Genesco Inc. (NYSE:GCO) Q3 2019 Earnings Conference Call Transcript

Dec 06, 2018 • 08:30 am ET

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Genesco Inc. (NYSE:GCO) Q3 2019 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Good day everyone and welcome to the Genesco Third Quarter Fiscal 2019 Conference Call. Just a reminder, today's call is being recorded

(Forward-looking Cautionary Statements)

All non-GAAP financial measures referred to in the prepared remarks are reconciled to their GAAP counterparts in the attachments to this morning's press release and in schedules available on the Company's homepage under Investor Relations in the quarterly results section.

I'll now turn the call over to Bob Dennis, Genesco's Chairman, President and CFO(Sic- CEO). Please go ahead, sir.

Executive
Robert Dennis

Good morning and thank you for being with us. I am joined today by our CFO, Mimi Vaughn.

The ongoing strength of our US footwear businesses again drove an acceleration in comparable sales on a sequential basis. Third quarter consolidated comps increased 4%, our strongest quarterly comp performance in more than 2.5 years, besting the 3% gain we posted in the second quarter. Importantly after turning positive last quarter for the first time in two years, our brick and mortar performance continued to improve with store comps up 4%, fueled by stronger store traffic. E-commerce sales also accelerated increasing 9% on the heels of Q2 gain as direct continued strong multiyear run.

Our overall comp result was shaped by strong results at Journeys and Johnston & Murphy, both of which have delivered exceptional comp performances in each quarter of the year thus far. While still in negative territory, Lids comps once again showed sequential improvement, as the business continues its recovery from the double digit decline it posted in last years' fourth quarter. Likewise, Schuh's comps rebounded somewhat from their more negative levels but remained under pressure from the challenging selling environment in the UK. For both Lids and Schuh, additional promotional activity in Q3 generated positive consumer response driving incremental sales and gross margin dollars and keeping inventories clean.

Even with the strong comp result, total sales for the quarter were down year-over-year due primarily to the calendar shift from last year's 53rd week that moved a strong back-to-school week out of the third quarter and into the second. Mimi will cover the financials in more detail later in the call but I want to highlight that we accrued significantly more bonus expense during the quarter than in the year ago period. In-addition, a shift in the timing of catalog expenses due to new revenue recognition standards also drove expenses higher in the quarter. Without these two items, even with lower sales, operating income would've been a little above last years level, thanks to the cost saving measures we've implemented this year.

The combination of strong comps, lower sales and the bonus in catalog expenses resulted in third quarter adjusted EPS of $0.95 which was ahead of our expectations by a few pennies. In addition, with the Black Friday weekend now behind us, consolidated November comps have picked up a little from Q3 levels getting Q4 off to a solid start. For the Black Friday weekend itself, starting on Thursday through Cyber Monday, we were pleased