Genesco Reports Fourth Quarter and Year End Fiscal 2009 Results
GCO) today reported earnings from continuing operations for the fourth quarter
ended
to earnings from continuing operations of
share, for the fourth quarter ended
quarter earnings reflected charges of
impairments, store closing costs and final expenses related to a terminated
merger agreement, offset by a gain on a lease termination transaction and tax
rate adjustments. Fiscal 2008 fourth quarter earnings included expenses
related to then-pending merger related litigation , asset impairments, store
closing costs and tax rate adjustments totaling
Adjusted for the listed items in both periods, earnings from continuing
operations were
quarter of Fiscal 2009, compared to
in the fourth quarter of Fiscal 2008. Because of the magnitude of the merger-
related expenses in the previous year’s results and for consistency with
Fiscal 2009′s previously announced results and earnings expectations, which
did not reflect the listed items, the Company believes that disclosure of
earnings from continuing operations adjusted for these items 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 in Schedule B to this press release.
Net sales for the fourth quarter of Fiscal 2009 declined 3.3% to
million
store sales in the fourth quarter of Fiscal 2009 declined by 5%. The Journeys
Group’s comparable store sales for the quarter declined by 2%, the Hat World
Group’s by 4%, Underground Station’s by 12%, and Johnston & Murphy Retail’s by
17%.
“Our retail sales in the fourth quarter were characterized by wide swings from
week to week. After a generally lackluster trend for most of the period
between
store sales for the weeks on either side of Christmas. A marked softening in
sales in early January caused us to fall short of the sales expectations we
announced at mid-month.
“Although sales rebounded strongly in the month of February, when our
combined retail operations posted a comparable sales increase of 7%, we are
not convinced that the choppiness in sales that we experienced throughout the
fourth quarter is behind us. We remain cautious in our outlook on the economy
and are running our business accordingly, with inventory quality and cash
generation as primary emphases.
“We believe that our focus on inventory management in the fourth quarter
has positioned us to do as well as consumer demand will allow as we look
toward the spring season. We ended the year with inventory levels only 2%
above the previous year-end, and retail inventories per square foot down 7%.
Our inventories are fresh, and we believe we have the capacity to move with
the market in the coming months.
“We are also pleased with our cash flow for Fiscal 2009, which we ended
with only
the previous year. We intend to continue to focus on cash generation while
the economic climate remains uncertain.”
Fiscal 2009 Results
The Company reported earnings from continuing operations of
million
2009
year. Fiscal 2009 earnings included a gain of
the settlement of merger-related litigation with The Finish Line offset by
merger-related expenses, asset impairments, store closing costs and other
items listed on Schedule B to this press release. Fiscal 2008 earnings
included charges for merger-related expenses, asset impairments, store closing
costs, and other listed items totaling
the listed items in both years, earnings from continuing operations were
million
million
magnitude of the merger-related expenses in the previous year’s results and
for consistency with Fiscal 2009′s previously announced results and earnings
expectations, which did not reflect the listed items, the Company believes
that disclosure of earnings from continuing operations adjusted for these
items 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 in Schedule B to this
release.
Outlook
Dennis also discussed the Company’s outlook for Fiscal 2010. “The
continuing economic uncertainty is causing us to provide a wider than normal
range of sales and earnings expectations for Fiscal 2010. Our baseline
scenario expects a weak first half with some signs of recovery beginning in
the second half of the year, with comparable sales for the Company’s retail
operations down about 3% in each of the first two quarters, flat in the third
quarter, and up 2% in the fourth quarter, with the fourth quarter comparison
made easier by the weakness of the two previous years’ fourth quarters.
Comparable store sales would be down 1% for the full year in this
scenario. On these comparable sales assumptions, we would expect to generate
earnings per share from continuing operations, subject to the adjustments
detailed in Schedule C included with this announcement, in the range of
to $1.80
“A more pessimistic scenario, premised on little or no improvement in the
economy during the current year, assumes comparable store sales down about 4%
in each of the first two quarters, and down 3% in each of the third and fourth
quarters. For the full year, comparable store sales would be down 3%. This
scenario also assumes a more aggressive markdown strategy to keep inventories
clean on the lower sales volume. In this scenario, we would expect to
generate earnings from continuing operations, subject to the adjustments
listed in Schedule C, in the range of
“In either case, we expect sufficient liquidity. Under the baseline plan,
we would expect to end the year with no bank revolving credit facility
borrowings, while even in the more pessimistic scenario, we would expect to
end the year with lower borrowings than at the end of Fiscal 2009.
“However external conditions develop, we intend to manage our businesses
with a focus on maintaining maximum flexibility to respond to the market,
generating strong cash flows, and capitalizing on the opportunities to
strengthen our competitive position for the recovery.”
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, continuing weakness in the consumer economy, inability of
customers to obtain credit, fashion trends that affect the sales or product
margins of the Company’s retail product offerings, changes in buying patterns
by significant wholesale customers, bankruptcies or deterioration in financial
condition of significant wholesale customers, disruptions in product supply or
distribution, unfavorable trends in fuel costs, foreign exchange rates,
foreign labor and materials costs, and other factors affecting the cost of
products, competition in the Company’s markets and changes in the timing of
holidays or in the onset of seasonal weather affecting period-to-period sales
comparisons. 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 on schedule and at acceptable expense
levels and to renew leases in existing stores and to conduct required
remodeling or refurbishment on schedule and at acceptable 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 our shares, 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. 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.
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About Genesco Inc.
Genesco Inc., a
headwear and accessories in more than 2,225 retail stores in
and
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
Fourth Quarter Fiscal Year Ended
In Thousands 2009 2008 2009 2008
Net sales $451,722 $466,995 $1,551,562 $1,502,119
Cost of sales 232,373 239,294 771,580 750,904
Selling and administrative
expenses 180,534 197,026 713,365 696,352
Restructuring and other,
net (282) 2,893 (196,575) 9,702
Earnings from operations 39,097 27,782 263,192 45,161
Interest expense, net 2,613 3,520 9,410 12,426
Earnings before income taxes
from continuing operations 36,484 24,262 253,782 32,735
Income tax expense 12,811 20,647 95,683 24,247
Earnings from continuing
operations 23,673 3,615 158,099 8,488
Provision for discontinued
operations, net 16 (368) (5,463) (1,603)
Net Earnings $23,689 $3,247 $152,636 $6,885
Earnings Per Share Information
Fourth Quarter Fiscal Year Ended
In Thousands (except per share
amounts) 2009 2008 2009 2008
Preferred dividend requirements $50 $50 $198 $217
Average common shares - Basic EPS 18,737 22,502 19,235 22,441
Basic earnings per share:
Before discontinued operations $1.26 $0.16 $8.21 $0.37
Net earnings $1.26 $0.14 $7.93 $0.30
Average common and common
equivalent shares - Diluted EPS 23,223 26,830 23,911 22,984
Diluted earnings per share:
Before discontinued operations $1.05 $0.16 $6.72 $0.36
Net earnings $1.05 $0.14 $6.49 $0.29
GENESCO INC.
Consolidated Earnings Summary
Fourth Quarter Fiscal Year Ended
In Thousands 2009 2008 2009 2008
Sales:
Journeys Group $229,541 $226,767 $760,008 $713,366
Underground Station
Group 34,035 42,880 110,902 124,002
Hat World Group 122,409 121,794 405,446 378,913
Johnston & Murphy Group 45,593 54,133 177,963 192,487
Licensed Brands 20,019 21,349 96,561 92,706
Corporate and Other 125 72 682 645
Net Sales $451,722 $466,995 $1,551,562 $1,502,119
Operating Income (Loss):
Journeys Group $24,463 $23,961 $49,050 $51,097
Underground Station
Group 593 2,281 (5,660) (7,710)
Hat World Group 14,770 17,278 36,670 31,987
Johnston & Murphy Group 1,867 7,348 10,069 19,807
Licensed Brands 2,387 1,783 11,925 10,976
Corporate and Other* (4,983) (24,869) 161,138 (60,996)
Earnings from operations 39,097 27,782 263,192 45,161
Interest, net 2,613 3,520 9,410 12,426
Earnings before income taxes
from continuing operations 36,484 24,262 253,782 32,735
Income tax expense 12,811 20,647 95,683 24,247
Earnings from continuing
operations 23,673 3,615 158,099 8,488
Provision for discontinued
operations 16 (368) (5,463) (1,603)
Net Earnings $23,689 $3,247 $152,636 $6,885
* Includes a $0.3 million credit in the fourth quarter of Fiscal 2009
which includes a $3.8 million gain on a lease termination offset by $3.1
million in asset impairments and $0.4 million for lease terminations.
Includes a $196.6 million credit in 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 and a $3.8 million gain
from a lease termination offset by $8.6 million in asset impairments,
$1.6 million in lease terminations and $1.1 million for other legal
matters. In the fourth quarter and year of Fiscal 2009, there is also
an additional $0.1 million and $0.2 million, respectively, of charges
related to lease terminations that are included in cost of sales on the
consolidated earnings summary. The fourth quarter and Fiscal 2009 also
included $0.2 million and $8.0 million, respectively, of merger-related
expenses.
Includes $2.9 million and $9.7 million of other charges in the fourth
quarter and year of Fiscal 2008, respectively, which includes $1.9
million and $8.7 million, respectively, in asset impairments and $1.2
million and $1.5 million, respectively, for lease terminations offset by
$0.2 million and $0.5 million, respectively, in excise tax refunds and
an antitrust settlement. There is also an additional $0.9 million of
charges related to lease terminations that are included in cost of sales
on the consolidated earnings summary for the fourth quarter and year of
Fiscal 2008. The fourth quarter and year of Fiscal 2008 also included
$16.0 million and $27.6 million, respectively, of merger- related
expenses.
GENESCO INC.
Consolidated Balance Sheet
January 31, February 2,
In Thousands 2009 2008
Assets
Cash and cash equivalents $17,672 $17,703
Accounts receivable 23,744 24,275
Inventories 306,078 300,548
Other current assets 53,358 41,140
Total current assets 400,852 383,666
Property and equipment 239,681 247,241
Other non-current assets 177,494 173,649
Total Assets $818,027 $804,556
Liabilities and
Shareholders' Equity
Accounts payable $73,143 $75,302
Current portion - long-term
debt - -
Other current liabilities 65,839 70,272
Total current liabilities 138,982 145,574
Long-term debt 118,520 155,220
Other long-term liabilities 113,591 82,347
Shareholders' equity 446,934 421,415
Total Liabilities and Shareholders' Equity $818,027 $804,556
GENESCO INC.
Retail Units Operated - Twelve Months Ended January 31, 2009
Balance Balance Balance
02/03/07 Open Close 02/02/08 Open Close 01/31/09
Journeys Group 853 118 4 967 50 5 1,012
Journeys 768 41 4 805 16 5 816
Journeys Kidz 73 42 0 115 26 0 141
Shi by Journeys 12 35 0 47 8 0 55
Underground Station
Group 223 2 33 192 0 12 180
Hat World Group 785 98 21 862 43 20 885
Johnston & Murphy Group 148 11 5 154 9 6 157
Shops 109 8 4 113 6 5 114
Factory Outlets 39 3 1 41 3 1 43
Total Retail Units 2,009 229 63 2,175 102 43 2,234
Retail Units Operated - Three Months Ended January 31, 2009
Balance Balance
11/01/08 Open Close 01/31/09
Journeys Group 1,008 7 3 1,012
Journeys 818 1 3 816
Journeys Kidz 137 4 0 141
Shi by Journeys 53 2 0 55
Underground Station Group 184 0 4 180
Hat World Group 879 13 7 885
Johnston & Murphy Group 157 3 3 157
Shops 114 2 2 114
Factory Outlets 43 1 1 43
Total Retail Units 2,228 23 17 2,234
Constant Store Sales
Three Months Ended Twelve Months Ended
January 31, February 2, January 31, February 2,
2009 2008 2009 2008
Journeys Group -2% -7% 1% -4%
Underground Station Group -12% -5% 0% -16%
Hat World Group -4% -4% 2% -2%
Johnston & Murphy Group -17% -1% -10% 2%
Shops -18% -1% -10% 2%
Factory Outlets -17% -2% -9% 2%
Total Constant Store Sales -5% -5% 0% -4%
Schedule B
Genesco Inc.
Adjustments to Reported Earnings from Continuing Operations
Three Months Ended January 31, 2009 and February 2, 2008
3 mos Impact 3 mos Impact
In Thousands (except per Jan 31, on EPS Feb 2, on EPS
share amounts) 2009 2008
Earnings from continuing
operations, as reported $23,673 $1.05 $3,615 $0.16
Adjustments: (1)
Merger-related expenses 132 0.01 9,596 0.36
Impairment & lease
termination charges 2,254 0.10 2,401 0.09
Gain on lease termination (1,295) (0.06) - -
Other legal matters (13) - (151) (0.01)
(Higher)/lower effective tax rate (825) (0.04) 10,967 0.41
Adjusted earnings from
continuing operations (2) $23,926 $1.06 $26,428 $1.01
(1) All adjustments are net of tax. The tax rate for the fourth quarter of
Fiscal 2009 before the impact of the settlement of merger-related
litigation and deductibility of prior year merger-related expenses and
other listed items above is 37.4%. The tax rate for the fourth
quarter of Fiscal 2008 is 39.9%.
(2) Reflects 23.2 million share count for Fiscal 2009 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 changes in effective tax rates and
other items not reflected in those expectations.
Schedule B
Genesco Inc.
Adjustments to Reported Earnings from Continuing Operations
Twelve Months Ended January 31, 2009 and February 2, 2008
12 mos Impact 12 mos Impact
In Thousands (except per Jan 31, on EPS Feb 2, on EPS
share amounts) 2009 2008
Earnings from continuing
operations, as reported $158,099 $6.72 $8,488 $0.36
Adjustments: (1)
Settlement of merger-related
litigation (124,159) (5.19) - -
Merger-related expenses 4,884 0.20 16,577 0.72
Impairment & lease termination
charges 6,305 0.26 6,667 0.29
Gain on lease termination (1,258) (0.05) - -
Other legal matters 645 0.03 (307) (0.02)
Interest on settlement income (419) (0.02) - -
(Higher)/lower effective tax rate (3,279) (0.14) 11,186 0.49
Adjusted earnings from
continuing operations (2) $40,818 $1.81 $42,611 $1.84
(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 and other listed
items above is 39.2%. The tax rate for Fiscal 2008 is 39.9%.
(2) Reflects 23.9 million share count for Fiscal 2009 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 changes in effective tax rates and
other items not reflected in those expectations.
Schedule C
Genesco Inc.
Adjustments to Forecasted Earnings from Continuing Operations
Fiscal Year Ending January 30, 2010
Baseline Scenario High Guidance Low Guidance
In Thousands (except per share amounts) Fiscal 2010 Fiscal 2010
Forecasted earnings from continuing
operations (1) $33,553 $1.54 $31,258 $1.44
Adjustments: (2)
Impairment and lease termination charges 6,028 0.26 6,028 0.26
Adjusted forecasted earnings from
continuing operations $39,581 $1.80 $37,286 $1.70
(1) Excludes impact of APB 14-1.
(2) All adjustments are net of tax. The planned tax rate for Fiscal 2010
for the baseline scenario is 40.5%.
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.
Schedule C
Genesco Inc.
Adjustments to Forecasted Earnings from Continuing Operations
Fiscal Year Ending January 30, 2010
Low Scenario High Guidance Low Guidance
In Thousands (except per share amounts) Fiscal 2010 Fiscal 2010
Forecasted earnings from continuing
operations (1) $22,082 $1.04 $19,666 $0.94
Adjustments: (2)
Impairment and lease termination charges 5,950 0.26 5,950 0.26
Adjusted forecasted earnings from
continuing operations $28,032 $1.30 $25,616 $1.20
(1) Excludes impact of APB 14-1.
(2) All adjustments are net of tax. The planned tax rate for Fiscal 2010
for the low scenario is 41.3%.
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.