NASHVILLE, Tenn., Sept. 7, 2018 /PRNewswire/ —
Second Quarter Fiscal 2019 Financial Summary
- Net sales increased 6% to $654 million
- Comparable sales increased 3%
- GAAP EPS from continuing operations was $0.01
- Non-GAAP EPS from continuing operations was $0.041
Genesco Inc. (NYSE: GCO) for the three months ended August 4, 2018, today reported GAAP earnings from continuing operations per diluted share of $0.01, compared to a loss per diluted share of $(0.20) in the second quarter last year. Adjusted for the Excluded Items in both periods, the Company reported second quarter earnings from continuing operations per diluted share of $0.04, compared to a loss per diluted share of $(0.10) last year.
Robert J. Dennis, Chairman, President and Chief Executive Officer, said:
“Our second quarter performance was highlighted by our strongest quarterly comparable sales increase in more than two years. Sales trends at Journeys and Johnston & Murphy accelerated compared with solid first quarter results driven by positive store comps at both businesses, leading to our first overall positive store comp in eight quarters. This positive store comp allowed us to leverage expenses, which along with the move of an important back-to-school sales week into the second quarter due to the calendar shift, led to a significant improvement in overall profitability versus the prior year period. Comparable sales at the Lids Sports Group remained negative, although trends once again improved on a sequential basis. Similarly, Schuh’s comp result was meaningfully better versus the first quarter, however, it was still negative as several factors in the U.K. combined to create a challenging selling environment during the second quarter.
“The third quarter so far has seen an acceleration in comparable sales over the second quarter driven by the continued strength of our U.S. footwear businesses during the heart of the important back-to-school season. We are encouraged by the momentum at Journeys and Johnston & Murphy but remain cautious in our outlook for Lids and Schuh over the remainder of the fiscal year due to the lack of visibility into improving trends. Longer-term, we continue to believe that the work we are doing to transform our operating model in response to changing consumer behavior and the evolving retail environment will lead to enhanced profitability and greater shareholder value.”
Second Quarter Review
Net sales for the second quarter of Fiscal 2019 increased 6% to $654 million from $617 millionin the second quarter of Fiscal 2018. Comparable sales increased 3%, with stores up 2% and direct up 7%. Direct-to-consumer sales were 10% of total retail sales for the quarter, up a little over last year.
| Comparable Sales | ||
| Comparable Same Store and Direct Sales: | 2QFY19 | 2QFY18 |
| Journeys Group | 10% | 1% |
| Schuh Group | (7)% | 3% |
| Lids Sports Group | (5)% | (2)% |
| Johnston & Murphy Group | 8% | (1)% |
| Total Genesco Comparable Sales | 3% | 0% |
|
Same Store Sales |
2% | (2)% |
| Comparable Direct Sales | 7% | 30% |
Second quarter gross margin this year was 49.2% compared with 49.7% last year. The 50 basis point decrease reflects primarily increased markdowns to clear slower-moving product at Schuh and Johnston & Murphy’s wholesale operations, as well as at Journeys due in part to the shift in the calendar, partially offset by better full price selling in the Company’s other business segments.
Selling and administrative expense for the second quarter this year was 48.8%, down 120 basis points, compared to 50.0% of sales for the same period last year. The decrease as a percentage of sales reflects the leveraging of rents, selling salaries, and several other expense categories on higher sales, partially offset by higher bonus accruals.
Genesco’s GAAP operating income for the second quarter was $1.4 million this year compared with an operating loss of $2.0 million last year. Adjusted for the Excluded Items in both periods, operating income for the second quarter was $2.4 million this year compared with an operating loss of $1.6 million last year. Adjusted operating margin was 0.4% of sales in the second quarter of Fiscal 2019 and (0.3)% last year.
The effective tax rate for the quarter was 35.5% in Fiscal 2019 compared to -18.9% last year. The adjusted tax rate, reflecting Excluded Items, was 37.6% in Fiscal 2019 compared to 31.9% last year. The higher adjusted tax rate for this year reflects the inability to recognize a tax benefit for certain overseas losses, partially offset by the lower U.S. federal income tax rate following the passage of the Tax Cut and Jobs Act in December 2017.
GAAP earnings from continuing operations were $0.2 million in the second quarter of Fiscal 2019, compared to a loss of $3.9 million in the second quarter last year. Adjusted for the Excluded Items in both periods, second quarter earnings from continuing operations were $0.8 million in Fiscal 2019, compared with a loss of $2.0 million last year.
Cash, Borrowings and Inventory
Cash and cash equivalents at August 4, 2018 were $49.8 million, compared with $43.5 millionat July 29, 2017.  Total debt at the end of the second quarter of Fiscal 2019 was $83.3 millioncompared with $190.9 million at the end of last year’s second quarter, a decrease of 56%. Inventories decreased 9% in the second quarter of Fiscal 2019 on a year-over-year basis.
Capital Expenditures and Store Activity
For the second quarter, capital expenditures were $12 million, which consisted of $7 millionrelated to store remodels and new stores and $5 million related to direct to consumer, omnichannel, information technology, distribution center and other projects.    Depreciation and amortization was $19 million. During the quarter, the Company opened eight new stores and closed 31 stores. Excluding Locker Room by Lids in Macy’s stores, the Company ended the quarter with 2,540 stores compared with 2,621 stores at the end of the second quarter last year, or a decrease of 3%. Square footage was down 2% on a year-over-year basis, both including and excluding Lids Locker Room departments in Macy’s stores.
Fiscal 2019 Outlook
For Fiscal 2019, the Company is reiterating its previously announced full-year guidance and expects:
- Comparable sales to be up 1% to 3%, and
- Adjusted diluted earnings per share in the range of $3.05 to $3.45.2
Access the conference call referenced below for details regarding changes in guidance assumptions.
About Genesco Inc.
Genesco Inc., a Nashville-based specialty retailer, sells footwear, headwear, sports apparel and accessories in more than 2,650 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, Little Burgundy, Lids, Locker Room by Lids, Johnston & Murphy, and on internet websites www.journeys.com, www.journeyskidz.com, www.journeys.ca, www.shibyjourneys.com, www.schuh.co.uk, www.littleburgundyshoes.com, www.johnstonmurphy.com, www.lids.com, www.lids.ca, www.lidslockerroom.com, www.trask.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.  In addition, Genesco sells wholesale footwear under its Johnston & Murphy brand, the Trask brand, the licensed Dockers brand, and other brands. For more information on Genesco and its operating divisions, please visit www.genesco.com.
