Genesco Reports Second Quarter Fiscal 2007 Results
NASHVILLE, Tenn., Aug 24, 2006 /PRNewswire-FirstCall via COMTEX News Network/ -- Genesco Inc. (NYSE: GCO) today reported earnings of $5.9 million, or $0.24 per diluted share, for the second quarter ended July 29, 2006. Earnings were $6.8 million, or $0.27 per diluted share, for the second quarter ended July 30, 2005. Earnings for the second quarter of this year included SFAS 123(R) share-based compensation and restricted stock expense of $1.7 million before taxes, or $0.04 per diluted share. Net sales for the second quarter of fiscal 2007 increased 11% to $304 million compared to $275 million for the second quarter of fiscal 2006.
Genesco Chairman, President and Chief Executive Officer Hal N. Pennington, said, "Strong performances in Journeys and our wholesale businesses helped to offset weakness in the urban market, reflecting an advantage of our diversified operating model. We also continued to execute our store growth plans during the quarter, opening a total of 47 stores, compared with 40 during the second quarter last year, and increasing square footage by 15% compared to a year ago.
"Net sales in the Journeys Group increased 15% to approximately $137 million in the second quarter. Same store sales increased 5% and footwear unit comps rose 8%. Athletic footwear, led by board sport shoes, sandals and women's casuals once again performed well, and we expect these trends to continue through the back to school season. We are excited about Journeys' prospects for the second half of the year, and we believe its product offerings provide an important point of differentiation to its customer. We remain on plan to open a total of 60 Journeys stores in fiscal 2007.
"Journeys Kidz posted another strong quarter, with total sales up 51% and same store sales up 12% against a 14% comparison last year. We remain on track to open a total of 25 Kidz stores in fiscal 2007 and continue to believe that we can eventually grow this chain to at least 250 stores across the country. Our newest concept, Shi by Journeys, is also performing well. We opened three Shi by Journeys stores during the quarter and now have six stores in operation. Based on the concept's early success, we now expect to accelerate our Shi by Journeys store opening plans for the balance of fiscal 2007.
"Net sales at Hat World increased 14% to approximately $79 million and same store sales were flat compared to the same period a year ago. We continued to experience strength in core and fashion-oriented Major League Baseball products, as well as branded action and performance headwear, but this was somewhat offset by softer sales in NCAA and other branded categories like beer and trucker hats. Challenges in the urban market affected the more street fashion-influenced stores while non-urban stores in the group posted a comparable store increase for the quarter. Even with the flat same store sales overall, Hat World generated an 11% operating margin for the quarter, lending support to our strategy of growing Hat World's highly profitable sales by opening stores. To that end, we now expect to open approximately 100 stores during fiscal 2007, compared to our earlier plan to open 85 to 90 stores. We believe that a solid merchandise position, a promising NFL season, a number of big market MLB teams in the pennant race and an expanded private label and embroidery program all bode well for Hat World in the second half.
"Net sales for the Underground Station Group, which includes the Jarman stores, were $31 million. Same store sales fell 6% in the second quarter. Same store sales in the Underground Station stores declined 5%, primarily due to weak demand in its men's athletic business and overall softness in the urban market. Underground Station continued to generate gains in women's footwear, as well as apparel, accessories and children's shoes. We expect that Underground Station's business will remain challenging in the near-term; however, we believe that its growing emphasis on women's and non-footwear categories will improve the chain's competitive position in the future.
"Johnston & Murphy's net sales increased 2% to $42 million, wholesale sales increased 4% and same store sales for the shops fell 2%. Johnston & Murphy wholesale shipped less off-priced product than in the second quarter last year, which made for a more difficult sales comparison, but benefited margins for the quarter. Feedback on Johnston & Murphy's product line at the recent WSA trade show was very positive. We remain focused on executing our strategic plan and leveraging Johnston & Murphy's powerful brand equity.
"Second quarter sales of Licensed Brands rose 16% to $16 million and operating income was up 31% to 8% of sales. Dockers Footwear continues to benefit from a growing demand for moderate, dress and dress casual footwear in general and the brand's growing status in that market."
Genesco said that it is revising its fiscal 2007 guidance for the year ending February 3, 2007, to take a more conservative outlook based on the continued challenging trends in the urban markets. The Company now expects sales of approximately $1.45 billion and diluted earnings per share of $2.50 to $2.54 for the year. The earnings per share estimate includes expected SFAS 123(R) share-based compensation and restricted stock expense totaling approximately $0.17 per share.
Genesco also announced that its board of directors has authorized the use of up to an additional $30 million in cash to repurchase shares of the Company's common stock from time to time in open market or privately negotiated transactions, depending on market conditions and other factors. The authorization is in addition to a $20 million authorization announced in June 2006. Since announcing the most recent authorization, the Company has used approximately $15.4 million of previous authorizations in open market purchases of approximately 498,000 shares.
In addition, Genesco announced that it has entered into an amendment to the credit agreement dated as of April 1, 2004, as amended April 10, 2006, governing its revolving credit facility with nine banks. The amendment increased aggregate revolving credit capacity to $105 million from $75 million and raised the limits on the payment of dividends and stock repurchases by the Company.
This release contains forward-looking statements, including those regarding the Company's sales and earnings outlook and all other statements not addressing solely historical facts or present conditions. Actual results could vary materially from the expectations reflected in these statements. A number of factors could cause differences. These include weakness in consumer demand for products sold by the Company, fashion trends that affect the sales or product margins of the Company's retail product offerings, changes in the timing of holidays or in the onset of seasonal weather affecting period to period sales comparisons, changes in buying patterns by significant wholesale customers, disruptions in product supply or distribution, further unfavorable trends in foreign exchange rates and other factors affecting the cost of products, changes in business strategies by the Company's competitors (including pricing and promotional discounts), the ability to open, staff and support additional retail stores on schedule and at acceptable expense levels and to renew leases in existing stores on schedule and at acceptable expense levels, variations from expected pension-related charges caused by conditions in the financial markets, and the outcome of litigation and environmental matters involving the Company. Forward-looking statements reflect the expectations of the Company at the time they are made. The Company disclaims any obligation to update such statements.
The Company's live conference call on August 24, 2006, at 7:30 a.m. (Central time) may be accessed through the Company's internet website, www.genesco.com. To listen live, please go to the website at least 15 minutes early to register, download and install any necessary software.
Genesco Inc., a Nashville-based specialty retailer, sells footwear, headwear and accessories in more than 1,850 retail stores in the United States and Canada, principally under the names Journeys, Journeys Kidz, Shi by Journeys, Johnston & Murphy, Underground Station, Hatworld, Lids, Hat Zone, Cap Factory, Head Quarters and Cap Connection, and on internet websites www.journeys.com, www.journeyskidz.com, www.undergroundstation.com, www.johnstonmurphy.com, www.lids.com, www.hatworld.com, and www.lidscyo.com. The Company also sells footwear at wholesale under its Johnston & Murphy brand and under the licensed Dockers and Perry Ellis brands. Additional information on Genesco and its operating divisions may be accessed at its website www.genesco.com.
GENESCO INC.
Consolidated Earnings Summary
Three Months Ended Six Months Ended
July 29, July 30, July 29, July 30,
In Thousands 2006 2005 2006 2005
Net sales $304,301 $275,168 $619,319 $561,253
Cost of sales 150,911 136,210 304,560 275,742
Selling and administrative
expenses 140,619 124,948 282,485 252,204
Restructuring and other, net 480 177 589 3,044
Earnings from operations 12,291 13,833 31,685 30,263
Interest expense, net 2,160 2,568 4,074 5,272
Earnings before income taxes from
continuing operations 10,131 11,265 27,611 24,991
Income tax expense 4,187 4,499 11,001 9,799
Earnings from continuing
operations 5,944 6,766 16,610 15,192
Earnings from (provision for)
discontinued operations - - (189) 65
Net Earnings $5,944 $6,766 $16,421 $15,257
Earnings Per Share Information
Three Months Ended Six Months Ended
In Thousands (except per share July 29, July 30, July 29, July 30,
amounts) 2006 2005 2006 2005
Preferred dividend requirements $64 $69 $128 $142
Average common shares - Basic EPS 22,988 22,702 23,015 22,613
Basic earnings per share:
Before discontinued operations $0.26 $0.29 $0.72 $0.67
Net earnings $0.26 $0.29 $0.71 $0.67
Average common and common
equivalent shares - Diluted EPS 27,340 27,142 27,388 27,020
Diluted earnings per share:
Before discontinued operations $0.24 $0.27 $0.65 $0.60
Net earnings $0.24 $0.27 $0.64 $0.61
GENESCO INC.
Consolidated Earnings Summary
Three Months Ended Six Months Ended
July 29, July 30, July 29, July 30,
In Thousands 2006 2005 2006 2005
Sales:
Journeys $136,669 $118,928 $278,169 $247,772
Underground Station Group 30,917 32,186 70,873 72,022
Hat World 78,506 69,055 149,194 131,202
Johnston & Murphy 41,916 41,008 85,947 82,516
Licensed Brands 16,116 13,916 34,915 27,608
Corporate and Other 177 75 221 133
Net Sales $304,301 $275,168 $619,319 $561,253
Operating Income (Loss):
Journeys $7,935 $6,951 $21,086 $20,719
Underground Station Group (1,747) (681) 658 1,935
Hat World 8,617 9,258 14,624 14,740
Johnston & Murphy 2,484 2,418 5,307 4,948
Licensed Brands 1,335 1,018 3,064 1,764
Corporate and Other* (6,333) (5,131) (13,054) (13,843)
Earnings from operations 12,291 13,833 31,685 30,263
Interest, net 2,160 2,568 4,074 5,272
Earnings before income taxes from
continuing operations 10,131 11,265 27,611 24,991
Income tax expense 4,187 4,499 11,001 9,799
Earnings from continuing
operations 5,944 6,766 16,610 15,192
Earnings from (provision for)
discontinued operations - - (189) 65
Net Earnings $5,944 $6,766 $16,421 $15,257
*Includes $0.5 million and $0.6 million of other charges in the second
quarter and six months of Fiscal 2007, respectively, primarily for asset
impairments. Includes $0.2 million and $0.4 million of other charges for
asset impairment and lease terminations in the second quarter and six
months of Fiscal 2006, respectively, and a $2.6 million charge for a
litigation settlement in the first six months of Fiscal 2006.
GENESCO INC.
Consolidated Balance Sheet
July 29, July 30,
In Thousands 2006 2005
Assets
Cash and cash equivalents $19,360 $38,848
Accounts receivable 19,293 17,762
Inventories 331,439 270,688
Other current assets 31,313 23,747
Total current assets 401,405 351,045
Property and equipment 204,419 173,316
Other non-current assets 156,285 159,588
Total Assets $762,109 $683,949
Liabilities and Shareholders' Equity
Accounts payable $144,954 $114,837
Current portion - long-term debt - -
Other current liabilities 55,212 53,923
Total current liabilities 200,166 168,760
Long-term debt 129,250 151,250
Other long-term liabilities 76,173 70,608
Shareholders' equity 356,520 293,331
Total Liabilities and Shareholders' Equity $762,109 $683,949
GENESCO INC.
Retail Units Operated - Six Months Ended July 29, 2006
Balance
01/29/05 Open Conv Close
Journeys 695 71 0 5
Journeys 654 60 0 4
Journeys Kidz 41 10 0 1
Shi by Journeys 0 1 0 0
Underground Station Group 229 21 0 21
Underground Station 165 21 2 8
Jarman Retail 64 0 (2) 13
Hat World 552 96 0 7
Johnston & Murphy 142 5 0 5
Shops 107 4 0 4
Factory Outlets 35 1 0 1
Total Retail Units 1,618 193 0 38
Retail Units Operated - Six Months Ended July 29, 2006
Balance Balance
01/28/06 Open Conv Close 07/29/06
Journeys 761 46 0 1 806
Journeys 710 27 0 1 736
Journeys Kidz 50 14 0 0 64
Shi by Journeys 1 5 0 0 6
Underground Station Group 229 7 0 5 231
Underground Station 180 7 2 0 189
Jarman Retail 49 0 (2) 5 42
Hat World 641 49 0 5 685
Johnston & Murphy 142 7 0 1 148
Shops 107 3 0 1 109
Factory Outlets 35 4 0 0 39
Total Retail Units 1,773 109 0 12 1,870
Retail Units Operated - Three Months Ended July 29, 2006
Balance Balance
04/29/06 Open Conv Close 07/29/06
Journeys 790 16 0 0 806
Journeys 730 6 0 0 736
Journeys Kidz 57 7 0 0 64
Shi by Journeys 3 3 0 0 6
Underground Station Group 232 2 0 3 231
Underground Station 186 2 1 0 189
Jarman Retail 46 0 (1) 3 42
Hat World 660 27 0 2 685
Johnston & Murphy 147 2 0 1 148
Shops 109 1 0 1 109
Factory Outlets 38 1 0 0 39
Total Retail Units 1,829 47 0 6 1,870
Constant Store Sales
Three Months Ended Six Months Ended
July 29, July 30, July 29, July 30,
2006 2005 2006 2005
Journeys 5% 6% 3% 7%
Underground Station Group -6% 9% -5% 9%
Underground Station -5% 12% -3% 12%
Jarman Retail -11% 1% -10% 2%
Hat World 0% 4% 0% 5%
Johnston & Murphy -3% 9% -1% 6%
Shops -2% 9% 0% 6%
Factory Outlets -6% 6% -3% 4%
Total Constant Store Sales 1% 7% 1% 7%
SOURCE Genesco Inc.
Financial, James S. Gulmi, +1-615-367-8325, or Media, Claire S. McCall, +1-615-367-8283, both of Genesco Inc.
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