07 Dec Genesco Trims FY Guidance Despite Solid Q3
Genesco Inc. reported earnings from continuing operations for the third quarter ended Oct. 31, 2015, of $32.9 million, or $1.43 per diluted share, compared to earnings from continuing operations of $28.8 million, or $1.21 per diluted share, for the third quarter ended Nov. 1, 2014.
Fiscal 2016 third quarter results reflect pretax items of $0.2 million, or less than 1 cents per diluted share after tax, for network intrusion expenses and asset impairment charges, offset by $0.7 million, or 3 cents per diluted share, from a lower than normal tax rate due to the release of valuation allowances. Fiscal 2015 third quarter results reflect pretax items of $2.0 million, or 7 cents per diluted share after tax, including $1.0 million related to deferred purchase price payments in connection with the acquisition of Schuh Group Limited and $1.0 million in network intrusion expenses and asset impairment charges. They also reflect the favorable resolution of formerly uncertain tax positions taken by Schuh at the time of the acquisition, resulting in the write-off of an indemnification asset of $7.1 million and the reversal of a corresponding FIN 48 provision, with essentially no net after-tax effect on earnings for the third quarter last year.
Adjusted for the items described above in both periods, earnings from continuing operations were $32.2 million, or $1.40 per diluted share, for the third quarter of Fiscal 2016, compared to earnings from continuing operations of $30.3 million, or $1.28 per diluted share, for the third quarter of Fiscal 2015.
Net sales for the third quarter of Fiscal 2016 increased 7 percent to $774 million from $723 million in the third quarter of Fiscal 2015. Consolidated third quarter 2016 comparable sales, including same store sales and comparable e-commerce and catalog sales, increased 7 percent, with a 6 percent increase in the Journeys Group, a 12 percent increase in the Lids Sports Group, a 2 percent increase in the Schuh Group, and a 5 percent increase in the Johnston & Murphy Group. Comparable sales for the company reflected a 6 percent increase in same store sales and a 25 percent increase in e-commerce sales.
Robert J. Dennis, chairman, president and chief executive officer of Genesco, said, “We are very pleased with the comparable sales increase we delivered in the third quarter. Our results were driven by strong full price selling combined with higher promotional activity in line with our strategy to right size the Lids Sports Group’s inventory levels. The pressure on gross margins from our clearance actions offset some of the earnings upside from our solid top-line performance.
“The fourth quarter started off slowly but accelerated over the Black Friday weekend. Fourth quarter consolidated comparable sales are up 6 percent through Dec. 1, 2015.
“Recent comparable sales trends have been volatile and we expect that the retail market will remain promotional through the balance of the Holiday season. Given these factors in combination with the incremental promotional activity we now plan at Lids Sports Group through the fourth quarter to conclude its inventory reduction initiative and to position it for the freshest possible start to the next fiscal year, we are revising our full year outlook. We now expect adjusted diluted earnings per share to be in the range of $4.50 to $4.60, compared to our previously issued guidance of $4.70 to $4.80. Consistent with previous guidance, these expectations do not include expected non-cash asset impairments and other charges, estimated in the range of $6.1 million to $6.6 million pretax, or $0.17 to $0.18 per share after tax, for the full fiscal year. These expectations also do not reflect expenses related to Schuh deferred purchase price payments as described above, which are $1.5 million, or $0.06 per diluted share, for the full year. This guidance now assumes comparable sales increases in the 5 percent to 6 percent range for the full year.”
Dennis concluded, “While we are disappointed with our reduced outlook, we believe that the steps we are taking now will allow the company to realize greater earnings power next year and beyond.”
Genesco Inc., a Nashville-based specialty retailer, sells footwear, headwear, sports apparel and accessories in more than 2,800 retail stores and leased departments throughout the U.S., Canada, the United Kingdom, the Republic of Ireland and Germany, 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 www.journeys.com, www.journeyskidz.com, www.shibyjourneys.com, www.schuh.co.uk, www.johnstonmurphy.com, www.lids.com, www.lids.ca, www.lidslockerroom.com, www.lidsteamsports.com, www.lidsclubhouse.com, www.trask.com, www.suregripfootwear.com and www.dockersshoes.com . 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.