Genesco Inc. reported earnings from continuing operations of $129.9 million, or $5.14 a share, for the first quarter ended May 3 after a pretax gain of $204.1 million, or $4.84 per diluted share, from the settlement of the merger-related litigation with The Finish Line, Inc. and UBS Securities. This gain was partially offset by expenses related to the litigation, the settlement of unrelated litigation, and store closings and fixed asset impairments totaling $9.5 million, or 23 cents a share.
After making adjustments, including the effects of the 4 million shares repurchased during the quarter, the company's adjusted earnings from continuing operations were $3.4 million, or 14 cents a share.
In the year-ago quarter, the owner of Journeys earned $2.2 million, or 10 cents a share. Earnings from continuing operations for the first quarter of last fiscal year reflected charges of $6.6 million, or 15 cents a share, primarily consisting of asset impairments in underperforming urban stores.
Net sales increased by 7% to $357 million from $335 million. Comps increased 2%.
Genesco chairman and CEO Hal N. Pennington said, “Our first quarter performance, which exceeded expectations, represents a solid start to the new fiscal year. We believe our business strategies are working in this difficult retail environment, as reflected in better than expected results at Journeys, Hat World and Underground Station. We believe that we are well positioned for the summer and back to school seasons.
First Quarter Business Unit Performance
“Net sales in the Journeys Group grew 8% to $169 million. Same store sales for the Journeys Group were flat for the quarter and same store sales in the Journeys stores were up 1%, compared to 3% last year. Unit comps rose more than 5% in the quarter, primarily driven by the skate business. As planned, we aggressively managed down inventories at Journeys during the quarter and we are currently well positioned from the perspectives of both inventory quality and merchandise assortment.
“Net sales in the Hat World Group increased 11% to approximately $88 million and same store sales increased 3% in the first quarter, with both urban and non-urban stores generating positive comparable sales. Our Hat World urban stores last comped positive in the fourth quarter of fiscal 2006. Hat World's core business, particularly core Major League Baseball products and the branded action category, continued to perform well during the quarter. We were also pleased to have generated meaningful operating margin expansion on the comparable sales increase.
“Net sales for the Underground Station Group, which includes the remaining Jarman stores, were $29 million for the first quarter. Same store sales increased 9% and unit comps rose 13%, reflecting Underground Station's progress with its new merchandising strategies. In addition, operating margin improved due to increased leverage from the strong comparable sales increase. We do not plan to open any new Underground Station stores in fiscal 2009 and we expect that the store count for the Group will be down 9% to 174 stores.
“Johnston & Murphy Group's net sales were approximately $47 million, with wholesale sales up 4% and same store sales for the Johnston & Murphy shops down 1%. Improved gross margins accounted for Johnston & Murphy's achievement of its first quarter operating earnings target, despite industry-wide weakness in the premium sector.
“First quarter sales of Licensed Brands increased 5% to approximately $25 million and operating margin improved nicely. Dockers® Footwear continues to perform well across all of its channels of distribution as we believe its comfort-value equation continues to resonate with its customers.”
Earnings per diluted share for the first quarter of this fiscal year also reflected the repurchase by the company of 4 million shares of common stock during the quarter at an aggregate cost of $91 million, pursuant to a previously announced stock repurchase program of up to $100 million. The company's effective tax rate for the first quarter of this fiscal year was reduced by the impact of higher income and by the deduction of prior period merger-related expenses that became deductible upon termination of the Finish Line merger, improving earnings per diluted share by an estimated 36 cents for the quarter.
