Genesco Inc. reported earnings slid 29.3 percent in its first quarter to $9.9 million, or 42 cents a share. Earnings, adjusted for one-time gains and costs, were 51 cents per share, falling well short of Wall Street's consensus estimate of 68 cents a share. The company slightly lowered its EPS guidance for the year, noting that Lids Sports Group's turnaround will involve additional gross margin pressure and more incremental expenses than originally planned.
Fiscal 2016 first quarter results reflect pretax items of $3.5 million, or 9 cents per share after tax, including $0.9 million of expenses related to deferred purchase price payments in connection with the acquisition of Schuh Group Limited, which are required to be expensed as compensation because the payment is contingent upon the payees' continued employment; and $2.6 million for network intrusion expenses, asset impairment charges and other legal matters. Fiscal 2015 first quarter results reflected pretax items of $7.7 million, or 21 cents per share after tax, including $5.7 million related to a change in accounting for bonus awards; $3.1 million of expenses related to deferred purchase price payments in connection with the acquisition of Schuh Group Limited; and $2.0 million in network intrusion expenses, asset impairment charges and other legal matters, offset by a $3.1 million gain on a lease termination.
Adjusted for the items described above in both periods, earnings from continuing operations were $12.2 million, or 51 cents per diluted share, for the first quarter of Fiscal 2016, compared to earnings from continuing operations of $19.3 million, or 81 cents per diluted share, for the first quarter of Fiscal 2015.
Net sales for the first quarter of Fiscal 2016 increased 5 percent to $661 million from $629 million in the first quarter of Fiscal 2015. Comparable sales in the first quarter 2016 increased 4 percent for the company with a 5 percent increase in the Journeys Group, a 3 percent increase in the Lids Sports Group, a 4 percent increase in the Schuh Group, and a 3 percent increase in the Johnston & Murphy Group.
"Our first quarter results were generally in line with our expectations," said Robert J. Dennis, chairman, president and chief executive officer of Genesco. "Our recent performance reflects solid top-line growth, with positive comparable sales in all our retail businesses, led by Journeys, where comparable sales would have been even stronger if not for product delivery delays related to the West Coast port challenges. The year-over-year decrease in earnings reflects expected gross margin pressure from planned actions to reduce inventories in the Lids Sports Group, the growth of businesses that are primarily second-half contributors, and expenses related to the growth of our e-commerce business.
"The second quarter is off to a good start with comparable sales through Saturday, May 23, 2015 up 7 percent from the same period last year.
"While our year-to-date performance is tracking close to plan, we now believe that the Lids Sports Group's turnaround will involve additional gross margin pressure and more incremental expenses than we originally planned. Therefore, we now expect Fiscal 2016 adjusted earnings per share in the range of $4.70 to $4.80, compared to Fiscal 2015's adjusted earnings per share of $4.74, and our previously announced range of $5.10 to $5.20 for Fiscal 2016. Consistent with previous guidance, these expectations do not include expected non-cash asset impairments and other charges, which are estimated in the range of $7.7 million to $8.2 million pretax, or $0.20 to $0.22 per share, after tax, in Fiscal 2016. This guidance assumes comparable sales increases in the 3 percent to 4 percent range for the full fiscal year."