Genesco Inc. (GCO)

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Genesco Inc. (GCO)

Q3 2013 Earnings Call

November 30, 2012 8:30 am ET


Robert Dennis – President, Chief Executive Officer

James Gulmi – Senior Vice President, Chief Financial Officer


Scott Krasik – BB&T Capital Markets

Sam Poser – Sterne Agee

Stephanie Wissink – Piper Jaffray

Mark Montagna – Avondale Partners

Steve Marotta – CL King & Associates

Jill Caruthers – Johnson Rice & Co.

Chris Svezia – Susquehanna Financial Group



Good day everyone and welcome to the Genesco Third Quarter Fiscal Year 2013 conference call. Just a reminder – today’s call is being recorded. Participants on the call expect to make forward-looking statements. These statements reflect the participants’ expectations as of today but actual results could be different. Genesco refers you to this morning’s earnings release and to the company’s SEC filings, including the most recent 10-Q filing filed on September 6, 2012 for some of the factors that could cause differences from the expectations reflected in the forward-looking statements made during the call today. Participants also expect to refer to certain adjusted financial measures during the call. All non-GAAP financial measures referred to in the prepared remarks are reconciled to their GAAP counterparts in the attachments to this morning’s press release and in schedules available on the company’s home page under Investor Relations

I will now turn the call over to Mr. Bob Dennis, Chairman, President and Chief Executive Officer. Please go ahead, sir.

Robert Dennis

Good morning and thank you for being with us today. With me is Jim Gulmi, our Chief Financial Officer; and as a reminder, Jim’s detailed review of the quarterly financials has been posted to our website along with the press release from earlier this morning. I’ll begin the call today with a few remarks about the third quarter and our November sales performance, and also provide some color on the start of holiday shopping. Then, I’ll turn the call over to Jim for a review of the numbers and then I will return to provide an overview of our operating segments and our updated five-year plan before we open the call up for questions.

Our third quarter results reflect a solid overall performance with adjusted earnings per share of $1.44, up from $1.21 last year. Third quarter comps were plus-4%, inline with our expectations and come on top of 12% a year ago and 9% the year before that. These comp numbers do not include an 11% increase in e-commerce sales, reflecting the work we’ve done expanding the product offering, integrating e-commerce with our stores, and enhancing the functionality of our various sites.

As noted in the release, we are raising our guidance for the year to a range of $5 to $5.08 per share. We will discuss this guidance in more detail later in the call.

In terms of monthly sales trends, the third quarter played out much the way we thought it would with back-to-school acting as a catalyst. Our brick-and-mortar businesses performed well in August and into early September, and as we expected the consumer was less inclined to shop over the remainder of the quarter. We see this pattern as an indication that consumers continue to respond favorably to buying events with softness persisting between these events. So November got off to a slow start due in part to Hurricane Sandy. While sales improved in the second half of the month, we finished with a negative 4% comp for the month and we estimate that the storm reduced overall comps for the month by about 1 to 2%.

Historically, a solid back-to-school performance has been an indication that our merchandise is well positioned for holiday. That said, our current guidance of essentially flat comps for the fourth quarter reflect several factors: first, a tough comparison with the fourth quarter last year when comps were up 12%; second, the likelihood that we will not recoup all of the sales lost to the hurricane in the fourth quarter; and finally our expectations for only partial improvement in some of the near-term challenges in the Lids businesses, challenges that they were dealing with in the third quarter. I will discuss these challenges when we discuss the Lids business in more detail later in the call.

For the holiday weekend, we delivered a low single-digit comp increase in the U.S. with Journeys up mid-single digits and Lids down low to mid-single digits. Our comp does not include e-commerce, for which orders booked were up 52% for the weekend, inclusive of Cyber Monday.

One important side note on the weekend – the number of our stores required to be open Thanksgiving evening or early Friday morning was up significantly. Our teams were well prepared to meet the considerable challenges of staffing small box stores with extended hours. We want to both congratulate and thank each of the retail management teams and especially all of our store associates whose holidays were disrupted for executing this event so effectively.

During the third quarter, we bought back approximately 145,000 shares for roughly $9 million at an average price of $59.40, leaving about $66 million available under our current authorization for additional repurchases.

And now, I’ll turn the call over to Jim.

James Gulmi

Thank you, Bob. Much of the detailed financial information for the quarter has been posted online, so I will only be making a few comments. As Bob pointed out, third quarter overall performance exceeded our expectations. Comp sales were up 4% for the quarter. This compares to 12% comps in the third quarter of last year and 9% two years ago. The Journeys group had an 8% comp increase on top of a 15% increase last year. Comps in both periods for the Journeys group have been adjusted to reflect the integration of the Underground by Journeys stores.

Comps were 9% for Schuh in the third quarter this year. As you know, comps for Schuh are now included in the total comp sales as of July 2012. The Lids group had a minus 5% comp decrease. This compares with an increase of 8% last year. Johnston & Murphy had a 6% comp increase on top of a 7% increase last year in the third quarter. I remind you that these comp sales do not include our direct businesses – that is, e-commerce and catalog sales. Genesco’s overall direct businesses increased 11% in the quarter. November same store sales for Genesco overall decreased 4% and direct sales increased 10%.

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