Genesco Inc. (NYSE: GCO) today reported first quarter results
for the three months ended April 29, 2023.
First Quarter Fiscal 2024 Financial Summary
- Net sales of $483 million decreased 7% compared to Q1FY23
- Excluding the impact of lower exchange rates, net sales
decreased 6% compared to Q1FY23
- Comps down 5%, with stores down 8% and direct up 7%
- E-commerce sales represented 21% of retail sales compared to
19% last year
- GAAP EPS from continuing operations was ($1.60) vs. $0.37 last
year
- Non-GAAP EPS from continuing operations was ($1.59)1 vs. $0.44
last year
- Repurchased $9.2 million of stock during Q1FY24, with $25.0
million remaining on the current authorization
Mimi E. Vaughn, Genesco’s Board Chair, President and Chief
Executive Officer, said, “Following a positive end to the holiday
season, the first quarter proved considerably more challenging than
we anticipated. Consumer demand at Journeys dropped off
significantly early in the quarter and did not improve as we
changed seasons in the latter part of March and into April,
offsetting another quarter of record sales at Schuh and Johnston
& Murphy. In response, we are taking swift actions to mitigate
the consumer shift in the marketplace, including closing more
underperforming Journeys stores, reducing our cost base further,
and working to quickly refine our product assortment. However,
given the ongoing uncertainty around near-term consumer behavior,
we are taking a much more conservative view and revising our
outlook for the remainder of Fiscal 2024.”
She continued, “Despite the difficulties in the current
environment, we remain excited about our future prospects and the
strength of our competitive positioning. Having navigated multiple
adverse retail cycles, our team has demonstrated a track record of
success, the resilience of our business, and the ability to rebound
and come out ahead. As the leading destination for teen fashion
footwear, and key partner to our brands, I feel confident that our
footwear focused strategy and the strategic initiatives we are
implementing will position Journeys to emerge from this period in
an even stronger competitive position.”
__________________________
1Excludes a charge for asset impairments,
net of tax effect in the first quarter of Fiscal 2024 (“Excluded
Items”). A reconciliation of earnings (loss) and earnings (loss)
per share from continuing operations in accordance with U.S.
Generally Accepted Accounting Principles (“GAAP”) with the adjusted
earnings (loss) and earnings (loss) per share numbers is set forth
on Schedule B to this press release. The Company believes that
disclosure of earnings (loss) and earnings (loss) 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.
First Quarter Review
Net sales for the first quarter of Fiscal 2024 of $483 million
decreased 7% compared to $521 million in the first quarter of
Fiscal 2023. The sales decrease compared to last year was driven by
decreased store sales in Journeys Group, decreased wholesale sales
and foreign exchange pressure, partially offset by a 5% increase in
e-commerce sales and strong store performance at Schuh and Johnston
& Murphy. Excluding the impact of lower exchange rates, net
sales decreased 6% for the first quarter of Fiscal 2024 compared to
the first quarter of Fiscal 2023. As a result of store closures in
response to the COVID-19 pandemic during the first quarter of
Fiscal 2022, the Company did not include comparable sales for the
first quarter of Fiscal 2023, except for comparable direct sales,
as it felt that overall sales was a more meaningful metric last
year.
Comparable Sales
Comparable Same Store and Direct
Sales:
1QFY24
1QFY23
Journeys Group
(14
)%
NA
Schuh Group
13
%
NA
Johnston & Murphy Group
18
%
NA
Total Genesco Comparable Sales
(5
)%
NA
Same Store Sales
(8
)%
NA
Comparable Direct Sales
7
%
(26
)%
The overall sales decrease of 7% for the first quarter of Fiscal
2024 compared to the first quarter of Fiscal 2023 was driven by a
decrease of 13% at Journeys and a 25% or $12 million decrease at
Genesco Brands, partially offset by an increase of 6% at Schuh and
an increase of 16% at Johnston & Murphy. On a constant currency
basis, Schuh sales were up 13% for the first quarter this year.
First quarter gross margin this year was 47.3%, down 100 basis
points compared with 48.3% last year. The decrease as a percentage
of sales compared to Fiscal 2023 is due primarily to a more
normalized promotional environment and increased markdowns at
Journeys, which offset improved margins in the remaining
businesses.
Selling and administrative expense for the first quarter this
year increased 520 basis points as a percentage of sales compared
with last year. Adjusted selling and administrative expense for the
first quarter this year increased 550 basis points as a percentage
of sales compared with last year. The increase as a percentage of
sales compared to Fiscal 2023 reflects the deleverage of expenses,
especially compensation expense, selling salaries and occupancy
expense as a result of decreased revenue in the first quarter of
Fiscal 2024.
Genesco’s GAAP operating loss for the first quarter was ($23.0)
million, or (4.8)% of sales this year, compared with operating
income of $8.2 million, or 1.6% of sales in the first quarter last
year. Adjusted for the Excluded Items in all periods, the operating
loss for the first quarter was ($22.7) million this year compared
to operating income of $9.5 million last year. Adjusted operating
margin was (4.7)% of sales in the first quarter of Fiscal 2024 and
1.8% in the first quarter last year.
The effective tax rate for the quarter was 23.7% in Fiscal 2024
compared to 36.7% in the first quarter last year. The adjusted tax
rate, reflecting Excluded Items, was 23.3% in Fiscal 2024 compared
to 34.7% in the first quarter last year. The lower adjusted tax
rate for the first quarter this year compared to the first quarter
last year reflects a reduction in the amount of foreign losses for
which we are unable to recognize a tax benefit.
GAAP loss from continuing operations was ($18.9) million in the
first quarter of Fiscal 2024 compared to earnings from continuing
operations of $5.0 million in the first quarter last year. Adjusted
for the Excluded Items in all periods, the first quarter loss from
continuing operations was ($18.7) million, or ($1.59) per share, in
Fiscal 2024, compared to earnings from continuing operations of
$5.9 million, or $0.44 per share, in the first quarter last
year.
Cash, Borrowings and Inventory
Cash as of April 29, 2023 was $31.8 million, compared with
$200.6 million as of April 30, 2022. Total debt at the end of the
first quarter of Fiscal 2024 was $118.2 million compared with $14.7
million at the end of last year’s first quarter. The past twelve
months the Company utilized cash and borrowing to replenish low
inventory levels by $172.2 million and return capital to
shareholders with share repurchases totaling $75.4 million.
Inventories increased 17% on a year over year basis, primarily for
the Johnston & Murphy and Schuh businesses to fuel growth,
while Journeys inventories were flat.
Capital Expenditures and Store Activity
For the first quarter this year, capital expenditures were $17
million, related primarily to retail stores and digital and
omnichannel initiatives. Depreciation and amortization was $11
million. During the quarter, the Company opened 12 stores and
closed 26 stores. The Company ended the quarter with 1,396 stores
compared with 1,414 stores at the end of the first quarter last
year, or a decrease of 1%. Square footage was essentially flat on a
year-over-year basis.
Share Repurchases
The Company repurchased 255,000 shares during the first quarter
of Fiscal 2024 at a cost of $9.2 million or an average of $35.96
per share. The Company currently has $25.0 million remaining on its
expanded share repurchase authorization announced in February
2022.
Store Closing and Cost Savings Update
- The Company now expects to close more than 100 Journeys stores
in Fiscal 2024, versus prior expectations to close 60 stores
- The Company now anticipates up to $40 million in cost
reductions, versus $20 million to $25 million prior, with $20
million realized in Fiscal 2024
Revised Fiscal 2024 Outlook
For Fiscal 2024, the Company now expects:
- Sales to be down 4% to 5%, or down 5% to 6% excluding the 53rd
week this year, compared to Fiscal 23
- Adjusted diluted earnings per share from continuing operations
in the range of $2.00 to $2.50 2
- Guidance assumes no further share repurchases and a tax rate of
25%
__________________________
2A reconciliation of the adjusted
financial measures cited in the guidance to their corresponding
measures as reported pursuant to GAAP is included in Schedule B to
this press release.
Conference Call, Management Commentary and Investor
Presentation
The Company has posted detailed financial commentary and a
supplemental financial presentation of first quarter results on its
website, www.genesco.com, in the investor relations section. The
Company's live conference call on May 25, 2023, at 7:30 a.m.
(Central time), may be accessed through the Company's 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.
Safe Harbor Statement
This release contains forward-looking statements, including
those regarding future sales, earnings, cost reductions, operating
income, gross margins, expenses, capital expenditures, depreciation
and amortization, tax rates, stores openings and closures, share
repurchases, ESG progress 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,” “feel,” “believe,” “anticipate,”
“optimistic,” “should” 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 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 store 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; our ability to pass on price increases to our
customers; 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 pandemics or
geopolitical events; 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, impacts of the Russia-Ukraine war, and
other sources of market weakness in the U.K. and Republic of
Ireland; the effectiveness of the Company's omnichannel
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 secure
allocations to refine product assortments to address consumer
demand; the ability to renew leases in existing stores and control
or lower occupancy costs, to open or close stores in the number and
on the planned schedule, 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 amount and timing of share repurchases; 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; our ability to meet our
sustainability, stewardship, emission and diversity, equity and
inclusion related ESG projections, goals and commitments; 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 in both the amount and
timeframe anticipated; 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,
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.
About Genesco Inc.
Genesco Inc., a Nashville-based specialty retailer and branded
company, sells footwear and accessories in more than 1,390 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.schuh.ie, www.schuh.eu, 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. Genesco is committed to progress in its
diversity, equity and inclusion efforts, and the Company's
environmental, social and governance stewardship. For more
information on Genesco and its operating divisions, please visit
www.genesco.com.
GENESCO INC. Condensed Consolidated Statements of
Operations (in thousands, except per share data)
(Unaudited) Quarter 1 Quarter 1
April
29, % of April 30, % of
2023
Net Sales
2022
Net Sales
Net sales
$
483,332
100.0
%
$
520,748
100.0
%
Cost of sales
254,524
52.7
%
269,304
51.7
%
Gross margin
228,808
47.3
%
251,444
48.3
%
Selling and administrative expenses
251,497
52.0
%
243,481
46.8
%
Asset impairments and other, net
308
0.1
%
(283
)
-0.1
%
Operating income (loss)
(22,997
)
-4.8
%
8,246
1.6
%
Other components of net periodic benefit cost
92
0.0
%
98
0.0
%
Interest expense, net
1,651
0.3
%
297
0.1
%
Earnings (loss) from continuing operations before income
taxes
(24,740
)
-5.1
%
7,851
1.5
%
Income tax expense (benefit)
(5,865
)
-1.2
%
2,882
0.6
%
Earnings (loss) from continuing operations
(18,875
)
-3.9
%
4,969
1.0
%
Loss from discontinued operations, net of tax
(15
)
0.0
%
(22
)
0.0
%
Net Earnings (Loss)
$
(18,890
)
-3.9
%
$
4,947
0.9
%
Basic earnings (loss) per share: Before discontinued
operations
$
(1.60
)
$
0.38
Net earnings (loss)
$
(1.60
)
$
0.38
Diluted earnings (loss) per share: Before discontinued
operations
$
(1.60
)
$
0.37
Net earnings (loss)
$
(1.60
)
$
0.37
Weighted-average shares outstanding: Basic
11,818
12,961
Diluted
11,818
13,369
GENESCO INC. Sales/Earnings Summary by Segment
(in thousands) (Unaudited) Quarter 1
Quarter 1
April 29, % of April 30, % of
2023
Net Sales
2022
Net Sales Sales: Journeys Group
$
272,190
56.3
%
$
314,445
60.4
%
Schuh Group
93,105
19.3
%
88,159
16.9
%
Johnston & Murphy Group
82,627
17.1
%
71,016
13.6
%
Genesco Brands Group
35,410
7.3
%
47,128
9.1
%
Net Sales
$
483,332
100.0
%
$
520,748
100.0
%
Operating income (loss): Journeys Group
$
(18,362
)
-6.7
%
$
14,930
4.7
%
Schuh Group
(1,790
)
-1.9
%
(2,746
)
-3.1
%
Johnston & Murphy Group
4,806
5.8
%
550
0.8
%
Genesco Brands Group
(32
)
-0.1
%
3,793
8.0
%
Corporate and Other(1)
(7,619
)
-1.6
%
(8,281
)
-1.6
%
Operating income (loss)
(22,997
)
-4.8
%
8,246
1.6
%
Other components of net periodic benefit cost
92
0.0
%
98
0.0
%
Interest expense, net
1,651
0.3
%
297
0.1
%
Earnings (loss) from continuing operations before income
taxes
(24,740
)
-5.1
%
7,851
1.5
%
Income tax expense (benefit)
(5,865
)
-1.2
%
2,882
0.6
%
Earnings (loss) from continuing operations
(18,875
)
-3.9
%
4,969
1.0
%
Loss from discontinued operations, net of tax
(15
)
0.0
%
(22
)
0.0
%
Net Earnings (Loss)
$
(18,890
)
-3.9
%
$
4,947
0.9
%
(1) Includes a $0.3 million charge in the first
quarter of Fiscal 2024 for asset impairments. Includes a
$0.3 million gain in the first quarter of Fiscal 2023 which
includes a $0.7 million gain on the termination of the pension
plan, partially offset by $0.4 million for asset impairments.
GENESCO INC. Condensed Consolidated Balance
Sheets (in thousands) (Unaudited)
April 29, 2023 April 30, 2022
Assets Cash and cash
equivalents
$
31,786
$
200,623
Accounts receivable
54,068
48,868
Inventories
470,763
401,479
Other current assets (1)
42,325
74,609
Total current assets
598,942
725,579
Property and equipment
239,120
219,421
Operating lease right of use assets
477,962
508,986
Goodwill and other intangibles
65,466
66,785
Non-current prepaid income taxes
54,567
-
Other non-current assets
59,255
27,671
Total Assets
$
1,495,312
$
1,548,442
Liabilities and Equity Accounts payable
$
143,814
$
243,224
Current portion operating lease liabilities
131,830
137,770
Other current liabilities
75,992
83,882
Total current liabilities
351,636
464,876
Long-term debt
118,151
14,712
Long-term operating lease liabilities
399,374
430,606
Other long-term liabilities
43,526
37,910
Equity
582,625
600,338
Total Liabilities and Equity
$
1,495,312
$
1,548,442
(1) Includes prepaid income taxes of $11.0 million and $47.1
million at April 29, 2023 and April 30, 2022, respectively.
GENESCO INC. Store Count Activity
Balance Balance Balance 01/29/22
Open Close 01/28/23 Open Close
04/29/23 Journeys Group
1,135
22
27
1,130
10
25
1,115
Schuh Group
123
4
5
122
1
0
123
Johnston & Murphy Group
167
2
11
158
1
1
158
Total Retail Stores
1,425
28
43
1,410
12
26
1,396
GENESCO INC. Comparable Sales
Quarter 1 Apr. 29, Apr. 30,
2023
2022(1)
Journeys Group
-14%
NA Schuh Group
13%
NA Johnston & Murphy Group
18%
NA Total Comparable Sales
-5%
NA Same Store Sales
-8%
NA Comparable Direct Sales
7%
-26%
(1) As a result of store closures in response to the
COVID-19 pandemic during the first quarter of Fiscal 2022, and the
Company's policy of removing any store closed for seven consecutive
days from comparable sales, the Company did not include comparable
sales for the first quarter of Fiscal 2023, except for comparable
direct sales, as it felt that overall sales was a more meaningful
metric last year.
Schedule B
Genesco Inc. Adjustments to Reported Earnings (Loss) from
Continuing Operations Three Months Ended April 29, 2023 and April
30, 2022 The Company believes that disclosure of earnings
(loss) and earnings (loss) per share from continuing operations and
operating income (loss) 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.
Quarter 1 Quarter 1
April 29, 2023
April 30, 2022
Net of Per Share Net of Per Share In
Thousands (except per share amounts)
Pretax Tax
Amounts Pretax Tax Amounts Earnings (loss) from continuing
operations, as reported
$
(18,875
)
($
1.60
)
$
4,969
$
0.37
Asset impairments and other adjustments: Asset impairment
charges
$
308
233
0.02
$
412
359
0.03
Gain on pension termination
-
-
0.00
(695
)
(511
)
(0.04
)
Expenses related to new HQ building
-
-
0.00
1,526
1,122
0.08
Total asset impairments and other adjustments
$
308
233
0.02
$
1,243
970
0.07
Income tax expense adjustments: Tax impact share based
awards
(47
)
0.00
-
0.00
Other tax items
(55
)
(0.01
)
(3
)
0.00
Total income tax expense adjustments
(102
)
(0.01
)
(3
)
0.00
Adjusted earnings (loss) from continuing operations (1) and
(2)
$
(18,744
)
($
1.59
)
$
5,936
$
0.44
(1) The adjusted tax rate for the first quarter of
Fiscal 2024 and 2023 is 23.3% and 34.7%, respectively. (2)
EPS reflects 11.8 million and 13.4 million share count for the
first quarter of Fiscal 2024 and 2023, respectively, which includes
common stock equivalents in the first quarter last year but not in
this year due to the loss from continuing operations.
Genesco Inc. Adjustments to Reported Operating Income (Loss) and
Selling and Administrative Expenses Three Months Ended April 29,
2023 and April 30, 2022
Quarter 1 - April 29, 2023
Operating Asset Impair Adj Operating In
Thousands
Income (Loss) & Other Adj Income
(Loss) Journeys Group
$
(18,362
)
$
-
$
(18,362
)
Schuh Group
(1,790
)
-
(1,790
)
Johnston & Murphy Group
4,806
-
4,806
Genesco Brands Group
(32
)
-
(32
)
Corporate and Other
(7,619
)
308
(7,311
)
Total Operating Loss
$
(22,997
)
$
308
$
(22,689
)
% of sales
-4.8
%
-4.7
%
Quarter 1 - April 30, 2022 Operating Asset Impair Adj
Operating In Thousands Income (Loss) & Other Adj Income (Loss)
Journeys Group
$
14,930
$
-
$
14,930
Schuh Group
(2,746
)
-
(2,746
)
Johnston & Murphy Group
550
-
550
Genesco Brands Group
3,793
-
3,793
Corporate and Other
(8,281
)
1,243
(7,038
)
Total Operating Income
$
8,246
$
1,243
$
9,489
% of sales
1.6
%
1.8
%
Quarter 1 In Thousands
April 29, 2023 April
30, 2022 Selling and administrative expenses, as reported
$
251,497
$
243,481
Expenses related to new HQ building
-
(1,526
)
Total adjustments
-
(1,526
)
Adjusted selling and administrative expenses
$
251,497
$
241,955
% of sales
52.0
%
46.5
%
Schedule B Genesco Inc. Adjustments to Forecasted Earnings
from Continuing Operations Fiscal Year Ending February 3, 2024
In millions (except per share amounts) High Guidance Low
Guidance Fiscal 2024 Fiscal 2024 Net of Tax Per Share Net of Tax
Per Share Forecasted earnings from continuing operations
$
29.0
$
2.42
$
22.7
$
1.89
Asset impairments and other adjustments: Asset impairments
and other matters
1.0
0.08
1.4
0.11
Total asset impairments and other adjustments (1)
1.0
0.08
1.4
0.11
Adjusted forecasted earnings from continuing operations (2)
$
30.0
$
2.50
$
24.1
$
2.00
(1) All adjustments are net of tax where applicable.
The forecasted tax rate for Fiscal 2024 is approximately 25%.
(2) EPS reflects 12.0 million share count for Fiscal 2024
which includes common stock equivalents. 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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230524005869/en/
Genesco Financial Contacts
Thomas A. George (615) 367-7465 tgeorge@genesco.com
Darryl MacQuarrie (615) 367-7672 dmacquarrie@genesco.com
Genesco Media Contact Claire
S. McCall (615) 367-8283 cmccall@genesco.com
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