Genesco Inc.

Good day, everyone, and welcome to the Genesco third quarter fiscal 2020 conference call. Just a reminder, today's call is being recorded. I will now turn the call over to Dave Slater, Vice President of FP&A and Investor Relations. Please go ahead, sir.

Good morning, everyone, and thank you for joining us to discuss our third quarter 2020 results and our full year fiscal 2020 outlook. With me on the call today are Bob Dennis, Genesco's Chairman, President, and Chief Executive Officer, Mimi Vaughn, our Chief Operating Officer, and Mel Tucker, our Chief Financial Officer. Participants on the call expect to make forward-looking statements. These statements reflect the participants' expectations as of today, but actual results could be different. Genesco refers you to this morning's earnings release and the company's SEC filings, including the most recent 10-K filing, for some of the factors that could cause differences from the expectations reflected in the forward-looking statements made during the call today. Participants also expect to refer to certain adjusted financial measures during the call. 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 the schedules available on the company's homepage under investor relations in the quarterly earnings section. I want to remind everyone we have posted a presentation summarizing our results and guidance that is accessible on our website. As another reminder, we filed an 8K in connection with our Q1 earnings release that contains adjusted non-GAAP fiscal 19 results by quarter for last year restated to reflect the sale of LID Sports Group as if we never owned the business per GAAP requirements. You can find this on our website as well. Now I'd like to turn it over to Bob.

Thanks, Dave. As you saw from our earnings release issued earlier this morning, we delivered strong third quarter results and increased our full year guidance. Before we get into a discussion of our recent performance and increased outlook, I want to take a few moments to touch on the leadership transition we announced last month. I couldn't be more pleased with the Board's decision to appoint Mimi as my successor as President and CEO. Since joining Genesco over 16 years ago, Mimi has excelled in each of her leadership roles, including as head of corporate strategy, head of shared services, chief financial officer, and most recently, chief operating officer. Her selection as the 12th president and CEO in Genesco's 95-year history is a further step in our succession planning process, which began several years ago. As we outlined in the November 4 press release, Mimi will assume her new role on February 2, 2020, the first day of our new fiscal year. On top of this, Mimi was elected to the company's Board of Directors effectively October 30th. Both appointments are incredibly well-deserved. I look forward to supporting Mimi and the entire management team in my role as Executive Chairman as we work together to continue the positive momentum we have built since divesting lids in February and turn our attention to delivering further value with our footwear-focused strategies. Mimi will discuss the strategic direction and the specific initiatives related to the strategy in more detail on our next call. For now, let me walk through the highlights from the third quarter. From a high level, our results significantly exceeded expectations as continued strength at journeys, coupled with much improved performance from SHU, easily offset headwinds from a challenging quarter for Johnson & Murphy. The improvement in EPS above our expectations in Q3 was driven by better operating performance and not by additional share buybacks. Consolidated comparable sales increased 3% on top of our most difficult two-year stock comp comparison to date this year. This marked our 10th consecutive quarter of positive comp sales. Importantly, our overall brick-and-mortar performance was positive for the ninth quarter in a row posting a gain despite ongoing traffic challenges. Meanwhile, e-commerce comps increased almost 20%, adding to its strong multi-year run. Total sales for the company would have been up, but for the impact of lower UK and Canadian exchange rates. The solid comp, combined with higher gross margins across all divisions, resulted in an improvement in profitability. On an adjusted basis, earnings per share worth $1.33 compared with $0.97 in the third quarter last year. Our third quarter and year-to-date performance highlight the success we were having as a more focused company following the sale of LIDS, as well as the benefit of our aggressive share repurchase activity. Looking at the performance of each of our footwear businesses in the third quarter, for Journeys, the quarter was driven by another successful back-to-school as full price selling of fashion athletic styles coupled with an extended sandal season contributed to strong results. The Journeys team remains at the top of its game as the team deftly navigates the ongoing fashion rotation that is an inherent part of the business. We are pleased with the bounds within Journeys' assortment as both fashion athletic and casual brands contributed to its results in Q3, further strengthening Journeys' market position. Both store and e-commerce comps at Journeys were solidly positive, which led to a 4% comp increase on top of last year's strong gain. Similar to recent quarters, great expense control along with strong sales allowed for expense leverage. Moving over to the UK, SHU delivered much stronger back-to-school results than we were anticipating given the prolonged softness and consumer demand for apparel and footwear. comps increased 3% for the quarter with fashion boots and fashion athletic driving the business. Leaning heavily into their advanced omni-channel capabilities, SHU was able to capitalize on an accelerated shift in the UK market to online spending, which more than compensated for ongoing softness and store performance. We believe the hard work of the SHU team and actions under our 20-point plan aimed at addressing profitability and enhancing shoe standing with the consumer and with the brands it sells are yielding positive results. For the moment, it appears there is some improvement in the UK consumer appetite for footwear as well. That said, in the immediate term, we are still cautious in our outlook due to the continued uncertainty about Brexit, the upcoming election, and the potential impact on consumer confidence as well as the protracted deterioration high street traffic. On our last call, we spoke about one of SHU's most critical initiatives. We're attacking SHU's fixed cost structure with a strong focus on rent reduction. We must renegotiate rents for SHU's store fleet in order to improve profitability following the ongoing declines in high street and mall foot traffic, making these rents uneconomical. SHU is working with an outside advisor and has engaged with every one of its landlord partners. And while we are making progress, we must make substantially more progress on this front as we head into the end of the year and achieve not only reductions, but more flexible rent structures to weather the current retail and consumer volatility. Back to the U.S., Johnson & Murphy posted its first negative comp in many quarters as comparable sales declined 6% in Q3 on top of a double-digit increase in the year-ago period. Following a flattish comp performance in the first half of the year, J&M could not overcome both the challenging comparison and the impact of unseasonably warm temperatures that it had on traffic and full footwear demand during the quarter. The team drove conversion in spite of lower traffic and reacted quickly to the difficult top-line trend, reducing both inventory and variable SG&A expense versus a year ago. Last year's introduction of premium sport casual footwear provided a tremendous boost to J&M's results. This year's footwear introductions have not had the same impact, which became even more apparent in Q3 with a more difficult environment. While we have seen some bows back in Q4 so far, in a footwear market currently dominated by some sameness, the team is working diligently on product innovation and new product introductions for next year to inject greater freshness into the assortment. We believe this will better position and differentiate J&M among its footwear competitors and will drive greater traffic and consumption for the brand. And finally, licensed brands delivered a better bottom-line performance with meaningfully higher gross margins on lower sales. With the sizable cash flow generated both from operations last year and from the sale of the Litz business, we've been actively buying back stock opportunistically and returning capital to shareholders. Mel will cover the buybacks in greater detail in his section. Now to touch on fourth quarter today. With the later Thanksgiving this year, visibility into the precise trend is more limited due to the offsets. However, our Q4 results to date are tracking to our projections. For the Black Friday weekend itself, starting on Thursday through Cyber Monday, and comparing with the same holiday period last year, consolidated comps were up nicely, with all of our businesses delivering positive results. Both e-commerce bookings and store comps were positive. However, our increases, like many other retailers who have reported out, were heavily weighted to online. Shoe's strong performance was especially noteworthy over the Black Friday weekend. Based on our strong Q3 results and positive start to Q4, we are raising our full-year outlook. We now expect earnings per share for fiscal 20 to be somewhere between $4.10 and and fall off $4.40. And as always, we do regard this guidance as a range, but somewhere close to the middle reflects our best current belief of where we might come out, which represents an increase of about 30% over fiscal 2019 earnings of $3.28. It has been a busy year so far, with the sale of LIDS kicking things off in February, followed by the ongoing work separating that business from our operations. A noteworthy call-out is that we have recently sold the former LIDS headquarters at a gain to carry in value. As we've made progress separating from LIDS, we've been concentrating on execution and are capitalizing on the benefits of being a more focused company. We are pleased with the initial progress we've made on this front and believe there are significant opportunities for further improvement over the longer term. And with that, let me turn the call over to Mel to give more specifics on the financials and guidance. Thanks, Bob.