8-K
GENESCO INC (GCO)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): September 3, 2020 (September 3, 2020)
GENESCO INC.
(Exact name of registrant as specified in its charter)
| Tennessee | 1-3083 | 62-0211340 | |
|---|---|---|---|
| (State or Other Jurisdiction<br><br><br>of Incorporation) | (Commission<br><br><br>File Number) | (I.R.S. Employer<br><br><br>Identification No.) | |
| 1415 Murfreesboro Pike | Nashville | Tennessee | 37217-2895 |
| (Address of Principal Executive Offices) | (Zip Code) |
(615) 367-7000
Registrant's telephone number, including area code
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| --- | --- |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of exchange on which registered |
|---|---|---|
| Common Stock, $1.00 par value | GCO | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
☐
ITEM 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
On September 3, 2020, Genesco Inc. issued a press release announcing results of operations for the fiscal second quarter ended August 1, 2020. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
On September 3, 2020, the Company also posted on its website, www.genesco.com, a slide presentation with summary results. A copy of the slide presentation is furnished as Exhibit 99.2 to this Current Report on Form 8-K.
In addition to disclosing financial results calculated in accordance with United States generally accepted accounting principles (GAAP), the press release furnished herewith contains non-GAAP financial measures, including adjusted selling and administrative expense, operating income, pretax earnings, earnings from continuing operations and earnings per share from continuing operations, as discussed in the text of the release and as detailed on the reconciliation schedule attached to the press release. For consistency and ease of comparison with the adjusted results for the prior period announced last year, the Company believes that disclosure of the non-GAAP measures will be useful to investors.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.
(d) Exhibits
The following exhibits are furnished herewith:
| Exhibit Number | Description |
|---|---|
| 99.1 | Press Release issued by Genesco Inc. dated September 3, 2020 |
| 99.2 | Genesco Inc. Second Fiscal Quarter Ended August 1, 2020 Summary Results |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| GENESCO INC. | ||
|---|---|---|
| Date: September 3, 2020 | By: | /s/ Melvin G. Tucker |
| Name: | Melvin G. Tucker | |
| Title: | Senior Vice President and Chief Financial Officer |
gco-ex991_8.htm
Exhibit 99.1
GENESCO INC. REPORTS FISCAL 2021 SECOND QUARTER RESULTS
Reopened Stores in a Phased Approach; 96% of Stores Now Open
Strong Digital Demand in Second Quarter
Second Quarter Fiscal 2021 Financial Summary
| • | Net sales decreased 20% from last year to $391 million with stores open about 70% of days |
|---|---|
| • | Robust 144% e-commerce growth |
| --- | --- |
| • | Generated $74 million of operating cash flow |
| --- | --- |
NASHVILLE, Tenn., Sept. 3, 2020 --- Genesco Inc. (NYSE: GCO) today reported a GAAP loss from continuing operations per diluted share of ($1.33) for the three months ended August 1, 2020, compared to earnings from continuing operations per diluted share of $0.05 in the second quarter last year. Adjusted for the excluded items in both periods, the Company reported a second quarter loss from continuing operations per diluted share of ($1.23), compared to earnings from continuing operations per diluted share of $0.15 last year.
Mimi E. Vaughn, Genesco Board Chair, President and Chief Executive Officer, said, “The second quarter began with consumers enthusiastically returning to our physical locations as we began reopening stores and continuing to actively engage and shop with us online. The speed and executional excellence our teams demonstrated in getting our stores open and operational was a huge advantage as we often opened on the first day permitted by local authorities. Despite our stores being open for about 70% of the days in the second quarter, total net revenue decreased only 20% as the drop in store volume was partially offset by a notable 144% increase in e-commerce sales as we pivoted to digital. Equally encouraging was our ability to reduce expenses and inventories in line with sales and to generate cash during the quarter. Journeys generated a positive operating income for the quarter, but gross margin headwinds especially at Johnston & Murphy and Schuh led to a consolidated operating loss.
“Towards the end of the second quarter and to begin the third quarter, our business in North America was significantly impacted by the changes in back-to-school timing brought on by the pandemic. This includes schools in several areas of the country starting later than last year and many others not returning to in-person learning. As such we believe the back-to-school selling season will extend deeper into the third quarter which has limited visibility as we head into the back half. I am incredibly proud of how our teams have responded to the unprecedented challenges we’ve faced thus far in Fiscal 2021. This, along with the strong strategic positioning of our businesses and current liquidity, gives me confidence that we will successfully weather this storm and emerge strong to take advantage of the many opportunities on the other side.”
______________________
1Excludes retail store asset impairment charges and a change in vacation policy, net of tax effect in the second quarter of Fiscal 2021 (“Excluded Items”). A reconciliation of earnings/loss and earnings/loss per share from continuing operations in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) with the adjusted earnings/loss and earnings/loss per share numbers is set forth on Schedule B to this press release. The Company believes that disclosure of earnings and earnings per share from continuing operations adjusted for the items not reflected in the previously announced expectations will be meaningful to investors, especially in light of the impact of such items on the results.
Store Re-Opening Update
Currently, the Company is operating in 96% of its locations, including approximately 1,130 Journeys, 160 Johnston & Murphy, and 125 Schuh locations.
All store locations are operating under enhanced measures to ensure the health and safety of employees and customers.
Genesco will continue its phased approach to reopen stores when:
| • | state and local governments have allowed stores to operate, |
|---|---|
| • | the Company believes it can operate safely under its enhanced health and safety measures, and |
| --- | --- |
| • | the Company believes that it can ensure the safety of its employees and customers. |
| --- | --- |
Second Quarter Review
Net sales for the second quarter of Fiscal 2021 decreased 20% to $391 million from $487 million in the second quarter of Fiscal 2020. This sales decrease was driven by store closures, a later start to back-to-school, lower store comps and lower wholesale sales, partially offset by digital comp growth of 144%. As a result of the store closures and gradual reopening of stores in response to COVID-19, the Company has not included second quarter Fiscal 2021 comparable sales, except for comparable direct sales, as it believes that overall sales is a more meaningful metric during this period.
| Comparable Sales | ||
|---|---|---|
| Comparable Same Store and Direct Sales: | 2QFY21 | 2QFY20 |
| Journeys Group | NA | 4% |
| Schuh Group | NA | 0% |
| Johnston & Murphy Group | NA | 1% |
| Total Genesco Comparable Sales | NA | 3% |
| Same Store Sales | NA | 1% |
| Comparable Direct Sales | 144% | 20% |
Overall sales were down 12% for Journeys, 22% at Schuh, and 64% at J&M while sales were up 62% at Licensed Brands due to the Togast acquisition.
Second quarter gross margin this year was 42.7%, down 590 basis points, compared with 48.6% last year. The decrease as a percentage of sales is due primarily to higher shipping and warehouse expense in all divisions driven by the increase in penetration of e-commerce, significant inventory reserves taken at Johnston & Murphy, and increased promotional activity at Schuh.
Adjusted selling and administrative expense for the second quarter this year increased 40 basis points as a percentage of net sales due to lower sales as a result of COVID-19. On a dollar basis, expenses decreased 19% compared to the same period last year driven by disciplined expense management, including: reduced selling salaries, occupancy, and compensation expense along with lower travel, advertising and bonus expenses.
Genesco’s GAAP operating loss for the second quarter was $(22.0) million, or (5.6)% of sales this year compared with operating income of $3.0 million, or 0.6% of sales last year. Adjusted for the excluded items in both periods, the operating loss for the second quarter was $(20.9) million this year compared with operating income of $4.7 million last year. Adjusted operating margin was (5.3)% of sales in the second quarter of Fiscal 2021 and 1.0% last year.
The effective tax rate for the quarter was 20.3% in Fiscal 2021 compared to 70.7% last year. The adjusted tax rate, reflecting excluded items, was 23.0% in Fiscal 2021 compared to 45.2% last year. The lower adjusted tax rate for this year primarily reflects the inability to recognize a tax benefit for certain foreign losses.
The GAAP loss from continuing operations was $(18.9) million in the second quarter of Fiscal 2021, compared to earnings from continuing operations of $0.8 million in the second quarter last year. Adjusted for the excluded items in both periods, the second quarter loss from continuing operations was $(17.4) million, or ($1.23) loss per share in Fiscal 2021, compared to earnings from continuing operations of $2.5 million, or $0.15 earnings per share last year.
Cash, Borrowings and Inventory
Cash and cash equivalents at August 1, 2020, were $299.1 million, compared with $58.0 million at August 3, 2019. Cash increased $60.6 million during the second quarter driven primarily by operating activities generating $74.4 million, partially offset by a use of cash in financing activities of $12.0 million, capital expenditures and other activities. Total debt at the end of the second quarter of Fiscal 2021 was $210.9 million compared with $75.1 million at the end of last year’s second quarter. Total unused availability as of August 1, 2020 was $63.4 million. Inventories decreased 18% in the second quarter of Fiscal 2021 on a year-over-year basis.
Capital Expenditures and Store Activity
For the second quarter, capital expenditures were $4 million, primarily related to digital and omni-channel initiatives and store projects already in progress. Depreciation and amortization was $12 million. During the quarter, the Company opened three new stores and closed six stores. The Company ended the quarter with 1,476 stores compared with 1,494 stores at the end of the second quarter last year, or a decrease of 1%. Square footage was down 1% on a year-over-year basis.
Share Repurchases
The Company did not repurchase any shares during the second quarter of Fiscal 2021.
Fiscal 2021 Outlook
Due to the continued uncertainty in the overall economy driven by COVID-19, the Company is not providing guidance at this time.
Conference Call, Management Commentary and Investor Presentation
The Company has posted detailed financial commentary and a supplemental financial presentation of second quarter results on its website, www.genesco.com, in the investor relations section. The Company’s live conference call on September 3, 2020, at 7:30 a.m. (Central time), may be accessed through the Company’s 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.
Safe Harbor Statement
This release contains forward-looking statements, including those regarding the performance outlook for the Company and its individual businesses (including, without limitation, those regarding back-to-school and holiday selling seasons and its ability to keep stores open, operate the stores safely and ensure the
safety of customers and employees) 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 adjustments to estimates and projections reflected in forward-looking statements, including as a result of the effects of COVID-19 on the Company’s business including whether there are periods of increases in the number of COVID-19 cases in locations in which the Company operates, further closures of stores due to COVID-19, weakness in store and shopping mall traffic, restrictions on operations imposed by government entities and landlords, changes in public safety and health requirements, the Company’s ability to adequately staff stores, limitations on the Company’s ability to provide adequate personal protective equipment to employees, and the Company’s ability to maintain social distancing requirements; stores closures and effects on the business as a result of civil disturbances; the level and timing of promotional activity necessary to maintain inventories at appropriate levels; the imposition of tariffs on products imported by the Company or its vendors as well as the ability and costs to move production of products in response to tariffs; the Company’s ability to obtain from suppliers products that are in-demand on a timely basis and effectively manage disruptions in product supply or distribution, including disruptions as a result of COVID-19; unfavorable trends in fuel costs, foreign exchange rates, foreign labor and material costs, and other factors affecting the cost of products; the effects of the British decision to exit the European Union and other sources of weakness in the U.K. market; the effectiveness of the Company's omnichannel initiatives; costs associated with changes in minimum wage and overtime requirements; wage pressure in the U.S. and the U.K.; weakness in the consumer economy and retail industry; competition and fashion trends in the Company's markets; risks related to the potential for terrorist events; risks related to public health and safety events, including for example, the COVID-19 coronavirus; changes in buying patterns by significant wholesale customers; retained liabilities associated with divestitures of businesses including potential liabilities under leases as the prior tenant or as a guarantor of certain leases; and changes in the timing of holidays or in the onset of seasonal weather affecting period-to-period sales comparisons. Additional factors that could cause differences from expectations include the ability to renew leases in existing stores and control or lower occupancy costs, and to conduct required remodeling or refurbishment on schedule and at expected expense levels; the Company’s ability to eliminate stranded costs associated with dispositions, including the sale of the Lids Sport Group business; the Company’s ability to realize anticipated cost savings, including rent savings; deterioration in the performance of individual businesses or of the Company's market value relative to its book value, resulting in impairments of fixed assets, operating lease right of use assets or intangible assets or other adverse financial consequences and the timing and amount of such impairments or other consequences; unexpected changes to the market for the Company's shares or for the retail sector in general; costs and reputational harm as a result of disruptions in the Company’s business or information technology systems either by security breaches and incidents or by potential problems associated with the implementation of new or upgraded systems; and the cost and outcome of litigation, investigations and environmental matters involving the Company. Additional factors are cited in the "Risk Factors," "Legal Proceedings" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections of, and elsewhere in, the Company’s SEC filings, copies of which may be obtained from the SEC website, www.sec.gov, or by contacting the investor relations department of Genesco via the Company’s website, www.genesco.com. Many of the factors that will determine the outcome of the subject matter of this release are beyond Genesco's ability to control or predict. Genesco undertakes no obligation to release publicly the results of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Forward-looking statements reflect the expectations of the Company at the time they are made. The Company disclaims any obligation to update such statements.
About Genesco Inc.
Genesco Inc., a Nashville-based specialty retailer, sells footwear and accessories in more than 1,475 retail stores throughout the U.S., Canada, the United Kingdom and the Republic of Ireland, principally under the names Journeys, Journeys Kidz, Schuh, Schuh Kids, Little Burgundy, Johnston & Murphy, and on internet websites www.journeys.com, www.journeyskidz.com, www.journeys.ca, www.littleburgundyshoes.com, www.schuh.co.uk, www.johnstonmurphy.com, www.johnstonmurphy.ca, and www.dockersshoes.com. In addition, Genesco sells wholesale footwear under its Johnston & Murphy brand, the licensed Dockers brand, the licensed Levi’s brand, the licensed Bass brand, and other brands. For more information on Genesco and its operating divisions, please visit www.genesco.com.
Genesco Inc. Financial ContactsGenesco Inc. Media Contact
Mel TuckerClaire S. McCall
Senior Vice President, Chief Financial Officer Director, Corporate Relations
(615) 367-7465(615) 367-8283
mtucker@genesco.comcmccall@genesco.com
Dave Slater
Vice President, Financial Planning & Analysis and IR
(615) 367-7604
dslater@genesco.com
GENESCO INC.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(Unaudited)
| Quarter 2 | Quarter 2 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| August 1,<br><br><br>2020 | % of<br><br><br>Net Sales | August 3,<br><br><br>2019 | % of<br><br><br>Net Sales | |||||||||
| Net sales | $ | 391,217 | 100.0 | % | $ | 486,573 | 100.0 | % | ||||
| Cost of sales | 224,217 | 57.3 | % | 250,040 | 51.4 | % | ||||||
| Gross margin | 167,000 | 42.7 | % | 236,533 | 48.6 | % | ||||||
| Selling and administrative expenses | 187,261 | 47.9 | % | 231,796 | 47.6 | % | ||||||
| Asset impairments and other, net | 1,733 | 0.4 | % | 1,775 | 0.4 | % | ||||||
| Operating income (loss) | (21,994 | ) | -5.6 | % | 2,962 | 0.6 | % | |||||
| Other components of net periodic benefit cost | (182 | ) | 0.0 | % | (93 | ) | 0.0 | % | ||||
| Interest expense, net | 1,918 | 0.5 | % | 347 | 0.1 | % | ||||||
| Earnings (loss) from continuing operations before income taxes | (23,730 | ) | -6.1 | % | 2,708 | 0.6 | % | |||||
| Income tax expense (benefit) | (4,806 | ) | -1.2 | % | 1,915 | 0.4 | % | |||||
| Earnings (loss) from continuing operations | (18,924 | ) | -4.8 | % | 793 | 0.2 | % | |||||
| Loss from discontinued operations, net of tax | (112 | ) | 0.0 | % | (216 | ) | 0.0 | % | ||||
| Net Earnings (Loss) | $ | (19,036 | ) | -4.9 | % | $ | 577 | 0.1 | % | |||
| Basic earnings (loss) per share: | ||||||||||||
| Before discontinued operations | $ | (1.33 | ) | $ | 0.05 | |||||||
| Net earnings (loss) | $ | (1.34 | ) | $ | 0.04 | |||||||
| Diluted earnings (loss) per share: | ||||||||||||
| Before discontinued operations | $ | (1.33 | ) | $ | 0.05 | |||||||
| Net earnings (loss) | $ | (1.34 | ) | $ | 0.04 | |||||||
| Weighted-average shares outstanding: | ||||||||||||
| Basic | 14,179 | 15,959 | ||||||||||
| Diluted | 14,179 | 16,028 |
GENESCO INC.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(Unaudited)
| Six Months Ended | Six Months Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| August 1,<br><br><br>2020 | % of<br><br><br>Net Sales | August 3,<br><br><br>2019 | % of<br><br><br>Net Sales | |||||||||
| Net sales | $ | 670,449 | 100.0 | % | $ | 982,224 | 100.0 | % | ||||
| Cost of sales | 383,305 | 57.2 | % | 500,783 | 51.0 | % | ||||||
| Gross margin | 287,144 | 42.8 | % | 481,441 | 49.0 | % | ||||||
| Selling and administrative expenses | 376,303 | 56.1 | % | 468,351 | 47.7 | % | ||||||
| Goodwill impairment | 79,259 | 11.8 | % | — | 0.0 | % | ||||||
| Asset impairments and other, net | 9,594 | 1.4 | % | 1,044 | 0.1 | % | ||||||
| Operating income (loss) | (178,012 | ) | -26.6 | % | 12,046 | 1.2 | % | |||||
| Other components of net periodic benefit cost | (306 | ) | 0.0 | % | (179 | ) | 0.0 | % | ||||
| Interest expense, net | 2,774 | 0.4 | % | 181 | 0.0 | % | ||||||
| Earnings (loss) from continuing operations before income\ taxes | (180,480 | ) | -26.9 | % | 12,044 | 1.2 | % | |||||
| Income tax expense (benefit) | (26,932 | ) | -4.0 | % | 4,781 | 0.5 | % | |||||
| Earnings (loss) from continuing operations | (153,548 | ) | -22.9 | % | 7,263 | 0.7 | % | |||||
| Loss from discontinued operations, net of tax | (265 | ) | 0.0 | % | (340 | ) | 0.0 | % | ||||
| Net Earnings (Loss) | $ | (153,813 | ) | -22.9 | % | $ | 6,923 | 0.7 | % | |||
| Basic earnings (loss) per share: | ||||||||||||
| Before discontinued operations | $ | (10.86 | ) | $ | 0.43 | |||||||
| Net earnings (loss) | $ | (10.87 | ) | $ | 0.41 | |||||||
| Diluted earnings (loss) per share: | ||||||||||||
| Before discontinued operations | $ | (10.86 | ) | $ | 0.43 | |||||||
| Net earnings (loss) | $ | (10.87 | ) | $ | 0.41 | |||||||
| Weighted-average shares outstanding: | ||||||||||||
| Basic | 14,145 | 16,802 | ||||||||||
| Diluted | 14,145 | 16,939 |
GENESCO INC.
Sales/Earnings Summary by Segment
(in thousands)
(Unaudited)
| Quarter 2 | Quarter 2 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| August 1,<br><br><br>2020 | % of<br><br><br>Net Sales | August 3,<br><br><br>2019 | % of<br><br><br>Net Sales | |||||||||
| Sales: | ||||||||||||
| Journeys Group | $ | 276,631 | 70.7 | % | $ | 315,175 | 64.8 | % | ||||
| Schuh Group | 71,732 | 18.3 | % | 92,476 | 19.0 | % | ||||||
| Johnston & Murphy Group | 24,097 | 6.2 | % | 67,267 | 13.8 | % | ||||||
| Licensed Brands | 18,757 | 4.8 | % | 11,583 | 2.4 | % | ||||||
| Corporate and Other | — | 0.0 | % | 72 | 0.0 | % | ||||||
| Net Sales | $ | 391,217 | 100.0 | % | $ | 486,573 | 100.0 | % | ||||
| Operating Income (Loss): | ||||||||||||
| Journeys Group | $ | 10,160 | 3.7 | % | $ | 11,329 | 3.6 | % | ||||
| Schuh Group | (6,838 | ) | -9.5 | % | 39 | 0.0 | % | |||||
| Johnston & Murphy Group | (18,243 | ) | -75.7 | % | 1,518 | 2.3 | % | |||||
| Licensed Brands | (1,222 | ) | -6.5 | % | (251 | ) | -2.2 | % | ||||
| Corporate and Other^(1)^ | (5,851 | ) | -1.5 | % | (9,673 | ) | -2.0 | % | ||||
| Operating income (loss) | (21,994 | ) | -5.6 | % | 2,962 | 0.6 | % | |||||
| Other components of net periodic benefit cost | (182 | ) | 0.0 | % | (93 | ) | 0.0 | % | ||||
| Interest, net | 1,918 | 0.5 | % | 347 | 0.1 | % | ||||||
| Earnings (loss) from continuing operations before income taxes | (23,730 | ) | -6.1 | % | 2,708 | 0.6 | % | |||||
| Income tax expense (benefit) | (4,806 | ) | -1.2 | % | 1,915 | 0.4 | % | |||||
| Earnings (loss) from continuing operations | (18,924 | ) | -4.8 | % | 793 | 0.2 | % | |||||
| Loss from discontinued operations, net of tax | (112 | ) | 0.0 | % | (216 | ) | 0.0 | % | ||||
| Net Earnings (Loss) | $ | (19,036 | ) | -4.9 | % | $ | 577 | 0.1 | % | |||
| ^(1)^ | Includes a $1.7 million charge in the second quarter of Fiscal 2021 for retail store asset impairments. Includes a $1.7 million charge in the second quarter of Fiscal 2020 which includes $1.0 million for lease terminations and $0.7 million for retail store asset impairments. | |||||||||||
| --- | --- |
GENESCO INC.
Sales/Earnings Summary by Segment
(in thousands)
(Unaudited)
| Six Months Ended | Six Months Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| August 1,<br><br><br>2020 | % of<br><br><br>Net Sales | August 3,<br><br><br>2019 | % of<br><br><br>Net Sales | |||||||||
| Sales: | ||||||||||||
| Journeys Group | $ | 445,556 | 66.5 | % | $ | 639,147 | 65.1 | % | ||||
| Schuh Group | 118,897 | 17.7 | % | 169,320 | 17.2 | % | ||||||
| Johnston & Murphy Group | 62,946 | 9.4 | % | 142,001 | 14.5 | % | ||||||
| Licensed Brands | 43,050 | 6.4 | % | 31,666 | 3.2 | % | ||||||
| Corporate and Other | — | 0.0 | % | 90 | 0.0 | % | ||||||
| Net Sales | $ | 670,449 | 100.0 | % | $ | 982,224 | 100.0 | % | ||||
| Operating Income (Loss): | ||||||||||||
| Journeys Group | $ | (26,923 | ) | -6.0 | % | $ | 30,305 | 4.7 | % | |||
| Schuh Group | (21,924 | ) | -18.4 | % | (5,389 | ) | -3.2 | % | ||||
| Johnston & Murphy Group | (27,827 | ) | -44.2 | % | 6,624 | 4.7 | % | |||||
| Licensed Brands | (3,723 | ) | -8.6 | % | 178 | 0.6 | % | |||||
| Corporate and Other^(1)^ | (18,356 | ) | -2.7 | % | (19,672 | ) | -2.0 | % | ||||
| Goodwill Impairment | (79,259 | ) | -11.8 | % | — | 0.0 | % | |||||
| Operating income (loss) | (178,012 | ) | -26.6 | % | 12,046 | 1.2 | % | |||||
| Other components of net periodic benefit cost | (306 | ) | 0.0 | % | (179 | ) | 0.0 | % | ||||
| Interest, net | 2,774 | 0.4 | % | 181 | 0.0 | % | ||||||
| Earnings (loss) from continuing operations before income taxes | (180,480 | ) | -26.9 | % | 12,044 | 1.2 | % | |||||
| Income tax expense (benefit) | (26,932 | ) | -4.0 | % | 4,781 | 0.5 | % | |||||
| Earnings (loss) from continuing operations | (153,548 | ) | -22.9 | % | 7,263 | 0.7 | % | |||||
| Loss from discontinued operations, net of tax | (265 | ) | 0.0 | % | (340 | ) | 0.0 | % | ||||
| Net Earnings (Loss) | $ | (153,813 | ) | -22.9 | % | $ | 6,923 | 0.7 | % | |||
| ^(1)^ | Includes a $9.6 million charge in the first six months of Fiscal 2021 which includes a $5.3 million charge for trademark impairment and a $4.7 million charge for retail store asset impairments, partially offset by a $(0.4) million gain for the release of an earnout related to the Togast acquisition. Includes a $1.0 million charge in the first six months of Fiscal 2020 for retail store asset impairments. | |||||||||||
| --- | --- |
GENESCO INC.
Condensed Consolidated Balance Sheets
(in thousands)
(Unaudited)
| August 1,<br><br><br>2020 | August 3,<br><br><br>2019 | |||
|---|---|---|---|---|
| Assets | ||||
| Cash and cash equivalents | $ | 299,144 | $ | 57,965 |
| Accounts receivable | 54,793 | 26,626 | ||
| Inventories | 365,267 | 444,706 | ||
| Other current assets | 58,454 | 45,040 | ||
| Total current assets | 777,658 | 574,337 | ||
| Property and equipment | 220,458 | 261,924 | ||
| Operating lease right of use assets | 670,323 | 754,537 | ||
| Goodwill and other intangibles | 67,939 | 116,685 | ||
| Other non-current assets | 33,650 | 48,044 | ||
| Total Assets | $ | 1,770,028 | $ | 1,755,527 |
| Liabilities and Equity | ||||
| Accounts payable | $ | 178,541 | $ | 157,822 |
| Current portion long-term debt | 24,860 | 14,896 | ||
| Current portion operating lease liabilities | 199,392 | 141,233 | ||
| Other current liabilities | 88,047 | 87,511 | ||
| Total current liabilities | 490,840 | 401,462 | ||
| Long-term debt | 186,049 | 60,244 | ||
| Long-term operating lease liabilities | 593,723 | 671,047 | ||
| Other long-term liabilities | 38,552 | 38,153 | ||
| Equity | 460,864 | 584,621 | ||
| Total Liabilities and Equity | $ | 1,770,028 | $ | 1,755,527 |
GENESCO INC.
Store Count Activity
| Balance<br><br><br>02/02/2019 | Open | Close | Balance<br><br><br>02/01/2020 | Open | Close | Balance<br><br><br>08/01/2020 | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Journeys Group | 1,193 | 8 | 30 | 1,171 | 3 | 5 | 1,169 | |||||||
| Schuh Group | 136 | 1 | 8 | 129 | 1 | 3 | 127 | |||||||
| Johnston & Murphy Group | 183 | 3 | 6 | 180 | 2 | 2 | 180 | |||||||
| Total Retail Units | 1,512 | 12 | 44 | 1,480 | 6 | 10 | 1,476 |
GENESCO INC.
Store Count Activity
| Balance<br><br><br>05/02/2020 | Open | Close | Balance<br><br><br>08/01/2020 | |||||
|---|---|---|---|---|---|---|---|---|
| Journeys Group | 1,171 | 2 | 4 | 1,169 | ||||
| Schuh Group | 127 | 1 | 1 | 127 | ||||
| Johnston & Murphy Group | 181 | 0 | 1 | 180 | ||||
| Total Retail Units | 1,479 | 3 | 6 | 1,476 |
GENESCO INC.
Comparable Sales
| Quarter 2 | Six Months Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| August 1,<br><br><br>2020^(1)^ | August 3,<br><br><br>2019 | August 1,<br><br><br>2020^(1)^ | August 3,<br><br><br>2019 | |||||||||
| Journeys Group | NA | 4 | % | NA | 5 | % | ||||||
| Schuh Group | NA | 0 | % | NA | 1 | % | ||||||
| Johnston & Murphy Group | NA | 1 | % | NA | 0 | % | ||||||
| Total Comparable Sales | NA | 3 | % | NA | 4 | % | ||||||
| Same Store Sales | NA | 1 | % | NA | 3 | % | ||||||
| Comparable Direct Sales | 144 | % | 20 | % | 105 | % | 17 | % | ||||
| ^(1)^ | As a result of store closures in response to the COVID-19 pandemic, the Company has not included second quarter or year to date Fiscal 2021 comparable sales, except for comparable direct sales, as it believes that overall net sales is a more meaningful metric during this period. | |||||||||||
| --- | --- |
GENESCO INC.
COVID-19 Related Adjustments
(in thousands)
(Unaudited)
| Quarter 1 | Six Months | |||||
|---|---|---|---|---|---|---|
| August 1, 2020 | August 1, 2020 | |||||
| Goodwill impairment | $ | — | $ | 79,259 | ||
| Incremental retail store asset impairment^(1)^ | 1,002 | 3,736 | ||||
| Trademark impairment^(1)^ | — | 5,260 | ||||
| Release of Togast earnout^(1)^ | — | (441 | ) | |||
| Excess inventory^(2)^ | 2,469 | 4,277 | ||||
| Non-productive compensation^(3) and (4)^ | 1,443 | 4,688 | ||||
| UK property tax relief^(3)^ | (3,934 | ) | (5,489 | ) | ||
| Incremental bad debt reserve^(3)^ | 643 | 3,065 | ||||
| Other^(3) and (5)^ | 1,092 | 894 | ||||
| Total COVID-19 related adjustments | $ | 2,715 | $ | 95,249 | ||
| ^(1)^ | Included in asset impairments and other, net on the Condensed Consolidated Statements of Operations. | |||||
| --- | --- | |||||
| ^(2)^ | Included in cost of sales on the Condensed Consolidated Statements of Operations. | |||||
| --- | --- | |||||
| ^(^^3^^)^ | Included in selling and administrative expenses on the Condensed Consolidated Statements of Operations. | |||||
| --- | --- | |||||
| ^(4^^)^ | Certain compensation paid to furloughed workers and commission based associates, net of the CARES Act, UK and Canadian government relief. | |||||
| --- | --- | |||||
| ^(5^^)^ | Includes primarily severance and increased cleaning and personal protective equipment expenses in the second quarter and first six months of Fiscal 2021 and is partially offset by the reversal of percentage rent for the first six months of Fiscal 2021. | |||||
| --- | --- |
Schedule B
Genesco Inc.
Adjustments to Reported Earnings (Loss) from Continuing Operations
Three Months Ended August 1, 2020 and August 3, 2019
The Company believes that disclosure of earnings (loss) and earnings (loss) per share from continuing operations and operating income (loss) adjusted for the items not reflected in the previously announced expectations will be meaningful to investors, especially in light of the impact of such items on the results.
| Quarter 2 | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| August 1, 2020 | August 3, 2019 | |||||||||||||||
| In Thousands (except per share amounts) | Pretax | Net of<br><br><br>Tax | Per Share<br><br><br>Amounts | Pretax | Net of<br><br><br>Tax | Per Share<br><br><br>Amounts | ||||||||||
| Earnings (loss) from continuing operations, as reported | $ | (18,924 | ) | $ | (1.33 | ) | $ | 793 | $ | 0.05 | ||||||
| Asset impairments and other adjustments: | ||||||||||||||||
| Retail store asset impairment charges | $ | 1,733 | 1,313 | 0.09 | $ | 731 | 451 | 0.03 | ||||||||
| Loss on lease terminations | — | — | 0.00 | 1,044 | 717 | 0.04 | ||||||||||
| Change in vacation policy | (616 | ) | (463 | ) | (0.03 | ) | — | — | 0.00 | |||||||
| Gain on Hurricane Maria | — | — | 0.00 | — | 2 | 0.00 | ||||||||||
| Total asset impairments and other adjustments | $ | 1,117 | 850 | 0.06 | $ | 1,775 | 1,170 | 0.07 | ||||||||
| Income tax expense adjustments: | ||||||||||||||||
| Tax impact share based awards | 1,129 | 0.08 | (54 | ) | 0.00 | |||||||||||
| Other tax items | (471 | ) | (0.04 | ) | 547 | 0.03 | ||||||||||
| Total income tax expense adjustments | 658 | 0.04 | 493 | 0.03 | ||||||||||||
| Adjusted earnings (loss) from continuing operations ^(1) and (2)^ | $ | (17,416 | ) | $ | (1.23 | ) | $ | 2,456 | $ | 0.15 |
^(1)^ The adjusted tax rate for the second quarter of Fiscal 2021 and 2020 is 23.0% and 45.2%, respectively.
| ^(2)^ | EPS reflects 14.2 million and 16.0 million share count for the second quarter of Fiscal 2021 and 2020, respectively, which excludes common stock equivalents in the second quarter of Fiscal 2021 due to the loss from continuing operations and includes common stock equivalents in the second quarter of Fiscal 2020. |
|---|
Genesco Inc.
Adjustments to Reported Operating Income (Loss)
Three Months Ended August 1, 2020 and August 3, 2019
| Quarter 2 - August 1, 2020 | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| In Thousands | Operating<br><br><br>Income<br><br><br>(Loss) | Asset Impair<br><br><br>& Other Adj | Adj<br><br><br>Operating<br><br><br>Income<br><br><br>(Loss) | ||||||
| Journeys Group | $ | 10,160 | $ | (263 | ) | $ | 9,897 | ||
| Schuh Group | (6,838 | ) | — | (6,838 | ) | ||||
| Johnston & Murphy Group | (18,243 | ) | (96 | ) | (18,339 | ) | |||
| Licensed Brands | (1,222 | ) | (39 | ) | (1,261 | ) | |||
| Corporate and Other | (5,851 | ) | 1,515 | (4,336 | ) | ||||
| Total Operating Loss | $ | (21,994 | ) | $ | 1,117 | $ | (20,877 | ) | |
| % of sales | -5.6 | % | -5.3 | % | |||||
| Quarter 2 - August 3, 2019 | |||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | |
| In Thousands | Operating<br><br><br>Income<br><br><br>(Loss) | Asset Impair<br><br><br>& Other Adj | Adj<br><br><br>Operating<br><br><br>Income<br><br><br>(Loss) | ||||||
| Journeys Group | $ | 11,329 | $ | — | $ | 11,329 | |||
| Schuh Group | 39 | — | 39 | ||||||
| Johnston & Murphy Group | 1,518 | — | 1,518 | ||||||
| Licensed Brands | (251 | ) | — | (251 | ) | ||||
| Corporate and Other | (9,673 | ) | 1,775 | (7,898 | ) | ||||
| Total Operating Income | $ | 2,962 | $ | 1,775 | $ | 4,737 | |||
| % of sales | 0.6 | % | 1.0 | % |
Genesco Inc.
Adjustments to Reported Earnings (Loss) from Continuing Operations
Six Months Ended August 1, 2020 and August 3, 2019
The Company believes that disclosure of earnings (loss) and earnings (loss) per share from continuing operations and operating income (loss) adjusted for the items not reflected in the previously announced expectations will be meaningful to investors, especially in light of the impact of such items on the results.
| Six Months Ended | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| August 1, 2020 | August 3, 2019 | ||||||||||||||||
| In Thousands (except per share amounts) | Pretax | Net of Tax | Per Share<br><br><br>Amounts | Pretax | Net of<br><br><br>Tax | Per Share<br><br><br>Amounts | |||||||||||
| Earnings (loss) from continuing operations, as reported | $ | (153,548 | ) | $ | (10.86 | ) | $ | 7,263 | $ | 0.43 | |||||||
| Asset impairments and other adjustments: | |||||||||||||||||
| Retail store asset impairment charges | $ | 4,775 | 3,541 | 0.25 | $ | 1,038 | 663 | 0.04 | |||||||||
| Trademark impairment | 5,260 | 5,153 | 0.36 | — | — | 0.00 | |||||||||||
| Goodwill impairment | 79,259 | 79,259 | 5.60 | — | — | 0.00 | |||||||||||
| Loss on lease terminations | — | — | 0.00 | 44 | 28 | 0.00 | |||||||||||
| Release Togast earnout | (441 | ) | (323 | ) | (0.02 | ) | — | — | 0.00 | ||||||||
| Change in vacation policy | (1,232 | ) | (914 | ) | (0.06 | ) | — | — | 0.00 | ||||||||
| Gain on Hurricane Maria | — | — | 0.00 | (38 | ) | (24 | ) | 0.00 | |||||||||
| Total asset impairments and other adjustments | $ | 87,621 | 86,716 | 6.13 | $ | 1,044 | 667 | 0.04 | |||||||||
| Income tax expense adjustments: | |||||||||||||||||
| Tax impact share based awards | 1,129 | 0.08 | (54 | ) | 0.00 | ||||||||||||
| Other tax items | (3,161 | ) | (0.22 | ) | 489 | 0.02 | |||||||||||
| Total income tax expense adjustments | (2,032 | ) | (0.14 | ) | 435 | 0.02 | |||||||||||
| Adjusted earnings (loss) from continuing operations ^(1) and (2)^ | $ | (68,864 | ) | $ | (4.87 | ) | $ | 8,365 | $ | 0.49 | |||||||
| ^(1)^ | The adjusted tax rate for the first six months of Fiscal 2021 and 2020 is 25.8% and 36.1%, respectively. | ||||||||||||||||
| --- | --- | ||||||||||||||||
| ^(2)^ | EPS reflects 14.1 million and 16.9 million share count for the first six months of Fiscal 2021 and 2020, respectively, which excludes common stock equivalents in the first six months of Fiscal 2021 due to the loss from continuing operations and includes common stock equivalents in the first six months of Fiscal 2020. | ||||||||||||||||
| --- | --- |
Genesco Inc.
Adjustments to Reported Operating Income (Loss)
Six Months Ended August 1, 2020 and August 3, 2019
| Six Months Ended - August 1, 2020 | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| In Thousands | Operating<br><br><br>Income<br><br><br>(Loss) | Asset Impair<br><br><br>& Other Adj | Adj<br><br><br>Operating<br><br><br>Income<br><br><br>(Loss) | ||||||
| Journeys Group | $ | (26,923 | ) | $ | (526 | ) | $ | (27,449 | ) |
| Schuh Group | (21,924 | ) | — | (21,924 | ) | ||||
| Johnston & Murphy Group | (27,827 | ) | (192 | ) | (28,019 | ) | |||
| Licensed Brands | (3,723 | ) | (78 | ) | (3,801 | ) | |||
| Corporate and Other | (97,615 | ) | 88,417 | (9,198 | ) | ||||
| Total Operating Income | $ | (178,012 | ) | $ | 87,621 | $ | (90,391 | ) | |
| % of sales | -26.6 | % | -13.5 | % | |||||
| Six Months Ended - August 3, 2019 | |||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | |
| In Thousands | Operating<br><br><br>Income<br><br><br>(Loss) | Asset Impair<br><br><br>& Other Adj | Adj<br><br><br>Operating<br><br><br>Income<br><br><br>(Loss) | ||||||
| Journeys Group | $ | 30,305 | $ | — | $ | 30,305 | |||
| Schuh Group | (5,389 | ) | — | (5,389 | ) | ||||
| Johnston & Murphy Group | 6,624 | — | 6,624 | ||||||
| Licensed Brands | 178 | — | 178 | ||||||
| Corporate and Other | (19,672 | ) | 1,044 | (18,628 | ) | ||||
| Total Operating Income | $ | 12,046 | $ | 1,044 | $ | 13,090 | |||
| % of sales | 1.2 | % | 1.3 | % |
gco-ex992_40.pptx.htm
FY21 Second Quarter June 9, 2020 September 3, 2020 Exhibit 99.2
Genesco Inc. FY21 Q2 Earnings Summary Results September 3, 2020
Safe Harbor Statement This presentation contains forward-looking statements, including those regarding the performance outlook for the Company and its individual businesses (including, without limitation, those regarding back-to-school and holiday selling seasons and its ability to keep stores open, operate the stores safely and ensure the safety of customers and employees) 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 adjustments to estimates and projections reflected in forward-looking statements, including as a result of the effects of COVID-19 on the Company’s business including whether there are periods of increases in the number of COVID-19 cases in locations in which the Company operates, further closures of stores due to COVID-19, weakness in store and shopping mall traffic, restrictions on operations imposed by government entities and landlords, changes in public safety and health requirements, the Company’s ability to adequately staff stores, limitations on the Company’s ability to provide adequate personal protective equipment to employees, and the Company’s ability to maintain social distancing requirements; stores closures and effects on the business as a result of civil disturbances; the level and timing of promotional activity necessary to maintain inventories at appropriate levels; the imposition of tariffs on products imported by the Company or its vendors as well as the ability and costs to move production of products in response to tariffs; the Company’s ability to obtain from suppliers products that are in-demand on a timely basis and effectively manage disruptions in product supply or distribution, including disruptions as a result of COVID-19; unfavorable trends in fuel costs, foreign exchange rates, foreign labor and material costs, and other factors affecting the cost of products; the effects of the British decision to exit the European Union and other sources of weakness in the U.K. market; the effectiveness of the Company's omnichannel initiatives; costs associated with changes in minimum wage and overtime requirements; wage pressure in the U.S. and the U.K.; weakness in the consumer economy and retail industry; competition and fashion trends in the Company's markets; risks related to the potential for terrorist events; risks related to public health and safety events, including for example, the COVID-19 coronavirus; changes in buying patterns by significant wholesale customers; retained liabilities associated with divestitures of businesses including potential liabilities under leases as the prior tenant or as a guarantor of certain leases; and changes in the timing of holidays or in the onset of seasonal weather affecting period-to-period sales comparisons. Additional factors that could cause differences from expectations include the ability to renew leases in existing stores and control or lower occupancy costs, and to conduct required remodeling or refurbishment on schedule and at expected expense levels; the Company’s ability to eliminate stranded costs associated with dispositions, including the sale of the Lids Sport Group business; the Company’s ability to realize anticipated cost savings, including rent savings; deterioration in the performance of individual businesses or of the Company's market value relative to its book value, resulting in impairments of fixed assets, operating lease right of use assets or intangible assets or other adverse financial consequences and the timing and amount of such impairments or other consequences; unexpected changes to the market for the Company's shares or for the retail sector in general; costs and reputational harm as a result of disruptions in the Company’s business or information technology systems either by security breaches and incidents or by potential problems associated with the implementation of new or upgraded systems; and the cost and outcome of litigation, investigations and environmental matters involving the Company. Additional factors are cited in the "Risk Factors," "Legal Proceedings" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections of, and elsewhere in, the Company’s SEC filings, copies of which may be obtained from the SEC website, www.sec.gov, or by contacting the investor relations department of Genesco via the Company’s website, www.genesco.com. Many of the factors that will determine the outcome of the subject matter of this release are beyond Genesco's ability to control or predict. Genesco undertakes no obligation to release publicly the results of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Forward-looking statements reflect the expectations of the Company at the time they are made. The Company disclaims any obligation to update such statements.
Non-GAAP Financial Measures We report consolidated financial results in accordance with generally accepted accounting principles (“GAAP”). However, to supplement these consolidated financial results our presentation includes certain non-GAAP financial measures such as earnings and earnings per share and operating income. This supplemental information should not be considered in isolation as a substitute for related GAAP measures. We believe that disclosure of earnings and earnings per share from continuing operations and operating income adjusted for the items not reflected in the previously announced expectations will be meaningful to investors, especially in light of the impact of such items on the results. Reconciliations of the non-GAAP supplemental information to the comparable GAAP measures can be found in the Appendix.
Key Earnings Highlights Q2 FY21
Key Earnings Highlights YTD FY21
Total and Comparable Sales Q2 FY21
Sales by Segment Q2 FY21 and FY20 FY21 FY20
Sales by Segment YTD FY21 and FY20 FY21 FY20
Adjusted Operating Income (Loss) by Segment Q2 FY21(1) ($ in millions)
Adjusted Operating Income (Loss) by Segment YTD FY21(1) ($ in millions)
Inventory/Sales Change by Segment Q2 FY21 ($ in millions)
Retail Stores Summary Q2 FY21
Retail Square Footage Q2 FY21 Square feet in thousands
FY21 Projected Retail Store Count
FY21 Projected Capital Spending
Appendix
Non-GAAP Reconciliation – Q2 FY21
Non-GAAP Reconciliation – YTD FY21