Genesco Inc. Reports Fiscal 2021 First Quarter Results
First Quarter Fiscal 2021 Financial Summary
- Net sales decreased 44% to
$279 million with stores closed starting in mid-March - GAAP EPS from continuing operations was (
$9.54 ) vs.$0.36 last year - Non-GAAP EPS from continuing operations was (
$3 .65)1 vs.$0.33 last year
"As the second quarter got underway, we began reopening our stores with the health and safety of our teams and customers as our top priority. Today, approximately 1,000 stores are open and we are pleased with the initial results we've experienced thus far, especially at Journeys where sales in the stores that have reopened are comping nicely positive to last year's volumes for the same period. That said, there continues to be a good deal of uncertainty about near-term trends and therefore we are planning sales conservatively and managing expenses and inventory accordingly. We feel good about the strategic positioning of our businesses for the longer-term, and we believe that we've taken the necessary steps to navigate the near-term impact of this pandemic."
Actions Taken in Response to COVID-19
In response to the impact from COVID-19, in the first quarter, the Company took the following actions to preserve financial liquidity and financial flexibility:
- Borrowed
$208 million on its existing lines of credit, extended payment terms with suppliers, managed inventory by reducing future receipts, and reduced planned capital expenditures by over 50% - Furloughed or reduced its workforce by 90% across stores, corporate offices, call centers and distribution centers
- Implemented salary reductions for the executive team and select employees, reduced the cash compensation of its board of directors, and suspended certain employee benefits, including 401(k) matching
- Maximized benefits provided by the CARES Act in the
U.S. as well as relief packages provided by theU.K. government, including employee retention credits, income tax benefits and property tax relief - Including the above, reduced expenses by 20% during the quarter
- Amended its ABL lending agreement, increasing the facility from
$275 million to up to$350 million of borrowing capacity
Store Re-Opening Update
As of
All store locations are operating under enhanced measures to ensure the health and safety of employees and customers, including requiring employees to wear masks, providing hand sanitizer in multiple locations throughout each store for customer and employee use, enhanced cleaning and sanitation protocols, reconfigured sales floors to promote physical distancing, and modified employee and customer interactions to limit contact.
Genesco will continue its phased approach to reopen stores when the following conditions are met:
- state and local governments have allowed stores to operate;
- the Company believes it can operate safely under its enhanced health and safety measures; and
- the Company believes that it can ensure the safety of its employees and customers
First Quarter Review
Net sales for the first quarter of Fiscal 2021 decreased 44% to
Comparable Sales |
||
|
1QFY21 |
1QFY20 |
|
NA |
7% |
|
NA |
2% |
|
NA |
0% |
Total Genesco Comparable Sales |
NA |
5% |
Same Store Sales |
NA |
4% |
Comparable Direct Sales |
64% |
15% |
First quarter gross margin this year was 43.0%, down 640 basis points, compared with 49.4% last year. The decrease as a percentage of sales is due primarily to higher shipping and warehouse expense in all divisions driven by the increase in penetration of e-commerce and an increase in inventory reserves at Journeys, higher penetration of sale product at Schuh, and more markdowns at Johnston & Murphy.
Selling and administrative expense for the first quarter this year increased as a percentage of net sales due to lower sales as a result of COVID-19, but expense in dollars decreased 20% compared to the same period last year. Proactive steps taken at the onset of the COVID-19 global pandemic and lower bonus expense drove the reduction in expenses. The Company reduced selling salaries, occupancy, and compensation expense along with many other non-essential expenses compared to the previous year.
Genesco's GAAP operating loss for the first quarter was
The effective tax rate for the quarter was 14.1% in Fiscal 2021 compared to 30.7% last year. The adjusted tax rate, reflecting excluded items, was 26.8% in Fiscal 2021 compared to 31.3% last year. The lower adjusted tax rate for this year primarily reflects the inability to recognize a tax benefit for certain foreign losses.
The GAAP loss from continuing operations was
Impairment Charges
Due to the significant decline in its stock price and market capitalization resulting from the outbreak of COVID-19, the Company identified indicators of impairment in the first quarter of Fiscal 2021. As a result, the Company recognized the full impairment of goodwill in its
Cash, Borrowings and Inventory
Cash and cash equivalents at
Capital Expenditures and Store Activity
For the first quarter, capital expenditures were
Share Repurchases
The Company did not repurchase any shares during the first quarter of Fiscal 2021.
Fiscal 2021 Outlook
Due to the continued uncertainty in the overall economy, the Company is not providing guidance at this time.
Conference Call, Management Commentary and Investor Presentation
The Company has posted detailed financial commentary and a supplemental financial presentation of first quarter results on its website, www.genesco.com, in the investor relations section. The Company's live conference call on
Safe Harbor Statement
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, earnings and those regarding its ability to reopen stores, operate the stores safely and ensure the safety of customers and employees) 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 and projections reflected in forward-looking statements, including as a result of the effects of COVID-19 on the Company's business including whether there is a second wave or periods of increases in the number of COVID-19 cases in locations in which the Company operates, restrictions on operations imposed by government entities and landlords, changes in public safety and health requirements, the Company's ability to adequately staff stores, limitations on the Company's ability to provide adequate personal protective equipment to employees, and the Company's ability to maintain social distancing requirements; stores closures and effects on the business as a result of civil disturbances; the level and timing of promotional activity necessary to maintain inventories at appropriate levels; the timing and amount of any share repurchases by the Company; the imposition of tariffs on products imported by the Company or its vendors as well as the ability and costs to move production of products in response to tariffs; the Company's ability to obtain from suppliers products that are in-demand on a timely basis and effectively manage disruptions in product supply or distribution, including disruptions as a result of COVID-19; 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
About
______________________
1Excludes a goodwill impairment charge, trademark impairment and retail store asset impairment charges, partially offset by a release of earn-out related to the Togast acquisition, net of tax effect in the first quarter of Fiscal 2021 ("Excluded Items"). A reconciliation of earnings/loss and earnings/loss per share from continuing operations in accordance with
|
|||||||||
Condensed Consolidated Statements of Operations |
|||||||||
(in thousands, except per share data) |
|||||||||
(Unaudited) |
|||||||||
Quarter 1 |
Quarter 1 |
||||||||
|
% of |
|
% of |
||||||
2020 |
|
2019 |
|
||||||
Net sales |
$ 279,232 |
100.0% |
$ 495,651 |
100.0% |
|||||
Cost of sales |
159,088 |
57.0% |
250,743 |
50.6% |
|||||
Gross margin |
120,144 |
43.0% |
244,908 |
49.4% |
|||||
Selling and administrative expenses |
189,042 |
67.7% |
236,555 |
47.7% |
|||||
|
79,259 |
28.4% |
- |
0.0% |
|||||
Asset impairments and other, net |
7,861 |
2.8% |
(731) |
-0.1% |
|||||
Operating income (loss) |
(156,018) |
-55.9% |
9,084 |
1.8% |
|||||
Other components of net periodic benefit cost |
(124) |
0.0% |
(86) |
0.0% |
|||||
Interest expense, net |
856 |
0.3% |
(166) |
0.0% |
|||||
Earnings (loss) from continuing operations before |
|||||||||
income taxes |
(156,750) |
-56.1% |
9,336 |
1.9% |
|||||
Income tax expense (benefit) |
(22,126) |
-7.9% |
2,866 |
0.6% |
|||||
Earnings (loss) from continuing operations |
(134,624) |
-48.2% |
6,470 |
1.3% |
|||||
Loss from discontinued operations, net of tax |
(153) |
-0.1% |
(124) |
0.0% |
|||||
Net Earnings (Loss) |
$ (134,777) |
-48.3% |
$ 6,346 |
1.3% |
|||||
Basic earnings (loss) per share: |
|||||||||
Before discontinued operations |
$ (9.54) |
$ 0.37 |
|||||||
Net earnings (loss) |
$ (9.55) |
$ 0.36 |
|||||||
Weighted-average shares outstanding - Basic |
14,110 |
17,645 |
|||||||
Diluted earnings (loss) per share: |
|||||||||
Before discontinued operations |
$ (9.54) |
$ 0.36 |
|||||||
Net earnings (loss) |
$ (9.55) |
$ 0.36 |
|||||||
Weighted-average shares outstanding - Diluted |
14,110 |
17,850 |
|||||||
|
|||||||||
Sales/Earnings Summary by Segment |
|||||||||
(in thousands) |
|||||||||
(Unaudited) |
|||||||||
Quarter 1 |
Quarter 1 |
||||||||
|
% of |
|
% of |
||||||
2020 |
|
2019 |
|
||||||
Sales: |
|||||||||
|
$ 168,925 |
60.5% |
$ 323,972 |
65.4% |
|||||
|
47,165 |
16.9% |
76,844 |
15.5% |
|||||
|
38,849 |
13.9% |
74,734 |
15.1% |
|||||
Licensed Brands |
24,293 |
8.7% |
20,083 |
4.1% |
|||||
Corporate and Other |
- |
0.0% |
18 |
0.0% |
|||||
|
$ 279,232 |
100.0% |
$ 495,651 |
100.0% |
|||||
Operating Income (Loss): |
|||||||||
|
$ (37,083) |
-22.0% |
$ 18,976 |
5.9% |
|||||
|
(15,086) |
-32.0% |
(5,428) |
-7.1% |
|||||
|
(9,584) |
-24.7% |
5,106 |
6.8% |
|||||
Licensed Brands |
(2,501) |
-10.3% |
429 |
2.1% |
|||||
Corporate and Other(1) |
(12,505) |
-4.5% |
(9,999) |
-2.0% |
|||||
Goodwill Impairment |
(79,259) |
-28.4% |
- |
0.0% |
|||||
Operating income (loss) |
(156,018) |
-55.9% |
9,084 |
1.8% |
|||||
Other components of net periodic benefit cost |
(124) |
0.0% |
(86) |
0.0% |
|||||
Interest, net |
856 |
0.3% |
(166) |
0.0% |
|||||
Earnings (loss) from continuing operations before |
|||||||||
income taxes |
(156,750) |
-56.1% |
9,336 |
1.9% |
|||||
Income tax expense (benefit) |
(22,126) |
-7.9% |
2,866 |
0.6% |
|||||
Earnings (loss) from continuing operations |
(134,624) |
-48.2% |
6,470 |
1.3% |
|||||
Loss from discontinued operations, net of tax |
(153) |
-0.1% |
(124) |
0.0% |
|||||
Net Earnings (Loss) |
$ (134,777) |
-48.3% |
$ 6,346 |
1.3% |
|||||
(1)Includes a |
|||||||||
million charge for retail store asset impairments, partially offset by a |
|||||||||
acquisition. Includes a |
|||||||||
partially offset by a |
|
|||||||
Condensed Consolidated Balance Sheets |
|||||||
(in thousands) |
|||||||
(Unaudited) |
|||||||
|
|
||||||
Assets |
|||||||
Cash and cash equivalents |
$ 238,574 |
$ 156,655 |
|||||
Accounts receivable |
55,259 |
33,275 |
|||||
Inventories |
391,803 |
367,998 |
|||||
Other current assets |
49,372 |
43,116 |
|||||
Total current assets |
735,008 |
601,044 |
|||||
Property and equipment |
227,058 |
271,320 |
|||||
Operating lease right of use assets |
692,489 |
769,922 |
|||||
|
66,579 |
124,623 |
|||||
Other non-current assets |
33,934 |
49,164 |
|||||
Total Assets |
$ 1,755,068 |
$ 1,816,073 |
|||||
Liabilities and Equity |
|||||||
Accounts payable |
$ 175,232 |
$ 121,655 |
|||||
Current portion long-term debt |
23,741 |
13,914 |
|||||
Current portion operating lease liabilities |
164,723 |
138,758 |
|||||
Other current liabilities |
66,328 |
89,537 |
|||||
Total current liabilities |
430,024 |
363,864 |
|||||
Long-term debt |
198,939 |
59,762 |
|||||
Long-term operating lease liabilities |
615,400 |
690,432 |
|||||
Other long-term liabilities |
34,883 |
39,089 |
|||||
Equity |
475,822 |
662,926 |
|||||
Total Liabilities and Equity |
$ 1,755,068 |
$ 1,816,073 |
|||||
|
||||||||||
Store Count Activity |
||||||||||
Balance |
Balance |
Balance |
||||||||
|
Open |
Close |
|
Open |
Close |
|
||||
|
1,193 |
8 |
30 |
1,171 |
1 |
1 |
1,171 |
|||
|
136 |
1 |
8 |
129 |
0 |
2 |
127 |
|||
|
183 |
3 |
6 |
180 |
2 |
1 |
181 |
|||
Total Retail Units |
1,512 |
12 |
44 |
1,480 |
3 |
4 |
1,479 |
|||
|
||||||||||
Comparable Sales |
||||||||||
Quarter 1 |
||||||||||
|
|
|||||||||
2020(1) |
2019 |
|||||||||
|
NA |
7% |
||||||||
|
NA |
2% |
||||||||
|
NA |
0% |
||||||||
Total Comparable Sales |
NA |
5% |
||||||||
Same Store Sales |
NA |
4% |
||||||||
Comparable Direct Sales |
64% |
15% |
||||||||
(1) As a result of store closures in response to COVID-19, the Company has not included first quarter Fiscal 2021 |
||||||||||
comparable sales, except for comparable direct sales, as it feels that overall sales is a more meaningful metric |
||||||||||
during this period. |
||||||||||
|
|||||
COVID-19 Related Adjustments |
|||||
(in thousands) |
|||||
(Unaudited) |
|||||
Quarter 1 |
|||||
|
|||||
|
$ 79,259 |
||||
Incremental retail store asset impairment(1) |
2,734 |
||||
Trademark impairment(1) |
5,260 |
||||
Release of Togast earnout(1) |
(441) |
||||
Excess inventory(2) |
1,808 |
||||
Non-productive compensation(3) and (4) |
3,245 |
||||
|
(1,555) |
||||
Incremental bad debt reserve(3) |
2,422 |
||||
Other(3) |
(198) |
||||
Total COVID-19 related adjustments |
$ 92,534 |
||||
(1)Included in asset impairments and other, net on the Condensed Consolidated |
|||||
Statements of Operations. |
|||||
(2)Included in cost of sales on the Condensed Consolidated Statements of |
|||||
Operations. |
|||||
(3)Included in selling and administrative expenses on the Condensed Consolidated |
|||||
Statements of Operations. |
|||||
(4)Compensation paid to furloughed workers, net of the CARES Act and UK |
|||||
government relief. |
|||||
Schedule B |
|||||||||
|
|||||||||
Adjustments to Reported Earnings (Loss) from Continuing Operations |
|||||||||
Three Months Ended |
|||||||||
The Company believes that disclosure of earnings (loss) and earnings (loss) per share from continuing operations and operating income (loss) 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. |
|||||||||
Quarter 1 |
|||||||||
May 2, 2020 |
May 4, 2019 |
||||||||
Net of |
Per Share |
Net of |
Per Share |
||||||
In Thousands (except per share amounts) |
Pretax |
Tax |
Amounts |
Pretax |
Tax |
Amounts |
|||
Earnings (loss) from continuing operations, as reported |
$ (134,624) |
( |
$ 6,470 |
|
|||||
Asset impairments and other adjustments: |
|||||||||
Retail store asset impairment charges |
$ 3,042 |
2,228 |
0.16 |
$ 307 |
212 |
0.01 |
|||
Trademark impairment |
5,260 |
5,153 |
0.37 |
- |
- |
0.00 |
|||
|
79,259 |
79,259 |
5.62 |
- |
- |
0.00 |
|||
Gain on lease terminations |
- |
- |
0.00 |
(1,000) |
(689) |
(0.04) |
|||
Release Togast earnout |
(441) |
(323) |
(0.02) |
- |
- |
0.00 |
|||
Change in vacation policy |
(616) |
(451) |
(0.03) |
- |
- |
0.00 |
|||
Gain on Hurricane Maria |
- |
- |
0.00 |
(38) |
(26) |
0.00 |
|||
Impact of additional dilutive shares |
- |
- |
(0.02) |
- |
- |
0.00 |
|||
Total asset impairments and other adjustments |
$ 86,504 |
85,866 |
6.08 |
$ (731) |
(503) |
(0.03) |
|||
Income tax expense adjustments: |
|||||||||
Other tax items |
(2,690) |
(0.19) |
(58) |
0.00 |
|||||
Total income tax expense adjustments |
(2,690) |
(0.19) |
(58) |
0.00 |
|||||
Adjusted earnings (loss) from continuing operations(1)and(2) |
$ (51,448) |
( |
$ 5,909 |
|
|||||
(1)The adjusted tax rate for the first quarter of Fiscal 2021 and 2020 is 26.8% and 31.3%, respectively. |
|||||||||
(2)EPS reflects 14.1 million and 17.9 million share count for the first quarter of Fiscal 2021 and 2020, respectively, which excludes common stock equivalents |
|||||||||
in the first quarter of Fiscal 2021 due to the loss from continuing operations and includes common stock equivalents in the first quarter of Fiscal 2020. |
Schedule B |
||||
|
||||
Adjustments to Reported Operating Income (Loss) |
||||
Three Months Ended |
||||
Quarter 1 - May 2, 2020 |
||||
Operating |
Asset Impair |
Adj Operating |
||
In Thousands |
Income (Loss) |
& Other Adj |
Income (Loss) |
|
|
$ (37,083) |
$ (263) |
$ (37,346) |
|
|
(15,086) |
- |
(15,086) |
|
|
(9,584) |
(96) |
(9,680) |
|
Licensed Brands |
(2,501) |
(39) |
(2,540) |
|
Corporate and Other |
(91,764) |
86,902 |
(4,862) |
|
Total Operating Loss |
$ (156,018) |
$ 86,504 |
$ (69,514) |
|
% of sales |
-55.9% |
-24.9% |
||
Quarter 1 - May 4, 2019 |
||||
Operating |
Asset Impair |
Adj Operating |
||
In Thousands |
Income (Loss) |
& Other Adj |
Income (Loss) |
|
|
$ 18,976 |
$ - |
$ 18,976 |
|
|
(5,428) |
- |
(5,428) |
|
|
5,106 |
- |
5,106 |
|
Licensed Brands |
429 |
- |
429 |
|
Corporate and Other |
(9,999) |
(731) |
(10,730) |
|
Total Operating Income |
$ 9,084 |
$ (731) |
$ 8,353 |
|
% of sales |
1.8% |
1.7% |
View original content:http://www.prnewswire.com/news-releases/genesco-inc-reports-fiscal-2021-first-quarter-results-301072425.html
SOURCE
Genesco Inc. Financial Contacts: Mel Tucker, Senior Vice President, Chief Financial Officer, (615) 367-7465, mtucker@genesco.com; Dave Slater, Vice President, Financial Planning & Analysis and IR, (615) 367-7604, dslater@genesco.com; Genesco Inc. Media Contact: Claire S. McCall, Director, Corporate Relations, (615) 367-8283, cmccall@genesco.com