Genesco Inc. had reported earnings from continuing operations for the fourth quarter ended Jan. 31, 2009, of $23.7 million, or $1.05 per diluted share, compared to earnings from continuing operations of $3.6 million, or 16 cents per diluted share, for the fourth quarter ended Feb. 2, 2008. Fiscal 2009 fourth quarter earnings reflected charges of 1 cent per diluted share, including asset impairments, store closing costs and final expenses related to a terminated merger agreement, offset by a gain on a lease termination transaction and tax rate adjustments.
Net sales for the fourth quarter of Fiscal 2009 declined 3.3% to $452 million from $467 million in the fourth quarter of Fiscal 2008. Comparable store sales in the fourth quarter of Fiscal 2009 declined by 5%. The Journeys Group's comparable store sales for the quarter declined by 2%, the Hat World Group's by 4%, Underground Station's by 12%, and Johnston & Murphy Retail's by 17%.
Robert J. Dennis, president and chief executive officer of Genesco, said, “Our retail sales in the fourth quarter were characterized by wide swings from week to week. After a generally lackluster trend for most of the period between Thanksgiving and Christmas, we enjoyed solid increases in comparable store sales for the weeks on either side of Christmas. A marked softening in sales in early January caused us to fall short of the sales expectations we announced at mid-month.
“Although sales rebounded strongly in the month of February, when our combined retail operations posted a comparable sales increase of 7%, we are not convinced that the choppiness in sales that we experienced throughout the fourth quarter is behind us. We remain cautious in our outlook on the economy and are running our business accordingly, with inventory quality and cash generation as primary emphases.
“We believe that our focus on inventory management in the fourth quarter has positioned us to do as well as consumer demand will allow as we look toward the spring season. We ended the year with inventory levels only 2% above the previous year-end, and retail inventories per square foot down 7%. Our inventories are fresh, and we believe we have the capacity to move with the market in the coming months.
“We are also pleased with our cash flow for Fiscal 2009, which we ended with only $32 million in bank borrowings compared to $69 million at the end of the previous year. We intend to continue to focus on cash generation while the economic climate remains uncertain.”
Fiscal 2009 Results
The company reported earnings from continuing operations of $158.1 million, or $6.72 per diluted share, for the fiscal year ended Jan. 31, 2009, compared to $8.5 million, or 36 cents per diluted share, for the previous year. Fiscal 2009 earnings included a gain of $4.91 per diluted share from the settlement of merger-related litigation with The Finish Line offset by merger-related expenses, asset impairments, store closing costs and other items. Fiscal 2008 earnings included charges for merger-related expenses, asset impairments, store closing costs, and other listed items totaling $1.48 per diluted share. Adjusted for the listed items in both years, earnings from continuing operations were $40.8 million, or $1.81 per diluted share, for Fiscal 2009, compared to $42.6 million, or $1.84 per diluted share, for Fiscal 2008. Because of the magnitude of the merger-related expenses in the previous year's results and for consistency with Fiscal 2009's previously announced results and earnings expectations, which did not reflect the listed items, the company believes that disclosure of earnings from continuing operations adjusted for these items will be useful to investors.
Dennis also discussed the company's outlook for Fiscal 2010. “The continuing economic uncertainty is causing us to provide a wider than normal range of sales and earnings expectations for Fiscal 2010. Our baseline scenario expects a weak first half with some signs of recovery beginning in the second half of the year, with comparable sales for the company's retail operations down about 3% in each of the first two quarters, flat in the third quarter, and up 2% in the fourth quarter, with the fourth quarter comparison made easier by the weakness of the two previous years' fourth quarters.
Comparable store sales would be down 1% for the full year in this scenario. On these comparable sales assumptions, we would expect to generate earnings per share from continuing operations, subject to certain adjustments included with this announcement, in the range of $1.70 to $1.80 per share for the year.
“A more pessimistic scenario, premised on little or no improvement in the economy during the current year, assumes comparable store sales down about 4% in each of the first two quarters, and down 3% in each of the third and fourth quarters. For the full year, comparable store sales would be down 3%. This scenario also assumes a more aggressive markdown strategy to keep inventories clean on the lower sales volume. In this scenario, we would expect to generate earnings from continuing operations, subject to certain adjustments, in the range of $1.20 to $1.30 per diluted share.
“In either case, we expect sufficient liquidity. Under the baseline plan, we would expect to end the year with no bank revolving credit facility borrowings, while even in the more pessimistic scenario, we would expect to end the year with lower borrowings than at the end of Fiscal 2009.
“However external conditions develop, we intend to manage our businesses with a focus on maintaining maximum flexibility to respond to the market, generating strong cash flows, and capitalizing on the opportunities to strengthen our competitive position for the recovery.”
GENESCO INC.
Consolidated Earnings Summary
Fourth Quarter Fiscal Year Ended
In Thousands 2009 2008 2009 2008
Net sales $451,722 $466,995 $1,551,562 $1,502,119
Cost of sales 232,373 239,294 771,580 750,904
Selling and administrative
expenses 180,534 197,026 713,365 696,352
Restructuring and other,
net (282) 2,893 (196,575) 9,702
Earnings from operations 39,097 27,782 263,192 45,161
Interest expense, net 2,613 3,520 9,410 12,426
Earnings before income taxes
from continuing operations 36,484 24,262 253,782 32,735
Income tax expense 12,811 20,647 95,683 24,247
Earnings from continuing
operations 23,673 3,615 158,099 8,488
Provision for discontinued
operations, net 16 (368) (5,463) (1,603)
Net Earnings $23,689 $3,247 $152,636 $6,885
Earnings Per Share Information
Fourth Quarter Fiscal Year Ended
In Thousands (except per share
amounts) 2009 2008 2009 2008
Preferred dividend requirements $50 $50 $198 $217
Average common shares – Basic EPS 18,737 22,502 19,235 22,441
Basic earnings per share:
Before discontinued operations $1.26 $0.16 $8.21 $0.37
Net earnings $1.26 $0.14 $7.93 $0.30
Average common and common
equivalent shares – Diluted EPS 23,223 26,830 23,911 22,984
Diluted earnings per share:
Before discontinued operations $1.05 $0.16 $6.72 $0.36
Net earnings $1.05 $0.14 $6.49 $0.29