Genesco Inc. reported earnings from continuing operations jumped 56.5 percent in the third quarter ended Oct. 27, to $41.0 million, or $1.71 per diluted share, from $26.2 million, or $1.09, a year ago.
Fiscal 2013 third quarter results reflect pretax items of $3.4 million, or 13 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, asset impairments and other legal matters, decreased by tax rate adjustments of $0.40 per diluted share. 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 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.
Adjusted for the items described above in both periods, earnings from continuing operations were $34.5 million, or $1.44 per diluted share, for the third quarter of Fiscal 2013, compared to earnings from continuing operations of $29.1 million, or $1.21 per diluted share, for the third 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. Since the compensation expense is a non-cash charge until the deferred purchase price is actually paid, the company believes that earnings including such expense may not be fully reflective of the company's ongoing results or indicative of its prospects.
Net sales for the third quarter of Fiscal 2013 increased 7.8 percent to $664.5 million from $616.5 million in the third quarter of Fiscal 2012. Comparable store sales in the third quarter of Fiscal 2013 increased by 4 percent for the company, with an 8 percent increase in the Journeys Group, a 5 percent decrease in the Lids Sports Group, a 9 percent increase in the Schuh Group, and a 6 percent increase in Johnston & Murphy Group.
Robert J. Dennis, chairman, president and chief executive officer of Genesco, said, “Our third quarter results were highlighted by strong earnings growth as we were able to meaningfully leverage expenses on a mid single digit comparable store sales gain.
“The fourth quarter got off to a slow start with November comparable store sales down 4 percent compared with a 12 percent increase in November last year. We estimate that Hurricane Sandy reduced November comparable store sales by approximately 1 percent to 2 percent. For the long Thanksgiving weekend, U.S. comparable store sales increased by low single digits.”
Dennis also discussed the company's updated outlook. “Based on our third quarter performance and our view of current trends in the marketplace, we are raising our Fiscal 2013 guidance. We now expect full year adjusted diluted earnings per share to be in the range of $5.00 to $5.08, an increase from our previous guidance range of $4.88 to $5.00. This new outlook represents an increase of 22 percent to 24 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 projected to total approximately $1.5 million to $2.5 million pretax, or $0.04 to $0.07 per share, after tax, in Fiscal 2013. In addition, this guidance does not reflect compensation expense associated with the Schuh deferred purchase price as described above, totaling approximately $12.0 million, or $0.50 per diluted share, for the full year. This guidance assumes comparable store sales in the 4 percent range for the full fiscal year.”
Dennis concluded, “Our teams have done a good job managing their businesses through the first nine months of Fiscal 2013. Collectively they have the company on pace to deliver another year of solid sales and earnings per share growth. We look to continue the progress we have made profitably expanding our top-line, and have recently adopted updated 5-year targets for annual sales of $3.5 billion and operating margins of 9.5 percent by Fiscal 2017.”
