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 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 8-K 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 Lids 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 and 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 contributions 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 omni-channel leader. During his tenure, we acquired Schuh, acquired Little Burgundy, sold the Lids Sports Group, and launched the footwear-focused 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 it's 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, onto our performance. There is 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 eleventh consecutive quarter of comp sales growth, achieving positive store comps by driving meaningful improvements in…

Thank you, Mimi. In fiscal '20 we celebrate another strong year of exceptional performance. For the year, we improved adjusted operating income by 9%, increasing from $91 million to $99 million. We improve EPS by $1.30 year-over-year to $4.58 in FY '20 versus $3.28 in FY '19 and $2.67 in FY '18. We grew comps by 3%, improved gross margin by 60 basis points, with every division shown improvement for the year. We held expense growth to less than 1% and continue to operating income improvement as a result. As Mimi mentioned, we had a solid fourth quarter and our performance exceeded expectations with EPS increasing from $3.09 to $2.18 cents last year or over 40% with improvement in our shoe business, lower corporate and bonus expense, and share buybacks aiding the year-over-year improvement. The beat to expectations was due to Schuh's performance and the elimination of more stranded costs than we expected. Q4 consolidated revenue was a little over last year's level due to a positive comp and improved exchange rates, this was partially offset by closed doors and lower wholesale sales. Consolidated comps are 1% driven by direct comps of 19%, and store comps that decreased 2%. Direct sales penetration as a percent of total retail sales was 16.6% for the quarter, accelerating 290 basis points ahead of last year. Our e-commerce business continues to experience robust growth as we invest in digital wallet, at the same time maintaining profitability in this channel. Journeys comp 1% for the quarter on top of this highest two-year stack comparison of the year at 18%. E-commerce grew strong double-digits once again, partially offset by negative store comps. Strong in store conversion and increases in average transaction size were outweighed by continued negative store traffic as the negative trend accelerated during the…

Thanks, Mel. Following a successful first year as a footwear-focused company, I'd like to touch briefly on the rationale we laid out when we made the decision to pursue our current strategy and discuss the exciting direction we're taking in this new chapter. Across our company we aspire to create and curate leading footwear brands that represents style, innovation and self-expression, and to be the destination for our consumers favorite fashion footwear. Each of our businesses has a strong strategic position, grounded in a deep and ever-evolving understanding of the customer it serves. The strength of our concepts and the advantages we've built overtime have established long-lasting leadership positions that make our footwear businesses outstanding on their own, for what they share through the benefits of synergies makes them even stronger together. We're best known for being a retailer but we have an important and valuable side of our business that successfully owns and licenses brands, given us a good platform for future growth. Our opportunity to unlock the full potential of Genesco is to accelerate the digital and omni-channel potential in our retail businesses and to grow our branded side. We made substantial progress on this in fiscal '20 and our future plans are to further grow profit in the short-term, and strengthen our strategic positions for longer term growth. Following the recent work on the sale and unplugging of the Lids business from our infrastructure, we believe this year provides a solid baseline from which to build a new growth plan. We updated our five-year plan in the fall using fiscal '20 as the first year, so I'd like to describe the outcome. Beginning with the top line, we're forecasting average annual growth in the 3% to 4% range driven by strong digital growth and robust conversion in…

Thank you. [Operator Instructions] And we will take our first question from Mitch Kummetz with Pivotal Research.

Yes, thanks for taking my questions. So Mimi, I know you don't like to speak to quarter day trends but given the special kind of circumstances here, I was hoping you could maybe address a few things. You called out in your release, also in your comments, the impact on COVID-19 on airport and tourist stores. Could you may be speak to how those are trending versus maybe the balance of the chain? Can you talk about maybe how many of your stores you would characterize as airport and tourist? And then, if you could talk a little bit about what you're seeing elsewhere within the business, particularly in some of those areas that have been maybe most effective, like, let's say, a Seattle, so maybe we could start there?

So Mitch, thanks for your questions. And, you know, I know there are a lot of questions about the impact of COVID-19 and the coronavirus, and I want to start by just talking a little bit about our trend. And starting with the trend in January and February and March, we can typically sell a lot of boots at Journeys if the weather is cold, and February is usually helped by tax returns. Last year, we did exactly that. We sold a lot of boots, this year the weather was warmer and we didn't sell as many boots as we would have if the weather had been cold. We saw a decline in store traffic at this time really over the late January into February time period, and maybe the customer decided that I'm going to perhaps wait until spring, I'm going to wear what I have now and wait until the seasons turn if the winter isn't going to last for long. So, then we ask to what extent is coronavirus having an impact on consumer demand? And we have to really discern how much is trend and how much is the impact from the coronavirus. We certainly have been seeing an impact on traffic and tourist locations, really in places in the U.K. like London and Edinburgh, and places they call the pretty cities which are places like New York [indiscernible] where lots of overseas tourists come to visit. On the West Coast in the US, we've also seen some impact mostly from tourists and as I mentioned in airports and wherever we have an airport location we have we've been impacted. I'd say we've started to see some impacts beyond tourist locations recently, but it is -- it's fairly recently that we have -- we've seen that impact. So it's a matter of discerning [ph] how much is trend and how much is impact from the coronavirus. So, we've built in only what we've seen so far in guidance. This is very obviously a dynamic and evolving situation. We don't know how far it will go or exactly how long it will last. And it's too soon to know how much this will specifically affect consumer spending. So, we've been through situations like this before Mitch, it might hurt mall traffic for a time, but it will eventually be under control and we're going to benefit on the other side of this from pent-up demand. And we typically tend to come out stronger on the other side. In the meantime, our digital business can pick up some of the slack, we haven't had that tool at our disposal in prior times when we have seen a demand shock. So, we think that we can benefit from some of the pent-up demand that will come out of the other side. So in the meantime, it is -- it's a rapidly evolving situation that we're paying attention to, and we are customizing our responses to what we see.

And can you say how many stores are tourist in airport?

We have a handful of airport locations in the neighborhood of 20 to 30 locations. And our tourist stores, really a lot depends on how you define those; we would define those as big cities like New York, and LA, and San Francisco, and Orlando would be one of those as well. The vast preponderance of our stores are in non-tourist locations, it's really the -- a smaller portion of the number of our stores are in our in tourist locations.

And then, on Journeys for Q1 you're guiding to a comp of down seven to down three; just hoping you could kind of break that out a little bit. You know, how much of that is the softness in boots to start the quarter versus any kind of drag from COVID-19 that you're seeing versus just the underlying trend within kind of the core, non-seasonal part of your business?

Sure. So just to start with Schuh performance. Schuh gave us a solid performance during the course of a holiday but it was very brand-specific. We started out with a burst of cold weather at the beginning of November and the update we gave you at ICR; at the beginning of January we said we were really pleased with how boots have sold over the holiday season. I think that that a lot of the softness that we saw in late January to February was due to weather among other things, and we didn't see the same sell-through on boots that we would have otherwise seen. Most of what we sell when it comes to boots is fashion, but it helps to have cold weather. Some of the more fashion related boots sold through nicely, some of the more weather dependent ones, not so much. And so that really is what we took as a trend going into the first quarter. As far as you know, we sell a lot of retro-athletic products. When the cycle first started, there was a lot of upside to sell something new into people's wardrobes and into their closets. We like the cycle because it stretches across a number of athletic brands, we have a lot to work with in the catalog of retro product. We still do sea legs to this cycle but it's very brand dependent, there is some performing well, and some not performing well. We're also very excited about the more casual side of our business; both, what sells in the summer, and also fashion boots in spite of what happened over the late winter -- the late winter seasons. And it's good to see this casual growth, we've been very athletically driven over the course of the last few years but casual adds to the diversifications.

We'll take our next question from Jonathan Komp with Baird.

Yes, hi, thank you. Maybe first just a follow-up to the last discussion there. Just more along kind of a casual assortment at Journeys. When I look at the website today, there is a lot of Crocs, Dr. Martens, Vans, even Converse; are those the types of brands that you think can keep the assortment fresh and working as you look ahead and what's embedded in the outlook for Journeys or just any thoughts on kind of the sustainability of the current assortment that you have?

Sure. So I would start by saying that I think looking at Journeys overall performance in the fourth quarter, we were going against a two-year stack of '18 and put a positive 1% on that. So, when you think about three years, we gained 20% in our Journeys business which I think is really a measure of gaining market share. And fashion is constantly rotating at Journeys, we are selling what that team consumer wants to buy; and when we look at our assortment certainly for the spring, we see some really nice opportunities in some of the brands that we are -- that we're offering. And interestingly, what we see is that we have -- we still have nice conversion in our stores, it really has been a function of traffic, and so I think strong conversion in our stores is a measure of when people walk into our stores and cross the leased line, they like what they see. It's really a matter of traffic is the issue that we have been facing over the more recent weeks.

Okay, that's really helpful. and then maybe a broader topic understanding this is probably difficult to answer and may be shifting day to day, but just curious, maybe how you think more broadly about contingency planning and protecting the business when you have 4% operating margin and yet seemingly pretty low visibility in terms of the near-term demand and some of the macro factors out there. Just -- how do you conceptually make sure you're protecting the business in that environment?

Yes, it's a great question. And I think that's top of mind for many companies these days, and in terms of what to do, and in reaction to the current virus situation. And John, I'd say the really good thing is that we have really experienced teams who have been through lots of cycles over the years, whether it be the Great Recession, or product rotations, or we -- you know, our teams, we've got a lot of long tenure in our teams. The health and safety of our people is really most important and we're taking all the necessary actions here. We have traffic counters in stores, we can react and adjust to staffing levels as needed and we're going to manage expenses and capital spending very carefully, it's a matter of really managing your business carefully through all of this. Again, over the long-term, I think the situation -- situations like these hurt mall traffic for a time. But eventually, when these situations get under control we will benefit from the pent-up demand that's out there. And long-term, the strength of our businesses and the strategic positioning is what helps us to get to the other side of these things. The retail environment typically has a shakeout during these times and strong retailers do well and weaker retailers find it hard to survive.

And we'll take our next question from Janine Stichter with Jefferies.

Hi, good morning. Just a few more clarifications on the guide; if you could just help me understand what's embedded. So you mentioned the slowdown in airport and tourist locations; are you embedding any broader slowdown outside of those stores in your comp guidance? And then on the gross margin guidance, is there any impact from either needing to help expedite goods that you sourced directly or for need to mark down products that may be arrived a little bit late? Just help me understand kind of what's in there. Thank you.

So just on the sales guide, Janine. We didn't build anything incremental into what the guide is, beyond what was in our current business related to the trends within our business. So, nothing additional built into that.

Yes, and just before we answer the rest of the question, Janine; there are so many permutations of what could happen that we can only build in what we know. As far as -- and I'll turn it back to Mel to just talk about expediting product, and adjusting for gross margin for late product deliveries.

Yes. So we really from an expediting product, we don't really think that we have too many issues there. I think from a supply perspective, speaking to our divisional presence, we feel pretty good about being able to get product in. So I don't think there is going to be any supply constraints, probably the only real issue on the margin line in the front half the year is; we have a little bit more cost of inventory in our Togast business which was required in Licensed Brand. So our margin profile will be a little bit lower in the front half of the year. And as we sell through the inventory we have on-hand, the margins in that business will improve; so the margins will be a little bit lower in Q1 and Q2. And also we're clearing additional product at Schuh as we mentioned, and it's driving a lot incremental revenue in the first quarter. But I think the first two quarters are a little bit challenged on the margin line but it's built into our full year guide.

Yes. So for now, I think -- and to sum that up, when you think about Chinese New Year, we had a lot of product that was completed and put on the water and so we tend to be in a good inventory position at the present moment, as Mel said. On the supply side, we -- most factories are up and running for product that we sourced directly, we have good visibility into the things we've sourced directly, what we get from third-party vendors we've not heard of many delays yet, Janine, and that's the large majority of our business but it's a bit too soon to tell. As we get into the into the second quarter, May and June are lower volume months for us, and so we're in-stock for much of what we need for spring; May and June will be lower volume months for us. When we need to start building inventory is a few months from now which is really back in into June and July for our Journeys business when we begin to stock-up for Back to School, we're landing a lot of fall product at that time too in addition to Back to School product. And so, you know, time will tell the extent to which we've got to expedite additional product but -- and except as that happens, it will be into the second quarter.

Okay, great, that's helpful. And then, just shifting gears a little bit; you've had some pretty consistent success with reducing rents. And now we're hearing even more so than ever some of the balance of power shifting back into the hands of the tenant. So, just any update on kind of what you're seeing in your conversations with your landlords? And if you feel like there is an opportunity for even maybe more significant rent reductions? Thank you.

Yes, I think -- I'll give some commentary and then let Mel just talk about what we have been seeing. But we have been paying a lot of attention to our fixed rent expense structure for really the last three years. We have had quite a lot of success here on, not only getting rent reductions but on shortening lease life. And what's important is that we are working to variabilize rent expense to the extent we can. And that's the whole reason behind the shortening of the lease life is that, if we can sign a shorter term renewal than -- if traffic goes up and sales go up, we're happy to pay more rent, and if it doesn't, then we have an opportunity to adjust again. Some of what we've been seeing, Mel made reference to in our prepared remarks where we are entering into agreements with some of our landlords on these shared fate deals where they help us with capital, they actually give us variable rent up front, we have an opportunity to have multiple kick outs and that is a way to just minimize risk and so we can move rent expense up and down according to how sales unfold. And to the extent that we find ourselves in a situation where we don't want to be in a store, we have the flexibility and the opportunity to exit. Mel, would you add anything to that?

Yes. I mean, I think you nailed it. I mean, I'd say that -- one more thing I'd add to it is this; we hit about 15% of our stores per year. So we've got quite a few more years of getting to stores and having a chance to renegotiate these renewals, and I'm especially excited by the fact that more and more of these deals we're entering into can be shared fate deals, and the more we can do that, the more we can protect on the downside as well. So, we're making good progress and I think we've got plenty of runway to keep doing that.

We'll take our next question from Steve Marotta with CL King & Associates.

Good morning, Mimi and Mel. First, just to put a fine point on -- I know you don't provide quarterly guidance but you've provided a little bit of color. Assuming negative EPS on -- literally negative EPS, not just a comparison on a year-over-year basis in the first and second quarter is not unreasonable, correct?

Yes, that's correct. We are expecting that it's going to -- we had a really strong first quarter last year. And we're expecting to go backwards. I think we said, we think it might be -- it will be difficult to make money in the first quarter based on the current negative comp projections. And then, even into the second quarter, we expect that we will go backwards and depending how far backwards we go, it may also be challenging. These are just simply very low volume quarters where we are hanging on with our fixed expenses to try to get to the back half of the year with Back to School and holiday where we make a lot of our profit.

I wanted to put a fine point on that. And then, you've mentioned that your annual guidance assumes nothing incremental outside of the current trends but it does assume some sort of normalization at some point. Is that a normalization assumption starting tomorrow to mean -- to the average comp expectation for the balance of the year? Or is that something that starts at the end of the first quarter or at the end of the second quarter? When is your inflection point to what would be considered normalized trends?

Yes. So I think what we've done is, we have -- if you look at our overall comp guidance we've given by quarter, we have been most conservative with comps in the first quarter. And even getting into the second quarter, we think that there is a possibility that we could have negative comps, but there is also a possibility that we start to round out at the end of the second quarter. But you know, the whole situation with the coronavirus is dynamic, and I would say -- it'd be safe to say that, if the situation unfolds further that we haven't built in any additional impact. So our guidance reflects what we've seen so far, and what we've seen so far says that the first half is going to be challenging but that we have a chance in the back half based on the product trends we're seeing. And then also based on the compares, if you look at fiscal '20, we had our strongest comps in the first half of the year; and towards the back end of the year we gave back a little on comps, so we expect the opposite to happen this year. A couple of other things that I've pointed out is that, the Togast business that Mel gave you the economics about; we need to add in and that adds to both, the top line and the bottom line we expect for this year. The year we've just finished had quite a bit of bonus built into our numbers and so we never like to give back bonus but it does provide some cushion to the extent that this year faces some challenges. And then finally, the share buybacks that that we've had out there that we've completed already as about 9% to this year as well. And so, when you look at our overall guidance that assumes the addition of some new revenue, it actually at the midpoint assumes that our base businesses go back a little bit and then we've got some cushion from the bonus. And then, finally share buybacks help on the EPS side.

And our last question comes from Sam Poser with Susquehanna.

Good morning. Thank you for taking my questions. I've got a couple; can you give us some idea of the range of volume out of Togast and how much you're foreseeing that business as -- how many bips [ph] that alone may impact the gross margin, let's say in the first quarter as it liquidates not sort of taking away the fundamental issue that the gross margin there is lower than other parts of the business?

Yes, so I'll start with the color and then I'll turn it to Mel to give you the specifics in the first quarter. But as you know, this Togast opportunity is a great opportunity. We really like the fact that we've added Levi's as a brand to our portfolio, and we've brought onboard a terrific team to complement our Licensed Brands team. Our Licensed Brands businesses is more front-end -- front of the year loaded; the Togast business is more back-end of the year loaded, we have some nuances in the acquisition where we've got some pressure on gross margin in the first part of the year as Mel mentioned. And in the back part of the year, we will -- we'll work through some of the inventory that we're taking on which gives us some more upside for gross margin. Mel, if you want to talk specifically about where we see the first quarter gross margins?

Yes. So for the year, we guided [ph] 30 to 50 basis points down in gross margin rate, and a lot of that is due to the addition of Togast and the wholesale business lower margins, $80 million to $90 million in revenue. But as I mentioned with Janine is that, there are additional royalties commissions in the cost of goods that we have in the front half of the year; as we've cycled through that inventory our margins will improve as the year progresses. So, if you think about that 30 to 50 basis points in the front half, it's probably twice that as far as the pressure in the front half and it gets better as the year progresses, and it actually flips in the back half.

Yes. And even more pressure probably in the first quarter than in the second quarter.

The first is the worst.

And could we see gross margins down like 80 to 100 basis points in total in the first quarter?

Yes.

And even a little more than that.

Yes.

That concludes today's question-and-answer session. At this time, I would like to turn the conference back to Mimi for any additional or closing remarks.

Thank you all for joining us today, and we look forward to giving you updates on our next earnings release.

That concludes today's presentation. Thank you for your participation. You may now disconnect.