Genesco Inc. reported earnings before discontinued operations of $12.5 million, or 55 cents per diluted share, for the third quarter ended October 30, 2004. The results included expenses of $0.02 per share related to the closing of certain Jarman retail stores in connection with the Company’s plan to accelerate the conversion of Jarman to Underground Station stores and retail store asset impairments. Net earnings were $9.4 million, or $0.42 per diluted share, for the third quarter last year. Net sales for the third quarter of fiscal 2005 increased 36% to $288 million compared to $212 million for the third quarter of fiscal 2004.
Genesco Chairman, President and Chief Executive Officer Hal N. Pennington, said, “Our third quarter results highlight the significant progress we have made across the board in our programs to improve our operating platform and promote long-term growth and profitability. We look forward to building on the momentum we have created in the marketplace.
“Net sales at Journeys increased 13% to approximately $138 million, same store sales rose 7% and footwear unit comps increased 10%. Once again, we benefited from the strong trend in fashion athletic footwear. As we move into the holiday selling season, we are confident that Journeys is well positioned from a merchandising perspective and we are excited about our prospects.
“The Underground Station Group, including the Jarman stores, reported a same store sales decrease of 5%. The Underground Station stores same store sales declined only 2%, which compares to a 7% decline for the same period last year. We have taken a number of steps to enhance the operations of Underground Station and the business has improved considerably since the beginning of the year. Importantly, these trends have continued into the fourth quarter so far. We recognize that there is a tremendous opportunity in this underserved niche and we remain committed to leveraging Underground Station’s unique position in the market.
“Hat World posted another excellent quarter, with total sales up 23% and same store sales up 12%, primarily driven by increased demand for core sports product, as well as by strength in the fashion and branded businesses. During the quarter, Hat World opened 25 stores, including its first campus-area location and its first two stores in Puerto Rico. Hat World has so far delivered on the high expectations we brought to its acquisition, and we remain focused on realizing its potential.
“We continued to make meaningful progress at Johnston & Murphy. Operating margin rose 370 basis points to 4.9%, as gross margin increased due to better sourcing, less promotional selling and a higher mix of premium product. For some time, we have been focused on profitable sales and margin improvement and it is gratifying to see the positive results of our efforts. As we head into the next stage of our strategic plan, we are working hard to enhance our brand image further and to update our store design in order to attract new customers.
“Finally, Dockers Footwear’s sales rose 8% to approximately $18 million, primarily due to the strength of the Stain Defender product. Dockers also experienced a substantial increase in gross margin, which helped drive a 400 basis point increase in operating margin to 11.7%. Dockers has continued to perform well in the moderately priced men’s shoe environment, which underscores the strength of the brand and is a testimony to the strength of its design, marketing and sales teams.”
Genesco also stated that it is revising upward its fiscal 2005 guidance. The Company now expects sales of approximately $1.1 billion for the year and diluted earnings per share to range from $2.01 to $2.02, including previously announced charges of approximately $0.07 to $0.08 per share primarily associated with the planned closing of Jarman and other underperforming stores. The Company noted that, if shares of its common stock close above $26.54 for 10 of the last 30 days of the fourth quarter, or if certain proposed changes in accounting standards governing the contingent conversion feature of the Company’s 4-1/8% convertible subordinated debentures become effective, the shares underlying the debentures must be included in diluted shares outstanding for purposes of the earnings per share calculation for the quarter and year. Assuming that the shares are included, diluted earnings per share guidance for the year would be adjusted to a range of $1.81 to $1.82 per share, including the previously announced store related charges.
Genesco also announced preliminary sales and diluted earnings per share guidance for the fiscal year ending January 28, 2006. The Company expects net sales for fiscal 2006 to range from $1.2 billion to $1.3 billion and diluted earnings per share to range from $2.37 to $2.41, assuming the convertible shares are not included in the calculation, or from $2.11 to $2.15, if the convertible shares are included.
GENESCO INC. Consolidated Earnings Summary Three Months Ended Nine Months Ended Oct. 30, Nov. 1, Oct. 30, Nov. 1, In Thousands 2004 2003 2004 2003 Net sales $288,398 $212,483 $759,863 $584,707 Cost of sales 145,030 113,355 383,928 313,998 Selling and administrative expenses 119,251 82,426 330,596 243,350 Restructuring and other, net 667 - 627 (139) Earnings from operations before interest and other 23,450 16,702 44,712 27,498 Loss on early retirement of debt - - - 2,581 Interest expense, net 3,138 1,510 7,916 5,691 Earnings before income taxes from continuing operations 20,312 15,192 36,796 19,226 Income tax expense 7,783 5,780 13,668 7,368 Earnings from continuing operations 12,529 9,412 23,128 11,858 Provision for discontinued operations, net (440) - (461) - Net Earnings $12,089 $9,412 $22,667 $11,858 Earnings Per Share Information Three Months Ended Nine Months Ended In Thousands (except per Oct. 30, Nov. 1, Oct. 30, Nov. 1, share amounts) 2004 2003 2004 2003 Preferred dividend requirements $73 $74 $219 $221 Basic earnings per share: Before discontinued operations $0.57 $0.43 $1.05 $0.54 Net earnings $0.55 $0.43 $1.02 $0.54 Diluted earnings per share: Before discontinued operations $0.55 $0.42 $1.02 $0.53 Net earnings $0.54 $0.42 $1.00 $0.53