NASHVILLE, Tenn., July 1, 2021 /PRNewswire/ -- Genesco Inc.
(NYSE: GCO) ("Genesco" or the "Company") today issued the following
statement:
Legion Partners Asset Management LLC ("Legion") and their
director slate recently issued two investor presentations
consisting of collectively over 200 pages of misinformation,
misleading claims, and superficial suggestions, as well as a press
release with inaccurate assertions regarding Genesco's commitment
to ESG and DE&I, which the Company believes demonstrate a lack
of understanding of Genesco's business and the industry and a
disregard for long-term value creation. Legion chooses to ignore
the hard work that Genesco has already done to address the changing
retail environment, as well as its recent results which demonstrate
that the Company's strategic plan is working.
Genesco has been undergoing a series of transformations since
2019, including at the Board and management level, to execute on a
new footwear focused strategy. Under the leadership of lead
independent director Matt Diamond,
and CEO Mimi Vaughn, Genesco put in
place a new six-pillar strategy that is generating results as
demonstrated by the Company's recent performance – including
delivering compelling results during the pandemic, a time when many
others in the industry struggled, as well as kicking off a strong
start to FY2022. Legion's public campaign is focused on disrupting
the work that is continuing to take place to drive value.
Accordingly, Genesco believes it is imperative to set the record
straight for shareholders.
Legion does not have a thoughtful plan to create shareholder
value.
Months after promising to deliver a comprehensive strategic plan
for Genesco, Legion has now instead proposed a random collection of
ideas in an attempt to generate short-term gains. In addition to
taking credit for initiatives Genesco has already completed, Legion
argues for initiatives that Genesco largely is either already
pursuing, has carefully considered and ultimately rejected, or that
simply do not make sense for Genesco's business.
- In terms of share buybacks, Genesco has initiated share
buybacks systematically in the past, repurchasing 30% of its shares
outstanding since FY2017, and expects to extend its strong track
record of capital return.
- Legion asserts that Genesco should take out $15 million related to SG&A, yet the Company
has already publicly set a target of $25-$30 million,
which is well above Legion's suggestion.
- Legion's suggestion to sell assets like Johnston & Murphy
and Schuh at this inopportune time, following a pandemic, at a deep
discount and without consideration for the resulting dis-synergies
and stranded costs, demonstrates its short-term focus that would
lead to destruction of shareholder value.
Journeys digital offerings resonate strongly with its teen
customer base.
Journeys is the destination for fashion footwear for teens in
stores and online. Last year, during the pandemic, Journeys grew
its e-commerce business over 80%, as teen consumers, among all
other choices, chose to shop at Journeys because of its compelling
digital offering. Every decision Journeys makes to deliver its
digital, omnichannel, social media and marketing choices is with
its teen consumer in mind. Legion's digital recommendations are
either outdated, already being implemented or are simply not
appropriate for the Journeys' customer base.
Genesco's businesses have significant synergies which are
increasingly important in today's environment.
Genesco is a footwear focused company with businesses that
benefit strongly from common ownership and synergies both within
and across its retail and branded platforms. Size and scale are
more important than ever, in particular to leverage growing
technology investments in today's rapidly changing industry that is
increasingly driven by digital. The use of the term "conglomerate"
to describe Genesco demonstrates that Legion does not understand
these current industry dynamics or Genesco's current business
model, especially given that they support this idea using quotes
from a former CEO dating back almost a decade to 2012.
Genesco derives meaningful synergies to enhance collective scale
and drive profitability. Among other synergies, Genesco benefits
from shared resources and technology, economies of scale for
purchases, and shared operations and expertise. Legion fails to
appreciate synergies already achieved by Genesco, as well as new
synergy opportunities that will drive value going forward. A few
examples include:
- Retail platform: Journeys and Schuh have significant overlap in
their vendor bases, typically 7 or 8 of their top 10 selling brands
overlap. This combined scale allows for stronger brand
relationships, enhanced purchasing power and exclusive product and
is critically important as brands rationalize less significant
distribution and consolidate relationships with their most
important partners.
- Branded platform: Genesco's branded businesses drive meaningful
synergies from the Company's global sourcing platform which spans
across Johnson & Murphy and Licensed Brands. For example, a
significant portion of the casual product in Johnston & Murphy
Factory stores is sourced by Licensed Brands where more scale
benefits both businesses.
- Across platforms: Genesco's robust direct-to-consumer platform
is shared by Journeys and Johnston & Murphy: shared systems
(e.g., point of sale systems), shared resources (e.g., real estate)
and shared contracts (e.g., parcel carrier).
- Across platforms: Levi's (Licensed Brands) is one of the
growing brands distributed in Journeys business with opportunity
for others.
The Company regularly reviews its portfolio, brands and strategy
and will continue to do so, including leveraging the insights and
perspectives of the Board of Directors.
Legion fundamentally misunderstands the dynamics of today's
footwear retail and branded market and implications for
Genesco.
Legion wrongly concludes there is an outsized wholesale
opportunity for Johnston & Murphy. Brands across the footwear
industry are consolidating to core strategic accounts that grow and
protect their brands and limiting distribution to capitalize on
direct-to-consumer opportunities. Legion's assertion that Johnston
& Murphy, a brand sold predominantly direct-to-consumer through
e-commerce and retail stores, should increase its wholesale
penetration to over 80% would be a strategic mistake. Johnston
& Murphy is a premium brand, with strong brand integrity
developed through quality product, pricing and premium
distribution. Increasing Johnston & Murphy's wholesale
penetration by significantly broadening distribution and moving the
brand down market would damage the brand.
Legion also demonstrates its stark lack of understanding of the
retail brick and mortar opportunity with suggestions that run
counter to the creation of shareholder value:
- Journeys is looking to optimize its current retail footprint.
Legion's proposed plan that Journeys should expand further into
several hundred malls and expand by hundreds of stores at a time
when digital penetration is accelerating is completely at odds with
the current market environment.
- Legion's suggestion to open 200+ additional Johnston &
Murphy stores relies on a dated view of the retail store base
opportunity given the rise of e-commerce.
Finally, Legion completely misses the important strategic
opportunity to grow the branded side of Genesco, which leverages
Genesco's excellent direct-to-consumer capabilities for growth,
higher margins and better valuation, given higher footwear brand
valuations relative to footwear retail valuations as a result of
these industry dynamics.
Genesco's Board completed its regular comprehensive strategic
portfolio review process, resulting in the sale of Lids Sports
Group, well before Legion's initial investment in the
Company.
Genesco's decision to sell Lids Sports Group was made prior to
Legion's 2018 investment in Genesco and resulted from a
Board-initiated strategic review process. Legion openly criticized
the sale of Lids, stating in a press release from February 2018 that, "the Board's decision to
initiate a sale of Lids…appears to be a defensive measure designed
to divert attention from other potentially more attractive
options." Now, years later, Legion is trying to take credit –
and give credit to one of its nominees Marjorie Bowen – for the decision made by
Genesco's Board prior to Legion's involvement. Legion's back and
forth raises serious questions about its credibility and confirms
its lack of conviction in any clear strategy for Genesco.
Legion refused to engage constructively with Genesco's Board
to avoid a proxy fight.
Simply put, Genesco is in an ongoing proxy contest due to
Legion's decision, after two brief conversations, to abruptly and
publicly demand that Genesco turn over a majority of its Board.
Nonetheless, Genesco's Board has attempted to engage with Legion
multiple times as highlighted in a recently released
letter dated May 19, 2021.
Genesco's Board welcomes constructive feedback from shareholders
and regularly reviews all aspects of Genesco's business to ensure
the Company is driving performance and generating long-term
shareholder value. Genesco put forth significant efforts to work in
good faith with Legion to reach a resolution that is in the best
interests of all shareholders, contrary to Legion's false
claims.
Genesco has proposed a new slate of highly qualified,
independent directors.
Since 2019, Genesco has been working on a transformation
strategy at both the Board and management level to ensure the
Company has the right leadership as it continues to move forward on
its footwear focused strategy. As part of this Board refreshment,
Genesco is proposing a slate of highly qualified, independent
directors for election at the 2021 Annual Meeting of Shareholders.
Legion is hard pressed to find actual faults with Genesco's
nominees, which is why it is trying to argue that Genesco's Board
is "interconnected" – stating that it has multiple Board members
who worked at McKinsey, graduated from top-tier institutions, or
live in neighboring states. Given the large number of qualified and
experienced corporate professionals to whom this applies, it would
be foolish to disqualify directors on that basis or to suggest the
Board is conflicted or that its highly qualified directors would
not be independent as a result.
Conveniently, Legion also ignores its slate's conflicts by
nominating Marjorie Bowen and
Margenett Moore-Roberts, both of whom have been Legion nominees in
prior campaigns. Further, Legion acknowledges Ms. Bowen's conflict
of interest by serving on the Board of Genesco's competitor,
Sequential Brands, a Board she joined, along with two others,
after Legion nominated her to Genesco's Board. Ms. Bowen and
Legion claim to value strong corporate governance, yet Ms. Bowen
made the decision to seek out and accept a position that would very
clearly conflict with her role on Genesco's Board. This, coupled
with her short Board tenure (average 1.4 years) and lack of
commitment, relevant skills and experience, are very concerning for
Genesco's Board.
Genesco has a longstanding commitment to
ESG and a robust DE&I policy.
Genesco's Board has long been deeply involved with ESG and
DE&I matters, with a relentless focus on providing oversight of
environmental, health and safety; diversity, equity and inclusion;
corporate social responsibility; corporate governance and
sustainability initiatives. In 2021, demonstrating further
leadership, the Board established the ESG subcommittee of the
Nominating and Governance Committee under the leadership of
Joanna Barsh and Thurgood Marshall, Jr., nationally recognized
leaders in ESG, to reinforce the Company's longstanding commitment
to ESG and DE&I as critical drivers of shareholder value.
As Genesco moves toward enhanced SASB and TCFD-aligned reporting
and continues brand and corporate-level initiatives that integrate
ESG stewardship into corporate strategies, strategic planning,
operational initiatives, customer and stakeholder connectivity and
corporate culture, Legion has conveniently chosen to ignore:
- Genesco intrinsically believes that diverse companies perform
better
- Genesco's DE&I commitment as is reflected by its first
female and racially diverse CEO, Board which is 56% female or
racially diverse, and workforce, of which 69% is female and 63% is
racially diverse
- Clear disclosure of sustainability policies and approach to ESG
on Genesco's website, including Climate Change Policy,
Environmental Policy, Supply Chain and Ethical Practices, and
Diversity and Equality initiatives
- Formulation of ESG Executive Steering Committee and ESG Task
Force in 2020 to drive Genesco's ESG assessment and disclosure
program, with a 30+-member task force focused on environment and
sustainability
- Establishment of Diversity, Equity and Inclusion Task Force in
2020, with plans to conduct a gender/race/ethnicity pay equity
audit
- DE&I survey conducted in North
America demonstrating that 84% of employees have a favorable
view of Genesco's DE&I approach, with shared findings
communicated to the Board and Management Committee, and utilized to
design near-term commitments
- Promotion of diversity, equity and inclusion initiatives
companywide, as well as in the communities where the Company
operates
- Recently published Climate Change Policy that focused on
reducing environmental impacts in five key areas: GHG emissions,
energy consumption, water usage, waste management, and packaging
materials
- Implementation of an updated Environmental Policy, with Schuh's
operations certified as a Carbon Neutral Organisation in
2020[1]
- Robust supply chain and ethical standards with policies ranging
from labor standards and human rights to whistleblower
protection
- Human Rights Policy published in 2021 based on UN Guiding
Principles on Business and Human Rights, as well as OECD
Guidelines
- Active support of organizations that champion human rights,
clearly disclosed on Genesco's website
- Genesco has a history of strong governance, evidenced by
consistently ranked as having low governance risk by ISS
Genesco's compensation program has garnered overwhelming
support from shareholders and leading proxy advisory firms.
Since 2016, Genesco's compensation proposals have been supported
by both ISS and Glass Lewis and averaged 95% of shareholder support
through say-on-pay votes. Genesco's compensation program rewards
management for creating sustainable shareholder value by maximizing
net operating earnings less the cost of capital used to produce
those earnings and also encourages the return of capital to
shareholders – demonstrating strong shareholder alignment. It is a
thoughtful plan design that incentivizes performance while
protecting shareholder interests, and the Board continuously
reviews it to ensure Genesco is driving performance and shareholder
value creation. Legion's flawed evaluation of compensation is an
effort to distract from the overwhelming support these programs
have received.
Genesco shareholders are encouraged to review Genesco's investor
presentation for a comprehensive update on the Company's track
record of execution, strong footwear focused strategy, and
fit-for-purpose Board of Directors. The presentation and additional
information can be found at www.GenescoDrivingValue.com.
Most importantly, Genesco strongly urges shareholders to vote
the BLUE proxy card FOR ALL the Company's highly qualified and
experienced director nominees. Shareholders are reminded that
their vote is important, no matter how many or how few shares they
own. Voting the WHITE proxy card, even in protest, will revoke any
previous proxy submitted using the BLUE proxy card. Only the
latest-dated proxy counts.
Shareholders with questions, or need help voting their
BLUE proxy card, may contact:
Innisfree M&A Incorporated
1 (877) 825-8772
(toll-free from the U.S. and Canada)
+1 (412) 232-3651
(from other locations)
About Genesco Inc.
Genesco Inc., a Nashville-based specialty retailer and branded
company, sells footwear and accessories in more than 1,455 retail
stores throughout the U.S., Canada, the United
Kingdom and the Republic of
Ireland, principally under the names Journeys, Journeys
Kidz, Little Burgundy, Schuh, Schuh Kids, Johnston & Murphy,
and on internet websites www.journeys.com, www.journeyskidz.com,
www.journeys.ca, www.littleburgundyshoes.com, www.schuh.co.uk,
www.johnstonmurphy.com, www.johnstonmurphy.ca,
www.nashvilleshoewarehouse.com, and www.dockersshoes.com. In
addition, Genesco sells footwear at wholesale under its Johnston
& Murphy brand, the licensed Levi's brand, the licensed Dockers
brand, the licensed Bass brand, and other brands. For more
information on Genesco and its operating divisions, please visit
www.genesco.com.
Forward-Looking Statements
This release contains
forward-looking statements, including those regarding the
performance outlook for the Company and all other statements not
addressing solely historical facts or present conditions. Forward-
looking statements are usually identified by or are associated with
such words as "intend," "expect," "believe," "should,"
"anticipate," "optimistic," "on track" and similar terminology.
Actual results could vary materially from the expectations
reflected in these statements. A number of factors could cause
differences. These include adjustments to projections reflected in
forward-looking statements, including those resulting from the
effects of COVID-19 on the Company's business, including COVID-19
case spikes in locations in which the Company operates, the
roll-out of COVID-19 vaccines and the public's acceptance of the
vaccines, additional stores closures due to COVID-19, the timing of
the re-opening of our stores, the timing of in-person back-to-work
and back-to-school and sales with respect thereto, weakness in
store and shopping mall traffic, restrictions on operations imposed
by government entities and/or landlords, changes in public safety
and health requirements, and limitations on the Company's ability
to adequately staff and operate stores. Differences from
expectations could also result from stores closures and effects on
the business as a result of civil disturbances; the level and
timing of promotional activity necessary to maintain inventories at
appropriate levels; the imposition of tariffs on product imported
by the Company or its vendors as well as the ability and costs to
move production of products in response to tariffs; the Company's
ability to obtain from suppliers products that are in-demand on a
timely basis and effectively manage disruptions in product supply
or distribution, including disruptions as a result of COVID-19;
unfavorable trends in fuel costs, foreign exchange rates, foreign
labor and material costs, and other factors affecting the cost of
products; the effects of the British decision to exit the European
Union and other sources of market weakness in the U.K. and
Republic of Ireland; the
effectiveness of the Company's omni-channel initiatives; costs
associated with changes in minimum wage and overtime requirements;
wage pressure in the U.S. and the U.K.; weakness in the consumer
economy and retail industry; competition and fashion trends in the
Company's markets; risks related to the potential for terrorist
events; risks related to public health and safety events; changes
in buying patterns by significant wholesale customers; retained
liabilities associated with divestitures of businesses including
potential liabilities under leases as the prior tenant or as a
guarantor; and changes in the timing of holidays or in the onset of
seasonal weather affecting period-to-period sales comparisons.
Additional factors that could cause differences from expectations
include the ability to renew leases in existing stores and control
or lower occupancy costs, and to conduct required remodeling or
refurbishment on schedule and at expected expense levels; the
Company's ability to realize anticipated cost savings, including
rent savings; the Company's ability to achieve expected digital
gains and gain market share; 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, operating
lease right of use assets or intangible assets or other adverse
financial consequences and the timing and amount of such
impairments or other consequences; unexpected changes to the market
for the Company's shares or for the retail sector in general; costs
and reputational harm as a result of disruptions in the Company's
business or information technology systems either by security
breaches and incidents or by potential problems associated with the
implementation of new or upgraded systems; the Company's ability to
realize any anticipated tax benefits; and the cost and outcome of
litigation, investigations and environmental matters involving the
Company, and the impact of actions initiated by activist
shareholders. 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, the Company's 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 the Company's 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.
Important Additional Information and Where to Find
It
Genesco has filed a definitive proxy statement (the
"Proxy Statement") and accompanying proxy card in connection with
the solicitation of proxies for the 2021 annual meeting of Genesco
shareholders (the "Annual Meeting"). INVESTORS AND
SHAREHOLDERS ARE STRONGLY ENCOURAGED TO READ THE PROXY STATEMENT
AND ACCOMPANYING PROXY CARD AND OTHER DOCUMENTS FILED WITH THE U.S.
Securities and Exchange Commission (the "SEC") CAREFULLY AND IN
THEIR ENTIRETY WHEN THEY BECOME AVAILABLE AS THEY WILL CONTAIN
IMPORTANT INFORMATION. Shareholders may obtain the Proxy
Statement, any amendments or supplements to the Proxy Statement and
other documents filed by Genesco with the SEC for no charge at the
SEC's website at www.sec.gov. Copies will also be available
at no charge in the Investors section of Genesco's corporate
website at www.genesco.com.
Participants in the Solicitation
Genesco, its
directors and certain of its executive officers may be deemed to be
participants in the solicitation of proxies from Genesco
shareholders in connection with the matters to be considered at the
Annual Meeting. Information regarding the names of Genesco's
directors and executive officers and certain other individuals and
their respective interests in Genesco by security holdings or
otherwise is set forth in the Annual Report on Form 10-K of Genesco
for the fiscal year ended January 30,
2021, and in the Proxy Statement. To the extent holdings of
such participants in Genesco's securities have changed since the
amounts described in the Proxy Statement, such changes have been
reflected on Initial Statements of Beneficial Ownership on Form 3
or Statements of Change in Ownership on Form 4 filed with the
SEC.
1 Certification was by Carbon Footprint
Limited.
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SOURCE Genesco Inc.