Genesco Inc. has acquired Schuh Group Ltd., a specialty retailer of casual and athletic footwear based in the United Kingdom.

The purchase price paid at closing was 100 million pounds Sterling ($161.7mm), subject to closing adjustments, less 29.5 million pounds ($47.7mm) outstanding under existing Schuh credit facilities, which remain in place.  The purchase agreement also provides for deferred purchase price payments totaling 25 million pounds, payable 15 million pounds and 10 million pounds on the third and fourth anniversaries of the closing, respectively, subject to the payees not having terminated their employment with Schuh under certain specified circumstances.  Genesco has also agreed to implement a bonus plan for certain members of Schuh management which will pay a total of up to 25 million pounds in cash bonuses in 2015 subject to the Schuh business having achieved specified performance targets. 

Genesco funded the initial payment and associated expenses with borrowings under an existing U.S. credit facility of $89 million and the balance from cash on hand. Genesco expects the acquisition will be accretive to earnings per share in its current fiscal year, excluding any merger and integration expenses and compensation expense attributable to the deferred purchase price payments because they are contingent upon the continued employment of the payees.

Headquartered in Scotland, Schuh operates 59 stores in the United Kingdom and Republic of Ireland, 16 concessions in Republic apparel stores and one of  the U.K.’s largest online shoe websites, The company’s core product selection consists of a broad range of branded casual and athletic footwear complemented by a meaningful private label offering targeted at its 15- to 24- year old core customer.  For the fiscal year ended March 27, 2011, Schuh generated net sales of approximately 164 million pounds with an operating margin above 9%  adjusted for goodwill amortization.

Robert J. Dennis, chairman, president and chief executive officer of Genesco, said, “Schuh provides us with an immediate and established retail presence in the United Kingdom, a highly experienced international management team, and improved insight into global fashion trends. The concept is similar to Journeys in customer demographics, product offering and operating philosophy, so it is a business we know and understand. At the same time, we believe that the combined businesses will benefit from significant merchandising synergies and from many opportunities to share best practices to our mutual benefit.  Financially, the Schuh business is compelling, with attractive store economics and solid growth prospects.”

Managing Director of Schuh Colin Temple and Finance Director Mark Crutchley will continue in their current leadership of the Schuh management team, which includes seven division heads overseeing store operations, buying, IT, human resources, ecommerce, merchandising, and logistics.

Colin Temple commented, “Schuh has gained market share in recent years due to a strong product assortment and a growing store base. Like Journeys, we specialize in providing our customers with branded casual and athletic footwear styles that are in line with current fashion trends and with a breadth and depth of assortment that is difficult to find elsewhere. We are excited to join the Genesco family and believe the combination of our talented organizations will help to further distinguish our concepts from the competition and accelerate our future growth plans.”

Genesco was advised in the transaction by Jefferies & Company and Schuh was advised by Noble Grossart Limited.

Second Quarter Same Store Sales

Genesco also said that same store sales for its retail stores other than Schuh had increased 14% in the second quarter to date through June 18, 2011, with the Journeys Group up 15%, the Lids Sports Group up 10%, the Johnston & Murphy Group up 20% and the Underground Station Group up 9%. 

“We are pleased with the strength of our U.S. based businesses and look forward to presenting an updated outlook for the balance of the year, including Schuh, when we announce our second quarter results in August,” Dennis concluded.