Good day, everyone, and welcome to the Genesco’s Fourth Quarter Fiscal 2019 Conference Call. Just as a reminder, today’s call is being recorded. 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 to the company’s SEC filings, including the most recent 10-Q 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 schedules available on the company’s homepage under Investor Relations in the quarterly earnings section. I will now turn the call over to Bob Dennis, Genesco’s Chairman, President and Chief Executive Officer. Please go ahead, sir.

Good morning, everyone, and thank you for being with us. I’m joined today by our Chief Financial Officer, Mimi Vaughn. Fiscal '19 was an incredibly significant and successful year for Genesco. We accomplished a lot with a number of important milestones and our turnaround in the trajectory of our business. Most notably, we delivered our strongest comp increase in three years; we achieved the positive store comp which in connection with our cost reduction program allowed us to leverage our brick and mortar expense structure; we drove increases in operating profit and EPS even as we incurred a fair amount of bonus expense versus almost none last year; we generated over $200 million in operating cash flow, including Lids. And then finally we completed the sale of Lids for $100 million subject to working capital adjustments and a $28 million tax benefit and we repaint the Lids headquarters building which leaves us with additional value. The sale provided us with even more cash to potentially accelerate share repurchases and more importantly allows us to now sharpen our focus as a footwear company. We were able to execute all of this because we have great businesses and great people. Our well positioned businesses remained undisputed leaders in their categories, the strength of our concept and compelling assortments allowed us to not only grow top line but the actions we took throughout the course of the year enabled us to flow more to the bottom line. Now an important note before I go on. Because we completed the sale of Lids on the last day of our fiscal year, according to GAAP, we must treat the division as a discontinued operation and restate our historical financials as if we never owned the business. Therefore, there are numbers in comparisons in our earnings…

Thanks, Bob. Good morning, everyone. We’ve posted more information in a brief presentation summarizing results and guidance in our CFO Commentary that you can access online at our Web site. To remind you, as Bob said, because we completed the sale on the last day of our fiscal year, GAAP requires that we include Lids’ results in discontinued operations and that we restate our historical financials as if we never owned the business. This restatement process involved taking certain expenses that were previously shared with and allocated to Lids and re-spreading them across our remaining businesses. It also involves including on both a historical and a future basis the cost of the Lids’ headquarters building which we still own even though there are no operations associated with it. The net effect of all of this is that for fiscal '19, operating income is lower by about 20 basis points for most divisions and corporate bears the cost of the building. This reduces profitability for continuing operations versus prior to the restatement and prior years generally will have a similar effect. Nevertheless, since Lids was both a higher gross margin and a higher SG&A expense business in average, without it gross margins are lower, SG&A expense is lower and operating margins are higher on a percentage basis for continuing operations on a consolidated basis. I would like to call out specifically that my portion of the discussion today will address results and outlook for our continuing operations only which are not including Lids. The strength of our U.S. footwear businesses drove significant increases in Q4 operating profit and EPS, even as we incurred a meaningful amount of bonus expense and had one less week of sales. Adjusted EPS grew 18% to $2.18 from $1.85 propelled by better gross margins, SG&A leverage…

Thanks, Mimi. With the sale of Lids finalized, I’d like to revisit the strategic rationale we laid out when we made the decision to be a footwear focused company. That decision came out of an in-depth strategic review that management and the board conducts with the assistance of outside advisors on an annual basis. On top of that, we have spent much of the last year going through an exhaustive process to evaluate each of the businesses in our portfolio in their connections to one another and have validated that they are better together than they are apart. Our strong strategic positioning, close connection with our customers and enduring leadership positions are what make each of our footwear businesses distinctive on their own and what they share as sources of synergies makes them stronger together. With greater focus, we believe we are now in a better position to unlock the full potential of our businesses and utilize the platforms we have for future growth. We also believe that a company focused solely on footwear is easier for investors to understand and therefore easier for the market to value appropriately. Journeys is the leading omni-channel retailer of branded fashion footwear to teens in North America, a position that has held for two-plus decades. As its strong performance through fiscal '19 once again demonstrates Journeys understanding of teens and unrivaled access to merchandize this customer wants, the equipment’s uniquely well served this fickle customer and to navigate the fashion shifts that are inherently part of life in this market segment and to create and maintain strong competitive advantage. Likewise, Schuh, despite its recent struggles, occupies a similar leadership position selling fashion footwear not only to teens but also to young adult shoppers in the UK. What further differentiates Schuh and engenders allegiance…

Thank you. [Operator Instructions]. We will take our first question from Jonathan Komp of Baird. Please go ahead.

Hi. Thank you. First question I have is just the non-GAAP including Lids for the year was $3.46, obviously exceeded the high end of your guidance and I was wondering if you could differentiate a little bit some of the drivers of the upside that you saw during the quarter?

Sure. It was driven first and foremost by a great comp result. And so as is often the case for us, the main driver is sales. But I’ll ask Mimi to put a little more color on that.

Yes, the main driver absolutely was sales. I think that we had expected that in January just given the great holiday season that we had had that we would give back a little bit in January and that actually did not come to fruition. We maintained the momentum through January. And then right at the end of the year I think that the impact of our cost savings initiatives really paid off. The beat expectations to our own expectations really came from cost savings across every one of our businesses. And so we saw savings in rents and in selling salaries and we saw it – and those are ones that should be recurring savings. We had one-time pickups as well in places like medical expenses. So all-in-all, we ended stronger on both the sales side and on the expense saving side than we expected.

And the other thing I’d just point out. Mimi mentioned it but I think it’s worth emphasizing again is that that result which exceeded our guidance which we’re very pleased with also included a significant bonus being paid out across the company versus virtually no bonus last year.

Great. And I’d like to follow up there more of a question on the outlook and when you look at some of the G&A drivers, incremental cost reductions, presumably a lot lower bonuses and then some of the rent savings, I’m surprised that you might not be assuming or you’re assuming deleverage on relatively modest comps but it seem like you might have a year where you could have better performance on that given some of those savings. So any more color on the size of the stranded costs you’re embedding or the other areas of inflation that are offsetting some of the benefits you might see?

Jonathan, I’ll start. As I said just before, it’s all about sales. And so with the low level of comp that we’re constructing for our guidance, it still gets a little tough to leverage. Even with all the cost savings improvements we have, we have two things. Mimi will talk about the stranded costs in a minute. And then we still have upward pressure on wages. We think we can mitigate some of that with the workforce management program we’re putting in place, but there is continued upward pressure on wages.

Yes, so I’ll talk first about just comps and the comps in our guidance. We feel really good about the momentum we have in Journeys and in Johnston & Murphy, but we’re coming off of a year where we had an 8% comp in Journeys for the year on top of a 4% comp the year before. So we think it’s appropriate to be conservative in our outlook despite this momentum that we’re seeing. And then in Johnston & Murphy, we finished the year with a 7% comp and so have also we think appropriately moderated the overall outlook for J&M. And there are headwinds over the UK and so we’re expecting even in spite of a pretty negative year last year flat to perhaps even negative comps for Schuh. So that doesn’t really give us a lot of top line to be able to leverage the expenses. To talk specifically about stranded costs, Lids was the least integrated of our business. We’ve got a program in place where we are going to stamp out as much of the stranded costs and reorganize internally to eliminate that. So it’s a few million dollars, Jon, but with the level of comps that we are projecting, it does become challenging to leverage. To the extent that we hit a higher end of our comp guidance and we get some more cost savings, which we haven’t fully baked into our plan, we will be in a position to leverage. I think our leverage point at this point is below the 2% comp range. And so if we are successful in exceeding that, then we ought to be in good shape.

Okay, great. And last one from me just on Journeys. I don’t know if you’re willing to give a little more color on the trends you’re seeing within the first quarter and kind of the shape that’s needed to hit the guidance of 0% to 1% on the comps. And then the fact that you’re projecting 1% to 2% for the balance of the year, just curious your thinking on why you wouldn’t expect it to be higher given what seems to be still a good merchandizing environment there?

Yes, Jon, we’re not going to give a lot more color. I thought we were pretty more generous than normal in terms of describing what was driving the business and it’s really more of the same. We’re not seeing necessarily new trends but what we’re seeing is nice freshness coming in from the brands that matter the most. And so as we highlighted in the fourth quarter, for example, the top sellers when you get down to style were different from a year ago even though some of the brands were the same and we’re seeing just continued efforts on our behalf by our vendors to continue to be fresh. And so that’s what we’re looking at. The guidance we have is against some very strong results that Journeys just delivered. So we think in the case of Journeys, based on their past performance, it’s prudent to be conservative. And then most obviously with Schuh, we’re going to continue to be conservative about comps there given the very high uncertainty of Brexit in that country right now.

And just one comment around the first quarter results. So for Journeys, in particular, given all of the puts and takes with tax refunds this year, we thought it would be prudent to be even more conservative in the first quarter. The government was running at the widest gap, about a $39 billion gap in the level of refunds. We’re still about $10 billion behind. Journeys business is especially sensitive to that. We saw in the third week or so of February a slowdown in those refunds. But once those refunds started to pick up, we saw really the momentum picked right back up. And so we think we can successfully come out on the other side once those refunds catch up.

We will now take our question from Steve Marotta of C.L. King and Associates. Please go ahead.

Good morning, Bob and Mimi.

Hi, Steve.

Mimi, you just mentioned that more conservative in Q1 for Journeys. Does the Journeys comp estimate for Q1 differ materially from the annual plan? When you say conservative, do you mean that your internal plans for Journeys comp in the first quarter is below the annual plan?

It’s a little bit below, Steve, not materially. I think it’s just more in terms of a point of emphasis that we thought it was prudent to be a little bit more cautious just because of the uncertainty. There were so many changes in terms of income taxes in the last year and income tax refunds, lots of speculation about whether refunds would be at the same level or not. And so we built in a little bit more conservatism to accommodate any of those unknowns.

Okay. And you mentioned that the stranded costs are a few million dollars. Do you mind putting a finer point on that?

The stranded costs if you look back it’s in probably $2 million to $3 million range and that is assuming that we can stamp out most of the stranded costs that we have. And so that’s what we’re working to do this year.

Also and I may have misheard this, I thought I heard Bob or Mimi mention that there were $20 million of targeted SG&A costs. Was that savings this year? Did I mishear that? Can you talk a little bit about where you are on the cost savings program that you have identified and what you anticipate executing this year and next?

Yes. So, Steve, we have made really good progress on our cost savings programs. I talked about a program in the fiscal year we just ended with a target of 35 million to 40 million which included Lids and we exceeded the top end of that range. We actually identified opportunities equal to 44 million. The 20 million that I referenced is really for this upcoming fiscal year and those savings we’ve not yet identified, we haven’t yet rolled all those savings into our plan. We’re going to adopt the same posture that we did last year where we set a target at the beginning of the year and we worked really hard to identify those initiatives throughout the year and we’ll update you as we make progress to that end.

We will now take our next question from Mitch Kummetz of Pivotal Research Group. Please go ahead.

Thanks for taking my questions. I guess a couple housekeeping on the guidance and then a third. So, Mimi, on the share count for the year, so in the press release and the footnotes, it looks like the low end of the range is built on 18.3 million and the high end is 17.7 million, so that’s 600,000 share difference. But you’ve got like 53 million left on the authorization. It seems like you got capacity to buy over another 1 million in shares. How should we think about that relative to the guide? It looks like the share count could be less than the 17.7 million based on where you are with the authorization?

Yes, Mitch, I think that what we had put into just the range was the shares that we had bought back to-date which is what represents the 18.3 million shares. And then we picked a number that said that if we were to be more aggressive about share buybacks, where would it be? And that would be within the $125 million authorization that we have. I think that the most important point I would make here is that we are opportunistic about how we think about share buybacks. We tend to buy back more when our stock price goes down and less when it goes up. And so we will be opportunistic to try to maximize the buybacks rather than just doing a forced march to buy back at any cost.

Sure.

Mitch, when we did the math on that – we did the math on that. Obviously how many shares you can buy back depends on the price of the stock. And so we may have taken a bit of conservative approach on what the price might be in terms of what’s available to us for further buybacks.

Got it. Okay. And then, Mimi, on the SG&A side, you’ve talked about how large the Journeys bonuses were in fiscal '19. Could you give us that number and can you say what is embedded in the plan for 2020? I’m guessing you would expect it to be down – it looks like you would think Journeys would have a more normal year in 2020 versus '19 just at least based on the comp outlook. Can you say kind of how much do you expect the Journeys bonuses to be down year-over-year in terms of what’s in the guide?

Sure. So the bonuses were good for Journeys, but we also had higher bonuses across other places in our organizations, in J&M and in corporate versus last year. And so the higher level of bonus expense really is across the organization. So we said it was in the neighborhood of $20 million and it actually ended up just a little bit above $20 million, $21 million. And we’ve also said that a more normalized bonus is in about half that level and about half that level is what we have in the plan for next year.

We will now take our final question from Laurent Vasilescu from Macquarie. Please go ahead.

Hello. Good morning. Thanks for taking my questions. I wanted to follow up on the earnings slow through for this coming year. I think in past years, about 70% of your earnings came from the back half and in the last two years all your earnings came from the front of the back half. So just curious to know how we should think about this coming fiscal year?

Yes. So, Laurent, I think that as I said, Lids was a bigger loss – had bigger losses in the first half of the year than the rest of our businesses. So we expect to have – to be positive which we weren’t. Last year in the first quarter we weren’t positive. We expect to be positive in the first and second quarters this year, but just marginally so because as I said it’s still tough to make money in these low volume quarters for the rest of our businesses. I would expect that if you just look at the sort of relationship between third and fourth quarters last year of earnings that you’d be pretty close to where we’re going to be for this year.

Okay, very helpful. And I think you called out that gross margins should expand about 10 to 20 bips for the year. Just curious to know how we should think about 1H and 2H? And then I think in the CFO Commentary, you talked about J&M’s gross margin pressure for the fourth quarter. Just curious to know if that continues into the first half of the year at J&M?

So I would say that the gross margin pickup is going to be really more so in the second and third quarters than in the first and the fourth quarters, but just marginally so. We’re talking about a small pickup. And then J&M’s gross margin pressure from Q4 hasn’t carried into the first part of fiscal '20. We actually expect that we are going to see a little bit of release in J&M in the first part of this year.

Okay, great. And then my last question I think it was mentioned that you need a 2% comp to leverage expenses for the overall company. Curious to know if that 2% comp is applicable to Journeys or do you need a little bit higher threshold to leverage expenses within that brand?

I think that 2% is really under a 2% level at this point and it’s for Journeys in particular. I think the way that you have to think about that is what’s the – how are costs increasing or not increasing? One of the comments that I made today is that our expenses on a year-over-year basis were flat in fiscal year '19 and that was a result of successful cost reduction efforts. The first wave of cost reductions has been a little bit easier than the subsequent waves. But to the extent that we can keep costs growing in the 1% to 2% range, then we ought to be able to leverage at those levels.

That concludes today’s question-and-answer session. Mr. Dennis, at this time I will turn the conference back to you for any additional or closing remarks.

Well, just simply, thank you everybody for your interest in Genesco and we look forward to talking to you again in three months.

This concludes today’s call. Thank you for your participation. You may now disconnect.