GCO Genesco Inc

NASHVILLE, Tenn., March 15, 2018 /PRNewswire/ -- Genesco Inc. (NYSE: GCO) today reported earnings from continuing operations for the 14-week period ended February 3, 2018, of $56.3 million, or $2.91 per diluted share, compared to earnings from continuing operations of $46.8 million, or $2.40 per diluted share, for the 13-week period ended January 28, 2017.  Fiscal 2018 fourth quarter results reflect a benefit of $19.8 million, or $1.02 per diluted share from lower tax expense, partially offset by pre-tax charges of $7.5 million, or $0.26 per diluted share including $5.4 million, or $0.19 per diluted share in licensing termination expenses and $2.1 million, or $0.07 per diluted share of store impairment charges, among other items.  Fiscal 2017 fourth quarter results reflect a pretax gain of $9.2 million, or $0.25 per diluted share after tax, including a gain on the sale of SureGrip Footwear of $12.3 million and a gain of $0.8 million on other legal matters, partially offset by $3.9 million of asset impairment charges, pension settlement expenses and other items.

Adjusted for the items described above in both periods, earnings from continuing operations were $41.5 million, or $2.15 per diluted share, for the fourth quarter of Fiscal 2018, compared to earnings from continuing operations of $41.8 million, or $2.15 per diluted share, for the fourth quarter of Fiscal 2017.  For consistency with Fiscal 2018'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 fourth quarter of Fiscal 2018 increased 5%, including the results of a 53^rd week, to $930 million from $883 million in the fourth quarter of Fiscal 2017.  Consolidated fourth quarter 2018 comparable sales, including same store sales and comparable e-commerce and catalog sales increased 1% with an 11% increase in the Journeys Group, a 1% increase in the Schuh Group, a 14% decrease in the Lids Sports Group, and a 4% increase in the Johnston & Murphy Group. Comparable sales for the Company included a 1% decrease in same store sales and a 15% increase in e-commerce sales.

The Company also reported net sales for the 53-week year ended February 3, 2018, of $2.91 billion, an increase of 1% from net sales of approximately $2.87 billion for the 52-week year ended January 28, 2017.  The loss from continuing operations for Fiscal 2018 was $111.4 million, or $5.80 per diluted share, compared to earnings from continuing operations of $97.9 million, or $4.85 per diluted share, for Fiscal 2017. Fiscal 2018 earnings reflect charges of $191.6 million, or $8.52 per diluted share after tax including a goodwill impairment charge of $182.2 million, or $8.18 per diluted share after tax, related primarily to the sustained decline in the Company's market value to a level below book value, among other items, plus a tax expense of $7.7 million, or $0.41 per diluted share related to the impact of share-based awards and goodwill impairment. Fiscal 2017 earnings reflect an after-tax gain of $0.52 per diluted share, including a $14.7 million gain on the sale of SureGrip Footwear and Lids Team Sports, an $8.9 million gain on network intrusion expenses as a result of a litigation settlement, and a $0.8 million gain on other legal matters, partially offset by $8.9 million in asset impairments and pension settlement expenses.

Adjusted for the listed items in both years, earnings from continuing operations were $60.3 million, or $3.13 per diluted share, for Fiscal 2018, compared to earnings from continuing operations of $87.2 million, or $4.33 per diluted share, for Fiscal 2017. For consistency with previously announced earnings expectations, which did not reflect the listed items, the Company believes that disclosure of earnings from continuing operations adjusted for those 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.

Robert J. Dennis, chairman, president and chief executive officer of Genesco, said, "Our fourth quarter earnings per share were in-line with our most recent outlook and flat with last year's level, as strong performance by our U.S. retail footwear businesses was offset by specific challenges in our other operating divisions.  Overall Fiscal 2018 was a difficult year as Journeys managed through a fashion rotation up until the start of back to school, Lids faced a number of specific marketplace headwinds, and consumers shifted their shopping from brick & mortar to online at an accelerated pace. While comparable sales were flat, our profitability suffered due primarily to deleverage from negative store results coupled with higher expenses from our omnichannel initiatives.  On a positive note, the EPS gap to last year improved sequentially each quarter and ultimately closed in the fourth  quarter.

"Looking ahead, we believe our near-term performance will continue to be shaped by the divergence in our two biggest businesses although not to the degree we experienced in the fourth quarter. Like our other businesses, Lids is subject to fashion cycles, and headwear is currently between trends, which we believe positions the business for the type of  recovery that Journeys is now enjoying once a new fashion driver emerges.  Though we don't know the timing of when this will occur, history points to an eventual rebound.  While we believe that Journeys' current product assortment is well positioned in terms of brands and styles to drive continued growth, this timing uncertainty combined with generally weak store traffic across retail causes us to be cautious about the current year. We expect adjusted diluted earnings per share for Fiscal 2019 in the range of $3.05 to $3.45, inclusive of the benefit from lower tax expense following the passage of the Tax Cuts and Jobs Act in December 2017."  These expectations do not include expected non-cash asset impairments and other charges, estimated in the range of $3.9 million to $4.9 million pretax, or $0.15 to $0.18 per share after tax, for the full fiscal year.  It also does not include certain tax effects related to equity grants pursuant to ASU 2016-09, estimated at $0.03 per share after tax or any possible SAB 118 adjustments related to our estimates arising from the 2017 Tax Act.  This guidance assumes comparable sales in the flat to  positive 2% range for the full 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.

Dennis concluded, "We continue to be confident that the work we are doing to strengthen the strategic positioning of our businesses will drive long-term growth. At the same time, we are undertaking a multi-year reshaping of our cost structure in order to improve profitability and deliver greater value to our shareholders and have already identified potential annualized cost savings in the range of $35 million to $40 million."

Conference Call and Management Commentary
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 March 15, 2018 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.

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 (including, without limitation, sales, expenses, 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 and projections reflected in forward-looking statements, including the level and timing of promotional activity necessary to maintain inventories at appropriate levels;  the timing and amount of non-cash asset impairments related to retail store fixed assets and intangible assets of acquired businesses; the effectiveness of the Company's omnichannel initiatives; costs associated with changes in minimum wage and overtime requirements; the level of chargebacks from credit card users for fraudulent purchases or other reasons; weakness in the consumer economy and retail industry; competition in the Company's markets, including online and including competition from some of the Company's vendors in both the licensed sports and branded footwear markets; fashion trends that affect the sales or product margins of the Company's retail product offerings; weakness in shopping mall traffic and challenges to the viability of malls where the Company operates stores, related to planned closings of department stores or other factors; the effects of the implementation of federal tax reform on the estimated tax rate reflected in certain forward-looking statements; the imposition of tariffs on imported products or the disallowance of tax deductions on imported products; changes in buying patterns by significant wholesale customers; bankruptcies or deterioration in financial condition of significant wholesale customers or the inability of wholesale customers or consumers to obtain credit; 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 effects of the British decision to exit the European Union, including potential effects on consumer demand, currency exchange rates, and the supply chain; the Company's ability to continue to complete and integrate acquisitions, expand its business and diversify its product base; changes in the timing of holidays or in the onset of seasonal weather affecting period-to-period sales comparisons; and the performance of athletic teams, the participants in major sporting events such as the Super Bowl and World Series, developments with respect to certain individual athletes, and other sports-related events or changes that may affect period-to-period comparisons in the Company's Lids Sports Group retail businesses. 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; 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;  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.

About Genesco Inc.
Genesco Inc., a Nashville-based specialty retailer, sells footwear, headwear, sports apparel and accessories in more than 2,675 retail stores and leased departments throughout the U.S., Canada, the United Kingdom, the Republic of Ireland and Germany, principally under the names Journeys, Journeys Kidz, Shi by Journeys, Schuh, Schuh Kids, Little Burgundy, Lids, Locker Room by Lids, Lids Clubhouse, Johnston & Murphy, and on internet websites www.journeys.com, www.journeyskidz.com, www.journeys.ca, www.shibyjourneys.com, www.schuh.co.uk, www.littleburgundyshoes.com, www.johnstonmurphy.com, www.lids.com, www.lids.ca, www.lidslockerroom.com, www.lidsclubhouse.com, www.trask.com, and www.dockersshoes.com.  The Company's Lids Sports Group division operates the Lids headwear stores, the Locker Room by Lids and other team sports fan shops and single team clubhouse stores.   In addition, Genesco sells wholesale footwear under its Johnston & Murphy brand, the Trask brand, the licensed Dockers brand, and other brands. For more information on Genesco and its operating divisions, please visit www.genesco.com.

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SOURCE Genesco Inc.