Genesco Inc. reported earnings before discontinued operations of $10.7 million, or 41 cents per diluted share, for the first quarter ended April 29, 2006. Net sales for the first quarter of fiscal 2007 increased 10% to $315 million compared to $286 million for the first quarter of fiscal 2006.
Earnings before discontinued operations were $8.4 million, or 33 cents per diluted share, for the first quarter ended April 30, 2005. Earnings before discontinued operations for the first quarter of this year included SFAS 123® share-based compensation and restricted stock expense of $1.6 million before taxes, or four cents per diluted share, while earnings before discontinued operations in the first quarter of last year included a charge of $2.6 million before taxes, or 6 cents per diluted share, related to the settlement of class action litigation.
Genesco Chairman, President and Chief Executive Officer Hal N. Pennington, said, “Driven by strong performances in our branded businesses and effective expense management across the board, we slightly exceeded our earnings per share expectations for the quarter despite lower than expected sales in our retail divisions. We are confident about our merchandising position as we head into summer and we are encouraged about our prospects for the back-to- school season. Additionally, we believe that most of the issues that affected sales in the first quarter will be less significant in the current quarter. We are consequently comfortable with our outlook for the second quarter.
“We also continued to successfully execute our store growth plans during the first quarter, opening a total of 62 stores, compared with 28 during the first quarter last year, and increasing square footage by 16% versus 5% over the same period last year. We remain focused on expanding our retail presence across the country and building on our leadership position in the marketplace.
“Net sales in the Journeys Group increased 10% to more than $141 million, same store sales increased 1% and footwear unit comps rose 4% in the first quarter. Board sport and women’s casual shoes continued to perform well; however, overall sales were affected by a shift in demand from men’s boots and utility footwear to lower-priced canvas shoes, sandals and clogs. We believe that the impact of this category shift will moderate in the second quarter, as boots and utility styles are historically less relevant in the summer months. We expect to open a total of 60 Journeys stores in fiscal 2007.
“Journeys Kidz registered another excellent quarter with total sales up 30% to more than $8 million and same store sales up 10%, against a 22% comparison last year. We remain on track to open a total of 25 Kidz stores in fiscal 2007. Our newest concept, Shi by Journeys, performed well during the quarter. We had three Shi by Journeys stores in operation at the end of the quarter and expect to have a total of 12 stores by the end of the year.
“Net sales at Hat World increased 14% to approximately $71 million and same store sales declined less than 1%. Hat World had a 7% comparable store sales increase in the same period a year ago. The Major League Baseball and branded core headwear categories continued strong, but this was somewhat offset by softness in demand for NCAA product. Hat World continued to expand its private label initiatives and roll out its embroidery machines, both of which represent attractive opportunities for incremental sales. We remain excited about the growth potential of Hat World and expect to open a total of 85 to 90 new stores in fiscal 2007.
“Net sales for the Underground Station Group, which includes Jarman, were flat at $40 million and same store sales fell 3% in the first quarter. Comparable store sales at Underground Station declined 2%, primarily due to weak demand in men’s boots and utility footwear. Underground Station continued to generate gains in women’s footwear as well as apparel, accessories and children’s shoes, and we see opportunities to expand these categories further.
“Johnston & Murphy posted another strong quarter, reflecting the continued success of the brand’s strategic repositioning. Johnston & Murphy net sales increased 6% to more than $44 million, same store sales for the shops rose 3% and wholesale sales increased 14% in the first quarter. The positive results were driven by ongoing strength in casual and dress casual footwear, which made up 68% of first quarter unit sales in the Johnston & Murphy retail shops, and substantial increases in apparel and accessories. We also opened five shops and factory stores in the first quarter and plan to open a total of 12 in fiscal 2007. These more aggressive retail growth plans highlight Johnston & Murphy’s positive momentum.
“First quarter sales of Licensed Brands increased 37% to $19 million and operating profit more than doubled. Dockers is benefiting from its positioning in both the traditional and contemporary categories within the growing casual footwear industry, and the innovative and proprietary features of its proStyle® and Stain Defender® product lines.”
Genesco also stated that it is slightly increasing its fiscal 2007 guidance. The Company now expects sales to increase 14% to approximately $1.46 billion for the year and diluted earnings per share to approximate $2.63. The earnings per share estimate includes the expected expense of SFAS 123® share-based compensation expense and the amortization of recently granted restricted stock totaling approximately $0.17 per share. In the previous year, this amount was $0.01 per share.
GENESCO INC.
Consolidated Earnings Summary
Three Months Ended
April 29, April 30,
In Thousands 2006 2005
Net sales $315,018 $286,085
Cost of sales 153,649 139,532
Selling and administrative expenses 141,866 127,256
Restructuring and other, net 109 2,867
Earnings from operations 19,394 16,430
Interest expense, net 1,914 2,704
Earnings before income taxes from
continuing operations 17,480 13,726
Income tax expense 6,814 5,300
Earnings from continuing operations 10,666 8,426
Discontinued operations, net (189) 65
Net Earnings $10,477 $8,491
Earnings Per Share Information
Three Months Ended
April 29, April 30,
In Thousands (except per share amounts) 2006 2005
Preferred dividend requirements $64 $73
Average common shares - Basic EPS 23,042 22,525
Basic earnings per share:
Before discontinued operations $0.46 $0.37
Net earnings $0.45 $0.37
Average common and common
equivalent shares - Diluted EPS 27,436 26,898
Diluted earnings per share:
Before discontinued operations $0.41 $0.33
Net earnings $0.40 $0.34
