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GENESCO Inc. Reports Operating Results (10-Q)

June 11, 2009 | About:

GENESCO Inc. (GCO) filed Quarterly Report for the period ended 2009-05-02.

Genesco is a leading retailer and wholesaler of branded footwear. The company operates two segments: Specialty Retail Footwear and Branded Footwear. The company's owned and licensed footwear brands sold through both wholesale and retail channels of distribution include Johnston & Murphy Dockers Footwear and Nautica Footwear. The company alsooperates the Volunteer Leather Company a leather tanning and finishing business. GENESCO Inc. has a market cap of $437.6 million; its shares were traded at around $22.79 with a P/E ratio of 12.4 and P/S ratio of 0.3. GENESCO Inc. had an annual average earning growth of 10.4% over the past 10 years. GuruFocus rated GENESCO Inc. the business predictability rank of 3-star.

Highlight of Business Operations:

increase in Journeys Group sales and a 15% increase in Licensed Brands sales, offset by a 16% decrease in Johnston & Murphy Group sales and an 8% decrease in Underground Station Group sales. Gross margin increased as a percentage of net sales during the first quarter of Fiscal 2010, primarily due to margin increases in the Journeys Group, Hat World Group and Underground Station Group offset by margin decreases in Johnston & Murphy Group and Licensed Brands. Selling and administrative expenses decreased as a percentage of net sales during the first quarter of Fiscal 2010, reflecting the comparison to substantial merger-related expenses in the first quarter of last year and decreases in selling and administrative expenses as a percentage of net sales in the Underground Station Group and Hat World Group, offset by increases as a percentage of net sales in the Journeys Group, Johnston & Murphy Group and Licensed Brands. Selling and administrative expenses during the first quarter of Fiscal 2009, included $7.2 million of merger-related expenses. Earnings from operations decreased as a percentage of net sales during the first quarter of Fiscal 2010, primarily due to the gain of $204.1 million in the first quarter last year from the settlement of merger-related litigation and to decreased earnings from operations in the Johnston & Murphy Group partially offset by an increase in earnings from operations in the Hat World Group, Journeys Group and Licensed Brands as well as a smaller loss in the Underground Station Group.

The Companys net sales in the first quarter ended May 2, 2009 increased 3.8% to $370.4 million from $356.9 million in the first quarter ended May 3, 2008. Gross margin increased 4.3% to $189.2 million in the first quarter this year from $181.4 million in the same period last year and increased as a percentage of net sales from 50.8% to 51.1%. Selling and administrative expenses in the first quarter this year increased 0.7% from the first quarter last year but decreased as a percentage of net sales from 50.4% to 49.0%. For the first quarter ended May 3, 2008, selling and administrative expenses included $7.2 million of merger-related litigation expenses in connection with the terminated merger with The Finish Line. The Company records buying and merchandising and occupancy costs in selling and administrative expense. Because the Company does not include these costs in cost of sales, the Companys gross margin may not be comparable to other retailers that include these costs in the calculation of gross margin. Explanations of the changes in results of operations are provided by business segment in discussions following these introductory paragraphs.

Net sales from Journeys Group increased 4.8% for the first quarter ended May 2, 2009 compared to the same period last year. The increase reflects primarily a 4% increase in average Journeys stores operated (i.e., the sum of the number of stores open on the first day of the fiscal quarter and the last day of each fiscal month during the quarter divided by four) and a 3% increase in comparable store sales. Comparable store sales were impacted by an increase of 5% in average price per pair of shoes, reflecting changes in product mix, offset by a 1% decrease in footwear unit comparable sales. Unit sales increased 2% during the same period. Journeys Group operated 1,018 stores at the end of the first quarter of Fiscal 2010, including 145 Journeys Kidz stores and 55 Shi by Journeys stores, compared to 985 stores at the end of the first quarter last year, including 123 Journeys Kidz stores and 50 Shi by Journeys stores.

Net sales from the Underground Station Group decreased 7.8% to $26.7 million for the first quarter ended May 2, 2009 from $29.0 million for the same period last year. The decrease reflects a 6% decrease in average Underground Station stores operated (related to the Companys strategy of closing Jarman stores and the planned closing or conversion announced in May 2007 of up to 49 Underground Station Group stores) and a 5% decrease in comparable store sales. The decrease in comparable store sales reflects flat comparable footwear unit sales and a 3% decline in the average price per pair of shoes, partially reflecting a higher percentage of womens and childrens products in the mix of products sold. Unit sales decreased 3% during the same period. Underground Station Group operated 177 stores at the end of the first quarter of Fiscal 2010, including 167 Underground Station stores, compared to 190 stores at the end of the first quarter last year, including 175 Underground Station stores.

Net sales from Hat World Group increased 12.6% for the first quarter ended May 2, 2009 compared to the same period last year, reflecting primarily a 7% increase in comparable store sales and a 2% increase in average stores operated as well as sales from the newly acquired Impact Sports business. The comparable store sales increase reflected a 2% increase in comparable store units sold, primarily from strength in fashion-oriented Major League Baseball products and branded action headwear. Hat World Group operated 880 stores at the end of the first quarter of Fiscal 2010, including 50 stores in Canada, compared to 868 stores at the end of the first quarter last year, including 38 stores in Canada.

Johnston & Murphy Group net sales decreased 15.5% to $39.3 million for the first quarter ended May 2, 2009 from $46.6 million for the first quarter ended May 3, 2008, reflecting primarily an 18% decrease in comparable store sales and a 20% decrease in Johnston & Murphy wholesale sales, offset by a 1% increase in average stores operated for Johnston & Murphy retail operations. Unit sales for the Johnston & Murphy wholesale business decreased 15% in the first quarter of Fiscal 2010 and the average price per pair of shoes decreased 5% for the same period. Retail operations accounted for 72.1% of Johnston & Murphy Group segment sales in the first quarter this year, up from 70.7% in the first quarter last year. The average price per pair of shoes for Johnston & Murphy retail operations decreased 5% (9% in the Johnston & Murphy Shops) in the first quarter this year, primarily due to higher markdowns and changes in product mix, and footwear unit comparable sales decreased 16% during the same period. The store count for Johnston & Murphy retail operations at the end of the first quarter of Fiscal 2010 included 161 Johnston & Murphy shops and factory stores compared to 156 Johnston & Murphy shops and factory stores at the end of the first quarter of Fiscal 2009.

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