Genesco Inc.

Good day, everyone, and welcome to the Genesco fourth 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 fourth quarter and fiscal 2020 full year results and our full year fiscal 2021 outlook. With me on the call today, are Mimi Vaughn, our President and Chief Executive 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 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 attachment 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 Mimi.

Thanks, Dave. Good morning, everyone. Fiscal 20 was filled with many notable successes and important accomplishments. In our first year as a footwear-focused company, we delivered strong results, building on the turnaround in profitability that began in fiscal 19. We strengthened our organizational capabilities through investments in people and technology. In addition, we made an acquisition late in the year that advances our go-forward strategy to build the branded side of our business and provides Genesco with another growth vehicle as we embark upon this exciting new chapter in our company's history. Before we get into a discussion of our recent performance and outlook, I'd like to thank Bob Dennis for his decade plus years of leadership as CEO and recognize his tremendous career and considerable contribution to our company. Bob led Genesco through a period of significant change for our industry. overseeing the company's transformation from primarily a bricks-and-mortar retailer to an omnichannel leader. During his tenure, we acquired SHU, acquired Little Burgundy, sold the Liz Sports Group, and launched the footwear focus strategy we are currently executing. In addition to the lasting imprint Bob has left on Genesco, he has positively impacted the greater Nashville community in so many ways through his many charitable works. Fortunately, the company and its shareholders will continue to benefit from Bob's wisdom and leadership in his new role as Executive Chairman. Bob, it's been a true pleasure for me and for us all to have had the opportunity to work with you. Now, on to our performance. There's much to celebrate from the past year. A few of the many highlights include delivering comp sales growth in every quarter, even as we faced more challenging comparisons, Marking our 11th consecutive quarter of comp sales growth. Achieving positive store comps by driving meaningful improvements in conversion while we combated lower store traffic. Achieving an all-time high for direct sales penetration growing by 180 basis points. Successfully unplugging lids to become a more focused company. Eliminating more stranded costs associated with the LIDS business than expected and continued success with our cost reduction efforts. Securing the rights to the Levi's footwear license, along with our acquisition of Togast, which added important scale and new opportunities to our licensed brands business. Generating almost $120 million worth of cash flow from operations. returning close to $200 million to shareholders through share repurchases, and increasing adjusted earnings per share by 40% on top of the 20-plus percent improvement delivered in fiscal 19. We were able to achieve all of this because we have tremendous businesses and great people. As a result of the actions we took throughout the course of fiscal 20, We're an even stronger company than we were a year ago, and our future as a footwear-focused company is bright. With a very healthy balance sheet, we have the flexibility to invest for growth and new capabilities in our current business, pursue new growth opportunities, and return cash to our shareholders. Full-year adjusted EPS of $4.58 was above our guidance range of $4.10 to $4.40, driven primarily by stronger than expected results at SHU during the fourth quarter, coupled with lower than planned expenses due to the significant progress we made removing stranded costs from the LIDS divestiture. Exceeding the high end of the range was a fitting finish to an outstanding year. Later in the call, I will outline the main pillars of our current five-year plan and selected key initiatives we're executing in fiscal 21 aimed at further advancing our footwear strategies. But now let's turn to Q4 results. Compared with the previous year, our Q4 performance included positive comps, gross margin expansion, and flat expenses as a percent of sales. The combination of these results and our share repurchase activity over the past 12 months fueled Q4 EPS of $3.09, an increase of 40% compared to the year-ago period. The fourth quarter was marked by a pronounced shift from bricks and mortar to e-commerce on both sides of the Atlantic. This dynamic was driven not only by heightened consumer preference for online shopping throughout the holiday season, but also encouraged by retailer offers and promotions, which jump-started the selling period. The shift among our businesses, in particular, was precipitated by technology enhancements we've deployed that have allowed for easier mobile use helped by increases in digital marketing spend, and bolstered by the trust our customers have in our ability to quickly deliver their gifts in time for the holidays. In the face of lower store traffic, our store selling teams did an excellent job driving higher conversion rates and higher transaction size. However, it wasn't enough to overcome the software footfall resulting in our first negative store comp in many quarters. As we look to our results by brand, let's start with Journeys and begin by congratulating the team on its impressive full-year results on top of last year's strong improvement. Journeys' deep understanding of the teen consumer and their fashion preferences, expertise of its merchant teams to interpret these trends and make the right product calls, and abilities of its store and e-commerce teams to deliver an exceptional customer experience firmly entrenches Journeys as the leading omnichannel retailer of fashion footwear for teens and generated another year of market share and operating income growth. Congratulations to the Journeys team on an outstanding year. Specifically in Q4, Journeys continued its solid top-line growth, posting a positive comp increase on top of a challenging two-year stat comp in the high teens, which was Journeys' most challenging stat comparison this year. Sales were driven by strong full-price selling, especially within key brands of our boot offering, reflecting a trend-right assortment. Journey's digital growth was a real highlight as we realized a record level of digital sales dollar growth. Journey's success in digital throughout the year was driven by the investments made on our redesigned website as well as our effective use of digital marketing to increase website traffic. Last year's expansion and upgrade of the Journeys Distribution Center, including dedicated e-commerce fulfillment, also allowed us to process this record volume and get orders out to customers faster and more cost-efficiently. Nonetheless, negative store costs made it difficult to leverage the fixed expense base in the store channel in spite of the robust digital growth and positive digital profit contributions. SHU exceeded expectations for Q4 and put a nice finish on the year with comps increasing low single digits for the second consecutive quarter. With its advanced omni-channel capabilities, SHU was ideally positioned to take advantage of the accelerated shift in consumer purchasing away from the high street to online, which was an even more pronounced trend in the UK. Similar to Journeys, boot sales were solid and SHU's kids' business was a strong contributor. The top and bottom line improvement achieved by the SHU team underscores its progress executing the 20-point plan we outlined last year aimed at turning SHU's business around, addressing near-term profitability, and enhancing SHU's standing with the consumer and with the brands itself. This plan included an exit from the German market to increase focus on the UK. In spite of negative store comps, SHU was able to add to the bottom line in Q4 given both the profitability and the scale of its digital business. These results are particularly encouraging as they were delivered in the midst of an extremely challenging holiday season in the UK. Congratulations also to the SHU team. Turning now to Johnston and Murphy. Comps improved on a sequential basis but were still negative down low single digits on top of a mid-single digit increase last year. Positive performance in apparel and outerwear could not offset the impact on consumer demand for footwear. As we discussed on our Q3 call, fiscal 19's introduction of premium sport casual footwear provided a tremendous boost to J&M's results. Last year's footwear introduction did not have the same impact, which became even more apparent in the back half of the year. In a footwear market currently dominated by sameness, the team is working diligently on product innovation and new product introductions for the coming year to inject greater freshness into the assortment. This should better position and differentiate J&M among its footwear competitors and drive greater traffic and consumption for the brand in seasons to come. Post-holiday, both traffic and sales slowed in our North American business. For journeys in particular, boots are an important sales driver, which coupled with an injection of cash for the consumer from tax refunds drove brisk boot sales last year in Q1. This year's temperate start and unseasonably warm weather in many parts of the country has contributed to less robust boot sales than we had planned. and we have experienced a notable drop in store traffic. At SHU, post-holiday sales have been robust, driven by clearance activity. Shifting gears now to fiscal 21. These traffic trends, coupled with the timing of J&M's new product innovation and introductions for the back half of the year, cause us to take a cautious outlook for the first half. We also acknowledge the potential for choppiness in the UK given uncertainty with Brexit throughout the year. To touch now on the coronavirus, we have seen store traffic affected most notably in tourist destinations in both the UK and North America and also in our airport stores. This is clearly a fluid situation which will undoubtedly change but our comp forecasts reflect what we know today and only what we have seen in the trend in our business thus far. We believe many of these factors are transitory and we currently expect to pick up in our business and the momentum to build in the second half, which is the most important time of the year with back to school and holiday. Importantly, we have EPS upside in fiscal 21 from share buybacks we completed already last year, and we will have new revenue and profit from the TOGAS acquisition. So, taking these factors into account, we're projecting adjusted earnings per share between $4.90 and $5.40 for fiscal 21. This guidance is arranged with both upside and downside potential. Something close to the middle reflects our best current belief of where we might come out for the year, which represents a double-digit increase over fiscal 20 earnings per share. Now, let me turn the call over to Mel to review the financials and the guidance in detail.