Genesco Inc. reported earnings from continuing operations rose 14.2 percent for the second quarter ended August
3, to $12.1 million, or 52 cents per share, from $10.6
million, or 44 cents, in the same period a year ago.
The latest quarter's results reflect net non-recurring expenses of
$700,000, or 4 cents a share. These include $2.8
million of expenses related to deferred purchase price payments in
connection with the acquisition of Schuh Group Limited, which are
required to be expensed as compensation because the payment is
contingent upon the payees' continued employment, and $1.2 million for
other legal matters, network intrusion expenses and asset impairment
charges, partially offset by a net gain of $3.3 million on the
termination of the lease of a New York City Journeys store location.
Last year's second quarter results included $3.3 million, or 6 cents per share after tax, in deferred purchase price payments in
connection with the acquisition of Schuh Group Limited and asset
impairment charges, decreased by tax rate adjustments.
Adjusted for the non-recurring items in both periods, earnings from continuing
operations were $13.2 million, or 56 cents, compared to $12.1 million, or 50 cents, representing a gain of 9.1 percent. Wall Street's consensus estimate had been 60 cents a share.
Net sales for the second quarter increased 5.7
percent to $574.7 million from $543.5 million, reflecting a comparable store sales decrease of 2 percent.
The Lids Sports Group's comparable store sales decreased by 3 percent,
the Journeys Group decreased by 1 percent, Schuh Group decreased by 7
percent, and Johnston & Murphy Retail increased by 7 percent.
Robert
J. Dennis, chairman, president and chief executive officer of Genesco,
said, “We are disappointed that our second quarter performance fell
short of expectations. Sales trends proved to be more challenging as
the quarter progressed and results came in below our plan. The third
quarter has gotten off to a difficult start with comparable sales down 3
percent through Saturday, August 24. Despite our current sales
trajectory we remain optimistic that we can deliver a modest comp
improvement in the fourth quarter based primarily on a product mix shift
in footwear that moves in our favor and easier comparisons for Journeys
and Lids.”
Dennis also discussed the company's updated outlook.
“Based on second quarter performance and month to date results for
August, we are lowering our outlook for Fiscal 2014. We now expect
adjusted Fiscal 2014 diluted earnings per share, prior to any change in
accounting for the company's bonus accruals, to be in the range of $5.20
to $5.30, a 3 percent to 5 percent increase over Fiscal 2013's adjusted
earnings per share of $5.06, down from our previously issued guidance
of $5.57 to $5.67. Consistent with our previous guidance, these
expectations do not include non-cash asset impairments , network
intrusion expenses and other legal matters offset in part by the net
gain on the lease termination. We estimate that these items will be in
the range of $1.0 million to $2.0 million pretax, or $0.02 to $0.05 per
share, after tax, in Fiscal 2014. They also do not reflect compensation
expense associated with the Schuh deferred purchase price as described
above, which is currently estimated at approximately $11.5 million, or
$0.49 per diluted share, or any additional expense related to the
potential change in accounting for the company's EVA Incentive Plan
bonus accruals, which we believe could range as high as $12.7 million
pretax, or $0.32 per share, after tax, for the full year. This guidance
assumes a comparable sales increase in the low single digit range for
the full fiscal year, including a low single digit decline in the third
quarter and a low to mid-single digit increase in the fourth quarter.”
Dennis concluded, “We continue to feel good about the
strategic strengths of each of our businesses and the long-term growth
prospects for our company. We've successfully navigated through
uncertain consumer environments before and I'm confident we are doing
the right things to ensure we once again emerge with our dominant market
positions intact.”
