Genesco Inc. announced last week that it expects to report weaker first quarter comp store sales results at its Hat World chain and sharply lower comps at its Underground Station group, prompting the company to lower its earnings forecast for the first quarter to a range of 9 cents to 12 cents per diluted share, down significantly from its
previous guidance of 28 cents per share.
GCO also pointed to an impairment charge resulting from the closure of 57 underperforming stores, 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.” as other reasons for the earnings shortfall.
The 57 stores targeted for closure are primarily in the Underground Station Group, which is the companys more urban-focused format, but will also include up to 8 urban stores in the Hat World Group. 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.
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 $7.0 million, or 14 cents to 16 cents per diluted share, primarily relating to the store closure plan. The company also expects to incur pretax charges of $14 million to $15 million, or 32 cents to 34 cents per
diluted share, in other costs related to the planned store closings over the next 18 months.
Journeys Group comps are expected to be up approximately 3% for the quarter and Johnston & Murphy retail is expected to be up 4% for the period. Hat World Group same-store sales are seen decreasing approximately 4% and Underground Station Group comps are forecast to fall 22% for the quarter.
