Genesco Inc. reported earnings before discontinued operations of $31.2 million, or $1.15 per diluted share, for the fourth quarter, up 22.8% from $25.4 million, or 97 cents per diluted share, for last year's fourth quarter. Net sales for the quarter increased 15% to $406 million compared to $353 million for the same quarter last year.
For the fiscal year ended January 28, 2006, the company reported earnings before discontinued operations of $62.6 million, or $2.38 per diluted share. Earnings before discontinued operations were $48.5 million, or $1.92 per diluted share, in fiscal 2005. Net sales for fiscal 2006 increased 15% to $1.28 billion compared to $1.11 billion for fiscal 2005.
Genesco Chairman, President and Chief Executive Officer Hal N. Pennington, said, “A strong fourth quarter concluded another strong year for Genesco. During the year we successfully executed our strategic plan, enhancing our leadership position in the market by opening 155 net new stores, expanding our mall and non-mall presence, and launching a test of a promising new retail concept. At the same time, we increased sales by 15%, expanded margins and generated double digit bottom line growth. These results reflect the talent and dedication of the entire Genesco organization.
“Net sales at Journeys increased 17.5% to approximately $193 million in the fourth quarter, same store sales rose more than 10% and footwear unit comps increased 12%. Fashion athletic, fusion, board sport and women's fashion and casual footwear all performed well in the quarter. With more than 700 stores, an unparalleled selection of product, powerful vendor relationships and a world class merchandising team, Journeys remains the destination retailer for teenagers and young adults for footwear and accessories. Its success in both mall and non-mall locations — including lifestyle centers, outlets and city streets — supports its potential for ongoing growth.
“An important component of our growth strategy is to leverage our platform and extend our brand strength and expertise across new concepts. In doing so, we see the opportunity to grow with our customer from toddler to teenager to adult. We have been successful with Journeys Kidz and we are now planning a more aggressive store roll-out for it in fiscal 2007. We have recently opened our first Shi by Journeys store designed to cater to fashionable women in their early 20s to mid 30s, continuing to serve an important Journeys customer as her tastes, needs and lifestyle change. While it is still very early in the testing process, we are encouraged by the store's initial performance.
“Hat World registered another strong quarter, with total sales up 21% to $98 million. Same store sales rose 6%, matching a 6% gain in the same period last year that was driven in part by strong demand for Boston Red Sox products associated with the team's 2005 World Series victory. The Major League Baseball and NFL categories continued to perform well in the fourth quarter of fiscal 2006. We continue to roll out embroidery machines, which represent an attractive add-on business in the larger stores. Given its versatility, illustrated by successful operations not only in malls, but also in airports, outlets, street locations, tourist destinations and kiosks, we remain confident about Hat World's significant growth potential. We plan to open 85 new Lids locations in fiscal 2007 and believe that we can eventually grow this chain to at least 900 stores in North America.
“Net sales for the Underground Station Group, which includes Jarman, increased 7% to $54 million and comparable store sales rose 4% in the fourth quarter. Underground Station posted a solid 6% comparable store gain, primarily driven by increased average selling prices. Throughout the year, the Underground Station team continued to execute its long-term strategic plan, growing the number of Underground Station locations while reducing the Jarman store base in a financially prudent manner. We ended the year with 180 Underground Station stores, up approximately 9% from the previous year, and 49 Jarman stores, roughly half the number of Jarman stores in operation two years ago. We are pleased with our progress at Underground Station and remain encouraged about its prospects for the future.
“Johnston & Murphy continued to deliver improved results during the fourth quarter, with net sales increasing 9% to $49 million and same store sales up 9%. Johnston & Murphy's performance for both the fourth quarter and the year was driven by meaningful gains in dress casual and casual footwear, coupled with growth in non footwear categories, which now include luggage, belts, socks, outerwear and personal leather goods. Over the past two years we have worked hard to reposition the Johnston & Murphy brand to broaden its appeal and attract new consumers, while at the same time driving gains in gross margin and profitability. Our results reflect our success so far, and we will continue to focus on improving our operations.
“Fourth quarter sales of Licensed Brands were $14 million, essentially flat with a year ago and in line with our projections. Early indications of stronger demand for Dockers Footwear's spring product make us optimistic about the opportunities for improvements in the business in the upcoming year.”
Genesco also reaffirmed its fiscal 2007 guidance. The Company now expects sales of approximately $1.46 billion for the year and diluted earnings per share to be approximately $2.62. The earnings per share estimate includes expected FAS 123 ® stock incentive expense and the amortization of recently granted restricted stock totaling approximately 17 cents per share. Last year's EPS reflected expenses of a penny per share related to employee restricted stock grants in the third quarter.
Consolidated Earnings Summary Fourth Quarter Fiscal Year Ended In Thousands 2006 2005 2006 2005 Net sales $406,287 $352,818 $1,283,876 $1,112,681 Cost of sales 200,902 177,669 631,469 561,597 Selling and administrative expenses 151,898 130,958 537,327 461,799 Restructuring and other, net (2) 649 2,253 1,221 Earnings from operations 53,489 43,542 112,827 88,064 Interest expense, net 2,416 3,046 10,357 10,962 Earnings before income taxes from continuing operations 51,073 40,496 102,470 77,102 Income tax expense 19,877 15,050 39,844 28,642 Earnings from continuing operations 31,196 25,446 62,626 48,460 Earnings from (provision for) discontinued operations, net 90 250 60 (211) Net Earnings $31,286 $25,696 $62,686 $48,249
Consolidated Earnings Summary Fourth Quarter Fiscal Year Ended In Thousands 2006 2005 2006 2005 Sales: Journeys $192,635 $163,931 $593,516 $521,942 Underground Station Group 53,637 50,175 164,054 148,039 Hat World 97,739 80,752 297,271 216,270 Johnston & Murphy 48,518 44,389 170,015 162,599 Licensed Brands 13,665 13,471 58,730 63,508 Corporate and Other 93 100 290 323 Net Sales $406,287 $352,818 $1,283,876 $1,112,681 Operating Income (Loss): Journeys $31,076 $26,989 $73,346 $60,065 Underground Station Group 6,990 6,101 10,890 6,963 Hat World 17,778 13,908 40,133 30,522 Johnston & Murphy 4,044 3,564 10,396 9,230 Licensed Brands 622 880 4,167 6,075 Corporate and Other* (7,021) (7,900) (26,105) (24,791) Earnings from operations 53,489 43,542 112,827 88,064 Interest, net 2,416 3,046 10,357 10,962 Earnings before income taxes from continuing operations 51,073 40,496 102,470 77,102 Income tax expense 19,877 15,050 39,844 28,642 Earnings from continuing operations 31,196 25,446 62,626 48,460 Earnings from (provision for) discontinued operations 90 250 60 (211) Net Earnings $31,286 $25,696 $62,686 $48,249 * Includes $0.6 million of other charges for asset impairment and lease terminations and a $1.7 million charge for the litigation settlement in Fiscal 2006. Includes $0.6 million and $1.2 million of other charges for asset impairment and lease terminations in the fourth quarter and year of Fiscal 2005 offset by a $0.6 million pension curtailment gain in Fiscal 2005.