine months of Fiscal 2013 is 

    36.6% excluding a FIN 48 discrete item of $0.3 million.







(2) EPS reflects 23.6 million and 24.1 million share count for Fiscal 2014 and 2013, respectively, which includes 

     common stock equivalents in both years.







The Company believes that disclosure of earnings and earnings per share from continuing operations adjusted

for the items not reflected in the previously announced expectations will be meaningful to investors, especially

in light of the impact of such items on the results.

 

 

Genesco Inc.

Adjustments to Reported Operating Income (Loss)

Nine Months Ended November 2, 2013 and October 27, 2012








 Nine Months Ended November 2, 2013 



 Operating 

 Bonus Adj 

Adj Operating

In Thousands 


 Income 

 and Other 

Income

Journeys Group*


$     56,198

$      7,028

$      63,226

Schuh Group**


(4,131)

12,595

8,464

Lids Sports Group


35,517

1,676

37,193

Johnston & Murphy Group


10,432

23

10,455

Licensed Brands


8,504

-

8,504

Corporate and Other*


(18,289)

4,441

(13,848)

Total Operating Income


$     88,231

$    25,763

$    113,994






*Journeys Group and Corporate adjustments include $3.5 million and $1.5 million, respectively, in bonus

  adjustments resulting from the gain on a lease termination for a Journeys store in the second quarter. 

**Schuh Group adjustments include $8.7 million in deferred purchase price payments.








 Nine Months Ended October 27, 2012 



 Operating 

 Bonus Adj 

Adj Operating

In Thousands 


 Income 

 and Other 

Income

Journeys Group


$     67,651

$     (3,231)

$      64,420

Schuh Group*


1,713

6,354

8,067

Lids Sports Group


56,785

1,527

58,312

Johnston & Murphy Group


8,950

31

8,981

Licensed Brands


8,530

(14)

8,516

Corporate and Other


(36,573)

3,367

(33,206)

Total Operating Income


$   107,056

$      8,034

$    115,090






*Schuh Group adjustments include $8.9 million in deferred purchase price payments.


 

 

Schedule B


Genesco Inc.

Adjustments to Forecasted Earnings from Continuing Operations

Fiscal Year Ending February 1, 2014







In Thousands (except per share amounts)


High Guidance

Low Guidance



Fiscal 2014

Fiscal 2014

Forecasted earnings from continuing operations 


$    101,039

$       4.29

$   99,304

$       4.21







Adjustments:  (1)






Impairment/Gain on lease termination


1,248

0.05

624

0.03

Change in accounting for bonus awards


8,808

0.37

8,808

0.37

Deferred payment - Schuh acquisition


11,540

0.49

11,540

0.49







Adjusted forecasted earnings from continuing operations (2)

$    122,635

$       5.20

$ 120,276

$       5.10







(1) All adjustments are net of tax where applicable.  The forecasted tax rate for Fiscal 2014 is approximately 37.6% 

    excluding a FIN 48 discrete item of $0.1 million.







(2) EPS reflects 23.6 million share count for Fiscal 2014 which includes common stock equivalents.







This reconciliation reflects estimates and current expectations of future results. Actual results may vary 

materially from these expectations and estimates, for reasons including those included in the discussion 

of forward-looking statements elsewhere in this release. The Company disclaims any obligation to update 

such expectations and estimates.  




 

SOURCE Genesco Inc.

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