Genesco Inc. reported net earnings of $3.3 million, or $0.15 per diluted share, for the first quarter ended May 3, 2003, compared with $8.2 million, or $0.33 per diluted share, for the first quarter last year. Net sales for the quarter were $193 million compared to $191 million for the first quarter of fiscal 2003.
Genesco President and Chief Executive Officer Hal N. Pennington, said, “Our results for the quarter reflect the general retail environment and a level of demand for seasonal merchandise that was behind both historical norms and our expectations. We were, however, pleased to see continued strength in our Underground Station stores and some signs of progress at Johnston & Murphy.
“Journeys same store sales declined 3% during the quarter, due primarily to weakness in seasonal footwear, with sales of sandals and other open styles down more than 25% and average prices down 10% in the category. In response, we have accelerated our promotional activity in this product category and we intend to reduce inventories to seasonally appropriate levels by the end of the second quarter.”
Pennington continued, “Underground Station posted another strong quarter, with same-store sales up 7% despite tough comparisons. We saw continued strength in women’s and athletic footwear as well as apparel. We remain very optimistic about the growth potential of this concept. Unfortunately, Jarman stores felt the effects of the retail environment and same store sales fell 10%, giving the Underground Station/Jarman segment a combined same-store sales decrease of 2%. The relative performance of the two businesses reinforces our strategy of continuing Underground Station’s expansion and opening no additional Jarman stores.
“We made solid progress with Johnston & Murphy in the quarter, giving us a heightened degree of confidence that the strategy we put in place last year to strengthen the business is working. Although retail same-store sales declined, our wholesale business came in above plan. We are focused on continuing to build on the brand’s equity and improve its financial performance.
“Dockers Footwear’s sales fell 19% during the quarter to $19 million due to a combination of factors, including lower levels of at once orders associated with retailer conservatism and fewer close-out shipments than last year. We are pleased that Dockers operating margins improved, driven by increased gross margins. We will continue to focus on asset management and expense control as Dockers works its way through this slower sales period.”
Pennington commented, “We see the second quarter unfolding as a continuation of first quarter trends. We continue to believe our prospects for the second half are good, as we move past the seasonal product issues and into what is historically the stronger part of the year for our retail businesses. Because of continuing economic uncertainty, we have built some additional conservatism into the lower end of our range of guidance for the second half. Any improvement in the retail climate would improve our prospects, as well.”
The Company now expects second quarter sales to range between $179 million to $181 million and earnings per share to be breakeven. For the third quarter, the Company expects sales to range from $224 million to $233 million and earnings per share to range between $0.41 to $0.48. For the fourth quarter, the Company expects sales to range from $266 million to $278 million and earnings per share to range between $0.72 to $0.82. The Company also stated that for fiscal 2004 it expects sales to range between $862 million to $885 million and earnings per share to range between $1.32 to $1.50.
Pennington concluded, “The underlying fundamentals of our business are sound, our strategy is intact and our financial position is strong. We remain committed to capitalizing on the opportunities that lie ahead.”
Consolidated Earnings Summary
Three Months Ended
May 3, May 4,
In Thousands 2003 2002
Net sales $192,746 $190,593
Cost of sales 104,654 100,445
Selling and administrative
expenses 80,653 75,226
Earnings from operations before
interest 7,439 14,922
Interest expense, net 2,032 1,672
Pretax earnings 5,407 13,250
Income tax expense 2,070 5,048
Net Earnings $3,337 $8,202
Consolidated Earnings Summary
Three Months Ended
May 3, May 4,
In Thousands 2003 2002
Sales:
Journeys $98,715 $91,474
Underground Station/Jarman
Group 34,573 33,199
Johnston & Murphy 40,216 42,365
Dockers 19,189 23,555
Corporate and Other 53 --
Net Sales $192,746 $190,593
Pretax Earnings (Loss):
Journeys $5,563 $8,203
Underground Station/Jarman
Group 1,560 2,650
Johnston & Murphy 1,800 4,107
Dockers 2,553 2,787
Corporate and Other (4,037) (2,825)
Operating income 7,439 14,922
Interest, net 2,032 1,672
Total Pretax Earnings 5,407 13,250
Income tax expense 2,070 5,048
Net Earnings $3,337 $8,202
Retail Units Operated
Balance Balance Balance
02/02/ 02/01/ 05/03/
02 Open Conv Close 03 Open Conv Close 03
Journeys Group 533 82 0 1 614 18 0 1 631
Journeys 519 61 0 1 579 16 0 1 594
Journeys Kidz 14 21 0 0 35 2 0 0 37
Underground Station/
Jarman Group 227 11 0 9 229 8 0 1 236
Underground Station 97 11 8 2 114 8 0 0 122
Jarman Retail 130 0 (8) 7 115 0 0 1 114
Johnston & Murphy 148 4 0 4 148 2 0 0 150
Shops 116 2 0 3 115 1 0 0 116
Factory Outlets 32 2 0 1 33 1 0 0 34
Total Retail Units 908 97 0 14 991 28 0 2 1,017
Constant Store Sales
Three Months Ended
May 3, May 4,
2003 2002
Journeys -3% -3%
Underground Station/Jarman Group -2% 19%
Underground Station 7% 16%
Jarman Retail -10% 21%
Johnston & Murphy -7% 1%
Shops -7% -1%
Factory Outlets -8% 8%
Total Constant Store Sales -3% 2%
