Genesco (GCO) Misses Q1 EPS by $1.13, Revenues Miss; Provides Business Update on Reopening & COVID-19 Actions

Genesco (NYSE: GCO) reported Q1 EPS of ($3.65), $1.13 worse than the analyst estimate of ($2.52). Revenue for the quarter came in at $279 million versus the consensus estimate of $306.47 million.

First Quarter Fiscal 2021 Financial Summary

Net sales decreased 44% to $279 million with stores closed starting in mid-March
GAAP EPS from continuing operations was ($9.54) vs. $0.36 last year
Non-GAAP EPS from continuing operations was ($3.65)1 vs. $0.33 last year

Genesco Inc. (NYSE: GCO) today reported a GAAP loss from continuing operations per diluted share of ($9.54) for the three months ended May 2, 2020, compared to earnings from continuing operations per diluted share of $0.36 in the first quarter last year. Adjusted for the excluded items in both periods, the Company reported a first quarter loss from continuing operations per diluted share of ($3.65), compared to earnings from continuing operations per diluted share of $0.33 last year.

Mimi E. Vaughn, Genesco President and Chief Executive Officer, said, "I am proud of how our organization has responded in these extraordinary times as we strived to protect our people, our customers and our business. Thanks to the work we did last year creating a footwear-focused company and building on the turnaround in profitability that began in Fiscal 2019, we entered the pandemic in a positon of strength. Despite the challenges we faced from the decision in mid-March to temporarily close all of our stores, we were able to stay actively engaged with existing and new customers as we successfully leveraged the multi-year investments we've made advancing our digital commerce capabilities. Our targeted actions combined with the accelerated shift in online purchasing brought on by COVID-19, helped fuel a triple digit e-commerce comp gain for the month of April and 64% comp growth for the first quarter. In May, e-commerce sales increased further above April's substantial levels.

"As the second quarter got underway, we began reopening our stores with the health and safety of our teams and customers as our top priority. Today, approximately 1,000 stores are open and we are pleased with the initial results we've experienced thus far, especially at Journeys where sales in the stores that have reopened are comping nicely positive to last year's volumes for the same period. That said, there continues to be a good deal of uncertainty about near-term trends and therefore we are planning sales conservatively and managing expenses and inventory accordingly. We feel good about the strategic positioning of our businesses for the longer-term, and we believe that we've taken the necessary steps to navigate the near-term impact of this pandemic."

Actions Taken in Response to COVID-19

In response to the impact from COVID-19, in the first quarter, the Company took the following actions to preserve financial liquidity and financial flexibility:

• Borrowed $208 million on its existing lines of credit, extended payment terms with suppliers, managed inventory by reducing future receipts, and reduced planned capital expenditures by over 50%
• Furloughed or reduced its workforce by 90% across stores, corporate offices, call centers and distribution centers
• Implemented salary reductions for the executive team and select employees, reduced the cash compensation of its board of directors, and suspended certain employee benefits, including 401(k) matching
• Maximized benefits provided by the CARES Act in the U.S. as well as relief packages provided by the U.K. government, including employee retention credits, income tax benefits and property tax relief
• Including the above, reduced expenses by 20% during the quarter
• Amended its ABL lending agreement, increasing the facility from $275 million to up to $350 million of borrowing capacity

Store Re-Opening Update

As of June 6, 2020, the Company is currently operating in close to 1,000 locations, including more than 900 Journeys, more than 80 Johnston & Murphy, and a few Schuh locations. The Company anticipates reopening close to 85% of all stores by the end of June.

All store locations are operating under enhanced measures to ensure the health and safety of employees and customers, including requiring employees to wear masks, providing hand sanitizer in multiple locations throughout each store for customer and employee use, enhanced cleaning and sanitation protocols, reconfigured sales floors to promote physical distancing, and modified employee and customer interactions to limit contact.

Genesco will continue its phased approach to reopen stores when the following conditions are met:

• state and local governments have allowed stores to operate;
• the Company believes it can operate safely under its enhanced health and safety measures; and
• the Company believes that it can ensure the safety of its employees and customers

Share Repurchases

The Company did not repurchase any shares during the first quarter of Fiscal 2021.

Fiscal 2021 Outlook

Due to the continued uncertainty in the overall economy, the Company is not providing guidance at this time.

For earnings history and earnings-related data on Genesco (GCO) click here.

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