Genesco Reports Second Quarter Fiscal 2009 Results
--- Pre-Tax Earnings From Continuing Operations Rise ---
--- Full-Year Outlook Raised ---
NASHVILLE, Tenn., Aug. 28 /PRNewswire-FirstCall/ -- Genesco Inc. (NYSE: GCO) reported a loss from continuing operations of $4.9 million, or $0.27 per diluted share, for the second quarter ended August 2, 2008. These results reflect $6.4 million, or $0.36 per diluted share, of income tax liability primarily related to an increase in the value of stock received in the settlement of litigation with The Finish Line Inc. that could not be recognized as income for accounting purposes. Earnings before income taxes from continuing operations for the quarter were $2.5 million, including fixed asset impairments, store-closing costs and litigation settlement expenses totaling $3.6 million pre-tax, or $0.09 per diluted share. In the second quarter last year, the Company reported a loss from continuing operations of $2.9 million, or $0.13 per diluted share. Last year's results reflected a loss before income taxes from continuing operations of $5.6 million, including charges of $5.5 million, or $0.13 per diluted share, primarily consisting of merger-related expenses, fixed asset impairments and store closing costs.
Adjusting for the listed items in both periods, earnings from continuing operations were $3.6 million, or $0.18 per diluted share, in the second quarter this year, compared to breakeven earnings and earnings per share in the same period last year. Because of the magnitude of the income tax effect of the settlement shares and for consistency with first quarter disclosures and with the Company's previously announced earnings expectations, which excluded the listed items, the Company believes the disclosure of adjusted earnings before discontinued operations on this basis will be useful to investors. A reconciliation of the adjusted financial measures to their corresponding measures as reported pursuant to U.S. Generally Accepted Accounting Principles is included on Schedule B to this press release.
As part of its March 2008 litigation settlement with The Finish Line, the Company received shares of Finish Line common stock, which it agreed to distribute to the Company's shareholders. The shares appreciated in value by approximately $23 million before the distribution occurred. Because of differences between U.S. Generally Accepted Accounting Principles and the tax law in their respective treatment of this appreciation, the Company recorded a tax liability on the appreciation, which could not be recognized as income for accounting purposes. Consequently, the Company's effective tax rate for the second quarter of Fiscal 2009 was 295%, compared to 47% for the same quarter last year.
The Company also recorded an after-tax charge of $5.4 million, or $0.29 per share, to discontinued operations for an environmental liability relating to settlement negotiations with the Environmental Protection Agency concerning the site of a factory in New York, which the Company operated in the late 1960s.
Net sales for the second quarter of fiscal 2009 increased by 8% to $353 million, compared to net sales for the second quarter of the previous year of $328 million. Comparable store sales for the Company increased 4%.
Genesco President and Chief Executive Officer Robert J. Dennis said, "Our solid second quarter operating results reflect the ongoing success of our merchandising strategies and excellent execution across the board from our team. Given our positive momentum, strong positioning in the marketplace and easier comparisons, which continue through the second half of the year, we are optimistic about our prospects for the balance of the year, although we remain mindful of the uncertain economic environment. Accordingly, we have modestly raised our expectations for the balance of the year."
Second Quarter Business Unit Performance
"Net sales in the Journeys Group grew 9% from the prior year period to $161 million. Same store sales for the Journeys Group were up 2% for the quarter and same store sales in the Journeys stores were up 2%, compared to a 7% decline last year. Footwear unit comps in Journeys rose 2% and average selling price increased 2% in the quarter. The solid results were driven by continued strength in Journeys' skate business, modestly offset by weakness in women's casual footwear.
"Net sales in the Hat World Group increased 13% from the prior year period to approximately $102 million and same store sales increased 7% in the second quarter, with urban stores up 9% and non-urban stores up 6%. Core and fashion Major League Baseball performed well and action brands were also very strong. Hat World once again generated meaningful operating margin expansion in the quarter.
"Net sales for the Underground Station Group, which includes the remaining Jarman stores, were $24 million for the second quarter. Same store sales increased 9% from the prior year period and footwear unit comps rose 13%, reflecting Underground Station's continued progress with its new merchandising strategies. In addition, operating margin improved once again, reflecting increased leverage from the strong comparable sales increase.
"Johnston & Murphy Group's net sales were approximately $44 million, with wholesale sales down 9% from the prior year period and same store sales for the Johnston & Murphy shops declined 3% from the prior year period. Johnston & Murphy's results reflect a challenging economic environment and a difficult comparison from the previous year. The brand remains strong, and management will continue to focus on driving dollars per transaction and carefully managing inventories and controlling expenses.
"Second quarter sales of Licensed Brands increased 16% from the prior year period to approximately $22 million. The Dockers(R) Footwear business remains solid across all of its channels of distribution, with particular strength in the specialty shoe retail chains."
Fiscal 2009 Outlook
The Company said it has raised its previously announced earnings per share outlook for the current fiscal year. The Company now expects earnings per share in the range of $2.15 to $2.20 for the full fiscal year (excluding merger-related expenses, asset impairment charges, and other items reflected on Schedule C to this announcement).
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, 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 and post closing adjustments to financial information reported, including the income tax liability related to the Finish Line shares, continuing weakness in the consumer economy, 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, bankruptcies or deterioration in financial condition of significant wholesale customers, disruptions in product supply or distribution, further unfavorable trends in fuel costs, foreign exchange rates, foreign labor and materials costs, and other factors affecting the cost of products, and competition in the Company's markets. Additional factors that could affect the Company's prospects and cause differences from expectations include 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, the ability to negotiate acceptable lease terminations and otherwise to execute the previously announced store closing plans on schedule and at expected expense levels, unexpected changes to the market for our shares, the impact of any future stock repurchases, variations from expected pension-related charges caused by conditions in the financial markets, and the outcome of litigation, investigations and environmental matters involving the Company, including but not limited to the outcome of the negotiations with the Environmental Protection Agency noted in this announcement. 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.
Conference Call
The Company's live conference call on August 28, 2008, 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.
About Genesco Inc.
Genesco Inc., a Nashville-based specialty retailer, sells footwear, headwear and accessories in more than 2,200 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 Shack, Hat Zone, Head Quarters and Cap Connection, and on internet websites www.journeys.com, www.journeyskidz.com, www.shibyjourneys.com, www.undergroundstation.com, www.johnstonmurphy.com, www.dockersshoes.com, and www.lids.com. The Company also sells footwear at wholesale under its Johnston & Murphy brand and under the licensed Dockers brand. 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
August 2, August 4, August 2, August 4,
In Thousands 2008 2007 2008 2007
Net sales $353,138 $327,977 $710,073 $662,628
Cost of sales 171,814 164,358 347,354 327,165
Selling and administrative
expenses 173,420 166,059 353,466 325,132
Restructuring and other, net 3,261 158 (198,577) 6,753
Earnings (loss) from operations 4,643 (2,598) 207,830 3,578
Interest expense, net 2,114 3,000 4,317 5,402
Earnings (loss) before income
taxes from continuing operations 2,529 (5,598) 203,513 (1,824)
Income tax expense (benefit) 7,458 (2,658) 78,550 (1,087)
Earnings (loss) from continuing
operations (4,929) (2,940) 124,963 (737)
Provision for discontinued
operations (5,361) (1,225) (5,454) (1,225)
Net Earnings (Loss) $(10,290) $(4,165) $119,509 $(1,962)
Earnings Per Share Information
Three Months Ended Six Months Ended
August 2, August 4, August 2, August 4,
In Thousands (except per share 2008 2007 2008 2007
amounts)
Preferred dividend requirements $50 $54 $99 $118
Average common shares - Basic EPS 18,513 22,415 19,782 22,403
Basic earnings (loss) per share:
Before discontinued operations ($0.27) ($0.13) $6.31 ($0.04)
Net earnings (loss) ($0.56) ($0.19) $6.04 ($0.09)
Average common and common
equivalent shares - Diluted EPS 18,513 22,415 24,508 22,403
Diluted earnings (loss) per share:
Before discontinued operations ($0.27) ($0.13) $5.15 ($0.04)
Net earnings (loss) ($0.56) ($0.19) $4.93 ($0.09)
GENESCO INC.
Consolidated Earnings Summary
Three Months Ended Six Months Ended
August 2, August 4, August 2, August 4,
In Thousands 2008 2007 2008 2007
Sales:
Journeys Group $160,960 $148,091 $329,722 $304,012
Underground Station Group 23,597 24,520 52,601 54,330
Hat World Group 102,169 90,460 189,906 169,304
Johnston & Murphy Group 44,014 45,657 90,585 91,951
Licensed Brands 22,145 19,059 46,893 42,588
Corporate and Other 253 190 366 443
Net Sales $353,138 $327,977 $710,073 $662,628
Operating Income (Loss):
Journeys Group $2,388 $983 $7,686 $11,800
Underground Station Group (3,038) (4,893) (4,019) (7,061)
Hat World Group 11,454 7,418 15,179 10,070
Johnston & Murphy Group 2,994 3,612 6,677 8,082
Licensed Brands 2,091 2,148 5,646 5,174
Corporate and Other* (11,246) (11,866) 176,661 (24,487)
Earnings (loss) from
operations 4,643 (2,598) 207,830 3,578
Interest, net 2,114 3,000 4,317 5,402
Earnings (loss) before income
taxes from continuing operations 2,529 (5,598) 203,513 (1,824)
Income tax expense (benefit) 7,458 (2,658) 78,550 (1,087)
Earnings (loss) from continuing
operations (4,929) (2,940) 124,963 (737)
Provision for discontinued
operations (5,361) (1,225) (5,454) (1,225)
Net Earnings (Loss) $(10,290) $(4,165) $119,509 $(1,962)
*Includes $3.3 million of other charges in the second quarter of Fiscal
2009 which includes $2.4 million in asset impairments, $0.6 million for
lease terminations and $0.3 million for other legal matters and includes
$198.6 million credit in the first six months of Fiscal 2009 of which
$204.1 million were proceeds as a result of the settlement of merger-
related litigation with The Finish Line and its investment bankers offset
by $3.6 million in asset impairments, $1.1 million for other legal
matters and $0.8 million for lease terminations. The second quarter and
six months of Fiscal 2009 also includes $0.3 million and $7.6 million,
respectively, of merger-related expenses.
Includes $0.2 million of other charges in the second quarter of Fiscal
2008 which includes $0.4 million of asset impairments offset by a $0.2
million excise tax refund and includes $6.8 million of other charges in
the first six months of Fiscal 2008 of which $6.7 million is asset
impairments and $0.3 million for lease terminations offset by a $0.2
million excise tax refund. The second quarter and six months of Fiscal
2008 also includes $5.4 million and $5.5 million, respectively, of
merger-related expenses.
GENESCO INC.
Consolidated Balance Sheet
August 2, August 4,
In Thousands 2008 2007
Assets
Cash and cash equivalents $24,283 $22,129
Accounts receivable 23,015 22,154
Inventories 327,986 347,574
Other current assets 41,199 54,610
Total current assets 416,483 446,467
Property and equipment 249,067 236,154
Other non-current assets 172,669 171,948
Total Assets $838,219 $854,569
Liabilities and Shareholders' Equity
Accounts payable $133,806 $119,727
Other current liabilities 85,995 56,374
Total current liabilities 219,801 176,101
Long-term debt 106,220 188,220
Other long-term liabilities 86,977 86,271
Shareholders' equity 425,221 403,977
Total Liabilities and Shareholders' Equity $838,219 $854,569
GENESCO INC.
Retail Units Operated - Six Months Ended August 2, 2008
Balance Balance Balance
02/03/07 Open Conv Close 02/02/08 Open Conv Close 08/02/08
Journeys Group 853 118 0 4 967 28 0 2 993
Journeys 768 41 0 4 805 10 0 2 813
Journeys Kidz 73 42 0 0 115 13 0 0 128
Shi by
Journeys 12 35 0 0 47 5 0 0 52
Underground
Station Group 223 2 0 33 192 0 0 7 185
Hat World Group 785 98 0 21 862 16 0 9 869
Johnston & Murphy
Group 148 11 0 5 154 3 0 2 155
Shops 109 8 0 4 113 1 0 2 112
Factory
Outlets 39 3 0 1 41 2 0 0 43
Total Retail
Units 2,009 229 0 63 2,175 47 0 20 2,202
Retail Units Operated - Three Months Ended August 2, 2008
Balance Balance
05/03/08 Open Conv Close 08/02/08
Journeys Group 985 10 0 2 993
Journeys 812 3 0 2 813
Journeys Kidz 123 5 0 0 128
Shi by Journeys 50 2 0 0 52
Underground Station Group 190 0 0 5 185
Hat World Group 868 5 0 4 869
Johnston & Murphy Group 156 0 0 1 155
Shops 113 0 0 1 112
Factory Outlets 43 0 0 0 43
Total Retail Units 2,199 15 0 12 2,202
Constant Store Sales
Three Months Ended Six Months Ended
August 2, August 4, August 2, August 4,
2008 2007 2008 2007
Journeys Group 2% -7% 1% -2%
Underground Station Group 9% -23% 9% -22%
Hat World Group 7% -2% 5% -3%
Johnston & Murphy Group -4% 5% -3% 4%
Shops -3% 5% -2% 4%
Factory Outlets -7% 6% -5% 6%
Total Constant Store Sales 4% -6% 3% -4%
Genesco Inc.
Adjustments to Reported Loss from Continuing Operations
Three Months Ended August 2, 2008 and August 4, 2007
3 mos Impact 3 mos Impact
In Thousands (except per Aug 2,2008 on EPS Aug 4,2007 on EPS
(share amounts)
Loss from continuing operations,
as reported (4,929) $(0.27) (2,940) (0.13)
Adjustments: (1)
Merger-related expenses 202 0.01 2,878 0.13
Impairment & lease termination
charges 1,780 0.07 83 0.00
Other legal matters 190 0.01 - -
Impact of higher effective tax
rate (2) 6,366 0.36 - -
Adjusted earnings from continuing
operations (3) 3,609 $0.18 21 $0.00
(1) All adjustments are net of tax. The tax rate for the second quarter
of Fiscal 2009 before the impact of the settlement of merger-related
litigation and deductibility of prior year merger-related expenses is
40.2% excluding a FIN 48 discreet item of $74,000. The tax rate for
the second quarter of Fiscal 2008 is 47.5%.
(2) Includes added tax on Finish Line share appreciation and impact on EPS
calculation from additional tax.
(3) Reflects 23.3 million share count which includes convertible shares
and common stock equivalents.
The Company believes that disclosure of earnings and earnings per share
from continuing operations on a pro forma basis adjusted for the items not
reflected in the previously announced expectations will be meaningful to
investors, in light of the impact of a higher effective tax rate and other
items not reflected in those expectations.
Genesco Inc.
Adjustments to Forecasted Earnings from Continuing Operations
Fiscal Year Ending January 31, 2009
High Guidance Low Guidance
In Thousands (except per share Fiscal 2009 Fiscal 2009
amounts)
Forecasted earnings from
continuing operations 164,905 $6.97 163,608 $6.92
Adjustments: (1)
Settlement of merger-related
litigation (122,037) $(5.09) (122,037) (5.09)
Merger-related expenses 4,531 $0.19 4,531 0.19
Impairment and lease termination
charges 6,008 $0.25 6,008 0.25
Other legal matters 638 $0.03 638 0.03
Lower effective tax rate (3,512) $(0.15) (3,512) (0.15)
Adjusted forecasted
earnings from continuing
operations 50,533 $2.20 49,236 $2.15
(1) All adjustments are net of tax. The tax rate for Fiscal 2009 before
the impact of the settlement of merger-related litigation and
deductibility of prior year merger-related expenses is 40.2% excluding
FIN 48 discreet items of $322,000.
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.
-0- 08/28/2008
/CONTACT: Financial, James S. Gulmi, +1-615-367-8325, or Media, Claire S.
McCall, +1-615-367-8283, both for Genesco Inc./
/Company News On-Call: http://www.prnewswire.com/comp/352750.html /
/Web site: http://www.genesco.com /
(GCO)
CO: Genesco Inc.
ST: Tennessee
IN: REA FAS
SU: ERN CCA ERP
TI-TP
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0365 08/28/2008 07:31 EDT http://www.prnewswire.com