GCO
$53.35
Genesco
$.26
.49%
Earnings Details
2nd Quarter July 2016
Thursday, September 01, 2016 6:47:00 AM
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Summary

Genesco Lowers Guidance

Genesco (GCO) reported 2nd Quarter July 2016 earnings of $0.34 per share on revenue of $625.6 million. The consensus earnings estimate was $0.26 per share on revenue of $641.3 million. Revenue fell 4.6% compared to the same quarter a year ago.

The company said it expects fiscal year earnings of $3.80 to $4.00 per share. The company's previous guidance was earnings of $4.80 to $4.90 per share and the current consensus earnings estimate is $4.89 per share for the year ending January 31, 2017.

Genesco Inc is engaged in the design and sourcing, marketing and distribution of footwear, apparel and accessories through retail stores.

Results
Reported Earnings
$0.34
Earnings Whisper
-
Consensus Estimate
$0.26
Reported Revenue
$625.6 Mil
Revenue Estimate
$641.3 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Genesco Reports Second Quarter Fiscal 2017 Results

Genesco Inc. (GCO) today reported earnings from continuing operations for the second quarter ended July 30, 2016, of $14.5 million, or $0.72 per diluted share, compared to earnings from continuing operations of $7.6 million, or $0.32 per diluted share, for the second quarter ended August 1, 2015. Fiscal 2017 second quarter results reflect a pretax gain of $10.4 million, or $0.38 per diluted share after tax, including an $8.9 million gain on network intrusion expenses as a result of a litigation settlement and a $2.5 million gain on the sale of Lids Team Sports, partially offset by $1.0 million for asset impairment charges. Fiscal 2016 second quarter results reflect pretax items of $1.8 million, or $0.04 per share after tax, including $0.6 million of expenses related to deferred purchase price payments in connection with the acquisition of Schuh Group Limited, which was required to be expensed as compensation because the payment was contingent upon the payees’ continued employment; and $1.2 million for asset impairment charges and network intrusion expenses.

Adjusted for the items described above in both periods, earnings from continuing operations were $6.9 million, or $0.34 per diluted share, for the second quarter of Fiscal 2017, compared to earnings from continuing operations of $8.5 million, or $0.36 per diluted share, for the second quarter of Fiscal 2016. For consistency with Fiscal 2017’s previously announced earnings expectations and with previously reported adjusted results for the prior year period, the Company believes that the disclosure of the results from continuing operations adjusted for these items will be useful to investors. A reconciliation of earnings and earnings per share from continuing operations in accordance with U.S. Generally Accepted Accounting Principles with the adjusted earnings and earnings per share numbers presented in this paragraph is set forth on Schedule B to this press release.

Net sales for the second quarter of Fiscal 2017 decreased 4.6% to $626 million from $656 million in the second quarter of Fiscal 2016, reflecting the divestiture of the Lids Team Sports business in the fourth quarter of Fiscal 2016. Consolidated second quarter Fiscal 2017 comparable sales, including same store sales and comparable e-commerce and catalog sales, decreased 1%, with a 4% decrease in the Journeys Group, flat comps at Lids Sports Group, a 1% decrease in the Schuh Group, and a 3% increase in the Johnston & Murphy Group. Comparable sales for the Company reflected a 2% decrease in same store sales and a 1% decrease in e-commerce sales.

Robert J. Dennis, Genesco Chariman, President and Chief Executive Officer, said, "Our comparable sales were challenged during the second quarter particularly in July with the emergence of a fashion rotation at Journeys. We experienced a sudden shift away from many of the core styles that have fueled Journeys’ strong performances in recent years. We were able to offset the effect this headwind had on our bottom line through a meaningful improvement in Lids Sports Group and continued strength at Johnston & Murphy combined with share repurchases over the past year."

"The third quarter is off to a difficult start driven largely by the impact of the fashion shift at Journeys during the height of the back to school season and challenges at Schuh. Comparable sales for the third quarter through Saturday, August 27, 2016, are down (5%) from the same period last year.

"Based on our comparable sales trend and expectations for sustained challenges due to the fashion rotation at Journeys and conditions at Schuh, we are lowering our full year outlook. We now expect adjusted diluted earnings per share for the fiscal year ending January 28, 2017, in the range of $3.80 to $4.00, compared to our previously issued guidance range of $4.80 to $4.90." These expectations do not include expected non-cash asset impairments and other charges including the gain on a litigation settlement and gain on the sale of Lids Team Sports in the second quarter this year, estimated in the range of a $1.2 million pretax gain to a $3.0 million pretax charge, or $(0.04) to $0.09 per share after tax, for the full fiscal year. This guidance assumes a comparable sales decrease in the low single digit range for the full year. A reconciliation of the adjusted financial measures cited in the guidance to their corresponding measures as reported pursuant to U.S. Generally Accepted Accounting Principles is included in Schedule B to this press release.

Dennis concluded, "While we are disappointed with our reduced outlook, we are confident that the Journeys’ team will be able to leverage their experience and strong vendor relationships to ensure Journeys emerges from this current cycle with leading, trend right merchandise assortments."

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 September 1, 2016 at 7:30 a.m. (Central time), may be accessed through the Company’s internet website, www.genesco.com. To listen live, please go to the website at least 15 minutes early to register, download and install any necessary software.

Cautionary Note Concerning Forward-Looking Statements This release contains forward-looking statements, including those regarding the performance outlook for the Company and its individual businesses (including, without limitation, sales, expenses, margins and earnings) and all other statements not addressing solely historical facts or present conditions. Actual results could vary materially from the expectations reflected in these statements. A number of factors could cause differences. These include adjustments to estimates reflected in forward-looking statements, including the level and timing of promotional activity necessary to maintain inventories at appropriate levels; the timing and amount of non-cash asset impairments related to retail store fixed assets and intangible assets of acquired businesses; the effectiveness of the Company’s omnichannel initiatives; costs associated with changes in minimum wage and overtime requirements; the level of chargebacks from credit card users for fraudulent purchases or other reasons; weakness in the consumer economy and retail industry; competition in the Company’s markets; fashion trends that affect the sales or product margins of the Company’s retail product offerings; weakness in shopping mall traffic and challenges to the viability of malls where the Company operates stores, related to planned closings of department stores or other factors; changes in buying patterns by significant wholesale customers; bankruptcies or deterioration in financial condition of significant wholesale customers or the inability of wholesale customers or consumers to obtain credit; disruptions in product supply or distribution; unfavorable trends in fuel costs, foreign exchange rates, foreign labor and material costs, and other factors affecting the cost of products; the effects of the British decision to exit the European Union, including potential effects on consumer demand, currency exchange rates, and the supply chain; the Company’s ability to continue to complete and integrate acquisitions, expand its business and diversify its product base; changes in the timing of holidays or in the onset of seasonal weather affecting period-to-period sales comparisons; and the performance of athletic teams, the participants in major sporting events such as the Super Bowl and World Series, developments with respect to certain individual athletes, and other sports-related events or changes that may affect period-to-period comparisons in the Company’s Lids Sports Group retail businesses. Additional factors that could affect the Company’s prospects and cause differences from expectations include the ability to build, open, staff and support additional retail stores and to renew leases in existing stores and control occupancy costs, and to conduct required remodeling or refurbishment on schedule and at expected expense levels; deterioration in the performance of individual businesses or of the Company’s market value relative to its book value, resulting in impairments of fixed assets or intangible assets or other adverse financial consequences; unexpected changes to the market for the Company’s shares; variations from expected pension-related charges caused by conditions in the financial markets; 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 cost and outcome of litigation, investigations and environmental matters involving the Company. Additional factors are cited in the "Risk Factors," "Legal Proceedings" and "Management’s Discussion and Analysis of Financial Condition and Results of Operations" sections of, and elsewhere in, our SEC filings, copies of which may be obtained from the SEC website, www.sec.gov, or by contacting the investor relations department of Genesco via our website, www.genesco.com. Many of the factors that will determine the outcome of the subject matter of this release are beyond Genesco’s ability to control or predict. Genesco undertakes no obligation to release publicly the results of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Forward-looking statements reflect the expectations of the Company at the time they are made. The Company disclaims any obligation to update such statements.

About Genesco Inc. Genesco Inc., a Nashville-based specialty retailer, sells footwear, headwear, sports apparel and accessories in more than 2,800 retail stores and leased departments throughout the U.S., Canada, the United Kingdom, the Republic of Ireland and Germany, principally under the names Journeys, Journeys Kidz, Shi by Journeys, Schuh, Schuh Kids, Little Burgundy, Lids, Locker Room by Lids, Lids Clubhouse, Johnston & Murphy, and on internet websites www.journeys.com, www.journeyskidz.com, www.shibyjourneys.com, www.schuh.co.uk, www.littleburgundyshoes.com, www.johnstonmurphy.com, www.lids.com, www.lids.ca, www.lidslockerroom.com, www.lidsclubhouse.com, http://shop.neweracap.com/ , www.trask.com, www.suregripfootwear.com and www.dockersshoes.com. The Company’s Lids Sports Group division operates the Lids headwear stores, the Locker Room by Lids and other team sports fan shops and single team clubhouse stores. In addition, Genesco sells wholesale footwear under its Johnston & Murphy brand, the Trask brand, the licensed Dockers brand, G.H. Bass & Co., SureGrip, and other brands. For more information on Genesco and its operating divisions, please visit www.genesco.com.

GENESCO INC.
Consolidated Earnings Summary
Three Months Ended
Six Months Ended
Jul. 30,
Aug. 1,
Jul. 30,
Aug. 1,
In Thousands
2016
2015
2016
2015
Net sales
$
625,557
$
655,525
$
1,274,350
$
1,316,122
Cost of sales
310,820
335,434
629,916
669,698
Selling and administrative expenses*
302,662
306,422
610,905
613,855
Asset impairments and other, net
(7,945)
1,173
(4,388)
3,819
Earnings from operations
20,020
12,496
37,917
28,750
Gain on sale of Lids Team Sports
(2,485)
-
(2,485)
-
Interest expense, net
1,306
928
2,443
1,573
Earnings from continuing operations
before income taxes
21,199
11,568
37,959
27,177
Income tax expense
6,695
3,975
12,891
9,639
Earnings from continuing operations
14,504
7,593
25,068
17,538
Provision for discontinued operations
74
(73)
(80)
(140)
Net Earnings
$
14,578
$
7,520
$
24,988
$
17,398
*Includes $0.6 million and $1.5 million in deferred payments related to the Schuh acquisition in the second quarter and first
six months ended August 1, 2015, respectively.
Earnings Per Share Information
Three Months Ended
Six Months Ended
Jul. 30,
Aug. 1,
Jul. 30,
Aug. 1,
In Thousands (except per share amounts) 2016
2015
2016
2015
Average common shares - Basic EPS
20,195
23,538
20,505
23,544
Basic earnings per share:
Before discontinued operations
$0.72
$0.32
$1.22
$0.74
Net earnings
$0.72
$0.32
$1.22
$0.74
Average common and common
equivalent shares - Diluted EPS
20,244
23,616
20,617
23,695
Diluted earnings per share:
Before discontinued operations
$0.72
$0.32
$1.22
$0.74
Net earnings
$0.72
$0.32
$1.21
$0.73
Consolidated Earnings Summary
Three Months Ended
Six Months Ended
Jul. 30,
Aug. 1,
Jul. 30,
Aug. 1,
In Thousands
2016
2015
2016
2015
Sales:
Journeys Group
$
252,134
$
247,177
$
546,355
$
525,809
Schuh Group
96,960
103,204
172,630
181,766
Lids Sports Group
188,912
222,218
368,288
428,547
Johnston & Murphy Group
65,151
60,822
135,126
127,184
Licensed Brands
22,100
21,942
51,566
52,519
Corporate and Other
300
162
385
297
Net Sales
$
625,557
$
655,525
$
1,274,350
$
1,316,122
Operating Income (Loss):
Journeys Group
$
4,481
$
9,228
$
24,101
$
33,650
Schuh Group (1)
5,693
4,892
3,032
2,231
Lids Sports Group
7,132
5,593
13,169
2,196
Johnston & Murphy Group
2,255
846
7,097
4,823
Licensed Brands
234
1,158
2,087
4,181
Corporate and Other (2)
225
(9,221)
(11,569)
(18,331)
Earnings from operations
20,020
12,496
37,917
28,750
Gain on sale of Lids Team Sports
(2,485)
-
(2,485)
-
Interest, net
1,306
928
2,443
1,573
Earnings from continuing operations
before income taxes
21,199
11,568
37,959
27,177
Income tax expense
6,695
3,975
12,891
9,639
Earnings from continuing operations
14,504
7,593
25,068
17,538
Provision for discontinued operations
74
(73)
(80)
(140)
Net Earnings
$
14,578
$
7,520
$
24,988
$
17,398
(1) Includes $0.6 million and $1.5 million in deferred payments related to the Schuh acquisition in the second quarter and
first six months ended August 1, 2015, respectively.
(2) Includes a $7.9 million gain in the second quarter of Fiscal 2017 which includes an $8.9 million gain for network
intrusion expenses as a result of a litigation settlement, partially offset by $1.0 million for asset impairments. Includes a
$4.4 million gain for the first six months of Fiscal 2017 which includes an $8.9 million gain for network intrusion expenses
as a result of a litigation settlement, partially offset by $4.4 million for asset impairments and $0.1 million for other legal matters.
Includes a $1.2 million charge in the second quarter of Fiscal 2016 which includes $1.0 million for asset impairments
and $0.2 million for network intrusion expenses.
Includes a $3.8 million charge for the first six months of Fiscal 2016
which includes $2.0 million for network intrusion expenses, $1.7 million for asset impairments and $0.1 million for other
legal matters.
Consolidated Balance Sheet
Jul. 30,
Aug. 1,
In Thousands
2016
2015
Assets
Cash and cash equivalents
$
41,466
$
48,997
Accounts receivable
46,469
58,385
Inventories
663,708
734,803
Other current assets
97,527
99,836
Total current assets
849,170
942,021
Property and equipment
321,231
310,415
Goodwill and other intangibles
366,186
393,155
Other non-current assets
44,726
38,297
Total Assets
$
1,581,313
$
1,683,888
Liabilities and
Equity
Accounts payable
$
269,371
$
271,021
Current portion long-term debt
10,620
18,764
Other current liabilities
127,714
135,986
Total current liabilities
407,705
425,771
Long-term debt
124,981
94,281
Pension liability
9,487
21,686
Deferred rent and other long-term liabilities
152,221
146,135
Equity
886,919
996,015
Total Liabilities and Equity
$
1,581,313
$
1,683,888
GENESCO INC.
Retail Units Operated - Six Months Ended July 30, 2016
Balance
Acquisi-
Balance
Balance
01/31/15
tions
Open
Close
01/30/16
Open
Close
07/30/16
Journeys Group
1,182
37
29
26
1,222
17
9
1,230
Journeys
834
0
13
5
842
9
5
846
Underground by Journeys
110
0
0
12
98
0
2
96
Journeys Kidz
189
0
16
5
200
8
0
208
Shi by Journeys
49
0
0
3
46
0
2
44
Little Burgundy
0
37
0
1
36
0
0
36
Schuh Group
108
0
17
0
125
4
3
126
Lids Sports Group*
1,364
0
27
59
1,332
7
64
1,275
Johnston & Murphy Group
170
0
8
5
173
4
3
174
Shops
105
0
3
5
103
3
2
104
Factory Outlets
65
0
5
0
70
1
1
70
Total Retail Units
2,824
37
81
90
2,852
32
79
2,805
Retail Units Operated - Three Months Ended July 30, 2016
Balance
Acquisi-
Balance
04/30/16
tions
Open
Close
07/30/16
Journeys Group
1,220
0
12
2
1,230
Journeys
841
0
5
0
846
Underground by Journeys
97
0
0
1
96
Journeys Kidz
201
0
7
0
208
Shi by Journeys
45
0
0
1
44
Little Burgundy
36
0
0
0
36
Schuh Group
124
0
3
1
126
Lids Sports Group*
1,317
0
4
46
1,275
Johnston & Murphy Group
172
0
3
1
174
Shops
102
0
2
0
104
Factory Outlets
70
0
1
1
70
Total Retail Units
2,833
0
22
50
2,805
* Includes 150 Locker Room by Lids in Macy’s stores as of July 30, 2016.
Comparable Sales (including same store and comparable direct sales)
Three Months Ended
Six Months Ended
Jul. 30,
Aug. 1,
Jul. 30,
Aug. 1,
2016
2015
2016
2015
Journeys Group
-4%
4%
-1%
5%
Schuh Group
-1%
8%
-3%
6%
Lids Sports Group
0%
8%
1%
6%
Johnston & Murphy Group
3%
10%
4%
6%
Total Comparable Sales
-1%
7%
0%
6%
Schedule B
Genesco Inc.
Adjustments to Reported Earnings from Continuing Operations
Three Months Ended July 30, 2016 and August 1, 2015
Three Months Ended
July 30, 2016
August 1, 2015
Net of
Per Share
Net of
Per Share
In Thousands (except per share amounts)
Pretax
Tax
Amounts
Pretax
Tax
Amounts
Earnings from continuing operations, as reported
$
14,504
$
0.72
$
7,593
$
0.32
Pretax adjustments:
Impairment charges
$
1,018
665
0.03
$
931
594
0.03
Deferred payment - Schuh acquisition
-
-
-
553
553
0.02
Sale of Lids Team Sports
(2,485)
(1,602)
(0.08)
-
-
-
Other legal matters
-
-
-
16
10
-
Network intrusion expenses
(8,963)
(5,777)
(0.29)
226
147
0.01
Total adjustments
$
(10,430)
(6,714)
(0.34)
$
1,726
1,304
0.06
Resolution of income tax matters
(872)
(0.04)
(417)
(0.02)
Adjusted earnings from continuing operations (1) and (2)
$
6,918
$
0.34
$
8,480
$
0.36
(1) The adjusted tax rate for the second quarter of Fiscal 2017 is 35.0% excluding a FIN 48 discrete item of $0.1 million.
The adjusted tax rate for
the second quarter of Fiscal 2016 is 36.0% excluding a FIN 48 discrete item of less than $0.1 million.
(2)
EPS reflects 20.2 and 23.6 million share count for Fiscal 2017 and 2016, which includes common stock equivalents in both years.
The Company believes that disclosure of earnings and earnings per share from continuing operations adjusted for the items not reflected in the
previously announced expectations will be meaningful to investors, especially in light of the impact of such items on the results.
Genesco Inc.
Adjustments to Reported Operating Income
Three Months Ended July 30, 2016 and August 1, 2015
Three Months Ended July 30, 2016
Operating
Adj Operating
In Thousands
Income
Other Adj
Income
Journeys Group
$
4,481
$
-
$
4,481
Schuh Group
5,693
-
5,693
Lids Sports Group
7,132
-
7,132
Johnston & Murphy Group
2,255
-
2,255
Licensed Brands
234
-
234
Corporate and Other
225
(7,945)
(7,720)
Total Operating Income
$
20,020
$
(7,945)
$
12,075
Three Months Ended August 1, 2015
Operating
Adj Operating
In Thousands
Income
Other Adj
Income
Journeys Group
$
9,228
$
-
$
9,228
Schuh Group*
4,892
553
5,445
Lids Sports Group
5,593
-
5,593
Johnston & Murphy Group
846
-
846
Licensed Brands
1,158
-
1,158
Corporate and Other
(9,221)
1,173
(8,048)
Total Operating Income
$
12,496
$
1,726
$
14,222
*Schuh Group adjustments include $0.6 million in deferred purchase price payments.
Schedule B
Genesco Inc.
Adjustments to Reported Earnings from Continuing Operations
Six Months Ended July 30, 2016 and August 1, 2015
Six Months Ended
July 30, 2016
August 1, 2015
Net of
Per Share
Net of
Per Share
In Thousands (except per share amounts)
Pretax
Tax
Amounts
Pretax
Tax
Amounts
Earnings from continuing operations, as reported
$
25,068
$
1.22
$
17,538
$
0.74
Pretax adjustments:
Impairment charges
$
4,453
2,870
0.14
$
1,697
1,081
0.05
Deferred payment - Schuh acquisition
-
-
-
1,490
1,490
0.06
Sale of Lids Team Sports
(2,485)
(1,602)
(0.08)
-
-
-
Other legal matters
90
57
-
118
75
-
Network intrusion expenses
(8,931)
(5,756)
(0.28)
2,004
1,277
0.05
Total adjustments
$
(6,873)
(4,431)
(0.22)
$
5,309
3,923
0.16
Resolution of income tax matters
(766)
(0.04)
(812)
(0.03)
Adjusted earnings from continuing operations (1) and (2)
$
19,871
$
0.96
$
20,649
$
0.87
(1) The adjusted tax rate for the first six months of Fiscal 2017 is 35.6% excluding a FIN 48 discrete item of $0.2 million.
The adjusted tax
rate for the first six months of Fiscal 2016 is 36.3% excluding a FIN 48 discrete item of less than $0.1 million.
(2)
EPS reflects 20.6 and 23.7 million share count for Fiscal 2017 and 2016, which includes common stock equivalents in both years.
The Company believes that disclosure of earnings and earnings per share from continuing operations adjusted for the items not reflected in
the previously announced expectations will be meaningful to investors, especially in light of the impact of such items on the results.
Genesco Inc.
Adjustments to Reported Operating Income
Six Months Ended July 30, 2016 and August 1, 2015
Six Months Ended July 30, 2016
Operating
Adj Operating
In Thousands
Income
Other Adj
Income
Journeys Group
$
24,101
$
-
$
24,101
Schuh Group
3,032
-
3,032
Lids Sports Group
13,169
-
13,169
Johnston & Murphy Group
7,097
-
7,097
Licensed Brands
2,087
-
2,087
Corporate and Other
(11,569)
(4,388)
(15,957)
Total Operating Income
$
37,917
$
(4,388)
$
33,529
Six Months Ended August 1, 2015
Operating
Adj Operating
In Thousands
Income
Other Adj
Income
Journeys Group
$
33,650
$
-
$
33,650
Schuh Group*
2,231
1,490
3,721
Lids Sports Group
2,196
-
2,196
Johnston & Murphy Group
4,823
-
4,823
Licensed Brands
4,181
-
4,181
Corporate and Other
(18,331)
3,819
(14,512)
Total Operating Income
$
28,750
$
5,309
$
34,059
*Schuh Group adjustments include $1.5 million in deferred purchase price payments.
Schedule B
Genesco Inc.
Adjustments to Forecasted Earnings from Continuing Operations
Fiscal Year Ending January 28, 2017
In Thousands (except per share amounts)
High Guidance
Low Guidance
Fiscal 2017
Fiscal 2017
Forecasted earnings from continuing operations
$
82,259
$
4.04
$
75,686
$
3.71
Adjustments:
(1)
Gain on sale of Lids Team Sports
(1,580)
(0.08)
(1,580)
(0.08)
Pension settlement
636
0.03
2,544
0.12
Asset impairment and other charges*
211
0.01
927
0.05
Adjusted forecasted earnings from continuing operations (2) $
81,526
$
4.00
$
77,577
$
3.80
*Includes $8.9 million gain for network intrusion expenses related to a litigation settlement in the second quarter this year.
(1) All adjustments are net of tax where applicable.
The forecasted tax rate for Fiscal 2017 is approximately 36.4%.
(2) EPS reflects 20.4 million share count for Fiscal 2017 which includes common stock equivalents.
This reconciliation reflects estimates and current expectations of future results. Actual results may vary
materially from these expectations and estimates, for reasons including those included in the discussion
of forward-looking statements elsewhere in this release. The Company disclaims any obligation to update
such expectations and estimates.

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/genesco-reports-second-quarter-fiscal-2017-results-300321383.html

SOURCE Genesco Inc.

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