Genesco’s Q2 Earnings Soar with Addition of Schuh

“We are pleased with the strength of our second quarter performance,” said Robert J. Dennis, chairman, president and chief executive officer of Genesco. “We generated significant operating expense leverage on solid sales growth to deliver earnings that were ahead of expectations. With August comparable sales up 9 percent, the third quarter is off to an encouraging start. We believe our merchandise assortment is well positioned for the remainder of back-to-school and the upcoming holiday season.”

 

Genesco Inc. reported earnings from continuing operations for the second quarter of $10.6 million, or 44 cents per diluted share, compared to earnings from continuing operations of $400,000, or a penny per diluted share, for the second quarter ended July 30, 2011.

Fiscal 2013 second quarter results reflect pretax items of $3.3 million, or 6 cents per diluted share after tax, primarily including compensation expenses related to deferred purchase price payments in connection with the acquisition of Schuh Group Limited in June 2011, decreased by tax rate adjustments, and asset impairment charges. As previously announced, because the obligation to pay the deferred purchase price for Schuh is contingent upon the continued employment of the payees, U.S. Generally Accepted Accounting Principles require that it be treated as compensation expense. Last year, second quarter results included $8.1 million pretax, or $0.21 per diluted share after tax, of acquisition-related expenses including deferred purchase price, decreased by a tax rate adjustment, and asset impairment charges.

Adjusted for the items described above in both periods, earnings from continuing operations were $12.1 million, or 50 cents per diluted share, for the second quarter of Fiscal 2013, compared to earnings from continuing operations of $5.2 million, or 22 cents per diluted share, for the second quarter of Fiscal 2012. For consistency with Fiscal 2013's previously announced earnings expectations and with previously reported adjusted results for the prior year period, the company believes that the disclosure of the results from continuing operations adjusted for these items will be useful to investors. Additionally, the company believes that the presentation of earnings from continuing operations before the compensation expense associated with the Schuh deferred purchase price will enable investors to understand the effect attributable to incorporating a continuing employment condition into the obligation to pay deferred purchase price. A reconciliation of earnings and earnings per share from continuing operations in accordance with U.S. GAAP with the adjusted earnings and earnings per share numbers presented in this paragraph is set forth on Schedule B to this press release.

Guidance raised
Dennis also discussed the company's updated outlook. “Based on second quarter performance, we are raising our guidance for the year. We now expect adjusted Fiscal 2013 diluted earnings per share to be in the range of $4.88 to $5.00, an increase from our previous guidance range of $4.70 to $4.82. The new outlook represents an increase of 19 percent to 22 percent over last year's adjusted earnings per share of $4.09. Consistent with previous guidance, these expectations do not include expected non-cash asset impairments and other charges, which are estimated in the range of $1.5 million to $2.5 million pretax, or $0.04 to $0.06 per share, after tax, in Fiscal 2013.

They also do not reflect compensation expense associated with the Schuh deferred purchase price as described above, which is currently estimated at approximately $12.0 million, or $0.49 per diluted share, for the full year. The revised guidance assumes a comparable sales increase in the 4 percent range for the full fiscal year.” A reconciliation of the adjusted financial measures cited in the guidance to their corresponding measures as reported pursuant to U.S. Generally Accepted Accounting Principles is included in Schedule B to this press release.

Dennis concluded, “Our strong operating performances over the last several quarters highlight the strength of our business model. While the economic conditions in each of our markets have been challenging at times, our portfolio of businesses have continued to perform well, thanks to their strategic advantages and focus on operational excellence.”

 

Genesco Inc.