Journeys Q1 Sales Rise 16% vs. 2019
-Results Meaningfully Exceed Expectations–
–Revenue and Earnings Above Pre-Pandemic Levels–
–Record First Quarter Digital Revenue–
NASHVILLE, Tenn., May 27, 2021 /PRNewswire/ —
First Quarter Fiscal 2022 Financial Summary
- Net sales increased 93% from last year to $539 million
- Net sales increased 9% over the first quarter two years ago with stores open about 90% of days
- GAAP operating income increased 71% over first quarter two years ago
- Non-GAAP operating income increased 125% over first quarter two years ago
- Comparable direct sales increased 43%
- Inventory down 23%
- GAAP EPS from continuing operations was $0.60 vs. ($9.54) last year and $0.36 two years ago
- Non-GAAP EPS from continuing operations was $0.791 vs. ($3.65) last year and $0.33two years ago
Genesco Inc. (NYSE: GCO) today reported GAAP earnings from continuing operations per diluted share of $0.60 for the three months ended May 1, 2021, compared to a loss from continuing operations per diluted share of ($9.54) in the first quarter last year and earnings from continuing operations of $0.36 per diluted share two years ago. Adjusted for the Excluded Items in all periods, the Company reported first quarter earnings from continuing operations per diluted share of $0.79, compared to a loss from continuing operations per diluted share of ($3.65) last year and earnings from continuing operations of $0.33 per diluted share two years ago.
Mimi E. Vaughn, Genesco board chair, president and chief executive officer, said, “Fiscal 2022 is off to a very strong start with a first quarter that meaningfully exceeded our expectations. Our momentum has been building each quarter following the disruption from COVID-19 last year and trends accelerated as the first quarter progressed. Our outperformance was driven by better than anticipated results at every division, led by record first quarter revenue and profitability at Journeys. The momentum from the first quarter has continued into May. Even as the pandemic continued to impact our business to varying degrees, our exceptional performance reflects the strong competitive positions of our retail and branded concepts and the traction we are experiencing with the footwear focused strategy we embarked on a couple of years ago, combined with a boost from U.S. government stimulus and pent-up demand as the economy reopened.”
“Our multi-year performance leading up to the outbreak of COVID-19, which featured 11 consecutive quarters of positive comparable sales growth for our footwear businesses, and our results during the pandemic, put us in a position of strength. Our organization has done an outstanding job capitalizing on the recent opportunities to positively transform our business at a faster pace, including developing a more advanced, more profitable digital channel, reshaping the cost structure of our store fleet, and strengthening our consumer connections. With a strong balance sheet, we are well positioned to further invest in growth, and create even greater value for our shareholders.”
Thomas A. George, Genesco interim chief financial officer, commented, “We were very pleased that the first quarter continued the sequential improvement of our operating results since the onset of the pandemic, as our top and bottom lines far outpaced last year’s levels and exceeded first quarter fiscal 2020 two years ago. Record first quarter digital revenue combined with improving store results fueled significant expense leverage, leading to higher operating income and first quarter adjusted EPS of $0.79compared to $0.33 in fiscal 2020.”
Store Re-Opening Update
As of May 27, 2021, the Company is operating in 96% of its locations, including approximately 1,100 Journeys, 160 Johnston & Murphy and 123 Schuh locations.
First Quarter Review
Net sales for the first quarter of Fiscal 2022 increased 93% to $539 million from $279 million in the first quarter of Fiscal 2021. This sales increase was driven by increased store sales resulting from store closures in the back half of the first quarter last year due to the COVID -19 pandemic, digital comp growth of 43% and increased wholesale sales. Stores were open about 90% of possible days in the first quarter this year as compared to 50% in the first quarter last year. As a result of store closures in response to the COVID-19 pandemic, the Company has not included first quarter comparable sales for this year or last year, except for comparable direct sales, as it feels that overall sales is a more meaningful metric for these periods. Comparable direct sales for the first quarter of Fiscal 2022 were 43% as compared to 64% for the first quarter of Fiscal 2021.
Overall sales were up 123% at Journeys, up 46% at Schuh, up 26% at Johnston & Murphy and up 84% at Licensed Brands. Overall sales were up 9% compared to the first quarter two years ago, with Journeys sales up 16% and Licensed Brands sales up 122%, partially offset by an 11% decrease in Schuh sales and a 35% decrease in Johnston & Murphy sales.
First quarter gross margin this year was 47.8%, up 480 basis points, compared with 43.0% last year and down 160 basis points compared with 49.4% in Fiscal 2020. The decrease as a percentage of sales as compared to Fiscal 2020 is due primarily to higher shipping and warehouse expense in our retail businesses as well as the mix of our businesses partially offset by decreased markdowns at Journeys. The higher shipping and warehouse expense in our retail businesses is driven by the increase in penetration of e-commerce as compared to Fiscal 2020.
Adjusted selling and administrative expense for the first quarter this year decreased 2,360 basis points as a percentage of sales compared with last year and decreased 340 basis points compared with Fiscal 2020. Such decrease is due primarily to reduced occupancy expense as well as reduced selling salaries partially offset by increased performance based compensation expense. The reduction in occupancy expense is driven by rent abatement agreements with landlords and government relief programs.
Genesco’s GAAP operating income for the first quarter was $15.5 million, or 2.9% of sales this year, compared with an operating loss of $(156.0) million, or (55.9)% of sales last year, and an operating income of $9.1 million, or 1.8% of sales in the first quarter of Fiscal 2020. Adjusted for the Excluded Items in all periods, operating income for the first quarter was $18.8 million this year compared to an operating loss of $(69.5) million last year and an operating income of $8.4 million in the first quarter of Fiscal 2020. Adjusted operating margin was 3.5% of sales in the first quarter of Fiscal 2022, (24.9)% last year and 1.7% in the first quarter of Fiscal 2020.
The effective tax rate for the quarter was 40.1% in Fiscal 2022 compared to 14.1% last year and 30.7% in the first quarter of Fiscal 2020. The adjusted tax rate, reflecting Excluded Items, was 35.7% in Fiscal 2022 compared to 26.8% last year and 31.3% in the first quarter of Fiscal 2020. The higher adjusted tax rate for this year as compared to last year reflects the inability to recognize a tax benefit for certain foreign losses and a higher mix of earnings in jurisdictions where the Company generates taxable income.
GAAP earnings from continuing operations were $8.9 million in the first quarter of Fiscal 2022, compared to a loss from continuing operations of $(134.6) million in the first quarter last year and earnings from continuing operations of $6.5 million in the first quarter of Fiscal 2020. Adjusted for the Excluded Items in all periods, first quarter earnings from continuing operations were $11.6 million, or $0.79 per share, in Fiscal 2022, compared to a loss from continuing operations of $(51.4) million, or ($3.65) loss per share, last year and earnings from continuing operations of $5.9 million, or $0.33per share, in the first quarter of Fiscal 2020.
Cash, Borrowings and Inventory
Cash and cash equivalents at May 1, 2021, were $258.0 million, compared with $238.6 million at May 2, 2020. Total debt at the end of the first quarter of Fiscal 2022 was $44.2 million compared with $222.7 million at the end of last year’s first quarter reflecting increased borrowings in the first quarter last year as a result of the COVID-19 pandemic. Inventories decreased 23% in the first quarter of Fiscal 2022 on a year-over-year basis and decreased 18% versus the first quarter of Fiscal 2020.
Capital Expenditures and Store Activity
For the first quarter, capital expenditures were $12 million, related primarily to digital and omnichannel initiatives. Depreciation and amortization was $11 million. During the quarter, the Company opened one store and closed 17 stores. The Company ended the quarter with 1,444 stores compared with 1,479 stores at the end of the first quarter last year, or a decrease of 2%. Square footage was down 2% on a year-over-year basis.
The Company did not repurchase any shares during the first quarter of Fiscal 2022. The Company currently has $90 million remaining on the $100 million board authorization from September 2019.
Fiscal 2022 Outlook
Due to the continued uncertainty in the overall economy driven by COVID-19, the Company is not providing guidance at this time.
About Genesco Inc.
Genesco Inc., a Nashville-based specialty retailer and branded company, sells footwear and accessories in more than 1,440 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, www.nashvilleshoewarehouse.com, and www.dockersshoes.com. In addition, Genesco sells footwear at wholesale under its Johnston & Murphy brand, the licensed Levi’s brand, the licensed Dockers brand, the licensed Bass brand, and other brands. For more information on Genesco and its operating divisions, please visit www.genesco.com.