Genesco Inc. reported earnings of $5.9 million, or 24 cents per diluted share, for the second quarter ended July 29, 2006. Earnings were $6.8 million, or 27 cents per diluted share, for the second quarter ended July 30, 2005. Earnings for the second quarter of this year included SFAS 123® share-based compensation and restricted stock expense of $1.7 million before taxes, or $0.04 per diluted share. Net sales for the second quarter of fiscal 2007 increased 11% to $304 million compared to $275 million for the second quarter of fiscal 2006.
Genesco Chairman, President and Chief Executive Officer Hal N. Pennington, said, “Strong performances in Journeys and our wholesale businesses helped to offset weakness in the urban market, reflecting an advantage of our diversified operating model. We also continued to execute our store growth plans during the quarter, opening a total of 47 stores, compared with 40 during the second quarter last year, and increasing square footage by 15% compared to a year ago.
“Net sales in the Journeys Group increased 15% to approximately $137 million in the second quarter. Same store sales increased 5% and footwear unit comps rose 8%. Athletic footwear, led by board sport shoes, sandals and women’s casuals once again performed well, and we expect these trends to continue through the back to school season. We are excited about Journeys prospects for the second half of the year, and we believe its product offerings provide an important point of differentiation to its customer. We remain on plan to open a total of 60 Journeys stores in fiscal 2007.
“Journeys Kidz posted another strong quarter, with total sales up 51% and same store sales up 12% against a 14% comparison last year. We remain on track to open a total of 25 Kidz stores in fiscal 2007 and continue to believe that we can eventually grow this chain to at least 250 stores across the country. Our newest concept, Shi by Journeys, is also performing well. We opened three Shi by Journeys stores during the quarter and now have six stores in operation. Based on the concept’s early success, we now expect to accelerate our Shi by Journeys store opening plans for the balance of fiscal 2007.
“Net sales at Hat World increased 14% to approximately $79 million and same store sales were flat compared to the same period a year ago. We continued to experience strength in core and fashion-oriented Major League Baseball products, as well as branded action and performance headwear, but this was somewhat offset by softer sales in NCAA and other branded categories like beer and trucker hats.
“Challenges in the urban market affected the more street fashion-influenced stores while non-urban stores in the group posted a comparable store increase for the quarter. Even with the flat same store sales overall, Hat World generated an 11% operating margin for the quarter, lending support to our strategy of growing Hat World’s highly profitable sales by opening stores. To that end, we now expect to open approximately 100 stores during fiscal 2007, compared to our earlier plan to open 85 to 90 stores. We believe that a solid merchandise position, a promising NFL season, a number of big market MLB teams in the pennant race and an expanded private label and embroidery program all bode well for Hat World in the second half.
“Net sales for the Underground Station Group, which includes the Jarman stores, were $31 million. Same store sales fell 6% in the second quarter. Same store sales in the Underground Station stores declined 5%, primarily due to weak demand in its men’s athletic business and overall softness in the urban market. Underground Station continued to generate gains in women’s footwear, as well as apparel, accessories and children’s shoes. We expect that Underground Station’s business will remain challenging in the near-term; however, we believe that its growing emphasis on women’s and non-footwear categories will improve the chain’s competitive position in the future.
“Johnston & Murphy’s net sales increased 2% to $42 million, wholesale sales increased 4% and same store sales for the shops fell 2%. Johnston & Murphy wholesale shipped less off-priced product than in the second quarter last year, which made for a more difficult sales comparison, but benefited margins for the quarter. Feedback on Johnston & Murphy’s product line at the recent WSA trade show was very positive. We remain focused on executing our strategic plan and leveraging Johnston & Murphy’s powerful brand equity.
“Second quarter sales of Licensed Brands rose 16% to $16 million and operating income was up 31% to 8% of sales. Dockers Footwear continues to benefit from a growing demand for moderate, dress and dress casual footwear in general and the brand’s growing status in that market.”
Genesco said that it is revising its fiscal 2007 guidance for the year ending February 3, 2007, to take a more conservative outlook based on the continued challenging trends in the urban markets. The Company now expects sales of approximately $1.45 billion and diluted earnings per share of $2.50 to $2.54 for the year. The earnings per share estimate includes expected SFAS 123® share-based compensation and restricted stock expense totaling approximately $0.17 per share.
GENESCO INC.
Consolidated Earnings Summary
Three Months Ended Six Months Ended
July 29, July 30, July 29, July 30,
In Thousands 2006 2005 2006 2005
Net sales $304,301 $275,168 $619,319 $561,253
Cost of sales 150,911 136,210 304,560 275,742
Selling and administrative
expenses 140,619 124,948 282,485 252,204
Restructuring and other, net 480 177 589 3,044
Earnings from operations 12,291 13,833 31,685 30,263
Interest expense, net 2,160 2,568 4,074 5,272
Earnings before income taxes from
continuing operations 10,131 11,265 27,611 24,991
Income tax expense 4,187 4,499 11,001 9,799
Earnings from continuing
operations 5,944 6,766 16,610 15,192
Earnings from (provision for)
discontinued operations - - (189) 65
Net Earnings $5,944 $6,766 $16,421 $15,257
Earnings Per Share Information
Three Months Ended Six Months Ended
In Thousands (except per share July 29, July 30, July 29, July 30,
amounts) 2006 2005 2006 2005
Preferred dividend requirements $64 $69 $128 $142
Average common shares - Basic EPS 22,988 22,702 23,015 22,613
Basic earnings per share:
Before discontinued operations $0.26 $0.29 $0.72 $0.67
Net earnings $0.26 $0.29 $0.71 $0.67
Average common and common
equivalent shares - Diluted EPS 27,340 27,142 27,388 27,020
Diluted earnings per share:
Before discontinued operations $0.24 $0.27 $0.65 $0.60
Net earnings $0.24 $0.27 $0.64 $0.61
