Genesco Earnings Jump, Sales Take Hit

NEW YORK — Amid a consistently struggling economy, footwear and accessories powerhouse Genesco Inc. Thursday posted fourth-quarter profits offset by several hearty one-time charges.

The Nashville, Tenn.-based manufacturer, wholesaler and retailer saw earnings for the quarter ended Jan. 31 grow to $23.7 million, or $1.05 per share, from $3.6 million, or 16 cents, in the same period last year.

Stripping out one-time charges and benefits, including those for impairment and those related to its terminated merger agreement with Finish Line Inc., net income would have declined to $23.9 million, or $1.06 a share, from $26.4 million, or $1.01 a share, in the same period last year.

“We think these are solid results given the economic climate and that they highlight the … strength of our business model,” said Bob Dennis, Genesco president and CEO, in a conference call Thursday. “We expect to emerge from the downturn with a stronger competitive position than when we went into it.”

Genesco, which owns Johnston & Murphy and Journeys and operates more than 2,000 footwear and hat stores in North America, saw net sales drop 3.3 percent to $452 million from $467 million last year and comparable-store sales decline 5 percent.

Comparable-store sales at Journeys were a relative bright spot, posting a 2 percent drop, whereas men’s footwear brand Johnston & Murphy sales declined 17 percent.

“Sales in the fourth quarter were choppy. The early part of the quarter was weak, and the weakness continued until a few days before Christmas,” Dennis said. “Sales then accelerated through early January when they softened dramatically again. This choppiness has continued into the new fiscal year, but so far in a direction that we like.”

Genesco saw a 7 percent rise in February store sales, but Dennis said he doesn’t expect it to last.

“We are assuming that the economy will not improve near-term and consumer demand will not begin to recover before the second half at the very earliest,” he said. “We recognize the possibility that this recession might extend well into our next fiscal year, [and] we are managing with the primary goal of maintaining maximum flexibility to be able to respond appropriately.”

Analysts said the company is poised to recover from this brutal economic period. “Their performance is relatively better than most,” said Mitch Kummetz of Robert W. Baird. “They gave us full-year guidance and didn’t hide from the difficult environment. This is the first company I’ve seen that has provided a couple of different scenarios, and that’s a good thing.”

Christopher Svezia, of Susquehanna Financial Group, seconded the favorable long-term outlook but doesn’t expect to see improvement before the end of the year.

“We believe Genesco shares will remain pressured at least through the [first half of the year],” Svezia said in a note. “However, given Genesco’s unique market positioning, strong management and solid financial position, we do not expect further depreciation from these levels.”

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