Genesco Picks Up U.K. Schuh Stores

Genesco Picks Up U.K. Schuh Stores
The selling floor at Schuh

The second cross-Atlantic footwear merger of the year is getting high praise.

Genesco Inc.’s acquisition of U.K. retailer Schuh Group Ltd. gives the company a chance to step up its global presence, analysts said last week.

“It looks like a match made in heaven,” said Scott Krasik, an analyst at BB&T Capital Markets. “After you grow [Schuh] in the U.K., you can take it to the [European] continent as well.”

Susquehanna Financial analyst Christopher Svezia also applauded the move. “There’s not a ton of growth left in the domestic marketplace,” he said. “Schuh is basically a Journeys in the U.K. It’s a very complementary business accretive to [Genesco’s] earnings and expands its global retail footprint.”

Nashville, Tenn.-based Genesco last Thursday sealed the deal, paying a total of 125 million pounds, or $199.8 million at current exchange, which is broken down into three payments: the first 100 million pounds upfront, then a 15 million pound installment payable in three years and the last 10 million pounds the year after that.

Robert Dennis, president and CEO of Genesco, said Schuh gives the firm a sizable retail presence in the U.K. and Ireland, and is in line with plans for international expansion. (Journeys already operates three doors in Canada and hopes to reach 100.)

“This [deal] establishes a presence across the pond from which we could someday contemplate further opportunities in Europe,” Dennis said in a conference call with analysts. “By expanding our footprint to the U.K., we gain more visibility into footwear trends from both sides of the Atlantic, become more important to our common vendors and create new growth opportunities.”

According to Jim Estepa, SVP of Genesco and president and CEO of its retail group, the firm plans to double the size of Schuh in the U.K. over the next four to five years by upping the store count to between 100 and 120.

Schuh, founded in 1981 and headquartered in Scotland, currently operates 59 stores in the U.K. and Ireland, and has one of Britain’s largest online shoe merchants, Schuh.co.uk.

“There’s no doubt that the buying power of both the businesses together will give us the opportunity to enhance the sales of the brands that we share. We’ll look at special makeups and collaborations for the brands sold in both Journeys and Schuh stores,” Estepa said, adding that over time there will be opportunity in the U.K. for Lids, Johnston & Murphy and other Genesco brands.

As part of the deal, Schuh’s leadership team, including managing director Colin Temple and finance director Mark Crutchley, will stay on to head the company. For the fiscal year ended March 27, 2011, Schuh generated net sales of roughly 164 million pounds, or $261.7 million, with an operating margin above 9 percent.

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