Genesco Reports First Quarter Fiscal 2015 Results
The following excerpt is from the company's SEC filing
NASHVILLE, Tenn., May 30, 2014 --- Genesco Inc. (NYSE:GCO) today reported earnings from continuing operations for the first quarter ended May 3, 2014, of $14.1 million, or $0.60 per diluted share, compared to earnings from continuing operations of $14.5 million, or $0.61 per diluted share, for the first quarter ended May 4, 2013. Fiscal 2015 first quarter results reflect expenses of $7.7 million, or $0.21 per diluted share after tax, including $5.7 million related to a change in accounting for bonus awards; $3.1 million related to deferred purchase price payments in connection with the acquisition of Schuh Group Li
mited; and $2.0 million in network intrusion expenses, asset impairment charges and other legal matters, offset by a $3.1 million gain on a lease termination. Fiscal 2014 first quarter results reflected expenses of $10.7 million, or $0.33 per diluted share after tax, including $6.5 million associated with a change in accounting for bonus awards, $2.9 million related to deferred purchase price payments in connection with the acquisition of Schuh Group Limited, and $1.3 million for impairment charges and network intrusion expenses.
Adjusted for the items described above in both periods, earnings from continuing operations were $19.3 million, or $0.81 per diluted share, for the first quarter of Fiscal 2015, compared to earnings from continuing operations of $22.2 million, or $0.94 per diluted share, for the first quarter of Fiscal 2014. For consistency with Fiscal 2015's previously announced earnings expectations and with previously reported adjusted results for the prior year period, the Company believes that the disclosure of the results from continuing operations adjusted for these items will be useful to investors. A reconciliation of earnings and earnings per share from continuing operations in accordance with U.S. Generally Accepted Accounting Principles with the adjusted earnings and earnings per share numbers presented in this paragraph is set forth on Schedule B to this press release.
Net sales for the first quarter of Fiscal 2015 increased 6.3% to $629 million from $591 million in the first quarter of Fiscal 2014. Consolidated first quarter 2015 comparable sales, including same store sales and comparable e-commerce and catalog sales, increased 1%, with a 1% increase in the Journeys Group, a 1% increase in the Lids Sports Group, a 1% decrease in the Schuh Group, and a 1% decrease in the Johnston & Murphy Group.
Robert J. Dennis, chairman, president and chief executive officer of Genesco, said, “We are pleased with our performance given the choppy retail environment, combined with the lack of a meaningful, new fashion driver in the teen footwear space early in the year. We continue to expect stronger comparable sales gains and improved profitability as we move into the back half of the year.
“The second quarter is off to a solid start with comparable sales up 3% through May 24. We are encouraged by the recent pace of business and optimistic that we can build on our current momentum.
“Based on first quarter performance and current visibility, we remain comfortable with our previously announced guidance for adjusted Fiscal 2015 diluted earnings per share in the range of $5.40 to $5.55, a 6% to 9% increase over Fiscal 2014’s adjusted earnings per share of $5.09. Consistent with our previous guidance, these expectations do not include non-cash asset impairments and other charges, partially offset by a gain on a lease termination in the first quarter this year, which we estimate will be in the range of $2.6 million to $3.1 million pretax, or $0.07 to $0.08 per share, after tax, in Fiscal 2015.
“They also do not reflect compensation expense associated with the Schuh deferred purchase price as described above, which is currently estimated at approximately $7.2 million, or $0.30 per diluted share, for the full year. This guidance assumes a comparable sales increase in the low single digit range for the full fiscal year.” A reconciliation of the adjusted financial measures cited in the guidance to their corresponding measures as reported pursuant to U.S. Generally Accepted Accounting Principles is included in Schedule B to this press release.
The Company has posted detailed financial commentary in writing on its website, www.genesco.com, in the investor relations section. The Company's live conference call on May 30, 2014 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.
This release contains forward-looking statements, including those regarding the performance outlook for the Company and its individual businesses (including, without limitation, sales, margins and earnings) 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, including the amount of required accruals related to the earn-out bonus potentially payable to Schuh management based on the achievement of certain performance objectives; the timing and amount of non-cash asset impairments related to retail store fixed assets or to intangible assets of acquired businesses; weakness in the consumer economy; competition in the Company's markets; 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 material costs, and other factors affecting the cost of products; the Company's ability to continue to complete and integrate acquisitions, expand its business and diversify its product base; 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 and to renew leases in existing stores and control occupancy costs, and to conduct required remodeling or refurbishment on schedule and at expected 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 the Company's shares; variations from expected pension-related charges caused by conditions in the financial markets; and the cost and 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.
Genesco Inc., a Nashville-based specialty retailer, sells footwear, headwear, sports apparel and accessories in more than 2,570 retail stores and leased departments throughout the U.S., Canada, the United Kingdom and the Republic of Ireland, principally under the names Journeys, Journeys Kidz, Shi by Journeys, Underground by Journeys, Schuh, Lids, Locker Room by Lids, Lids Clubhouse, Johnston & Murphy, and on internet websites www.journeys.com, www.journeyskidz.com, www.shibyjourneys.com, www.schuh.co.uk, www.johnstonmurphy.com, www.lids.com, www.lids.ca, www.lidslockerroom.com, www.lidsteamsports.com, www.lidsclubhouse.com, www.trask.com, www.suregripfootwear.com and www.dockersshoes.com. The Company's Lids Sports Group division operates the Lids headwear stores and the lids.com website, the Locker Room by Lids and other team sports fan shops and single team clubhouse stores, and the Lids Team Sports team dealer business. In addition, Genesco sells wholesale footwear under its Johnston & Murphy brand, the Trask brand, the licensed Dockers brand, SureGrip, and other brands. For more information on Genesco and its operating divisions, please visit www.genesco.com.
GENESCO INC. Consolidated Earnings Summary Three Months Ended May 3, May 4,In Thousands 2014 2013Net sales $628,825 $591,388Cost of sales 312,881 292,951Selling and administrative expenses* 293,337 271,384Asset impairments and other, net (1,111) 1,329Earnings from operations 23,718 25,724Interest expense, net 701 1,039Earnings from continuing operations before income taxes 23,017 24,685 Income tax expense 8,919 10,176Earnings from continuing operations 14,098 14,509 Provision for discontinued operations (125) (99)Net Earnings $13,973 $14,410
*Includes $3.1 million and $2.9 million, respectively, in deferred payments related to the Schuh acquisition for the first quarter ended May 3, 2014 and May 4, 2013.
Earnings Per Share Information Three Months Ended May 3, May 4,In Thousands (except per share amounts) 2014 2013Preferred dividend requirements $— $33 Average common shares - Basic EPS 23,369 23,295 Basic earnings per share: From continuing operations $0.60 $0.62 Net earnings $0.60 $0.62 Average common and common equivalent shares - Diluted EPS 23,692 23,732 Diluted earnings per share: From continuing operations $0.60 $0.61 Net earnings $0.59 $0.61
(1)Includes $3.1 million and $2.9 million, respectively, in deferred payments related to the Schuh acquisition for the first quarter ended May 3, 2014 and May 4, 2013.
(2)Includes a $1.1 million gain in the first quarter of Fiscal 2015 which includes a $3.1 million gain for a lease termination, partially offset by $1.2 million for network intrusion expenses and $0.8 million in asset impairments. Includes a $1.3 million charge in the first quarter of Fiscal 2014 which includes $1.2 million in asset impairments and $0.1 million for network intrusion expenses.
GENESCO INC. Consolidated Balance Sheet May 3, May 4,In Thousands2014 2013Assets Cash and cash equivalents$71,882 $39,668Accounts receivable53,746 44,194Inventories587,245 509,100Other current assets82,912 64,464Total current assets795,785 657,426Property and equipment280,972 241,534Other non-current assets406,150 403,114Total Assets$1,482,907 $1,302,074Liabilities and Equity Accounts payable$171,026 $117,923Current portion long-term debt7,489 5,576Other current liabilities142,470 121,614Total current liabilities320,985 245,113Long-term debt25,600 47,745Other long-term liabilities194,825 182,008Equity941,497 827,208Total Liabilities and Equity$1,482,907 $1,302,074
Genesco Inc.Adjustments to Reported Earnings from Continuing OperationsFirst Quarter Ended May 3, 2014 and May 4, 2013 First Impact onFirst Impact on Quarter DilutedQuarter DilutedIn Thousands (except per share amounts)Apr 2014 EPSApr 2013 EPSEarnings from continuing operations, as reported$14,098$0.60$14,509$0.61 Adjustments: (1) Impairment charges5190.027600.04Deferred payment - Schuh acquisition3,1020.132,8510.12Gain on lease termination(1,991)(0.09)——Change in accounting for bonus awards3,5750.154,1170.17Other legal matters13—(13)—Network intrusion expenses7610.0389—Higher (lower) effective tax rate (783)(0.03)(66)— Adjusted earnings from continuing operations (2)$19,294$0.81$22,247$0.94
(1) All adjustments are net of tax where applicable. The tax rate for the first quarter of Fiscal 2015is 37.0% excluding a FIN 48 discrete item of less than $0.1 million. The tax rate for the first quarter of Fiscal 2014 is 37.1% excluding a FIN 48 discrete item of less than $0.1 million.
(2) EPS reflects 23.7 million share count for both Fiscal 2015 and 2014, which includes common stock equivalents in both years.
The Company believes that disclosure of earnings and earnings per share from continuing operations 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.
Genesco Inc.Adjustments to Forecasted Earnings from Continuing OperationsFiscal Year Ending January 31, 2015 In Thousands (except per share amounts)High GuidanceLow Guidance Fiscal 2015Fiscal 2015Forecasted earnings from continuing operations$119,299$5.03$115,421$4.87 Adjustments: (1) Asset impairment and other charges1,6320.071,9470.08Change in accounting for bonus awards3,5780.153,5780.15Deferred payment - Schuh acquisition7,2280.307,2280.30 Adjusted forecasted earnings from continuing operations (2)$131,737$5.55$128,174$5.40
(1) All adjustments are net of tax where applicable. The forecasted tax rate for Fiscal 2015 is approximately 37.0% excluding a FIN 48 discrete item of $0.1 million.
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.
The above information was disclosed in a filing to the SEC. To see this filing in its entirety, click here. Genesco Inc. next reports earnings on May 30, 2014.
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