Genesco’s Q1 Profits Dip on 4 Percent Comp Decline

Fiscal 2014 first quarter results reflect expenses of $4.2 million, or 16 cents per diluted share after tax, including $2.9 million of expenses related to deferred purchase price payments in connection with the acquisition of Schuh Group Limited, which are required to be expensed as compensation because the payment is contingent upon the payees continued employment; and $1.3 million in asset impairment charges and network intrusion expenses. Fiscal 2013 first quarter results reflect expenses of $3.1 million, or 12 cents per diluted share after tax, primarily including deferred purchase price payments in connection with the acquisition of Schuh Group Limited.

Adjusted for the items described above in both periods, earnings from continuing operations were $22.2 million, or 94 cents per diluted share, for the first quarter of Fiscal 2014, compared to earnings from continuing operations of $23.8 million, or 98 cents per diluted share, for the first quarter of Fiscal 2013.

Net sales for the first quarter of Fiscal 2014 decreased 1.5 percent to $591 million from $600 million in the first quarter of Fiscal 2013.

Consolidated first quarter 2014 comparable sales, including same store sales and comparable e-commerce and catalog sales, decreased 4 percent, with a 2 percent decrease in the Journeys Group, a 6 percent decrease in the Lids Sports Group, an 11 percent decrease in the Schuh Group, and a 7 percent increase in the Johnston & Murphy Group.

Robert J. Dennis, chairman, president and chief executive officer of Genesco, said, “After a slow start in February, which we attribute primarily to delayed processing of federal income tax refunds, comparable sales improved for the balance of the quarter, despite continued headwinds from unseasonably cold weather. Strong gains in our direct channel helped partially offset soft retail traffic, which combined with well-controlled expenses allowed us to deliver earnings that were slightly ahead of expectations.

“The improved sales trends we experienced during the March – April period have accelerated during the second quarter so far with May comparable sales up 1 percent through May 25.  We are encouraged by the recent momentum and optimistic about our prospects for the upcoming back to school season.

“Based on first quarter performance and current visibility, we remain comfortable with our previously issued guidance for adjusted Fiscal 2014 diluted earnings per share  in the range of $5.57 to $5.67, a 10 percent to 12 percent increase over Fiscal 2013’s adjusted earnings per share of $5.06. Consistent with our previous guidance, these expectations do not include non-cash asset impairments and network intrusion expenses, which we estimate will be in the range of $3.4 million to $4.4 million pretax, or $0.09 to $0.12 per share, after tax, in Fiscal 2014. They also do not reflect compensation expense associated with the Schuh deferred purchase price as described above, which is currently estimated at approximately $11.5 million, or $0.49 per diluted share, for the full year. This guidance assumes a comparable sales increase in the low single digit range for the full fiscal year.” 

Dennis concluded, “We believe the investments we are making in our businesses, including improved e-commerce infrastructure and selective store openings, are delivering solid returns and positioning the Company for sustainable sales and earnings growth in the years ahead. Our teams continue to execute at a high level, and we remain  on track to achieve our 5-year target of $3.5 billion in sales and an operating margin of 9.5 percent by fiscal 2017.”