Good day, everyone and welcome to the Genesco's Second Quarter Fiscal 2019 Conference Call. Just 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 today’s call. 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 would now turn the call over to Bob Dennis, Genesco's Chairman, President and Chief Executive Officer. Please go ahead, sir.

Good morning and thank you for being with us. I'm joined today by our Chief Financial Officer, Mimi Vaughn. In the second quarter, we delivered our strongest quarterly comp gain in over two years and a meaningful improvement in profitability compared with last year's second quarter. The strong week of back-to-school sales that moved into the second quarter as a result of last year's 53-week calendar shift helped boost this year's quarterly earnings. Consolidated comparable sales increased 3% with stores up 2%, which is our first positive store comp in eight quarters and e-commerce, up 7% and even better on the positive 2% store comp, we achieved expense leverage in the quarter. Our top line was driven by ongoing strength at Journeys and Johnston & Murphy, both of which experienced acceleration in sales trends on top of solid Q1 results. Lids comps remained negative, although they also improved on a sequential basis and the business is well up from the double digit declines it posted in the fourth quarter. Similarly, Schuh’s comps got meaningfully better versus Q1, but were still negative as several factors in the UK combined to create a challenging selling environment. The significant improvement in our US footwear businesses, especially Journeys more than offset the headwinds at Lids and across the Atlantic. Second quarter adjusted earnings per share of positive $0.04 exceeded our expectations and compares to an adjusted loss per share of $0.10 last year. As we discussed before, our second quarter typically has lower sales volume, as our teen customer gets out of school and customers in general turn their attention to summertime activities rather than shopping. At the end of the quarter, we began to get a read on back-to-school and we're pleased to see comps accelerate further at that time. August was a…

Thank you, Bob. Good morning. We've posted more information in our CFO commentary and new brief presentation, summarizing results and guidance that you can access online at our website. Journeys' very robust performance more than offset decreases in some of our other businesses to deliver a strong quarter that returned Q2 to positive profitability. This profit increase was helped by a week of strong back-to-school sales that moved into the second quarter as a result of last year's 53-week calendar shift. Licensed brands also delivered significantly better results contributing further to these positive results. Results across all our US businesses met or beat expectations, dampened to some extent by greater challenges at Schuh. Overall strong sales, positive store comp and the impact of our cost reduction efforts allowed us to leverage SG&A expense even in this low volume second quarter and in spite of lower gross margins improved adjusted EPS to positive $0.04. Q2 consolidated revenue was up 6% to $654 million, including the additional BTS week, which at around $21 million was in line with our expectations. Consolidated comps were up 3% with store comps, up 2% and direct comps, up 7%. Store comps were nicely positive for Journeys and J&M and overall swung from negative 2% last quarter to positive 2% this quarter. Direct as a percent of total retail sales in Q2 was 10%, up 50 basis points year-to-date demonstrating again the progress we've made driving e-commerce. Journeys posted significantly improved results. Comps were positive 10%, marking the fifth consecutive quarter of increases. The business performed well across multiple dimensions, highlighted by mid-single digit growth in store traffic, higher conversion and improved average ticket size. Average ticket was boosted by higher priced apparel and a small increase in footwear ASPs, but the strongest driver of Journeys' improvement…

Thank you, Mimi. To conclude, I want to express my thanks for the good work of all of our employees throughout the Company. Your talent and dedication are evident in the positive results in the second quarter that are key to our success in the second half and beyond. And I also want to give some special thanks to our employees in Hawaii who got our stores there back up and running quickly in the aftermath of Hurricane Lane. We know it takes a special level of commitment to continue to perform your jobs well in the middle of personally challenging circumstances and we are always proud of our employees who go above and beyond in situations like that. And with that said, operator, we are now ready to take questions.

[Operator Instructions] Our first question will come from Mitch Kummetz with Pivotal Research.

Let me see how I can ask one really long question. So, I guess, it will be a question about the outlook. Mimi, you talked about Q3 earnings being down a fair amount. Hoping, you’d give us a definition of what down a fair amount means and then also on the third quarter, your comp range is a 2 to 5 comp, the midpoint is 3.5, that's a little bit better than what you guys just did in Q2. I'm wondering if you think you can leverage the SG&A in Q3 and kind of what sort of store comp is embedded in that 2 to 5 range, I don't know if you said that already.

Mitch, we'll count that as one question, and I will lead off with just one comment. We, as a company, are not inclined to give quarterly guidance. So with that said, Mimi, help him out.

Yeah. So, Mitch, there are a couple of things that I would just call out around the third quarter. One is that, remember that the really important back-to-school week shifted out of the third quarter and into the second. So we've picked up from that and we're going to give that back in the third quarter, so that's one thing to remember. The second thing is that the dynamic of our bonus expense is that we didn't have bonuses last year, last year was a tough year for us, and therefore we're accumulating bonus this year, and so because of that and because we accrue most of our bonus in the back half of the year, we end up deleveraging this year over last in spite of the positive comps. The last thing that I would mention is that even with the take- up in comps and the take up in store comps, the places that we're actually adding comps to are in our stronger performing divisions where we continue to add positively but not at the rate we would otherwise if we were not accumulating bonus. So, we're adding contribution for positively performing businesses, we're taking away contribution at a bigger rate for those that are not performing as well. And so, the net result of that really brings us back to about the same place that we were prior to the take up in the comps.

Yes. Simply put, Mitch, when we have stores that are at low volumes and they go more negative than we expected, the hit there is hard, and so it doesn't necessarily sum up the way, little -- as Mimi said in her prepared remarks, it's a little counterintuitive, but it doesn't sum up the way you might simply believe it would.

Yes, so can we leverage SG&A in Q3, we're actually not expecting to leverage SG&A in Q3 as a result of all that.

We will now move to Jonathan Komp with Baird.

Yeah. Hi. Thank you. Just want to kind of gauge your overall broader confidence in the trends you're seeing. Obviously, especially on Journeys, you took up the comps expectation a little bit into the fourth quarter, and I'm curious to hear a little bit more of the thinking behind that. You called out some of the assortment that you're seeing, and just broadly kind of your overall confidence as you look to the fourth quarter and later in the year and being able to drive all of your earnings growth after clearly some moving parts between the quarters, between Q2 and Q3 here. Just trying to get a broader sense of your confidence in those views.

I'll start with just sort of a macro comment and then hand it to Mimi. One of the things that we've seen that's interesting in the dynamics in the mall right now is traffic patterns. We've gone through, I think, four years where traffic into footwear and apparel store has declined significantly, and all of a sudden, we've reached a year where it's flattened out a little bit, not for all of retail, but for footwear and apparel as a category. And so, we're seeing -- for reasons that we can't completely understand, we're seeing a flattening out of that, and so that's giving us from a macro standpoint an opportunity to do better, but then obviously, Journeys is doing a lot of terrific things within their world. And I'll hand it to Mimi for that.

Yes, so Jon, we had guided to a 4% to 5% comp for Journeys in the second quarter and they delivered a 10%. And that's meaningful because we began to comp against the positive uptick that Journeys experienced coming out of the fashion rotation last year, and so that was a really good sign. And that momentum of positive on top of positive is what led us to look to the third quarter and through the heart of back-to-school, as Bob said, Journeys continued to perform well, and so August is largely in the books, September and October will be a continuation of those trends, and then the mix shift into boots. We expect that we will continue to sell athletic products, but the range, we've got a fairly wide range on comp for Journeys in the fourth quarter. We're comping against the really strong number from last year. We had a good boot season for Journeys last year. I think the upside in our comp guidance is really dependent on how the winter turns out, what the weather is like for the winter and the strength of boot sales overall.

[Operator Instructions] And our next question will come from Laurent Vasilescu with Macquarie.

Good morning. This is Werlson Hwang on behalf of Laurent. Thanks for taking my question. The gross margin guide for the year was inched up slightly last quarter and today's gross margin guide of 30 bps, and that implies about 80 bps of GM expansion in the second half. How should we think about it between the third and the fourth quarters?

Okay, so between the third and the fourth quarter, so we gave up, we had a little bit more markdowns than we had expected for the second quarter, but in the third and fourth, we actually project a pickup of about the same level.

I call you back to the inventory situation that we have really gotten the inventories very clean, inventories were down more than sales across most of our businesses, and so that helps our positioning for our gross margin in the back half.

And our next question will come from Steve Marotta with CL King and Associates.

I'll try to squeeze in two questions and just apologize upfront. The first is Mimi, if it's possible, if you could quantify the amount of Q3, well, the amount of sales that spilled into Q3 from Q2. I know that you mentioned it with some, but I don't think that you put a number on it, that would be -- impact of the calendar shift specifically. And also maybe address just your anticipation of the NFL season, was problematic last year for a host of reasons, viewership certainly not withstanding. And if you could just talk a little bit about if you see stabilization in that category. Sort of independent of what the playoff show, just overall consumer view of NFL and the impact on the product in the third and fourth quarters.

Steve, I'll take on the NFL first. It's a very important part of our fourth quarter. And as you remember, our NFL business was off significantly last season as it really was for the whole industry. This year, we're not expecting to pick much of that back up. I think, we're going to expect to pick up some of it. And it's just been a little early to get a good read. And part of what was going on last year, we think was a number of high-profile injured players, which obviously, hit jersey business directly, but probably indirectly hurt a little bit of the fan focus as we lost that. There were also some high-profile teams that did not live up with the expectations, which meant that -- to our expectations or everybody else's and so that left our inventory a little out of whack to where we would like it to be. In terms of the rest of the dynamics of the NFL, we're not going to comment on any of that, it is what it is, and so right now, we're in wait-and-see mode, but as I said, we gave up a lot last year and we're not budgeting, not expecting to get a ton of that back this year.

So Steve, in the second quarter, we picked up about $21 million worth of sales from that came out of Q3 and moved into Q2. But Q3 has less sales as a result, not quite to that level, because the week that ends up shifting in is a stronger week for Q3, so we don't quite give up $21 million, it's under 20 million that we give up in the third quarter. And then I'll just remind you in the fourth quarter, we give up in the neighborhood of $45 million or so worth of sales and these are all based on numbers from last year that if we just shifted the calendar last year, what would the impact have been. The important thing about the fourth quarter is that we've got one less week of sales for us last year that was a week of diluted sale. We thought that the dilution to EPS was in the neighborhood of $0.05 because of the really weak week in February that we picked up that really wasn't a positive contributor. So that's the general cadence of how we see sales unfolding based on last year's number.

And our next question will come from Christian Yonkoski with Piper Jaffray.

Hi. This is Christian on for Erinn this morning. Thank you for taking our question. We know you guys mentioned some factors in the UK driving weakness in the overall environment. We were wondering if you could maybe parse out those factors and speak to how the domestic consumer looks in the UK versus tourist.

Yeah. So, this is Bob. I'll start with some macro stuff and then let again Mimi get a little more specific. What's going on in the UK is just a little funky at the moment. If you look at their overall GDP, the growth has been slow, it's 1.2%, 1.3%, not expected to improve a lot this year. And yet, on top of that, you've got consumer confidence that's running pretty high and so spending at retail sales in the Q2 was running at around 3%. But if you look underneath that number, a lot of the spending in the UK is focused on basics and the apparel and footwear category is actually not doing well and the High Street metrics that you can look at, tell you that the High Street is struggling despite that dynamic. So it's really kind of a mixed picture. If you go specifically into the summer, what was going on, you had the World Cup which -- where the English team went pretty far and that's a distraction. And then really above the average temperatures, it was such an incredibly unusual summer in the UK that everyone believes that that depressed shopping. And so that's sort of a short-term factor that went into it. Obviously, the country is facing a very challenging situation with the Brexit and the issues that remain unresolved there, and so we're not thinking that that's going to all get better quickly and so that's driving our thinking about how to extend Schuh's trend forward.

Yeah. I think that based on that, we looked at Schuh and we looked at the performance of Schuh. We delivered a performance that was at the low end of our comp range for the second quarter, and as a result, we look to the back part of the year and against positive comps for Schuh last year. We felt that there would be some headwinds and that it would be prudent to take Schuh's comps to a more negative level for this year. Now the one area of opportunity I would highlight is, really again boots in the fourth quarter. Last year, the boot season for Schuh was not a very strong one. The softness in footwear and apparel started in the fourth quarter. And therefore, we had to -- our sell-through was not at the level that we would have liked to see and we ended up clearing a lot of product at the end of the fourth quarter. So even in spite of that, given the challenges that we've seen in footwear, we continue to be conservative, but if there's -- some of the upside is really going to be in boots, then it's going to be dependent on the winter weather.

And that concludes our question-and-answer session. And now, I'd like to turn the call back to Bob Dennis for any additional or closing remarks.

Well, thank you all for joining us, and we look forward to having another chat with you in three months. Thank you all.