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Genesco CEO to expect sufficient liquidity under baseline plan
06 Mar '09
6 min read
"We are also pleased with our cash flow for Fiscal 2009, which we ended with only $32 million in bank borrowings compared to $69 million at the end of the previous year. We intend to continue to focus on cash generation while the economic climate remains uncertain."
Fiscal 2009 Results
The Company reported earnings from continuing operations of $158.1 million, or $6.72 per diluted share, for the fiscal year ended January 31, 2009, compared to $8.5 million, or $0.36 per diluted share, for the previous year. Fiscal 2009 earnings included 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 2008 earnings included charges for merger-related expenses, asset impairments, store closing costs, and other listed items totaling $1.48 per diluted share. Adjusted for the listed items in both years, earnings from continuing operations were $40.8 million, or $1.81 per diluted share, for Fiscal 2009, compared to $42.6 million, or $1.84 per diluted share, for Fiscal 2008.
Because of the magnitude of the merger-related expenses in the previous year's results and for consistency with Fiscal 2009's previously announced results and earnings expectations, which did not reflect the listed items, the Company believes that disclosure of earnings from continuing operations adjusted for these 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 release.
Outlook:
Dennis also discussed the Company's outlook for Fiscal 2010. "The continuing economic uncertainty is causing us to provide a wider than normal range of sales and earnings expectations for Fiscal 2010. Our baseline scenario expects a weak first half with some signs of recovery beginning in the second half of the year, with comparable sales for the Company's retail operations down about 3% in each of the first two quarters, flat in the third quarter, and up 2% in the fourth quarter, with the fourth quarter comparison made easier by the weakness of the two previous years' fourth quarters.
Comparable store sales would be down 1% for the full year in this scenario. On these comparable sales assumptions, we would expect to generate earnings per share from continuing operations, subject to the adjustments detailed in Schedule C included with this announcement, in the range of $1.70 to $1.80 per share for the year.
"A more pessimistic scenario, premised on little or no improvement in the economy during the current year, assumes comparable store sales down about 4% in each of the first two quarters, and down 3% in each of the third and fourth quarters. For the full year, comparable store sales would be down 3%. This scenario also assumes a more aggressive markdown strategy to keep inventories clean on the lower sales volume. In this scenario, we would expect to generate earnings from continuing operations, subject to the adjustments listed in Schedule C, in the range of $1.20 to $1.30 per diluted share.
"In either case, we expect sufficient liquidity. Under the baseline plan, we would expect to end the year with no bank revolving credit facility borrowings, while even in the more pessimistic scenario, we would expect to end the year with lower borrowings than at the end of Fiscal 2009.
"However external conditions develop, we intend to manage our businesses with a focus on maintaining maximum flexibility to respond to the market, generating strong cash flows, and capitalizing on the opportunities to strengthen our competitive position for the recovery."
Fiscal 2009 Results
The Company reported earnings from continuing operations of $158.1 million, or $6.72 per diluted share, for the fiscal year ended January 31, 2009, compared to $8.5 million, or $0.36 per diluted share, for the previous year. Fiscal 2009 earnings included 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 2008 earnings included charges for merger-related expenses, asset impairments, store closing costs, and other listed items totaling $1.48 per diluted share. Adjusted for the listed items in both years, earnings from continuing operations were $40.8 million, or $1.81 per diluted share, for Fiscal 2009, compared to $42.6 million, or $1.84 per diluted share, for Fiscal 2008.
Because of the magnitude of the merger-related expenses in the previous year's results and for consistency with Fiscal 2009's previously announced results and earnings expectations, which did not reflect the listed items, the Company believes that disclosure of earnings from continuing operations adjusted for these 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 release.
Outlook:
Dennis also discussed the Company's outlook for Fiscal 2010. "The continuing economic uncertainty is causing us to provide a wider than normal range of sales and earnings expectations for Fiscal 2010. Our baseline scenario expects a weak first half with some signs of recovery beginning in the second half of the year, with comparable sales for the Company's retail operations down about 3% in each of the first two quarters, flat in the third quarter, and up 2% in the fourth quarter, with the fourth quarter comparison made easier by the weakness of the two previous years' fourth quarters.
Comparable store sales would be down 1% for the full year in this scenario. On these comparable sales assumptions, we would expect to generate earnings per share from continuing operations, subject to the adjustments detailed in Schedule C included with this announcement, in the range of $1.70 to $1.80 per share for the year.
"A more pessimistic scenario, premised on little or no improvement in the economy during the current year, assumes comparable store sales down about 4% in each of the first two quarters, and down 3% in each of the third and fourth quarters. For the full year, comparable store sales would be down 3%. This scenario also assumes a more aggressive markdown strategy to keep inventories clean on the lower sales volume. In this scenario, we would expect to generate earnings from continuing operations, subject to the adjustments listed in Schedule C, in the range of $1.20 to $1.30 per diluted share.
"In either case, we expect sufficient liquidity. Under the baseline plan, we would expect to end the year with no bank revolving credit facility borrowings, while even in the more pessimistic scenario, we would expect to end the year with lower borrowings than at the end of Fiscal 2009.
"However external conditions develop, we intend to manage our businesses with a focus on maintaining maximum flexibility to respond to the market, generating strong cash flows, and capitalizing on the opportunities to strengthen our competitive position for the recovery."
Genesco Inc
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