Genesco Inc., the parent of Journeys, reported comp sales in the fourth quarter rose 1 percent.

GAAP earnings from continuing operations per diluted share of $2.49 for the three months ended February 1, 2020, compared to earnings from continuing operations per diluted share of $1.53 in the fourth quarter last year. Adjusted for the Excluded Items in both periods, the company reported fourth-quarter earnings from continuing operations per diluted share of $3.09, compared to earnings from continuing operations per diluted share of $2.18 last year.

GAAP earnings from continuing operations per diluted share were $3.94 for the year ended February 1, 2020, compared to earnings from continuing operations per diluted share of $2.63 for the year ended February 2, 2019. Adjusted for the Excluded Items in both periods, the company reported Fiscal 2020 earnings from continuing operations per diluted share of $4.58, compared to earnings from continuing operations per diluted share of $3.28 for Fiscal 2019.

Mimi E. Vaughn, Genesco president and chief executive officer, said, “Fiscal 2020, which marked our first year as a footwear focused company, was filled with many notable successes and important accomplishments. We delivered strong results, building on the turnaround in profitability that began in fiscal 2019. This included positive consolidated comparable sales growth in every quarter, even as we faced more challenging comparisons and positive store comps for the year. Positive comps combined with gross margin expansion, cost reduction efforts and share repurchase activity, helped fuel a 40 percent year-over-year increase in adjusted earnings per share. In addition, we made an accretive acquisition late in the year that advances our go-forward strategy to build the branded side of our business and provides Genesco with another growth vehicle as we embark upon this exciting new chapter in our company’s history.

“The first quarter has started slowly for our U.S. footwear businesses which have experienced challenging traffic trends early in the new fiscal year due in part to unseasonably warm weather in many parts of the country. We have also seen store traffic affected in tourist destinations both in the U.K. and the U.S. and in our airport locations due to the impact on travel from the Coronavirus. Despite these near-term headwinds, we are confident in the strategic course we have set for Genesco. With a very healthy balance sheet, we have the flexibility to invest for growth and new capabilities in our current businesses, pursue new growth opportunities and return cash to our shareholders.”

Fourth Quarter Review
Net sales for the fourth quarter of Fiscal 2020 were flat at $678 million compared to the fourth quarter of Fiscal 2019. Excluding the impact of lower exchange rates this year, revenue was still flat for the quarter. Comparable sales increased 1 percent, with stores down 2 percent and direct up 19 percent. Direct-to-consumer (DTC) sales were 16.6 percent of total retail sales for the quarter, compared to 13.7 percent last year.

By segment, comps grew 1 percent at Journeys Group, rose 3 percent at Schuh Group and declined 3 percent at Johnston & Murphy Group.

Fourth-quarter gross margin this year was 46.9 percent, up 20 basis points, compared with 46.7 percent last year. The increase, as a percentage of sales, reflects decreased markdowns for Journeys Group, more full-price selling for Schuh Group, partially offset by increased markdowns at Johnston & Murphy retail.

Selling and administrative expenses, as a percentage of sales for the fourth quarter this year, was 38.5 percent, down 40 basis points, compared to 38.9 percent of sales for the same period last year. Adjusted selling and administrative expenses were flat for the fourth quarter this year. Expenses reflect lower bonus expenses and improved rent, offset by increased marketing expenses.

Genesco’s GAAP operating income for the fourth quarter was $45.3 million, or 6.7 percent of sales this year, compared with $50.6 million, or 7.5 percent of sales last year. Adjusted for the Excluded Items in both periods, operating income for the fourth quarter was $59.3 million, or 8.8 percent of sales this year, compared with $58.5 million, or 8.7 percent of sales last year.

The effective tax rate for the quarter was 21.0 percent in Fiscal 2020 compared to 40.6 percent last year. The adjusted tax rate, reflecting Excluded Items, was 25.3 percent in Fiscal 2020 compared to 27.5 percent last year. The lower adjusted tax rate for this year reflects ­­­­­­­­­­­­­­­­­­the benefit of additional income taxed at lower jurisdictional statutory tax rates, partially offset by a reduction in U.S. federal tax credits.

GAAP earnings from continuing operations were $35.5 million in the fourth quarter of Fiscal 2020, compared to $29.7 million in the fourth quarter last year. Adjusted for the Excluded Items in both periods, fourth-quarter earnings from continuing operations were $44.1 million, or $3.09 per share, in Fiscal 2020, compared to $42.4 million, or $2.18 per share, last year.

Full-Year Review
Net sales for Fiscal 2020 were flat at $2.2 billion compared to Fiscal 2019. Excluding the impact of lower exchange rates this year, revenue increased 1 percent for the year. Comparable sales increased 3 percent, with stores up 1 percent and direct up 18 percent. DTC sales were 12.6 percent of total retail sales for the year compared to 10.8 percent last year.

By segment, comps grew 4 percent at Journeys Group, rose 2 percent at Schuh Group and declined 2 percent at Johnston & Murphy Group.

Fiscal 2020 gross margin this year was 48.4 percent, up 60 basis points, compared with 47.8 percent last year. The increase as a percentage of sales reflects decreased markdowns for Journeys Group, better margins on sale price product for Schuh Group and improved wholesale margins for Johnston & Murphy.

Selling and administrative expenses as a percentage of sales for the year were flat at 44.0 percent compared to the same period last year. Adjusted selling and administrative expenses were up 20 basis points for the year compared to the same period last year. The increase reflects increased marketing expenses, partially offset by lower rent expenses.

Genesco’s GAAP operating income for Fiscal 2020 was $83.3 million, or 3.8 percent of sales, compared with $81.8 million, or 3.7 percent of sales last year. Adjusted for the Excluded Items in both periods, operating income was $99.2 million, or 4.5 percent of sales this year, compared with $90.7 million, or 4.1 percent of sales last year.

The effective tax rate was 25.1 percent in Fiscal 2020 compared to 34.5 percent last year. The adjusted tax rate, reflecting Excluded Items, was 26.9 percent in Fiscal 2020 compared to 27.1 percent last year. The lower adjusted tax rate for this year reflects ­­­­­­­­­­­­­­­­­­the benefit of additional income taxed at lower jurisdictional statutory tax rates partially offset by a reduction in U.S. federal tax credits.

GAAP earnings from continuing operations were $61.8 million in Fiscal 2020, compared to $51.2 million in Fiscal 2019. Adjusted for the Excluded Items in both periods, earnings from continuing operations were $71.8 million, or $4.58 per share, in Fiscal 2020, compared to $64.0 million, or $3.28 per share, last year.

Cash, Borrowings and Inventory
Cash and cash equivalents at February 1, 2020, were $81.4 million, compared with $167.4 million at February 2, 2019. Total debt at the end of the fourth quarter of Fiscal 2020 was $14.4 million compared with $65.7 million at the end of last year’s fourth quarter, a decrease of 78 percent. Inventories were flat in the fourth quarter of Fiscal 2020 on a year-over-year basis.

Capital Expenditures and Store Activity
For the fourth quarter, capital expenditures were $8 million, which consisted of $5 million related to store remodels and new stores and $3 million related to DTC, omnichannel, information technology, distribution center, and other projects. Depreciation and amortization were $12 million. During the quarter, the company opened 3 new stores and closed 15 stores. The company ended the quarter with 1,480 stores compared with 1,512 stores at the end of the fourth quarter last year, or a decrease of 2 percent. Square footage was down 2 percent on a year-over-year basis.

Share Repurchases
For the fourth quarter of Fiscal 2020, the company did not repurchase any shares. Since late December 2018 through the end of Fiscal 2020, the company has spent approximately $235 million repurchasing over 5.5 million shares across three authorizations totaling $325 million, including a new $100 million authorization announced in late September 2019.

Fiscal 2021 Outlook
For Fiscal 2021, the company expects:

  • Total sales to increase 3 percent to 6 percent including sales from the recent Togast acquisition;
  • Comparable sales to be down 1 percent to up 2 percent; and
  • Adjusted diluted earnings per share from continuing operations in the range of $4.90 to $5.40 with an expectation that earnings for the year will be near the midpoint of the range.

Photo courtesy Genesco