NASHVILLE, Tenn., Dec. 6, 2018 /PRNewswire/ —
Third Quarter Fiscal 2019 Financial Summary
- Net sales were $713 million
- Comparable sales increased 4%
- GAAP EPS from continuing operations was $0.74
- Non-GAAP EPS from continuing operations was $0.951
Genesco Inc. (NYSE: GCO) today reported GAAP earnings from continuing operations per diluted share of $0.74 for the three months ended November 3, 2018, compared to a loss per diluted share of $(8.55) in the third quarter last year. Adjusted for the Excluded Items in both periods, the Company reported third quarter earnings from continuing operations per diluted share of $0.95, compared to earnings per diluted share of $1.02 last year.
Robert J. Dennis, Chairman, President and Chief Executive Officer, said:
“We achieved our highest quarterly comparable sales increase in more than two years driven by the ongoing strength of our U.S. footwear businesses. Journeys and Johnston & Murphy delivered strong performances both in-store and online, which fueled an acceleration in our combined consolidated store and digital comps on a sequential basis. While still negative, sales trends at both the Lids Sports Group and Schuh Group continued to improve following a very challenging start to the year. Even with the strong comp result, sales were down year-over-year due primarily to the calendar shift that moved an important back-to-school sales week out of the third quarter into the second quarter. At the same time, a change in timing of catalog expenses due to new revenue recognition standards contributed to an increase in operating costs. All of this resulted in earnings per share that were slightly ahead of our expectations but below last year’s level.
“The fourth quarter has started well, highlighted by solid results during the Black Friday through Cyber Monday period. While we are optimistic about continued strength at Journeys and Johnston & Murphy, the persistent negative comps at Lids and Schuh keep us cautious for the balance of the year, with the greater part of holiday shopping ahead of us. Looking further ahead, we believe the many initiatives we’ve recently executed have the Company well positioned to generate increased profitability and deliver greater shareholder value in fiscal 2020.”
Third Quarter Review
Net sales for the third quarter of Fiscal 2019 decreased 1% to $713 million from $717 million in the third quarter of Fiscal 2018. Comparable sales increased 4%, with stores up 4% and direct up 9%. Direct-to-consumer sales were 11% of total retail sales for the quarter, compared to 10% last year.
| Comparable Sales | ||
| Comparable Same Store and Direct Sales: | 3QFY19 | 3QFY18 |
| Journeys Group | 9% | 4% |
| Schuh Group | (4)% | 4% |
| Lids Sports Group | (2)% | (6)% |
| Johnston & Murphy Group | 10% | (1)% |
| Total Genesco Comparable Sales | 4% | 1% |
|
Same Store Sales |
4% | (2)% |
| Comparable Direct Sales | 9% | 24% |
Third quarter gross margin this year was 49.5% compared with 49.4% last year.
Selling and administrative expense for the third quarter this year was 45.9%, up 90 basis points, compared to 45.0% of sales for the same period last year. The increase as a percentage of sales reflects higher bonus accruals and the shift in timing of catalog expenses, partially offset by the leveraging of rents and several other expense categories.
Genesco’s GAAP operating income for the third quarter was $19.5 million this year compared with an operating loss of $152.4 million last year. Adjusted for the Excluded Items in both periods, operating income for the third quarter was $26.0 million this year compared with operating income of $31.3 million last year. Adjusted operating margin was 3.7% of sales in the third quarter of Fiscal 2019 and 4.4% last year.
The effective tax rate for the quarter was 22.1% in Fiscal 2019 compared to -7.1% last year. The adjusted tax rate, reflecting Excluded Items, was 25.9% in Fiscal 2019 compared to 33.9% last year. The lower adjusted tax rate for this year reflects the lower U.S. federal income tax rate following the passage of the Tax Cut and Jobs Act in December 2017, partially offset by the inability to recognize a tax benefit for certain overseas losses.
GAAP earnings from continuing operations were $14.5 million in the third quarter of Fiscal 2019, compared to a loss of $164.8 million in the third quarter last year. Adjusted for the Excluded Items in both periods, third quarter earnings from continuing operations were $18.7 million in Fiscal 2019, compared to earnings from continuing operations of $19.7 million last year.
Cash, Borrowings and Inventory
Cash and cash equivalents at November 3, 2018 were $53.4 million, compared with $50.7 million at October 28, 2017.  Total debt at the end of the third quarter of Fiscal 2019 was $81.8 million compared with $223.6 million at the end of last year’s third quarter, a decrease of 63%. Inventories decreased 5% in the third quarter of Fiscal 2019 on a year-over-year basis.
Capital Expenditures and Store Activity
For the third quarter, capital expenditures were $16 million, which consisted of $10 million related to store remodels and new stores and $6 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 15 new stores and closed 19 stores. Excluding Locker Room by Lids in Macy’s stores, the Company ended the quarter with 2,534 stores compared with 2,604 stores at the end of the third 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 narrowing its previously announced guidance range for adjusted diluted earnings per share and reiterating its expectation that earnings for the year will be near the midpoint of the range. The Company expects:
- Comparable sales to be up 2% to 3%, and
- Adjusted diluted earnings per share in the range of $3.10 to $3.40.2
Access the conference call below for details regarding 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 Groupdivision 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.
