Genesco’s Q1 Handily Beats Street Targets

Genesco’s Q1 Handily Beats Street Targets

Genesco Inc. reported a modest gain in first-quarter earnings that came out well ahead of Wall Street’s target. The upside was boosted by a “significantly better” performance at Lids Sports Group. The company reiterated its guidance for the year.

Earnings from continuing operations for the first quarter ended April 30, 2016, reached $10.6 million, or 50 cents per diluted share, compared to earnings from continuing operations of $9.9 million, or 42 cents per diluted share, for the first quarter ended May 2, 2015.

Fiscal 2017 first quarter results reflect a pretax charge of $3.6 million, or 12 cents per diluted share after tax, including $3.4 million of asset impairment charges and $0.2 million in other legal matters. Fiscal 2016 first quarter results reflect pretax items of $3.5 million, or $0.09 per share after tax, including $0.9 million of expenses related to deferred purchase price payments in connection with the acquisition of Schuh Group Limited, which were required to be expensed as compensation because the payment was contingent upon the payees’ continued employment; and $2.6 million for network intrusion expenses, asset impairment charges and other legal matters.

Adjusted for the items described above in both periods, earnings from continuing operations were $13.0 million, or 62 cents per diluted share, for the first quarter of Fiscal 2017, compared to earnings from continuing operations of $12.2 million, or 51 cents per diluted share, for the first quarter of Fiscal 2016. Wall Street’s consensus estimate had been 39 cents.

Net sales for the first quarter of Fiscal 2017 decreased 2 percent to $649 million from $661 million in the first quarter of Fiscal 2016, primarily reflecting the divestiture of the Lids Team Sports business in January 2016. Consolidated first quarter 2017 comparable sales, including same store sales and comparable e-commerce and catalog sales, increased 1 percent, with a 1 percent increase in the Journeys Group, a 2 percent increase in the Lids Sports Group, a 5 percent decrease in the Schuh Group, and a 6 percent increase in the Johnston & Murphy Group. Comparable sales for the company reflected a 1 percent increase in same store sales and e-commerce sales were flat.

“We are pleased with the increase in first quarter profitability, which exceeded our expectations, driven by a significantly better performance from the Lids Sports Group,” said Robert J. Dennis, chairman, president and chief executive officer of Genesco. “While overall comparable sales were at the lower end of our projected range, this was more than offset by a meaningful improvement in gross margin.

“Early second quarter comparable sales accelerated versus the first quarter, prior to the offset last week for Memorial Day, which was a week earlier last year. Comparable sales for the three weeks through Saturday, May 21, 2016, were up 1 percent from the same period last year. We do not consider the period to be indicative of top line performance for the full quarter because of this Memorial Day offset.

“Based on our first quarter performance, we are reiterating our full year outlook taking into account some external headwinds pressuring sales and expenses. We still expect adjusted diluted earnings per share for the fiscal year ending January 28, 2017, in the range of $4.80 to $4.90, which represents a 12 percent to 14 percent increase over Fiscal 2016’s adjusted earnings per share of $4.29.”

These expectations do not include expected non-cash asset impairments and other charges, estimated in the range of $9.8 million to $10.3 million pretax, or $0.30 to $0.31 per share after tax, for the full fiscal year. This guidance assumes comparable sales increases in the 1 percent to 2 percent range for the full year.

The company also announced that its board of directors has replaced the remaining $11 million balance of a previous $100 million repurchase program authorized in January 2016 with a new authorization to repurchase up to $100 million of common stock. The program is intended to be implemented through purchases made from time to time using a variety of methods, which may include open market purchases, private transactions, block trades, or otherwise, or by any combination of such methods, in accordance with SEC and other applicable legal requirements. The program does not obligate the company to acquire any particular amount of common stock and it may be suspended or discontinued at any time in the company’s discretion. The company repurchased a total of 1.1 million shares of common stock in the first quarter of Fiscal 2017 at a total cost of approximately $73 million and an average price of $66.75 per share.