12 Mar Genesco Q4 Earnings Disappoint Despite Strong Comps
Genesco Inc. reported comparable sales in the fourth quarter ended Jan. 31, 2015 increased 10 percent compared with the quarter ended Feb. 1, 2014 as comps increased 16 percent at Journeys Group, 7 percent at the Lids Sports Group, 3 percent at the Schuh Group, and 2 percent at the Johnston & Murphy Group.
Net sales for the fiscal fourth quarter increased 12.6 percent to $893 million from $793 million in the fourth quarter of Fiscal 2014.
Genesco said earnings from continuing operations for the fourth quarter ended Jan. 31, 2015, of $51.8 million, or $2.18 per diluted share, compared to earnings from continuing operations of $42.2 million, or $1.79 per diluted share, for the fourth quarter ended Feb. 1, 2014.
“Fourth quarter sales were strong, exceeding our expectations,” Robert J. Dennis, chairman, president and chief executive officer of Genesco, said. “However, gross margin pressure, lower than planned contribution from new stores and acquisitions in the Lids Sports Group and unfavorable trends in foreign exchange rates resulted in disappointing earnings.”
Fiscal 2015 fourth quarter results reflect pretax items of $1.9 million, or $0.12 per share after tax, including $1.0 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 $0.9 million for network intrusion expenses and asset impairment charges. Fiscal 2014 fourth quarter results reflect pretax items of $7.2 million, or $0.37 per share after tax, including $3.0 million of expenses related to deferred purchase price payments in connection with the acquisition of Schuh Group Limited, and $5.7 million for network intrusion expenses, other legal matters, a lease termination, and asset impairment charges, partially offset by a $1.5 million gain related to the change in accounting for deferred bonuses under the company’s EVA incentive plan announced by the company in September 2013.
Adjusted for the items described above in both periods, earnings from continuing operations were $54.7 million, or $2.30 per diluted share, for the fourth quarter of Fiscal 2015, compared to earnings from continuing operations of $51.0 million, or $2.16 per diluted share, for the fourth quarter of Fiscal 2014.
Full year results
The company also reported net sales for the year ended Jan. 31, 2015, of $2.86 billion, an increase of 8.9 percent from net sales of $2.62 billion for the year ended Feb. 1, 2014. Earnings from continuing operations for Fiscal 2015 were $99.4 million, or $4.19 per diluted share, compared to earnings from continuing operations of $93.0 million, or $3.94 per diluted share, for Fiscal 2014.
Fiscal 2015 earnings reflect after-tax charges of $0.55 per diluted share, including, an indemnification asset write-off, network intrusion-related expenses, compensation expense associated with the Schuh deferred purchase price, effects of the change in accounting for deferred bonuses under the EVA incentive plan, asset impairments, other legal matters, partially offset by a gain on a lease termination. Fiscal 2014 earnings reflect after-tax charges of $1.15 per diluted share, including the effects of the change in accounting for deferred bonuses under the EVA incentive plan, network intrusion-related expenses, compensation expense associated with the Schuh deferred purchase price, asset impairments, other legal matters, and a lease termination, partially offset by a gain on another lease termination.
Adjusted for the listed items in both years, earnings from continuing operations were $112.3 million, or $4.74 per diluted share, for Fiscal 2015, compared to earnings from continuing operations of $120.3 million, or $5.09 per diluted share, for Fiscal 2014.
“Comparable sales for the first quarter through Saturday, March 7, 2015, were up a solid 5 percent from the same period last year, despite the effects of severe winter storms in several of our key markets in February and early March,” said Dennis.
“Based on the continued challenges in the Lids Sports Group combined with foreign exchange headwinds and supply chain uncertainties from the backlog related to recent West Coast port delays, we believe it is prudent to adopt a more conservative outlook for Fiscal 2016. We now expect adjusted Fiscal 2016 diluted earnings per share to be in the range of $5.10 to $5.20, which represents a 8 percent to 10 percent increase over Fiscal 2015’s adjusted earnings per share of $4.74.
Consistent with previous guidance, these expectations do not include expected non-cash asset impairments and other charges, which are estimated in the range of $5.8 million to $6.3 million pretax, or $0.16 to $0.17 per share, after tax, in Fiscal 2016. This guidance assumes comparable sales increases in the 3 percent to 4 percent range for the full fiscal year.
“While our bottom line results for Fiscal 2015 were lower than we planned, we are pleased with the health of our footwear businesses, and especially with Journeys’ continuing strength,” Dennis said. “At the same time, we are confident that the Lids Sports Group’s strategic potential remains considerable despite current competitive and operational issues and are focused on improving the Group’s long-term profitability.”
Genesco Inc., a Nashville-based specialty retailer, sells footwear, headwear, sports apparel and accessories in more than 2,820 retail stores and leased departments throughout the U.S., Canada, the United Kingdom and the Republic of Ireland, principally under the names Journeys, Journeys Kidz, Shi by Journeys, Schuh, Schuh Kids, Lids, Locker Room by Lids, Lids Clubhouse, Johnston & Murphy, and on internet websites. The company’s Lids Sports Group division operates the Lids headwear stores, the Locker Room by Lids and other team sports fan shops and single team clubhouse stores, and the Lids Team Sports team dealer business. In addition, Genesco sells wholesale footwear under its Johnston & Murphy brand, the Trask brand, the licensed Dockers brand, SureGrip, and other brands.