Genesco Responds to Potential Proxy Fight
Genesco Inc. (NYSE: GCO) (“Genesco” or the “Company”) today confirmed that Legion Partners Asset Management, LLC (“Legion”) has provided notice of its intent to nominate a controlling slate of seven individuals to stand for election to the Genesco Board of Directors at the 2021 Annual Meeting of Shareholders.
The Board and Nominating and Governance Committee will review the proposed Legion nominees and present the Board’s recommendation regarding director nominees in the Company’s definitive proxy materials, which will be filed with the Securities and Exchange Commission and mailed to all shareholders eligible to vote at the 2021 Annual Meeting. The date of the 2021 Annual Meeting has not yet been announced, and Genesco shareholders are not required to take action at this time.
In response to Legion’s nominations, Genesco issued the following statement:
“While we disagree with many of Legion’s assertions and are surprised that they are seeking to replace a majority of Genesco’s eight-member Board after not responding to our repeated requests for their input and ideas or sharing their proposed candidates in advance, we value all feedback from shareholders and will continue to seek to have a constructive dialogue with Legion like we would with any shareholder. We will review the letter from Legion, along with their proposed director candidates, and respond in due course. Genesco’s Board and recently appointed management team are committed to acting in the best interests of all shareholders and executing on our plans to drive meaningful growth and shareholder value creation.
Strong footwear-focused strategy driving continued momentum
“Our footwear-focused strategy has successfully delivered strong performance both before and throughout the pandemic, including 11 consecutive quarters of positive comps prior to the pandemic and 50% growth in EPS in fiscal 2020. Under our new CEO, Mimi Vaughn, just prior to the pandemic and its impact on our business and the retail industry generally, we set forth a comprehensive five-year plan focused on six strategic growth pillars aimed at accelerating Genesco’s transformation and capitalizing on significant synergies across our businesses – including our shared technology platforms – to further drive growth and profitability. Our successes despite the difficulties of the past year have reinforced our view that we have the right plan in place, and the Board has been actively involved in working with our management team to implement and adjust our strategy as we respond to accelerating changes across our industry.
Robust Board and CEO-led response to COVID-19 generating results
“In response to the pandemic, our team rose to the challenge and moved quickly to close and reopen Genesco’s fleet of nearly 1,500 retail locations and drive record conversion rates to partially offset the impact of reduced foot traffic, all while making the safety of our customers and employees the highest priority. Our deliberate investments in our digital capabilities prior to the pandemic enabled Genesco to capitalize on the accelerated shift to online shopping, resulting in record digital revenues of $450 million in fiscal 2021, an increase of almost 75% year-over-year, while also fueling record profitability for this channel.
Well-positioned for growth following strong performance through the pandemic
“Executing the Company’s current strategy produced positive results in fiscal 2021, including sequential improvement in revenue and gross margin in every quarter since Q1 fiscal 2021. In light of the pandemic, we were pleased to end the 2021 fiscal year with strong fourth quarter performance, including total company operating margin of nearly 10% and record operating income at Journeys. We also successfully reduced our full year operating expenses, inclusive of rent abatements, by nearly 16% compared to fiscal 2020 while generating cash flows over $130 million, ensuring sufficient liquidity. We are now entering fiscal 2022 with a very healthy balance sheet, and we continue to make changes to our cost base and allocate capital expenditures to enable increased investment in growth and enhance our ROIC.
Proven track record of share price growth under new leadership and footwear-focused strategy
“Genesco’s share price has increased significantly as a result of the execution of our footwear-focused strategy and strategic growth plans under Ms. Vaughn and over the past year, reflecting tangible measures put in place during the pandemic. Since Ms. Vaughn became CEO in February 2020, Genesco’s share price has increased approximately 24%, and over the past year, Genesco’s share price has increased over 150%, reflecting strong momentum coming out of the pandemic and heading into fiscal 2022.
Highly engaged, independent Board committed to ongoing refreshment
“These successes were overseen by Genesco’s experienced Board and management team, with a focus on preserving capital, reducing expenses and increasing liquidity. While we are still in the early stages of our five-year growth plan under the leadership of Ms. Vaughn, Genesco is already performing strongly, and we believe we are on a clear path to drive growth and sustained profitability. Genesco’s Board and management team will continue to review and refine our strategies for seizing the opportunities ahead for the benefit of all shareholders.
“Our highly engaged, independent Board believes that diversity and new perspectives are important and regularly evaluates Board composition to make sure it reflects the mix of skills and expertise the Company needs at the time. As part of our ongoing refreshment program, two of our eight directors were appointed in the last 18 months, we appointed a new lead director in the last two years, and three tenured directors have either retired or stepped down over the last three years. We are committed to continuing this Board refreshment process to meet the strategic needs of Genesco as we execute our strategy and position the Company to succeed in an increasingly digital retail environment.”
About Genesco Inc.
Genesco Inc., a Nashville-based specialty retailer, sells footwear and accessories in more than 1,455 retail stores throughout the U.S., Canada, the United Kingdom and the Republic of Ireland, principally under the names Journeys, Journeys Kidz, Little Burgundy, Schuh, Schuh Kids, Johnston & Murphy, and on internet websites www.journeys.com, www.journeyskidz.com, www.journeys.ca, www.littleburgundyshoes.com, www.schuh.co.uk, www.johnstonmurphy.com, www.johnstonmurphy.ca, and www.dockersshoes.com. In addition, Genesco sells wholesale footwear under its Johnston & Murphy brand, the licensed Dockers brand, the licensed Levi’s brand, the licensed Bass brand, and other brands. For more information on Genesco and its operating divisions, please visit www.genesco.com.