Genesco Trims Full-Year Guidance

09 Dec Genesco Trims Full-Year Guidance

Genesco Inc. reported earnings from continuing operations for the third quarter ended November 2, 2013, of $27.8 million, or $1.18 per diluted share, compared to earnings from continuing operations of $42.2 million, or $1.76 per diluted share, for the third quarter ended October 27, 2012.

Fiscal 2014 third quarter results reflect pretax items of $8.5 million, or 25 cents per diluted share after tax, including $4.0 million of expenses related to the change in accounting for deferred bonuses under the vompany’s EVA Incentive Plan announced by the company in September 2013, $3.0 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 $1.5 million for network intrusion expenses, asset impairment charges and other legal matters. Fiscal 2013 third quarter results reflect net pretax items of $1.5 million, or 8 cents per diluted share after tax, including a reduction in expenses of $1.8 million related to the change in accounting for deferred bonuses under the EVA Incentive Plan offset by compensation expense related to deferred purchase price payments in connection with the acquisition of Schuh Group Limited, asset impairments and other legal matters, decreased by tax rate adjustments of 40 cents per diluted share.

Adjusted for the items described above in both periods, earnings from continuing operations were $33.8 million, or $1.43 per diluted share, for the third quarter of Fiscal 2014, compared to earnings from continuing operations of $34.5 million, or $1.44 per diluted share, for the third quarter of Fiscal 2013. On average, 9 analysts polled by Thomson Reuters expected earnings per share of $1.38 for the quarter.

For consistency with Fiscal 2014’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.

Net sales for the third quarter of Fiscal 2014 increased 0.3 percent to $666.3 million from $664.5 million in the third quarter of Fiscal 2013.  Comparable store sales in the third quarter of Fiscal 2014 decreased by 1 percent for the Company, with a 5 percent increase in the Lids Sports Group, a 2 percent decrease in the Journeys Group, a 10 percent decrease in the Schuh Group, and a 7 percent increase in the Johnston & Murphy Group.

Robert J. Dennis, Genesco chairman, president and chief executive officer, said, “As we expected, easier comparisons in our U.S.-based retail businesses as the third quarter progressed allowed for a modest improvement in consolidated comparable sales relative to recent quarters and overall results in line with our expectations.

“Comparable sales for the fourth quarter to date through Tuesday, December 3, were flat.  Because the retail environment remains somewhat choppy and the calendar shifts make meaningful comparisons difficult, we are adopting a slightly more cautious outlook for the balance of the year.

“We now expect adjusted diluted earnings per share to be in the range of $5.10 to $5.20, compared to Fiscal 2013’s adjusted earnings per share of $5.06. Consistent with our previous guidance, these expectations do not include non-cash asset impairments, network intrusion expenses and other legal matters or the net gain on a Journeys New York City store lease termination reported in the second quarter.  We estimate that these items will be in the range of $1.0 million to $2.0 million pretax, or $0.03 to $0.05 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, or expense related to the change in accounting for the Company’s EVA Incentive Plan bonus accruals, which we believe could range as high as $14.1 million pretax, or $0.37 per share, after tax, for the full year. This guidance assumes a comparable sales decrease in the low single digit range for the full fiscal year, including a low single digit increase in the fourth quarter.”

In reporting second-quarter results on Aug. 28, Genesco had said it expects adjusted Fiscal 2014 diluted earnings per share, prior to any change in accounting for the Company’s bonus accruals, to be in the range of $5.20 to $5.30, a 3 percent to 5 percent increase over Fiscal 2013’s adjusted earnings per share of $5.06 and down from its previously issued guidance of $5.57 to $5.67.

Dennis concluded, “We continue to focus on successfully navigating the current headwinds while staying the course on our long-term strategic direction. We recently updated our 5-year plan and now expect annual sales to hit $3.9 billion and operating margins to be approximately 9 percent to 9.5 percent by Fiscal 2018. We remain confident in our strategic position and our ability to achieve our growth targets and generate increased value for our shareholders.”