Genesco Inc. reported earnings from continuing operations for the third quarter ended Oct. 29, 2011, of $26.2 million, or $1.09 per share, compared to earnings from continuing operations of $17.0 million, or 72 cents per share, in the year-ago quarter.
Fiscal 2012 third quarter results reflect pretax items of $3.4 million, or 12 cents per diluted share after tax, including compensation expense related to deferred purchase price payments in connection with the acquisition of Schuh Group Limited in June 2011, acquisition expenses and other legal matters. 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.
Fiscal 2011 third quarter results were reduced by pretax items totaling $3.1 million, or 5 cents per diluted share, after tax, primarily related to fixed asset impairments and purchase price accounting adjustments. Adjusted for the items described above in both periods, earnings from continuing operations were $29.1 million, or $1.21 per diluted share, for the third quarter of Fiscal 2012, compared to earnings from continuing operations of $18.1 million, or $0.77 per diluted share, for the third quarter of Fiscal 2011.
Net sales for the third quarter of Fiscal 2012 increased 33 percent to $616.5 million from $464.8 million in the third quarter of Fiscal 2011. Comparable store sales in the third quarter of Fiscal 2012 increased by 12 percent. The Lids Sports Group's comparable store sales increased by 8 percent, the Journeys Group increased by 15 percent, Johnston & Murphy Retail increased by 7 percent, and Underground Station increased by 14 percent.
Robert J. Dennis, chairman, president and chief executive officer of Genesco, said, “Our third quarter operating performance was exceptionally strong, highlighted by significant gains in sales and profitability. We were particularly encouraged by our 12 percent comparable store sales gain, which contributed to strong expense leverage for the quarter. The strength of our product assortments combined with the current fashion trends have us well positioned as we get set for our busiest selling period of the year. “The fourth quarter has gotten off to a good start with comparable store sales up 11 percent through the first three weeks of November. While we do not expect to maintain comparable sales at this level for the balance of the quarter, we are optimistic about our ability to meaningfully expand our top and bottom line over the same period a year ago.”
Dennis also discussed the company's updated outlook.
“Based on our third quarter performance, we are raising our Fiscal 2012 guidance. We now expect full year diluted earnings per share to be in the range of $3.64 to $3.69, which represents a 47 percent to 49 percent increase over last year's earnings, up from our previous guidance range of $3.35 to $3.42. Consistent with previous guidance, these expectations do not include expected non-cash asset impairments and other charges, which are projected to total approximately $2.5 million to $3.5 million pretax, or 6 to 9 cents per share, after tax, in Fiscal 2012. They also do not reflect Schuh acquisition expenses and compensation expense associated with the Schuh deferred purchase price as described above, totaling approximately $13.8 million, or 54 cents per diluted share, for the full year. This guidance assumes comparable store sales of 10 percent to 11 percent 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 results through the first three quarters of Fiscal 2012 are well ahead of our initial expectations and have us set up to deliver a very strong year. They also represent a great start to our 5-year plan. I believe that we have the right people and strategies in place to drive our portfolio of businesses forward to achieve $3.1 billion in sales and operating margins of at least 9 percent by Fiscal 2016.”
Consolidated Earnings Summary Three Months Ended Nine Months Ended October 29, October 30, October 29, October 30, In Thousands 2011 2010 2011 2010 Net sales $ 616,525 $ 464,838 $ 1,568,618 $ 1,229,345 Cost of sales 304,373 228,097 771,640 600,489 Selling and administrative expenses 265,895 207,942 721,954 584,484 Restructuring and other, net 345 2,120 1,936 6,564 Earnings from operations* 45,912 26,679 73,088 37,808 Interest expense, net 1,869 306 3,464 768 Earnings from continuing operations before income taxes 44,043 26,373 69,624 37,040 Income tax expense 17,882 9,406 28,138 13,906 Earnings from continuing operations 26,161 16,967 41,486 23,134 Provision for discontinued operations (73) (50) (997) (784) Net Earnings $ 26,088 $ 16,917 $ 40,489 $ 22,350 *Includes $3.1 million and $10.9 million, respectively, of acquisition related expenses for the three and nine months ended October 29, 2011. Earnings Per Share Information Three Months Ended Nine Months Ended October 29, October 30, October 29, October 30, In Thousands (except per share amounts) 2011 2010 2011 2010 Preferred dividend requirements $ 49 $ 49 $ 147 $ 148 Average common shares - Basic EPS 23,407 23,069 23,158 23,337 Basic earnings per share: Before discontinued operations $1.12 $0.73 $1.79 $0.98 Net earnings $1.11 $0.73 $1.74 $0.95 Average common and common equivalent shares - Diluted EPS 23,976 23,562 23,728 23,770 Diluted earnings per share: Before discontinued operations $1.09 $0.72 $1.74 $0.97 Net earnings $1.09 $0.72 $1.70 $0.93