Genesco Earnings Call NUGGETS: Boots Volumes, Journeys Business
On Wednesday, Genesco, Inc. (NYSE:GCO) reported its second quarter earnings and discussed the following topics in its earnings conference call. Take a look.
Scott Krasik – BB&T Capital Markets: Well, maybe help us understand your comment about Journeys, that boots is the biggest seasonal difference. Are you implying that boots aren’t a big portion of Q3 but are of Q4, or you’re saying that they have started out strong in Q3? I was confused.
Robert J. Dennis – Chairman, President and CEO: No comments about trends. As you know, Scott, we don’t comment on category trends or on the mix or on the brands for that matter. So, what I’m really commenting about is yes, the volumes for boots are much higher for us in the fourth quarter than in the third quarter, and as such we get a bit of an early read in the third quarter, but the fourth quarter is what is important. Now, that said, we’re in the business. We offer a really broad assortment to the teenager and so fashion keeps moving and what our merchants are really good at is moving around as necessary. Our record is pretty good at figuring out what we think the right mix is and reacting to the marketplace appropriately, but as I said, we’re not going to comment on what our commitment is other than to say that Boots again will be a significant part of our business.
Scott Krasik – BB&T Capital Markets: Then, if we look at August last year, your Journeys comp was 8 and then you reported a much stronger comp for the quarter, so is that Hurricane Irene or is there something, is that how we should view the order or magnitude for the hurricane or is there something else to play?
Robert J. Dennis – Chairman, President and CEO: Don’t overplay the hurricane. We’re just calling it out because we know, I think it was in the last week, we had more stores closed last year than we had this year obviously, and I don’t want to make deal of weather. I mean look, hurricane is about to hit now and so it goes up and down year-over-year. So, the things about the rest of the quarter and we’re conservative just because we’re very pleased with August but we look forward and as we said, it’s a choppy marketplace. And so, back when there was a recession, Scott, you’ll remember that the pattern for us and I think some other retailers was we did really well during periods where people had a real reason to buy like back-to-school and we did well at holiday. And the softer periods for us were those sort of troughs in between event-buying periods, so we’re very alert to that. Now with that said, back-to-school for us started pretty late, and so we finished August with some pretty nice momentum. So, lots of things going on. We’re going to remain conservative, but we’re buying to preserve some opportunity to get some upside.
Scott Krasik – BB&T Capital Markets: And then just two quick ones; the eight JAS, three LSU and one Texas Tech Store, because just for the timing of when you buy, do they move the needle for this year?
Robert J. Dennis – Chairman, President and CEO: No, I mean single stores don’t move the needle. We are calling those out not as much to say anything moves the needle, but to highlight the fact that we’re consistently following the strategy to consolidate that space of broadly assorted licensed sport stores, and we’re doing it as we had said before both through acquisition and through opening new properties.
Scott Krasik – BB&T Capital Markets: Then Jim, I know you’re not giving guidance for next year, but the $12 million in bonuses that were excluding this year, is that a good number to think about for Schuh for next year?
James S. Gulmi – SVP, Finance and CFO: Yes, that’s a good number.
Mitchel Kummetz – Robert W. Baird: Jim, I’ll start with you. It’s a kind of a question that was asked to you. So, on your outlook for the back half, 2 to 3 comp, can you just give us a little help of how we should think about that maybe by quarter and then also by concept.
James S. Gulmi – SVP, Finance and CFO: Okay. As we’ve said we start on August pretty strong and the month of August is an important month for us in the quarter. So the month at the beginning of the quarter certainly has an impact on the third quarter. So we are looking at around 4% in the third quarter and 1% to 2% in the fourth quarter for the overall. Then if you look at the different segments of our business, Journeys is in the range of 5% to 6% in the third quarter, 1% to 2% in the fourth quarter; Schuh is in the range of 7% in the third quarter, 1% to 2% in the fourth quarter; Johnston & Murphy 3% to 4% in the third quarter, around 2% in the fourth quarter; Lids is 1% to 2% in the third quarter and 1% to 2% in the low-end of that in the fourth quarter. As I said around 4% for the third quarter for total Genesco and 1% to 2% for the fourth quarter.
Mitchel Kummetz – Robert W. Baird: It sounds like you were prepared for that question.
James S. Gulmi – SVP, Finance and CFO: No. How I would be prepared.
Mitchel Kummetz – Robert W. Baird: Bob, on the Journeys business, you mentioned that ASPs were 8% in Q2. You said that you expect ASP to remain positive in Q3 and then you sort of anniversary some price increases in the fourth quarter. So how – I mean how do you think, I mean at this point as you into the back half, I mean are ASPs not quite as strong in Q3 as Q4, I guess it all depends on mix and how that plays out? But how do you see comp being driven in the fourth quarter as you start to anniversary these ASP increases?
Robert J. Dennis – Chairman, President and CEO: Well you said it right. It’s hard for us to predict ASPs because mix has always been a major effect and as you know for many years it brought ASPs down. As we said we anniversary the price increases which started to roll in sort of October-ish and roll through the rest of the year. So, that’s why we’re calling up the fact that we anticipate third quarter to still have an ASP increase. I’m not going to pen it down to be in the same as the last quarter, but it should still be a factor. When we think about comp, we buy to a comp number in mind; we buy dollars not units. We’re not paying attention to ASPs because we’re paying attention to an overall buy budget, and so the whole Company, including the Journeys’ team is being thoughtful about this economy and buying reasonably conservative. So, now that said, and we’ve said this before, the Journeys’ team has the advantage partly because of their size to be able to buy a little north of what that plan might be and then adjust as necessary, if necessary, down the road, and they have a history of being able to make those adjustments through a range of techniques and working with our vendors. So, you heard Jim’s guidance. We’re being conservative, but we’re preserving a little bit of the upside with our buying patterns.
Mitchel Kummetz – Robert W. Baird: Maybe one last question for Jim. Jim, you mentioned in your comments that on the SG&A leverage, rent was one area where you saw some good leverage, on a 2 to 3 comp over the balance of this year, how much opportunity do you see on the rent side in order to drive additional leverage in the back half of the year, just given where you see those rents go?
James S. Gulmi – SVP, Finance and CFO: Well, we think that right now we’re looking at, based on the numbers we’ve thrown out, that we will be able to leverage rent in the third and fourth quarters some. So, the numbers do reflect continued leveraging of rent in the back half.