Genesco Inc. reported a loss from continuing operations for the first quarter ended May 2, 2009, of $5.6 million, or 30 cents per diluted share, compared to earnings from continuing operations of $129.4 million, or $5.14 per diluted share, for the first quarter ended May 3, 2008.
Adjusted for the listed items in both periods, earnings from continuing operations were $3.5 million, or 17 cents per diluted share, for the first quarter of Fiscal 2010, compared to $3.8 million, or 17 cents per diluted share, for the first quarter of Fiscal 2009. Because of the magnitude of the merger-related litigation settlement in the previous year's results and for consistency with Fiscal 2010's previously announced earnings expectations, which did not reflect the listed items, the company believes that disclosure of earnings from continuing operations adjusted for those items will be useful to investors. A reconciliation of the adjusted financial measures to their corresponding measures as reported pursuant to U.S. Generally Accepted Accounting Principles is included in Schedule B to this press release.
Net sales for the first quarter of Fiscal 2010 increased 4% to $370 million from $357 million in the first quarter of Fiscal 2009. Comparable store sales in the first quarter of Fiscal 2010 increased by 2%. The Journeys Group's comparable store sales for the quarter rose by 3%, the Hat World Group's increased by 7%, Underground Station's comps declined by 5%, and Johnston & Murphy Retail's fell by 18%.
Robert J. Dennis, president and chief executive officer of Genesco, said, “Given the current economic environment, we are pleased with our better than expected performance in the first quarter. Our ability to deliver these results in such turbulent times highlights the benefits of our diversified operating model and the strength and experience of our management team. Both the Journeys Group and Hat World posted strong comparable store sales and operating earnings increases during the quarter. Licensed brands sales were also solid, up 15%. However, Johnston & Murphy and Underground Station remained weak for the first quarter.
“As we reported on our last release, sales in February were strong, and as expected, March comps were weaker due to the Easter offset. We experienced a sales rebound in the first half of April, then business slowed again and comparable store sales through May 25 were down 9%. We believe that May comparisons are particularly challenging due in part to last year's stimulus checks.
“We continue to focus aggressively on inventory management, as year-over year inventories were up 5% and inventories per square foot increased only 2% for the quarter. In addition, our financial position remains solid as we recently converted $56.4 million of convertible notes into common stock and our cash flow remains strong.”
Outlook
Dennis also discussed the company's outlook for Fiscal 2010. “Based on our strong first quarter results, we are now slightly more comfortable with our previously announced baseline earnings scenario of $1.70 to $1.80 per share for the year. While we remain somewhat cautious in our outlook given the recent choppiness in sales trends, approximately 80% of our earnings normally come in the second half of the year and we believe that we are well-positioned from a merchandising perspective as we head into the summer and back-to-school selling season.”
Dennis concluded, “While we are cognizant of the recent lack of a strong sales trend and we are carefully monitoring our business, there are a number of things happening in the marketplace that are encouraging to us in the longer term. Industry rationalization, real-estate flexibility on rents, lower remodeling requirements and increased accessibility to attractive malls at compelling terms all represent meaningful benefits to us and we are fully committed to capitalizing on all the opportunities that lie ahead.”
GENESCO INC.
Consolidated Earnings Summary
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Three Months Ended
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Restated
May 2, May 3,
In Thousands 2009 2008
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Net sales $370,366 $356,935
Cost of sales 181,144 175,540
Selling and administrative
expenses 181,369 180,046
Restructuring and other, net 4,973 (201,838)
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Earnings from operations 2,880 203,187
Loss on early retirement of debt 5,119 -
Interest expense, net 3,083 2,945
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(Loss) earnings before income
taxes from continuing
operations (5,322) 200,242
Income tax expense 281 70,802
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(Loss) earnings from continuing
operations (5,603) 129,440
Provision for discontinued
operations, net (159) (93)
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Net (Loss) Earnings $(5,762) $129,347
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