Genesco Q4 Earnings Soar on 12 Percent Comp Increase

Fiscal 2012 fourth quarter results reflect pretax items of $3.7 million, or 25 cents per diluted share after tax, including compensation expense related to deferred purchase price payments in connection with the acquisition of Schuh Group Limited in June 2011 and other legal matters, and an effective tax rate reflecting the non-deductibility of the compensation expense related to the deferred purchase price.  As previously announced, because the obligation to pay the deferred purchase price for Schuh is contingent upon the continued employment of the payees, U.S. Generally Accepted Accounting Principles require that it be treated as compensation expense.  For tax purposes, however, the obligation is treated as purchase price, and is therefore not deductible.  Fiscal 2011 fourth quarter results were favorably affected by 8 cents per share due to a lower tax rate offset by pretax items totaling $2.8 million, or 7 cents per diluted share after tax, primarily related to network intrusion expenses, asset impairments and purchase price accounting adjustments.

Adjusted for the items described above in both periods, earnings from continuing operations were $47.5 million, or $1.97 per diluted share, for the fourth quarter of Fiscal 2012, compared to earnings from continuing operations of $31.3 million, or $1.33 per diluted share, for the fourth quarter of Fiscal 2011. For consistency with Fiscal 2012's previously announced earnings expectations and with previously reported adjusted results for the prior year period, the company believes that the disclosure of the results from continuing operations adjusted for these items will be useful to investors. Additionally, the company believes that the presentation of earnings from continuing operations before the compensation expense associated with the Schuh deferred purchase price will enable investors to understand the effect attributable to incorporating a continuing employment condition into the obligation to pay deferred purchase price. 

Net sales for the fourth quarter of Fiscal 2012 increased 29 percent to $723 million from $560 million in the fourth quarter of Fiscal 2011.  Comparable store sales in the fourth quarter of Fiscal 2012 increased by 12 percent.  The Lids Sports Group's comparable store sales increased by 13 percent, the Journeys Group increased by 14 percent, Johnston & Murphy Retail increased by 8 percent, and Underground Station decreased by 4 percent.

Robert J. Dennis, chairman, president and chief executive officer of Genesco, said, “We finished Fiscal 2012 with an excellent fourth quarter, led by strong performances from our two largest businesses, Journeys Group and Lids Sports Group. In addition, Schuh and Johnston & Murphy also contributed meaningfully to our results. Our merchandise strategies continued to drive strong full price selling in our stores and on our websites, helping push adjusted fourth quarter operating margin above 10 percent for the first time in five years.

“Fiscal 2013 has started well, with February consolidated comparable store sales up 13 percent. While we expect these trends to moderate, we continue to look for positive comparable store sales on top of the challenging quarterly comparisons ahead of us.”

Dennis also discussed the company's updated outlook. 

“Based on current visibility we expect adjusted Fiscal 2013 diluted earnings per share to be in the range of $4.58 to $4.70, which represents a 12 percent to 15 percent increase over last year's adjusted earnings per share of $4.09. Consistent with previous guidance, these expectations do not include expected non-cash asset impairments and other charges, which are estimated in the range of $1.4 million to $2.5 million pretax, or $0.04 to $0.06 per share, after tax, in Fiscal 2013. They also do not reflect compensation expense associated with the Schuh deferred purchase price as described above, which are currently estimated at approximately $12.0 million, or $0.49 per diluted share, for the full year. This guidance assumes comparable sales of 2 percent to 3 percent for the full fiscal year.”  A reconciliation of the adjusted financial measures cited in the guidance to their corresponding measures as reported pursuant to U.S. Generally Accepted Accounting Principles is included in Schedule B to this press release.

Fiscal Year 2012

The company also reported earnings from continuing operations for the fiscal year ended January 28, 2012, of $83.0 million, or $3.48 per diluted share, compared to earnings from continuing operations of $54.5 million, or $2.29 per diluted share, for the fiscal year ended January 29, 2011. Fiscal 2012 earnings reflected after-tax charges of $0.61 per diluted share, including compensation expense associated with the Schuh deferred purchase price, acquisition expenses, asset impairments, other legal matters and network intrusion-related expenses.  Fiscal 2011 earnings reflected after-tax charges of $0.19 per diluted share, including asset impairments, purchase price accounting adjustments, network intrusion-related expenses, flood loss and other legal matters, partially offset by a lower effective tax rate.

Adjusted for the listed items in both years, earnings from continuing operations were $97.5 million, or $4.09 per diluted share, for Fiscal 2012, compared to earnings from continuing operations of $59.0 million, or $2.48 per diluted share, for Fiscal 2011.  For consistency with 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 Fiscal 2012 increased 28 percent to $2.29 billion from $1.79 billion in Fiscal 2011.

Dennis concluded, “We are entering the new fiscal year from a position of strength. With a diversified portfolio of businesses that generate significant cash flow, we are well situated to take advantage of the profitable growth opportunities ahead of us. We believe our recent operating performance confirms we are on the right strategic course to achieve our goals of $3.1 billion in sales and operating margins of 9 percent by Fiscal 2016.”