Genesco Reports Second Quarter Results
-- Company Reports Second Quarter Diluted Earnings Per Share of $0.21 --
-- Raises Fiscal 2005 Guidance --
NASHVILLE, Tenn., Aug. 19 /PRNewswire-FirstCall/ -- Genesco Inc. (NYSE: GCO) today reported net earnings of $4.8 million, or $0.21 per diluted share, for the second quarter ended July 31, 2004. Items including the recognition of a gain on the curtailment of the Company's defined benefit plan and a tax benefit partially offset by retail store asset impairments and retail store closings, added $0.02 per diluted share in the second quarter of fiscal 2005. This compares with a net loss of $891,000, or $0.04 per diluted share, for the second quarter last year, which included a net loss of $0.07 per diluted share primarily related to the Company's refinancing of its convertible subordinated notes in the second quarter of fiscal 2004. Net sales for the second quarter of fiscal 2005 increased 37% to $246 million compared to $179 million for the second quarter of fiscal 2004.
Genesco President and Chief Executive Officer Hal N. Pennington said, "We are very pleased to be able to once again exceed expectations for the second quarter. Our results were primarily driven by continued strength at Hat World, a solid performance at Journeys and ongoing improvements at Johnston & Murphy and Dockers. As we head into the second half of the fiscal year, we are encouraged by our momentum and believe we are well positioned to take advantage of the current trends in the marketplace.
"Total sales at Journeys increased 8.5% to approximately $106 million and both same store sales and footwear unit comps rose 2%. We continued to benefit from the strong trend in athletic and solid gains in women's fashion footwear, offset in part by the impact of the shift in the tax-free timing in some states. We think our merchandise selection looks great for back-to- school and we are excited about our prospects.
"Underground Station reported a same store sales decline of 11% compared to a 9% increase last year. As expected, Underground Station's business remained challenging during the quarter due to difficult same store sales and product comparisons. Looking ahead, comparisons begin to moderate and we remain focused on improving this business.
"Hat World registered another strong quarter, with total sales up 30% and same store sales up 16% reflecting robust demand for our core sports product and ongoing strength in our fashion and branded businesses. We remain excited about this acquisition and the short and long-term opportunities of this business.
"Johnston & Murphy posted its second consecutive quarter of increased profitability. Operating margin improved significantly as we continued to benefit from enhanced sourcing efficiencies, less promotional selling and a higher mix of premium product. We believe the strong positive feedback that we recently received at WSA is further evidence that our initiatives are working and we remain committed to executing our strategic plan for this business.
"Finally, Dockers generated meaningful gains in terms of sales and operating income during the second quarter. Revenues grew 20.3% to $14.2 million and operating margin increased to 9.2% compared to a negative operating margin of 2.2% last year. Over the past six months we have made significant progress at Dockers and we are optimistic that this positive momentum will continue into the back half of the fiscal year."
Genesco also stated that it is revising upward its fiscal 2005 guidance. The Company now expects sales for the year of approximately $1.1 billion and earnings per share to range from $1.89 to $1.92, including previously announced charges of approximately $0.08 to $0.09 per share associated with the planned closing of Jarman and other underperforming stores in fiscal 2005.
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 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 integration of the Hat World acquisition, 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. They also include the impact of proposed changes in the accounting treatment of the contingent conversion feature of the Company's 4-1/8% convertible subordinated notes due 2023 and the triggering of that feature by certain increases in the trading price of the Company's common stock, either of which could result in an increase in common shares deemed outstanding in the calculation of earnings per share by 3.9 million shares. The Company disclaims any obligation to update such statements.
The Company's live conference call on August 19, 2004, at 7:30 a.m. (Central time) may be accessed through the Company's internet website, http://www.genesco.com . The Company expects to discuss results from the second quarter, and its current expectations for the fiscal year ending January 29, 2005, during the call. 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 1,550 retail stores in the United States and Canada, principally under the names Journeys, Journeys Kidz, Johnston & Murphy, Underground Station, Hatworld, Lids, Hat Zone, Cap Factory, Cap Connection and Head Quarters, and on internet websites http://www.journeys.com, http://www.johnstonmurphy.com , http://www.lids.com , http://www.hatworld.com , and http://www.lidscyo.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 http://www.genesco.com .
GENESCO INC.
Consolidated Earnings Summary
Three Months Ended Six Months Ended
July 31, August 2, July 31, August 2,
In Thousands 2004 2003 2004 2003
Net sales $245,939 $179,478 $471,465 $372,224
Cost of sales 124,050 95,989 238,898 200,643
Selling and administrative expenses 112,085 80,271 211,315 160,924
Restructuring and other, net 186 139 40 139
Earnings from operations before
interest and other 9,990 3,357 21,292 10,796
Loss on early retirement of debt - 2,581 - 2,581
Interest expense, net 2,896 2,149 4,778 4,181
Earnings (loss) before income
taxes from continuing operations 7,094 (1,373) 16,514 4,034
Income tax expense (benefit)* 2,301 (482) 5,897 1,588
Earnings (loss) from continuing
operations 4,793 (891) 10,617 2,446
Provision for discontinued
operations, net (21) - (21) -
Net Earnings (Loss) $4,772 $(891) $10,596 $2,446
*Includes favorable tax settlements of $0.4 million and $0.5 million in
the second quarter and six months of Fiscal 2005, respectively.
Earnings Per Share Information
Three Months Ended Six Months Ended
In Thousands (except per share July 31, August 2, July 31, August 2,
amounts) 2004 2003 2004 2003
Preferred dividend requirements $73 $73 $146 $147
Average common shares - Basic EPS 21,903 21,754 21,833 21,748
Basic earnings (loss) per share:
Before discontinued operations $0.22 ($0.04) $0.48 $0.11
Net earnings (loss) $0.21 ($0.04) $0.48 $0.11
Average common and common
equivalent shares - Diluted EPS 22,391 21,754 22,309 22,041
Diluted earnings (loss) per share:
Before discontinued operations $0.21 ($0.04) $0.47 $0.10
Net earnings (loss) $0.21 ($0.04) $0.47 $0.10
GENESCO INC.
Consolidated Earnings Summary
Three Months Ended Six Months Ended
July 31, August 2, July 31, August 2,
In Thousands 2004 2003 2004 2003
Sales:
Journeys $105,785 $97,474 $220,026 $196,189
Underground Station Group 28,462 30,722 63,591 65,295
Hat World 57,956 - 76,041 -
Johnston & Murphy 39,413 39,392 79,954 79,608
Dockers 14,223 11,821 31,703 31,010
Corporate and Other 100 69 150 122
Net Sales $245,939 $179,478 $471,465 $372,224
Pretax Earnings (Loss):
Journeys $6,058 $6,711 $15,330 $12,274
Underground Station Group (1,485) 231 137 1,791
Hat World 7,519 - 9,116 -
Johnston & Murphy 1,285 174 3,626 1,974
Dockers 1,311 (263) 3,055 2,290
Corporate and Other* (4,698) (3,496) (9,972) (7,533)
Operating income 9,990 3,357 21,292 10,796
Loss on early retirement of debt - 2,581 - 2,581
Interest, net 2,896 2,149 4,778 4,181
Total Pretax Earnings (Loss) 7,094 (1,373) 16,514 4,034
Income tax expense (benefit)** 2,301 (482) 5,897 1,588
Earnings (loss) from continuing
operations 4,793 (891) 10,617 2,446
Provision for discontinued
operations (21) - (21) -
Net Earnings (Loss) $4,772 $(891) $10,596 $2,446
*Includes $0.4 million and $0.6 million of other charges for asset
impairment and lease terminations in the second quarter and six months
of Fiscal 2005 offset by a $0.6 million pension curtailment gain in the
second quarter and six months of Fiscal 2005 and a $0.1 million
restructuring adjustment in the second quarter and six months of Fiscal
2004.
**Includes favorable tax settlements of $0.4 million and $0.5 million in
the second quarter and six months of Fiscal 2005, respectively.
GENESCO INC.
Consolidated Balance Sheet
July 31, August 2,
In Thousands 2004 2003
Assets
Cash and cash equivalents $15,380 $32,968
Accounts receivable 17,449 14,579
Inventories 263,377 213,440
Other current assets 23,918 22,073
Total current assets 320,124 283,060
Property and equipment 148,279 125,865
Other non-current assets 162,563 27,344
Total Assets $630,966 $436,269
Liabilities and Shareholders' Equity
Accounts payable $104,468 $80,074
Current portion - long-term debt 13,000 -
Other current liabilities 51,621 36,750
Total current liabilities 169,089 116,824
Long-term debt 189,250 86,250
Other long-term liabilities 42,924 47,342
Shareholders' equity 229,703 185,853
Total Liabilities and Shareholders' Equity $630,966 $436,269
GENESCO INC.
Retail Units Operated - Six Months Ended July 31, 2004
Balance
02/01/03 Open Conv Close
Journeys 614 55 0 4
Journeys 579 50 0 4
Journeys Kidz 35 5 0 0
Underground Station Group 229 18 0 14
Underground Station 114 18 8 3
Jarman Retail 115 0 (8) 11
Hat World/Lids 0 0 0 0
Johnston & Murphy 148 7 0 7
Shops 115 5 0 5
Factory Outlets 33 2 0 2
Total Retail Units 991 80 0 25
GENESCO INC.
Retail Units Operated - Six Months Ended July 31, 2004
Balance Acquisi- Balance
01/31/04 tions Open Conv Close 07/31/04
Journeys 665 18 0 3 680
Journeys 625 17 0 3 639
Journeys Kidz 40 1 0 0 41
Underground Station Group 233 8 0 11 230
Underground Station 137 8 4 1 148
Jarman Retail 96 0 (4) 10 82
Hat World/Lids 0 503 18 0 2 519
Johnston & Murphy 148 3 0 9 142
Shops 115 0 0 8 107
Factory Outlets 33 3 0 1 35
Total Retail Units 1,046 503 47 0 25 1,571
Retail Units Operated - Three Months Ended July 31, 2004
Balance Acquisi- Balance
05/01/04 tions Open Conv Close 07/31/04
Journeys 677 5 0 2 680
Journeys 636 5 0 2 639
Journeys Kidz 41 0 0 0 41
Underground Station Group 231 3 0 4 230
Underground Station 142 3 3 0 148
Jarman Retail 89 0 (3) 4 82
Hat World/Lids 492 17 12 0 2 519
Johnston & Murphy 147 1 0 6 142
Shops 112 0 0 5 107
Factory Outlets 35 1 0 1 35
Total Retail Units 1,547 17 21 0 14 1,571
Constant Store Sales
Three Months Ended Six Months Ended
July 31, August 2, July 31, August 2,
2004 2003 2004 2003
Journeys 2% -1% 5% -2%
Underground Station Group -10% -3% -6% -2%
Underground Station -11% 9% -6% 8%
Jarman Retail -9% -14% -6% -12%
Johnston & Murphy 0% 2% 4% -3%
Shops 0% 1% 3% -3%
Factory Outlets 0% 8% 6% 0%
Total Constant Store Sales -1% -1% 3% -2%
Hat World/Lids 16% -
April 1, 2004 - July 31, 2004 17% -
SOURCE Genesco Inc.
CONTACT: Financial, James S. Gulmi, +1-615-367-8325, or Media, Claire S.
McCall, +1-615-367-8283, both of Genesco Inc.