CEO of Genesco pleased with first quarter performance

30 May '09

4 min read

Genesco Inc reported a loss from continuing operations for the first quarter ended May 2, 2009, of $5.6 million, or $0.30 per diluted share, compared to earnings from continuing operations of $129.4 million, or $5.14 per diluted share, for the first quarter ended May 3, 2008.

Fiscal 2010 first quarter earnings reflected pretax charges of $11 million, or $0.47 per diluted share, related to a loss on the early retirement of debt in connection with the exchange of $56.4 million of convertible notes for common stock announced in April 2009 as well as fixed asset impairments, lease terminations, litigation settlements and a higher effective tax rate.

In addition, the first quarter reflected higher interest costs due to the adoption of FSP APB 14-1, or "APB 14-1," a new accounting standard applicable to the Company's convertible debt. Fiscal 2009 first quarter earnings included a gain on merger related litigation and a lower effective tax rate, partially offset by charges associated with merger related expenses, asset impairment and lease terminations and other legal matters. Fiscal 2009 earnings also include a restatement of interest expense required by the adoption of APB 14-1, which required retroactive application resulting in higher interest costs.

Adjusted for the listed items in both periods, earnings from continuing operations were $3.5 million, or $0.17 per diluted share, for the first quarter of Fiscal 2010, compared to $3.8 million, or $0.17 per diluted share, for the first quarter of Fiscal 2009. Because of the magnitude of the merger-related litigation settlement in the previous year's results and 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.

Net sales for the first quarter of Fiscal 2010 increased 4% to $370 million from $357 million in the first quarter of Fiscal 2009. Comparable store sales in the first quarter of Fiscal 2010 increased by 2%. The Journeys Group's comparable store sales for the quarter rose by 3%, the Hat World Group's increased by 7%, Underground Station's comps declined by 5%, and Johnston & Murphy Retail's fell by 18%.

Robert J. Dennis, president and chief executive officer of Genesco, said, "Given the current economic environment, we are pleased with our better than expected performance in the first quarter. Our ability to deliver these results in such turbulent times highlights the benefits of our diversified operating model and the strength and experience of our management team. Both the Journeys Group and Hat World posted strong comparable store sales and operating earnings increases during the quarter. Licensed brands sales were also solid, up 15%. However, Johnston & Murphy and Underground Station remained weak for the first quarter.

"As we reported on our last release, sales in February were strong, and as expected, March comps were weaker due to the Easter offset. We experienced a sales rebound in the first half of April, then business slowed again and comparable store sales through May 25 were down 9%. We believe that May comparisons are particularly challenging due in part to last year's stimulus checks.

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