March 04, 2010 at 07:32 AM EST
Genesco Reports Fourth Quarter Fiscal 2010 Results
--Reiterates Fiscal 2011 Outlook--

NASHVILLE, Tenn., March 3 /PRNewswire-FirstCall/ -- Genesco Inc. (NYSE: GCO) today reported earnings from continuing operations for the fourth quarter ended January 30, 2010, of $25.8 million, or $1.08 per diluted share, compared to earnings from continuing operations of $23.2 million, or $1.05 per diluted share, for the fourth quarter ended January 31, 2009.  Fiscal 2010 fourth quarter earnings reflected charges of $0.08 per diluted share, including asset impairments, loss on early retirement of debt and tax rate adjustments, partially offset by a gain related to other legal matters.  Fiscal 2009 fourth quarter earnings reflected charges of $0.01 per diluted share, including asset impairments, store closing costs and final expenses related to a terminated merger agreement, offset by a gain on a lease termination transaction and tax rate adjustments.  In addition, Fiscal 2009 earnings also included a restatement of interest expense required by the adoption of APB 14-1, which required retroactive application resulting in additional interest costs.

Adjusted for the listed items in both periods, earnings from continuing operations were $27.7 million, or $1.16 per diluted share, for the fourth quarter of Fiscal 2010, compared to earnings from continuing operations of $23.9 million, or $1.06 per diluted share, for the fourth quarter of Fiscal 2009.  For consistency with Fiscal 2010's previously announced earnings expectations, which did not reflect the listed items, the Company believes that disclosure of earnings from continuing operations adjusted for those items will be useful to investors. A reconciliation of the adjusted financial measures to their corresponding measures as reported pursuant to U.S. Generally Accepted Accounting Principles is included in Schedule B to this press release.

Net sales for the fourth quarter of Fiscal 2010 increased 6% to $479 million from $452 million in the fourth quarter of Fiscal 2009. Comparable store sales in the fourth quarter of Fiscal 2010 were flat with a year ago. Comparable store sales in the Hat World Group increased by 6%, the Journeys Group decreased by 3%, Underground Station decreased by 2%, and Johnston & Murphy Retail increased by 2%.

Robert J. Dennis, president and chief executive officer of Genesco, said, "Our fourth quarter earnings exceeded expectations, driven by strong sales at Hat World and our direct-to-consumer catalog and e-commerce businesses combined with higher gross margins for the Company and well managed expenses across all our divisions.  This performance caps a year in which, despite a challenging retail environment, we generated almost $100 million in cash flow from operations and paid down all $32 million of our outstanding bank debt, to end with $82 million in cash and no debt.

"As we begin the new fiscal year, all of our businesses are performing above their fourth quarter comparable sales, with positive comparable store sales across the board.  For February, comparable sales increased 10% for the Hat World Group, 4% for the Journeys Group, 13% for Underground Station, 4% for Johnston & Murphy Retail and 6% for the total Company.  Including the 17% comparable sales increase for the direct businesses, the Company's comparable sales for February increased 7%.  

"Especially given the strong start to the first quarter, we remain comfortable with our previously announced expectations for fiscal 2011 of earnings per share between $2.00 and $2.10. Consistent with previous years, this guidance does not include expected non-cash asset impairments which are projected to be approximately $9 million to $11 million, or $0.23 to $0.28 per share, in fiscal 2011. This guidance assumes full year comparable sales in the positive 2% to 3% range.

"We move forward confident that we have the right strategies in place at each of our operating segments. With a much stronger balance sheet than a year ago, we are better positioned to pursue multiple near-term growth opportunities that we have identified."

Fiscal Year 2010

The Company also reported earnings from continuing operations for the fiscal year ended January 30, 2010, of $29.1 million, or $1.31 per diluted share, compared to earnings from continuing operations of $156.2 million, or $6.72 per diluted share, for the fiscal year ended January 31, 2009.  Fiscal 2010 earnings reflected charges of $0.56 per diluted share, including asset impairments, loss on early retirement of debt and tax rate adjustments, partially offset by a gain related to other legal matters.  In addition, Fiscal 2010 reflected additional interest expense due to the adoption in the first quarter of Fiscal 2010 of FSP APB 14-1, a new accounting standard applicable to the Company's convertible debt.  Fiscal 2009 earnings reflected a gain of $4.91 per diluted share from the settlement of merger-related litigation with The Finish Line offset by merger-related expenses, asset impairments, store closing costs and other items listed on Schedule B to this press release.  Fiscal 2009 earnings also included a restatement of interest expense required by the adoption of APB 14-1, which required retroactive application resulting in additional interest costs.

Adjusted for the listed items in both years, earnings from continuing operations were $43.1 million, or $1.87 per diluted share, for Fiscal 2010, compared to earnings from continuing operations of $40.8 million, or $1.81 per diluted share, for Fiscal 2009.  For consistency with previously announced earnings expectations, which did not reflect the listed items, the Company believes that disclosure of earnings from continuing operations adjusted for those items will be useful to investors. A reconciliation of the adjusted financial measures to their corresponding measures as reported pursuant to U.S. Generally Accepted Accounting Principles is included in Schedule B to this press release.  Net sales for Fiscal 2010 increased 1% to $1.57 billion from $1.55 billion in Fiscal 2009.

Cautionary Note Concerning Forward-Looking Statements

This release contains forward-looking statements, including those regarding the performance outlook for the Company for Fiscal 2011, 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 continuing weakness in the consumer economy, inability of customers to obtain credit, fashion trends that affect the sales or product margins of the Company's retail product offerings, changes in buying patterns by significant wholesale customers, bankruptcies or deterioration in financial condition of significant wholesale customers, disruptions in product supply or distribution, unfavorable trends in fuel costs, foreign exchange rates, foreign labor and materials costs, and other factors affecting the cost of products, competition in the Company's markets and changes in the timing of holidays or in the onset of seasonal weather affecting periodtoperiod sales comparisons.  Additional factors that could affect the Company's prospects and cause differences from expectations include the ability to build, open, staff and support additional retail stores, to renew leases in existing stores and to conduct required remodeling or refurbishment on schedule and at expected expense levels, 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 or intangible assets or other adverse financial consequences, unexpected changes to the market for our shares, variations from expected pension-related charges caused by conditions in the financial markets, and the 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 our 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 our 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.

Conference Call

The Company's live conference call on March 4, 2010, 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.  

About Genesco Inc.

Genesco Inc., a Nashville-based specialty retailer, sells footwear, headwear and accessories in more than 2,270 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, www.undergroundstation.com, http://www.johnstonmurphy.com/ www.dockersshoes.com, and www.lids.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.

    
    
                                   GENESCO INC.
    
    Consolidated Earnings Summary
    
                                 Fourth Quarter           Fiscal Year Ended
                         ----------------------    ------------------------
                                     Restated *                  Restated *
                         January 30, January 31,   January 30,   January 31,
    In Thousands               2010        2009          2010          2009
                               ----        ----          ----          ----
    Net sales              $479,026    $451,722    $1,574,352    $1,551,562
    Cost of sales           242,489     232,373       778,482       771,580
    Selling and 
     administrative 
     expenses               189,960     180,534       718,269       713,365
    Restructuring
     and other, net           2,497        (282)       13,361      (196,575)
                              -----        ----        ------      --------
    Earnings from
     operations              44,080      39,097        64,240       263,192
    Loss on early
     retirement of debt         399           -         5,518             -
    Interest expense, net     1,439       3,405         8,234        12,478
                              -----       -----         -----        ------
    Earnings before
     income taxes
     from continuing
     operations              42,242      35,692        50,488       250,714
    Income tax expense       16,413      12,513        21,402        94,495
                             ------      ------        ------        ------
    Earnings from
     continuing operations   25,829      23,179        29,086       156,219
    
    Earnings from (provision 
     for) discontinued 
     operations, net             25          16          (273)       (5,463)
                                ---         ---          ----        ------
    Net Earnings            $25,854     $23,195       $28,813      $150,756
                            =======     =======       =======      ========
    
    
    * Fiscal 2009 results restated as a result of retroactive application of
      FSP APB 14-1.
    
    
    
    Earnings Per Share Information
    
                                 Fourth Quarter           Fiscal Year Ended
                         ----------------------    ------------------------
    In Thousands                      Restated *                  Restated *
    (except per share    January 30, January 31,   January 30,   January 31,
     amounts)                  2010        2009          2010          2009
                               ----        ----          ----          ----
    Preferred dividend
     requirements               $50         $50          $198          $198
    
    Average common shares -
      Basic EPS              23,279      18,737        21,471        19,235
    
    Basic earnings per share:
      Before discontinued 
       operations             $1.11       $1.23         $1.35         $8.11
      Net earnings            $1.11       $1.23         $1.33         $7.83
    
    Average common and common 
     equivalent shares -
     Diluted EPS             23,981      23,223        23,500        23,911
    
    Diluted earnings per share:
      Before discontinued
       operations             $1.08       $1.05         $1.31          $6.72
      Net earnings            $1.08       $1.05         $1.30          $6.49
                              =====       =====         =====          =====
    
    
    
                                   GENESCO INC.
    
    Consolidated Earnings Summary
    
                               Fourth Quarter            Fiscal Year Ended
                        ----------------------   -------------------------
                                      Restated                    Restated
                        January 30, January 31,  January 30,    January 31,
    In Thousands              2010        2009         2010           2009
                              ----        ----         ----           ----
    Sales:
      Journeys Group      $225,356    $229,541     $749,202       $760,008
      Underground
       Station Group        32,223      34,035       99,458        110,902
      Hat World Group      152,403     122,409      465,776        405,446
      Johnston & Murphy
       Group                47,334      45,593      166,079        177,963
      Licensed Brands       21,540      20,019       93,194         96,561
      Corporate and Other      170         125          643            682
                               ---         ---          ---            ---
      Net Sales           $479,026    $451,722   $1,574,352     $1,551,562
                          ========    ========   ==========     ==========
    
    Operating Income (Loss):
      Journeys Group       $24,029     $24,463      $44,285        $49,050
      Underground Station
       Group                 1,517         593       (4,584)        (5,660)
      Hat World Group       19,979      14,770       44,039         36,670
      Johnston & Murphy
       Group                 4,126       1,867        5,484         10,069
      Licensed Brands        2,847       2,387       12,372         11,925
      Corporate and Other*  (8,418)     (4,983)     (37,356)       161,138
                             ------      ------      -------        -------
      Earnings from
       operations           44,080      39,097       64,240        263,192
      Loss on early
       retirement of debt      399           -        5,518              -
      Interest, net          1,439       3,405        8,234         12,478
                             -----       -----        -----         ------
    Earnings Before income 
     taxes from continuing
     operations             42,242      35,692       50,488        250,714
    
    Income tax expense      16,413      12,513       21,402         94,495
                            ------      ------       ------         ------
    
    Earnings from
     continuing operations  25,829      23,179       29,086        156,219
    
    Earnings from (provision 
     for) discontinued 
     operations                 25          16         (273)        (5,463)
                               ---         ---         ----         ------
    Net Earnings           $25,854     $23,195      $28,813       $150,756
                           =======     =======      =======       ========
    
    
    *Includes $2.5 million of other charges in the fourth quarter of Fiscal
      2010, which includes $2.9 million in asset impairments and $0.2 million 
      in lease terminations offset by $0.6 million in other legal matters.
      Includes $13.4 million of other charges in Fiscal 2010 which includes
      $13.3 million in asset impairments and $0.4 million for lease
      terminations offset by $0.3 million in other legal matters.  For Fiscal
      2010, there is also an additional $0.1 million of charges related to
      lease terminations that are included in cost of sales in the   
      consolidated earnings summary.
    
      Includes a $0.3 million credit in the fourth quarter of Fiscal 2009
      which includes a $3.8 million gain on a lease termination offset by $3.1
      million in asset impairments and $0.4 million for lease terminations.
      Includes a $196.6 million credit in Fiscal 2009 of which $204.1 million
      were proceeds as a result of the settlement of merger-related litigation
      with The Finish Line and its investment bankers and a $3.8 million gain
      from a lease termination offset by $8.6 million in asset impairments,
      $1.6 million in lease terminations and $1.1 million for other legal
      matters. In the fourth quarter and year of Fiscal 2009, there is also an
      additional $0.1 million and $0.2 million, respectively, of charges
      related to lease terminations that are included in cost of sales on the
      consolidated earnings summary.  The fourth quarter and Fiscal 2009 also
      included $0.2 million and $8.0 million, respectively, of merger-related
      expenses.
    
    
    
                                  GENESCO INC.
    Consolidated Balance Sheet
    
                                                              Restated
                                                January 30, January 31,
    In Thousands                                      2010        2009
    ------------                                      ----        ----
    Assets
    Cash and cash equivalents                      $82,148     $17,672
    Accounts receivable                             27,217      23,744
    Inventories                                    290,974     306,078
    Other current assets                            49,733      50,625
    --------------------                            ------      ------
    Total current assets                           450,072     398,119
    --------------------                           -------     -------
    Property and equipment                         216,293     239,681
    Other non-current assets                       197,287     178,263
    ------------------------                       -------     -------
    Total Assets                                  $863,652    $816,063
    ============                                  ========    ========
    
    Liabilities and Shareholders' Equity
    Accounts payable                               $92,699     $73,143
    Current portion - long-term debt                     -           -
    Other current liabilities                       76,958      65,839
    -------------------------                       ------      ------
    Total current liabilities                      169,657     138,982
    -------------------------                      -------     -------
    Long-term debt                                       -     113,735
    Other long-term liabilities                    111,682     113,591
    Shareholders' equity                           582,313     449,755
    --------------------                           -------     -------
    Total Liabilities and Shareholders' Equity    $863,652    $816,063
    ==========================================    ========    ========
    
    
    
                                  GENESCO INC.
    Retail Units Operated - Twelve Months Ended January 30, 2010
    
                             Balance                           Balance
                            02/02/08       Open     Close     01/31/09
                            --------       ----     -----     --------
    Journeys Group               967         50         5        1,012
        Journeys                 805         16         5          816
        Journeys Kidz            115         26         0          141
        Shi by Journeys           47          8         0           55
    Underground Station
     Group                       192          0        12          180
    Hat World Group              862         43        20          885
    Johnston & Murphy
     Group                       154          9         6          157
        Shops                    113          6         5          114
        Factory Outlets           41          3         1           43
        ---------------          ---        ---       ---          ---
    Total Retail Units         2,175        102        43        2,234
    ==================         =====        ===       ===        =====
    
    
                                                              Balance
                        Acquisitions       Open     Close     01/30/10
                        ------------       ----     -----     --------
    Journeys Group                 0         19         6        1,025
      Journeys                     0          9         6          819
      Journeys Kidz                0          9         0          150
      Shi by Journeys              0          1         0           56
    Underground Station Group      0          0        10          170
    Hat World Group               38         35        37          921
    Johnston & Murphy Group        0          7         4          160
      Shops                        0          5         3          116
      Factory Outlets              0          2         1           44
      ---------------            ---        ---       ---          ---
    Total Retail Units            38         61        57        2,276
    ==================           ===        ===       ===        =====
    
    
    
    Retail Units Operated - Three Months Ended January 30, 2010
    
                                Balance  Acquisi-              Balance
                               10/31/09   tions Open Close   01/30/10
                               --------   ------ ---- -----   --------
    Journeys Group             1,022          0    4    1        1,025
      Journeys                   819          0    1    1          819
      Journeys Kidz              148          0    2    0          150
      Shi by Journeys             55          0    1    0           56
    Underground Station Group    174          0    0    4          170
    Hat World Group              885         37   12   13          921
    Johnston & Murphy Group      162          0    1    3          160
      Shops                      117          0    1    2          116
      Factory Outlets             45          0    0    1           44
                                 ---        ---  ---  ---          ---
    Total Retail Units         2,243         37   17   21        2,276
                               =====        ===  ===  ===        =====
    
    
    
    Constant Store Sales
                                Three Months Ended        Twelve Months Ended
                              ------------------         -------------------
                            January 30,  January 31,  January 30,  January 31,
                                2010        2009         2010           2009
                                ----        ----         ----           ----
    Journeys Group               -3%         -2%          -3%             1%
    Underground Station Group    -2%        -12%          -7%             0%
    Hat World Group               6%         -4%           3%             2%
    Johnston & Murphy Group       2%        -17%          -8%           -10%
                                ---         ---          ---            ---
     Total Constant Store Sales   0%         -5%          -2%             0%
                                ===         ===          ===            ===
    
    
    
                                                                  Schedule B
                                          Genesco Inc.
                 Adjustments to Reported Earnings from Continuing Operations
                   Three Months Ended January 30, 2010 and January 31, 2009
    
    In Thousands (except         3 mos     Impact      3 mos    Impact
     per share amounts)        Jan 2010    on EPS    Jan 2009   on EPS
                               --------    ------    --------   ------
    Earnings from continuing
     operations, as reported    $25,829     $1.08     $23,179    $1.05
    Adjustments:  (1)
    Merger-related expenses           -         -         132     0.01
    Impairment & lease
     termination charges          1,927      0.08       2,254     0.10
    Gain on lease termination         -         -      (1,295)   (0.06)
    Other legal matters            (382)    (0.01)        (13)       -
    Loss on early
     retirement of debt             247      0.01           -        -
    Convertible debt interest 
     restatement (APB 14-1)          23         -         494        -
    Lower (higher) effective 
     tax rate(2)                     74         -        (825)   (0.04)
    Adjusted earnings from 
     continuing operations(3)   $27,718     $1.16     $23,926    $1.06
                                -------     -----     -------    -----
    
    
    (1) All adjustments are net of tax.  The tax rate for the fourth quarter
        of Fiscal 2010 is 38.2% excluding a FIN 48 discreet item of $0.2
        million.  The tax rate for the fourth quarter of Fiscal 2009 before
        the impact of the settlement of merger-related litigation and
        deductibility of prior year merger-related expenses and other listed
        items above is 37.4%.
    
    (2) Includes added tax on Finish Line share appreciation and impact on EPS
        calculation from additional tax in Fiscal 2009.
    
    (3) Reflects 24.0 million share count for Fiscal 2010 and 23.2 million
        share count for Fiscal 2009 which includes convertible shares and
        common stock equivalents in both years.
    
    The Company believes that disclosure of earnings and earnings per share
    from continuing operations on a pro forma basis adjusted for the items not
    reflected in the previously announced expectations will be meaningful
    to investors, in light of the impact of changes in effective tax rates and
    other items not reflected in those expectations.
    
    
    
                                                                  Schedule B
                                        Genesco Inc.
             Adjustments to Reported Earnings from Continuing Operations
              Twelve Months Ended January 30, 2010 and January 31, 2009
    
    In Thousands (except
     per share amounts)               12 mos     Impact    12 mos    Impact
                                     Jan 2010    on EPS   Jan 2009   on EPS
                                     --------    ------   --------   ------
    Earnings from continuing
     operations, as reported          $29,086    $1.31    $156,219    $6.72
    Adjustments:  (1)
    Settlement of merger-related 
     litigation                             -        -    (124,159)   (5.19)
    Merger-related expenses                 -        -       4,884     0.20
    Impairment & lease
     termination charges                8,447     0.36       6,305     0.26
    Gain on lease termination               -        -      (1,258)   (0.05)
    Other legal matters                  (167)   (0.01)        645     0.03
    Loss on early retirement of debt    3,396     0.14           -        -
    Convertible debt interest 
     restatement (APB 14-1)               871        -       1,880        -
    Interest on settlement income           -        -        (419)   (0.02)
    Lower (higher) effective 
     tax rate(2)                        1,508     0.07      (3,279)   (0.14)
    
    Adjusted earnings from
     continuing operations(3)         $43,141    $1.87     $40,818    $1.81
                                      -------    -----     -------    -----
    
    
    (1) All adjustments are net of tax.  The tax rate for  Fiscal 2010
        before a positive adjustment of $1.2 million for FIN 48 and other
        adjustments is 38.45% excluding a FIN 48 discreet item of $0.5
        million.  The tax rate for Fiscal 2010 excludes the non-
        deductibility of certain items incurred in connection with the
        inducement of the conversion of the 4 1/8% Debentures for common
        stock.  The tax rate for Fiscal 2009 before the impact of the
        settlement of merger-related litigation and deductibility of prior
        year merger-related expenses and other listed items above is 39.2%.
    
    (2) Includes added tax on Finish Line share appreciation and impact
        on EPS calculation from additional tax in Fiscal 2009.
    
    (3) Reflects 23.5 million share count for Fiscal 2010 and 23.9
        million share count for Fiscal 2009 which includes convertible shares
        and common stock equivalents in both years.
    
    The Company believes that disclosure of earnings and earnings per
    share from continuing operations on a pro forma basis adjusted for the
    items not reflected in the previously announced expectations will be
    meaningful to investors, in light of the impact of changes in effective
    tax rates and other items not reflected in those expectations.
    
    
    
                                                                  Schedule B
                                     Genesco Inc.
                Adjustments to Forecasted Earnings from Continuing Operations
                             Fiscal Year Ending January 29, 2011
    
    In Thousands (except per                  High Guidance     Low Guidance
     share amounts)                            Fiscal 2011       Fiscal 2011
                                            ----------------    --------------
    Forecasted earnings from continuing 
     operations                             $44,271    $1.84    $41,869  $1.74
    
    Adjustments:(1)
    Impairment and lease termination charges  6,108     0.26      6,108   0.26
                                              -----     ----      -----   ----
    Adjusted forecasted earnings 
     from continuing operations(2)          $50,379    $2.10    $47,977  $2.00
                                            -------    -----    -------  -----
    
    
    (1) All adjustments are net of tax.  The forecasted tax rate for Fiscal
        2011 is 40.0%.
    
    (2) Reflects 23.9 million share count for Fiscal 2011 which includes
        common stock equivalents.
    
    This reconciliation reflects estimates and current expectations of future
    results. Actual results may vary materially from these expectations and
    estimates, for reasons including those included in the discussion of
    forward-looking statements elsewhere in this release. The Company
    disclaims any obligation to update such expectations and estimates.

SOURCE Genesco Inc.

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