EX-99.1 2 g09279exv99w1.htm EX-99.1 PRESS RELEASE 08/30/07 EX-99.1
 

Exhibit 99.1
Financial Contact: James S. Gulmi (615) 367-8325
Media Contact: Claire S. McCall (615) 367-8283
GENESCO REPORTS SECOND QUARTER FISCAL 2008 RESULTS
-Company Reports Loss of $0.13 Per Share Before Discontinued Operations,
Including Merger-Related Expenses, Asset Impairment Charges and
Store Closing Costs of Approximately $0.13 Per Share-
NASHVILLE, Tenn., Aug. 30, 2007 — Genesco Inc. (NYSE: GCO) today reported a loss before discontinued operations of $2.9 million, or $0.13 per diluted share, for the second quarter ended August 4, 2007. Results for the quarter included $5.5 million pretax, or approximately $0.13 per diluted share, in expenses related to the Company’s proposed merger with a subsidiary of The Finish Line Inc., retail store asset impairment charges and costs related to the previously announced decision to close certain underperforming stores, primarily in the Underground Station Group. For the second quarter ended July 29, 2006, earnings before discontinued operations were $5.9 million, or $0.24 per diluted share. Net sales for the second quarter of fiscal 2008 increased 8% to $328 million, compared to $304 million for the second quarter of fiscal 2007.
     Genesco Chairman and Chief Executive Officer Hal N. Pennington said, “Our second quarter results were affected by the combination of a later start to back-to-school, later sales tax holidays in Texas and Florida and a generally challenging retail environment, especially in footwear. While back-to-school season is still in progress, we are encouraged by the improving trend in sales for the third quarter to date.
     “Net sales in the Journeys Group increased 8% to approximately $148 million in the second quarter, while same store sales declined 7%. The shift in sales tax holidays in Texas and Florida from the second quarter last year to the third quarter this year had an especially pronounced effect on the Journeys Group, since approximately 16% of Journeys stores are located in those two states. Journeys’ same store sales in Texas and Florida decreased 13% and 20%, respectively, in the quarter. We expect the Journeys business for the balance of the year to benefit from the later back-to-school and tax holiday sales and from more pronounced competitive merchandising advantages

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in the fall and holiday seasons, and are pleased with the week-to-week improvement in comparable sales thus far in the quarter: Journeys Group’s same store sales have improved from 10% decline in the first week in August, to a 3% increase in the second week, to a 9% increase for the week most recently ended, for a 1% increase for the month to date.
     “Net sales in the Hat World Group increased 15% to approximately $90 million, while same store sales declined 2% in the second quarter, primarily due to fewer store-wide promotions compared to last year, ongoing challenges in the urban market and the back-to-school and tax holiday shift. Hat World’s core business, particularly Major League Baseball products, performed well during the quarter and the Canadian business remains strong across the board. Through the third week of fiscal August, same store sales for the Hat World Group increased 4%.
     “Net sales for the Underground Station Group, which includes the remaining Jarman stores, were $25 million, and same store sales declined 23%, in line with our expectations for the quarter. Same store sales again reflected the weak urban market, a difficult Nike comparison, and continued softness in the athletic category. Additionally, the tax holiday shift exacerbated the comparison, as 21% of Underground Station stores are located in Texas and Florida. For the first three weeks of August, same store sales in the Underground Station Group declined 20%. We expect Underground Station to benefit in the second half from new merchandising strategies for the fall and from easier comparisons with last year, as Nike’s significance to last year’s sales progressively diminishes and overall comparisons moderate.
     “Johnston & Murphy Group’s net sales increased 9% to approximately $46 million in the second quarter. Wholesale sales rose 18%, same store sales for the shops were up 5% and operating margin increased 200 basis points to 7.9%, reflecting continuing strength across Johnston & Murphy’s product lines. For the first three weeks of August, same store sales increased 7%.
     “Second quarter sales of Licensed Brands increased 18% to approximately $19 million, and operating margin increased 370 basis points to 12%. The Dockers Footwear product continued to perform well in the volume moderate channel and its business with the specialty shoe chains was strong.”
     The Company said that because of its merger agreement with a subsidiary of The Finish Line, Inc., it does not expect to issue specific guidance with respect to sales and earnings

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expectations for the balance of the year.
     This release contains forward-looking statements, including those regarding the performance outlook for the Company and its individual businesses, the proposed merger with a subsidiary of The Finish Line, Inc., and all other statements not addressing solely historical facts or present conditions. Actual results could vary materially from the expectations reflected in these statements. A number of factors could cause differences. These include uncertainty regarding the effect and timing of the Company’s proposed merger with a subsidiary of The Finish Line, Inc., weakness in consumer demand for products sold by the Company, fashion trends that affect the sales or product margins of the Company’s retail product offerings, changes in the timing of holidays or in the onset of seasonal weather affecting period to period sales comparisons, changes in buying patterns by significant wholesale customers, disruptions in product supply or distribution, further unfavorable trends in foreign exchange rates and other factors affecting the cost of products, and competition in the Company’s markets. Additional factors that could affect the Company’s prospects and cause differences from expectations include the ability to open, staff and support additional retail stores on schedule and at acceptable expense levels and to renew leases in existing stores on schedule and at acceptable expense levels, the ability to negotiate acceptable lease terminations and otherwise to execute the store closing plan referred to in this release on schedule and at expected expense levels, variations from expected pension-related charges caused by conditions in the financial markets, and the outcome of litigation and environmental matters involving the Company. Forward-looking statements reflect the expectations of the Company at the time they are made. The Company disclaims any obligation to update such statements.
     The Company’s live conference call on August 30, 2007, at 7:30 a.m. (Central time) may be accessed through the Company’s internet website, www.genesco.com. To listen live, please go to the website at least 15 minutes early to register, download and install any necessary software.
     Genesco Inc., a Nashville-based specialty retailer, sells footwear, headwear and accessories in more than 2,100 retail stores in the United States and Canada, principally under the names Journeys, Journeys Kidz, Shi by Journeys, Johnston & Murphy, Underground Station, Hatworld, Lids, Hat Shack, Hat Zone, Head Quarters and Cap Connection, and on internet websites www.journeys.com, www.journeyskidz.com, www.shibyjourneys.com,

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www.undergroundstation.com, www.johnstonmurphy.com, www.lids.com and www.lidskids.com. The Company also sells footwear at wholesale under its Johnston & Murphy brand and under the licensed Dockers brand. Additional information on Genesco and its operating divisions may be accessed at its website www.genesco.com.

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GENESCO INC.
Consolidated Earnings Summary
                                 
    Three Months Ended     Six Months Ended  
    August 4,     July 29,     August 4,     July 29,  
In Thousands   2007     2006     2007     2006  
 
Net sales
   $ 327,977     $ 304,301     $ 662,628     $ 619,319  
Cost of sales
     164,358       150,911       327,165       304,560  
Selling and administrative expenses
     166,059       140,619       325,132       282,485  
Restructuring and other, net
     158       480       6,753       589  
 
Earnings (loss) from operations
     (2,598 )     12,291       3,578       31,685  
Interest expense, net
     3,000       2,160       5,402       4,074  
 
Earnings (loss) before income taxes from continuing operations
     (5,598 )     10,131       (1,824 )     27,611  
 
                                
Income tax expense (benefit)
     (2,658 )     4,187       (1,087 )     11,001  
 
Earnings (loss) from continuing operations
     (2,940 )     5,944       (737 )     16,610  
 
                                
Provision for discontinued operations
     (1,225 )     —       (1,225 )     (189 )
 
Net Earnings (Loss)
   $ (4,165 )   $ 5,944     $ (1,962 )   $ 16,421  
 
Earnings Per Share Information
                                 
    Three Months Ended     Six Months Ended  
    August 4,     July 29,     August 4,     July 29,  
In Thousands (except per share amounts)   2007     2006     2007     2006  
 
Preferred dividend requirements
   $ 54     $ 64     $ 118     $ 128  
 
                                
Average common shares — Basic EPS
     22,415       22,988       22,403       23,015  
 
                                
Basic earnings (loss) per share:
                                
Before discontinued operations
   ($ 0.13 )   $ 0.26     ($ 0.04 )   $ 0.72  
Net earnings (loss)
   ($ 0.19 )   $ 0.26     ($ 0.09 )   $ 0.71  
 
                                
Average common and common equivalent shares — Diluted EPS
     22,415       27,340       22,403       27,388  
 
                                
Diluted earnings (loss) per share:
                                
Before discontinued operations
   ($ 0.13 )   $ 0.24     ($ 0.04 )   $ 0.65  
Net earnings (loss)
   ($ 0.19 )   $ 0.24     ($ 0.09 )   $ 0.64  

 

 

GENESCO INC.
Consolidated Earnings Summary
                                 
    Three Months Ended     Six Months Ended  
    August 4,     July 29,     August 4,     July 29,  
In Thousands   2007     2006     2007     2006  
 
Sales:
                                
Journeys Group
   $ 148,091     $ 136,669     $ 304,012     $ 278,169  
Underground Station Group
     24,520       30,917       54,330       70,873  
Hat World Group
     90,460       78,506       169,304       149,194  
Johnston & Murphy Group
     45,657       41,916       91,951       85,947  
Licensed Brands
     19,059       16,116       42,588       34,915  
Corporate and Other
     190       177       443       221  
 
Net Sales
   $ 327,977     $ 304,301     $ 662,628     $ 619,319  
 
Operating Income (Loss):
                                
Journeys Group
   $ 983     $ 7,935     $ 11,800     $ 21,086  
Underground Station Group
     (4,893 )     (1,747 )     (7,061 )     658  
Hat World Group
     7,418       8,617       10,070       14,624  
Johnston & Murphy Group
     3,612       2,484       8,082       5,307  
Licensed Brands
     2,281       1,335       5,360       3,064  
Corporate and Other*
     (11,999 )     (6,333 )     (24,673 )     (13,054 )
 
Earnings (loss) from operations
     (2,598 )     12,291       3,578       31,685  
Interest, net
     3,000       2,160       5,402       4,074  
 
Earnings (loss) before income taxes from continuing operations
     (5,598 )     10,131       (1,824 )     27,611  
Income tax expense (benefit)
     (2,658 )     4,187       (1,087 )     11,001  
 
Earnings (loss) from continuing operations
     (2,940 )     5,944       (737 )     16,610  
Provision for discontinued operations
     (1,225 )     —       (1,225 )     (189 )
 
Net Earnings (Loss)
   $ (4,165 )   $ 5,944     $ (1,962 )   $ 16,421  
 
*   Includes $0.2 million of other charges in the second quarter of Fiscal 2008 which includes $0.4 million of retail asset impairments offset by a $0.2 million excise tax refund and includes $6.8 million of other charges in the first six months of Fiscal 2008 of which $6.7 million is asset impairments related to underperforming stores, primarily in the Underground Station Group, and $0.3 million for lease terminations offset by a $0.2 million excise tax refund. Includes $0.5 million and $0.6 million of other charges in the second quarter and six months of Fiscal 2007, respectively, primarily for asset impairments. The second quarter and six months of Fiscal 2008 also includes $5.4 million in expenses related to the Company’s proposed merger with a subsidiary of The Finish Line Inc.

 

 

GENESCO INC.
Consolidated Balance Sheet
                 
    August 4,     July 29,  
In Thousands   2007     2006  
 
Assets
                
Cash and cash equivalents
   $ 22,129     $ 19,360  
Accounts receivable
     22,154       19,293  
Inventories
     347,574       331,439  
Other current assets
     54,610       31,313  
 
Total current assets
     446,467       401,405  
 
Property and equipment
     236,154       204,419  
Other non-current assets
     171,948       156,285  
 
Total Assets
   $ 854,569     $ 762,109  
 
Liabilities and Shareholders’ Equity
                
Accounts payable
   $ 119,727     $ 144,954  
Other current liabilities
     56,374       55,212  
 
Total current liabilities
     176,101       200,166  
 
Long-term debt
     188,220       129,250  
Other long-term liabilities
     86,271       76,173  
Shareholders’ equity
     403,977       356,520  
 
Total Liabilities and Shareholders’ Equity
   $ 854,569     $ 762,109  
 

 

 

GENESCO INC.
Retail Units Operated — Six Months Ended August 4, 2007
                                                                                 
    Balance     Acquisi-                             Balance                             Balance  
    01/28/06     tions     Open     Conv     Close     02/03/07     Open     Conv     Close     08/04/07  
 
Journeys Group
     761               96       0       4       853       58       0       2       909  
Journeys
     710               61       0       3       768       23       0       2       789  
Journeys Kidz
     50               24       0       1       73       18       0       0       91  
Shi by Journeys
     1               11       0       0       12       17       0       0       29  
Underground Station Group
     229               11       0       17       223       1       0       5       219  
Underground Station
     180               11       3       1       193       1       1       2       193  
Jarman Retail
     49               0       (3 )     16       30       0       (1 )     3       26  
Hat World Group
     641       49       104       0       9       785       51       0       7       829  
Johnston & Murphy Group
     142               13       0       7       148       6       0       0       154  
Shops
     107               7       0       5       109       4       0       0       113  
Factory Outlets
     35               6       0       2       39       2       0       0       41  
 
Total Retail Units
     1,773       49       224       0       37       2,009       116       0       14       2,111  
 
Retail Units Operated — Three Months Ended August 4, 2007
                                         
    Balance                             Balance  
    05/05/07     Open     Conv     Close     08/04/07  
 
Journeys Group
     884       25       0       0       909  
Journeys
     777       12       0       0       789  
Journeys Kidz
     84       7       0       0       91  
Shi by Journeys
     23       6       0       0       29  
Underground Station Group
     223       0       0       4       219  
Underground Station
     195       0       0       2       193  
Jarman Retail
     28       0       0       2       26  
Hat World Group
     809       25       0       5       829  
Johnston & Murphy Group
     152       2       0       0       154  
Shops
     112       1       0       0       113  
Factory Outlets
     40       1       0       0       41  
 
Total Retail Units
     2,068       52       0       9       2,111  
 
Constant Store Sales
                                 
    Three Months Ended   Six Months Ended
    August 4,   July 29,   August 4,   July 29,
    2007   2006   2007   2006
     
Journeys Group
     -7 %     5 %     -2 %     3 %
Underground Station Group
     -23 %     -6 %     -22 %     -5 %
Underground Station
     -25 %     -5 %     -24 %     -3 %
Jarman Retail
     -12 %     -11 %     -13 %     -10 %
Hat World Group
     -2 %     0 %     -3 %     0 %
Johnston & Murphy Group
     5 %     -3 %     4 %     -1 %
Shops
     5 %     -2 %     4 %     0 %
Factory Outlets
     6 %     -6 %     6 %     -3 %
 
Total Constant Store Sales
     -6 %     1 %     -4 %     1 %