Genesco Inc. plans to close or convert up to 57 underperforming stores, primarily in the Underground Station Group. The 57 targeted stores also include up to 8 urban stores in the Hat World Group. In addition, the company revised its previously announced earnings outlook for the first quarter ended May 5, 2007.
GCO said that it expects its earnings for the first quarter, to reflect fixed asset impairment non-cash pretax charges of $6.2 million to $7 million primarily relating to stores included in the plan, or 14 cents to 16 cents per diluted share. The company also expects to incur pretax charges of $14 million to $15 million (or 32 cents to 34 cents per diluted share) for additional asset write downs, lease terminations, and other costs related to the planned store closings over the next 18 months, primarily in the current fiscal year, subject to its ability to negotiate acceptable lease terminations. The stores targeted for closure in the plan had an aggregate pre-tax operating loss of $4.9 million and sales of approximately $22 million for the 12 fiscal months ended May 5, 2007.
Due to the expected impairment charges, weaker than expected retail operating results, a slightly higher than expected effective tax rate, and professional and other expenses incurred in connection with an unsolicited acquisition proposal by Foot Locker, Inc., the company has revised its previously announced earnings outlook for the first quarter ended May 5, 2007. The company said it now expects to report earnings in the range of 9 cents to 12 cents per diluted share for the quarter compared to the original guidance of 28 cents per share. The revised guidance reflects an expected shortfall of a penny to 2 cents per share related to operating performance compared to the original guidance, asset impairment charges of 14 cents to 16 cents per share and approximately a penny per share of incremental income tax expense and unplanned costs incurred in connection with the Foot Locker proposal.
“We remain confident that Underground Station is a viable concept filling an underserved niche in the market,” said Genesco Chairman and Chief Executive Officer Hal N. Pennington. “We believe that closing these stores will allow us to focus on strengthening the remaining stores and improve the prospects for a quicker turnaround in the Underground Station business.”
The company said that it expects to report same store sales growth of approximately 3% for the Journeys Group and 4% for Johnston & Murphy retail, and same store decrease of approximately 4% for the Hat World Group and a 22% decline for the Underground Station Group for the quarter.
