Genesco Inc. reported earnings before discontinued operations of $35.7 million, or $1.36 per diluted share, for the fiscal fourth quarter ended February 3, 2007, compared to $31.2 million, or $1.15 per diluted share, for the 13-week fourth quarter ended January 28, 2006. Net sales for the quarter increased 17% to $476.9 million, compared to $406.3 million in fiscal 2006. Excluding the fourteenth week in fiscal 2007, the sales increase from the comparable 13-week period last year was approximately 11%.
Earnings before discontinued operations for the fourth quarter of this year reflected SFAS 123R share-based compensation and restricted stock expense of $1.9 million before taxes, or five cents per diluted share, compared to $0.6 million before taxes, or one penny per diluted share, for the fourth quarter last year. In addition, this year's fourth quarter results benefited by approximately one penny per diluted share from the recognition of gift card related income and favorable litigation settlement offset by charges for expenses associated with the early termination of a licensing agreement and asset impairment charges in underperforming stores. The Company also recognized two cents in this year's fourth quarter income tax provision reflecting items that impacted the full year's effective income tax rate.
For the 53-week fiscal year ended February 3, 2007, the Company reported earnings before discontinued operations of $68.2 million, or $2.61 per diluted share, compared to $62.6 million, or $2.38 per diluted share, for the 52-week fiscal year ended January 28, 2006. Earnings before discontinued operations for fiscal 2007 reflected SFAS 123R share-based compensation and restricted stock expense of $6.9 million before taxes, or $0.18 per diluted share, compared to $0.6 million before taxes, or $0.01 per diluted share for fiscal 2006. Fiscal 2007 results reflected the gift card income, favorable litigation settlement and early license termination charge discussed previously, as well as asset impairment charges for underperforming stores for the balance of the year, which in the aggregate reduced the fiscal year earnings by approximately $0.03 per diluted share, net. Fiscal 2006 results reflected charges for a litigation settlement, asset impairments and lease terminations of $2.3 million pretax or $0.05 per diluted share, net.
Net sales for the 53-week fiscal year 2007 increased 14% to $1.5 billion compared to $1.3 billion for the 52-week fiscal year 2006. Excluding the fifty-third week in fiscal 2007, the net sales increase from the comparable 52-week period last year was approximately 12%.
Genesco Chairman and Chief Executive Officer Hal N. Pennington, said, “We were pleased with our solid results for the fourth quarter. The Journeys Group, Johnston & Murphy Group and Dockers all outperformed expectations, although Underground Station Group and Hat World Group were affected by the ongoing softness in the urban market. We are implementing a number of strategies to improve the trends in these businesses; however, we expect that these businesses will continue to negatively impact our performance during the first half of fiscal 2008.
“Net sales at Journeys Group increased 22% to approximately $234 million and same store sales rose 6% in the fourth quarter. Journeys remains the destination retailer for branded footwear for young adults. With the ability to operate successfully in both mall and non-mall locations, we are confident that meaningful expansion opportunities still exist. Journeys Kidz also posted another quarter of excellent growth, with sales up 59% and same store sales up 8%. Based on the ongoing strength of Journeys Kidz, we now believe that there is an opportunity for it to become a 250 to 300 store chain. We also continue to be pleased with the performance of Shi by Journeys. We ended the year with 12 Shi by Journeys stores. While we continue to validate the concept, if it proves out, we believe that its merchandise and demographic positioning are suitable for at least 500 malls nationwide.
“Net sales in the Hat World Group increased 19% to approximately $116 million and same store sales declined 1%, compared to a 6% gain in the fourth quarter last year. We expect a challenging first quarter at Hat World, primarily due to ongoing weakness in the urban segment and Major League Baseball's on-field hat transition; however, we are forecasting improvement in the business throughout the balance of the year. Hat World remains a highly profitable, high-margin business, for which we see significant expansion opportunities, and we are increasing our total store target for Hat World to 1,200 to 1,300 stores.
“Net sales for the Underground Station Group, which includes the remaining Jarman stores, were $49 million. Same store sales declined 15%, compared to a 4% gain in the fourth quarter last year. Same store sales at Underground Station fell 15%, primarily due to continued softness in the men's athletic and urban markets in general. We are working to reposition Underground Station away from its athletic emphasis and back towards its original focus on casual and dress styles, but now with significantly more emphasis on the women's business. We expect performance improvements from this repositioning to be gradual, but steady.
“Johnston & Murphy's net sales increased 17% to approximately $57 million in the fourth quarter. Wholesale sales rose 12%, same store sales were up 5% and operating margin increased 380 basis points to 12.1%. Over the past three years, Johnston & Murphy's operating income has increased at a compound annual growth rate of 55%. We are pleased with the continuing success of our strategy to grow Johnston & Murphy sales and earnings by enhancing the brand image and improving the product line.
“Fourth quarter sales of Licensed Brands increased 51% to approximately $21 million. The Dockers Footwear product line continues to retail well, backlog is strong and we are excited about the response to the new product introductions from last fall and for the spring.
“We believe that we have identified our near-term challenges and that we are taking the appropriate steps to address them. Looking ahead, we remain very confident about our brands and our platform, and our view of our retail growth prospects has improved as we have successfully launched new brand extensions and identified additional expansion opportunities for many of our existing concepts.”
Genesco outlined its guidance for the fiscal year ending February 2, 2008. The Company now expects sales of approximately $1.6 billion and diluted earnings per share of $2.78 to $2.81 for the year. For the first quarter, the Company expects sales of approximately $339 million to $341 million and earnings of approximately $0.28 per diluted share. The earnings per share estimates include expected SFAS 123R share-based compensation and restricted stock expense totaling approximately $0.20 per share for the fiscal year and $0.05 per share for the first quarter.