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Strong sales insufficient to avoid disappointing earnings at Genesco

Mar 16, 2015 United States
Strong sales insufficient to avoid disappointing earnings at Genesco
Net sales increased 8.9% in the full year, but acquisitions in the group, unfavorable trends in foreign exchange rates and lower than planned contribution from new stores, contributed to earnings below expectations
Genesco's net sales for the fourth quarter of fiscal 2015 increased 12.6% totaling 893 million US dollars from 793 million US dollars in the fourth quarter of fiscal 2014. Comparable sales in the fourth quarter 2015 increased 10% for the company with a 16% increase in the Journeys Group, a 7% increase in the Lids Sports Group, a 3% increase in the Schuh Group, and a 2% increase in the Johnston & Murphy Group.

Earnings from continuing operations for the fourth quarter ended on the 31st of January totaled 51.8 million US dollars (up by 23%), or 2.18 US dollars per diluted share. According to Genesco, fourth quarter results reflect pretax items of 1.9 million US dollars, including 1.0 million US dollars of expenses related to deferred purchase price payments in connection with the acquisition of Schuh Group Limited and 0.9 million US dollars for network intrusion expenses and asset impairment charges.

Genesco also reported net sales for the year ended on the 31st of January 2015 totaling 2.86 billion US dollars, up by 8.9% from net sales of 2.62 billion US dollars for the year ended on the 1st of February 2014. 

Earnings from continuing operations for the full year reached 99.4 million US dollars (7% up from previous fiscal year), or 4.19 US dollars per diluted share.

Robert J. Dennis, Chairman, President and Chief Executive Officer of Genesco, commented: "Fourth quarter sales were strong, exceeding our expectations.  However, gross margin pressure, lower than planned contribution from new stores and acquisitions in the Lids Sports Group and unfavorable trends in foreign exchange rates resulted in disappointing earnings."

The company is adopting a more conservative outlook for fiscal 2016 based on the current state of the business and bearing in mind this set of results now present. "Comparable sales for the first quarter through Saturday, March 7, 2015, were up a solid 5% from the same period last year, despite the effects of severe winter storms in several of our key markets in February and early March (…) Based on the continued challenges in the Lids Sports Group combined with foreign exchange headwinds and supply chain uncertainties from the backlog related to recent West Coast port delays, we believe it is prudent to adopt a more conservative outlook for fiscal 2016. We now expect adjusted fiscal 2016 diluted earnings per share to be in the range of 5.10 US dollars to 5.20 US dollars, which represents a 8% to 10% increase over fiscal 2015's adjusted earnings per share of 4.74 US dollars”, commented Mr Dennis adding: "While our bottom line results for fiscal 2015 were lower than we planned, we are pleased with the health of our footwear businesses, and especially with Journeys' continuing strength. At the same time, we are confident that the Lids Sports Group's strategic potential remains considerable despite current competitive and operational issues and are focused on improving the Group's long-term profitability."

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