Genesco Inc. reported earnings from continuing operations for the first quarter ended April 29, 2017, of $1.0 million, or 5 cents per diluted share, compared to earnings from continuing operations of $10.6 million, or 50 cents per diluted share, for the first quarter ended April 30, 2016. Fiscal 2018 first quarter results reflect a pretax asset impairment charge of $0.1 million, or 1 cent per diluted share after tax. Fiscal 2017 first quarter results reflect pretax items of $3.6 million, or 12 cents per share after tax, including $3.4 million of asset impairment charges and $0.2 million in other legal matters.
Adjusted for the items described above in both periods, earnings from continuing operations were $1.1 million, or 6 cents per diluted share, for the first quarter of Fiscal 2018, compared to earnings from continuing operations of $13.0 million, or 62 cents per diluted share, for the first quarter of Fiscal 2017. Wall Street’s consensus estimate had been 27 cents.
Net sales for the first quarter of Fiscal 2018 decreased 0.8 percent to $643 million from $649 million in the first quarter of Fiscal 2017. Consolidated first quarter 2018 comparable sales, including same store sales and comparable e-commerce and catalog sales, decreased 1 percent, with a 5 percent decrease in the Journeys Group, a 1 percent increase in the Lids Sports Group, a 10 percent increase in the Schuh Group, and a 3 percent decrease in the Johnston & Murphy Group. Comparable sales for the company included a 4 percent decrease in same store sales and a 28 percent increase in direct sales.
Robert J. Dennis, chairman, president and chief executive officer of Genesco, said, “Our first quarter performance reflects a number of challenges, many of which were expected, early in the new fiscal year. Consolidated comparable sales were pressured by weak store traffic in our U.S. businesses, which we believe was due in part to federal income tax refund delays, and by the impact from the significant fashion rotation at Journeys. This was partially offset by very strong growth in digital channel sales. The combination of a 1 percent comp decline, expense deleverage on lower sales, gross margin headwinds at Journeys and Lids, that were especially pronounced in the first quarter, and increased marketing and digital investment resulted in earnings substantially lower than last year and a little below our internal forecasts.
“While Journeys continues to make good progress adjusting its product offerings to better reflect current consumer demand, we now believe Journeys’ comp recovery will take longer to materialize than previously expected due to a more significant slowdown in the declining part of its merchandise assortment. In addition, we have adopted a more conservative outlook for store-based sales given the anemic level of mall traffic year-to-date and the more pronounced shift in consumer spending away from stores to online. Therefore, we now expect adjusted diluted earnings per share for the year in the range of $3.90 to $4.05, compared to our previously issued guidance range of $4.40 to $4.55.”
These expectations do not include expected non-cash asset impairments and other charges, estimated in the range of $5.3 million to $6.3 million pretax, or $0.18 to $0.21 per share after tax, for the full fiscal year. They also do not include certain tax effects related to equity grants pursuant to the newly effective ASU 2016-09, estimated at $0.09 per share after tax. This guidance assumes comparable sales are flat to up to 1 percent for the full year.
Dennis concluded, “While we are disappointed with our lower guidance, our second quarter comp trend through Saturday, May 20, is better than what we experienced in the first quarter, in particular for Journeys. Despite the slow start to the year, we believe that the strategies we are executing will result in improved sales and margin trends, particularly in the back half, as the year progresses and drives profitable growth and increased shareholder value over the long-term.”
Photo courtesy Journeys