Good day, everyone, and welcome to the Genesco First Quarter Fiscal 2022 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 First Quarter fiscal 2022 Results. 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 and 10-Q filings for some of the factors, including the impact of COVID-19 that could cause differences from the expectations reflected in that forward-looking statements made during the call today. Participants are also expect to refer to certain adjusted financial measures during the call. All non-GAAP financial measures referred to in prepared remarks are reconciled to their GAAP counterparts and 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 that is accessible on our website. With me on the call today is Mimi Vaughn, our Board Chair, President and Chief Executive Officer who will begin our prepared remarks with highlights from the first quarter; and Tom George, our Chief Financial Officer who will review Q1 results in more detail and provide direction for Q2. Now, I'd like to turn it over to Mimi.

Thanks, Dave. Good morning, everyone, and thank you for joining us today. Our company began fiscal 2022 with positive momentum, following an incredibly challenging year battling the pandemic. In each successive quarter, our people worked with great tenacity and success to improve top and bottom line results to close the gap to pre-pandemic levels, drive the recovery and return to profitable growth. We entered the pandemic year from a position of strength following 11 consecutive quarters of comp sales growth in our footwear businesses. Our overall performance in a difficult environment reflects the strong competitive positions of our retail and branded concepts, the strength of our footwear focused strategy and our success capitalizing on opportunities to bolster these positions. Thanks to the ingenuity and efforts of our people, we exited last year with a solid foundation to build upon. As a result, fiscal 2022 is off to an incredibly strong start with the first quarter that meaningfully exceeded our expectations. Our outperformance was driven by better-than-anticipated results at every division led by record first quarter revenue and profitability at Journeys. Even as the pandemic continued to impact our businesses to varying degrees, the pace of our recovery accelerated each month and overall in Q1, reflecting stellar execution, combined with a temporary boost from U.S. government stimulus and pent-up demand as the economy reopened faster than anticipated. I'd like to begin today by outlining some of the key highlights from the quarter. First, revenue and operating profit exceeded pre-pandemic levels, increasing 9% and 125% respectively over Q1 fiscal 2020, two years ago, even with our stores open for a little less than 90% of the possible operating days in the quarter given closures primarily in the UK and Canada. Next, higher operating profit combined with pre-pandemic share repurchases delivered outstanding Q1…

Thanks, Mimi. Q1 results far exceeded both our expectations and last year across the board. For comparison purposes, we believe that comparing to two years ago, our pre-pandemic fiscal 2020 provides the most meaningful assessment of current performance as there is simply too much noise in fiscal 2021's results for drawing informative comparisons. However, looking back at how our business has changed since fiscal 2020, ecommerce has become a larger percentage and our licensed brands segment has become a larger piece of the total as well due to the acquisition of Togast and strong Levi's sales. These changes come with an overall lower gross margin rate due to the impact of direct shipping expense and the expansion of our wholesale volume, which should be more than offset with lower SG&A from these businesses, coupled with the impact of our cost reduction initiative once our business normalizes post-pandemic. While these changes will reshape the P&L, they have a positive impact on operating margins and an added benefit of a less capital intensive business model. Turning back to Q1, I'm pleased to report that the first quarter continued the sequential improvement of our operating results since the onset of the pandemic. Higher revenue in excess of pre-pandemic levels combined with SG&A that remains well-managed, led to significantly higher operating income versus fiscal 2020 and Q1 adjusted earnings per share of $0.79, compared to $0.33 in fiscal 2020. In terms of the specifics for the quarter, consolidated revenue was $539 million, up 9% compared to fiscal 2020, driven by continued strengthen ecommerce, up 144% versus fiscal 2020 combined with strong results from Journeys and licensed brands compared to pre-pandemic levels. We did not provide overall or store comp results in Q1 as our comp policy removes any stores that are close for seven…

Thanks, Tom. As I said, the footwear focus strategy we embarked on a couple of years ago is the right strategy for our business and the foundation of our strong performance. Let me briefly revisit the rationale behind this strategy and how it continues to drive results. Across our company, we aspire to create and curate leading footwear brands that represents style, innovation and self-expression to be the destination for our consumers' favorite fashion footwear. Our strong strategic positioning in the specialty consumer markets we serve, close connections with our customers and enduring leadership positions are what makes each of our footwear businesses distinctive on their own and the synergies they share make them stronger together. We're best known for our retail platform, but we have an important and valuable side of our business that successfully owns and licenses brands, giving us another good platform for future growth. Our opportunity to unlock the full potential of Genesco is to accelerate the digital and omnichannel potential in our retail businesses and to meaningfully grow our branded side. We operate in an industry undergoing substantial change with the continued consumer adaption of digital commerce, positioning our company to affect transformational change. We made substantial progress on this in fiscal 2020 and the pandemic despite its challenges was an accelerant to this change. Looking at the retail side of our business Journeys' understanding of teens and unrivaled access to merchandise they want equips Journeys uniquely well to serve this fickle customer and to navigate the shifts that are an advantageous and inherent part of fashion footwear in this market segment. Schuh occupies an essentially identical position in the UK. Both brands have exceptional merchandising abilities and a passionate focus on customer service. Both serve as key omnichannel distribution partners for the current most…

Thank you. At this time, we'll be conducting a question-and-answer session. [Operator Instructions] Thank you. Our first question is from the line of Steve Marotta with CL King. Please proceed with your questions.

Good morning, Mimi and Tom. Congratulations on capitalizing on the tailwind in the first quarter. Very nicely done.

Hey, Steve.

Thank you, Steve.

Thank you.

I want to ask you a little bit about the inventory position versus two years ago considering that it's below two years ago and the pace of sales are as good as they are. I'm assuming you're in chase mode. Can you talk a little bit about when you would expect a little bit more equilibrium between what your inventories are and what you expect demand to be?

Sure. Steve, definitely the supply chain situation has been challenging. It's not just the ports but transportation from the ports, containers, COVID disruption, has -- it really started with COVID and the supply chains haven't been ready for the consumption to pick up so robustly. It's not a new problem. We have been managing throughout the pandemic with this situation. Our last quarter that we just had, we had some of these issues as well. Basically what happened is that whatever inventory came in went right back out. There was a worse gap to fiscal 2020 at the beginning of the quarter, yet sales were strong. So, we again have been managing through this. So, the good news is things have been getting better at the ports and in the supply chain. We're a very important partner to our brands. They've worked with us a lot to date and this is a lower volume time for us that gives us a bit of time to catch up. We do expect to do a good amount of catching up in the second quarter, which will help with back-to-school. We expect to be in good shape by the end of the third quarter in time for holiday based on what we know today.

That's really helpful. And I did want to touch a little bit on back-to-school and holiday overall, as well. Considering that it looks like even summer camps and by that, I mean immediate term are a little bit more normalized, that as far as all indications are from in-person classes, elementary, middle and high schools, as well as colleges will be occurring in the back-to-school season and how abnormal obviously, last year was, you could dream a little dream about how strong back-to-school could be and then obviously dovetail a little bit into holiday. Assuming that there is much optimism internally there as there might be here in my commentary, can you talk a little bit about how you would approach a holiday season in order to maximize sales and market share? Thanks.

Yes, sure. Look, there are a lot of great pluses out there. GDP growth is good, there's been a huge injection of cash into the economy, there are a lot of savings, employments increasing, COVID cases have been rapidly declining. You can just feel that people are excited to get back to normal. They just feel that America is coming back to life. Back-to-school should be more normal this year than last year. It was completely not normal last year. We gathered a lot of data about back-to-school. We estimated about two-thirds of students attended only virtually. Back-to-school for us starts in late July, we do a significant business in August and then it trails off in September. So, we are really watching to see what the school districts are saying. All school districts have not decided definitively what they're going to do next year, but there's a big push to get back in-person. And so, we think that that is going to be a positive for our business. We also think that there are nice underlying drivers like the enhancements to the child tax credit that's going to start in the middle of July. So, people are going to get payments directly into their accounts and this timing coincides nicely with back-to-school. It's going to continue through right up until holiday. So, it may help with gift-giving as well. And so, we see lots of great signs in our business, we see lots of great signs in the economy. There was a tremendous amount of disruption last year, so the consumer patterns are different. And so we are taking all that into account and are optimistic, but know that there's a lot to come in the back part of the year.

Very helpful. I'll take the balance offline. Thanks.

Thank you.

Thank you. Our next question is from the line of Jonathan Komp with Baird. Please, proceed with your questions?

Yes, hi. Thank you. First I want to ask on Journeys, maybe separate of consumer demand or ability and willingness to spend. How are you thinking about positioning the assortment? Just looking at how strong Journeys has been and any commentary, the balance of the seasonal summer season here and then how you're positioning the assortment for back-to-school and fall, winter?

Sure. First of all, I just want to give a shout out to our merchants. They placed the right bets on the right product. They have so much experience just navigating the twists and turns of the teen market and clearly the twists and turns of the pandemic. What we have been seeing in this latest fashion cycle, and Jon, you know we spent a lot of time talking with you about the retro-athletic cycle which was the cycle right before we went into the pandemic. And we started to see last year that there was a real shift into what we call more casual product. I talked about it on the call. We saw casual in terms of sandals, in terms of boots, we saw the propensity of the consumer to shift away from fashion athletic which they always are consuming into a more casual assortment. This is a real positive for our Journeys' business because we're uniquely positioned to serve the customer in the casual assortment. What's interesting right now is that teens are finding inspiration for whatever they are wearing. And just reinterpretations of a throwback style. So, 1980s 1990s, the 2000 fashions, there's a lot of diversity in fashions and styles right now -- Tiktok videos and other social media, teens want to show their individual style and that is just playing nicely into the assortment we have. They're borrowing bits and pieces from what they are seeing and this is translating into just such creativity and such wonderful displays of fashion. And so we expect that's going to continue through back-to-school and back into holiday and casual has grown as a percentage of our business every quarter last year and also in Q1.

Okay, that's really helpful. And then one on just the licensed business. Can you give a little more detail on what's driving the Levi's growth? And then when you look at the license portfolio combined currently, how do you think about the opportunity for the brands that you have currently?

Sure. We have traditionally in our licensed brands business, we've been at double-digit operating margin with really good return on invested capital. We knew that we needed to add a license as a consumer appeal of some of the licenses that we had in our portfolio had been waning and sales had been shrinking not enough to support our infrastructure and we've been searching for the right opportunity for some time. So, Levi's clearly just an incredible iconic brand name with a tremendous amount of heritage was the right opportunity for us. This Togast acquisition added to our overall sourcing capabilities. We were able to get some infrastructure to add on to the infrastructure that we have right now that allows us to hit some different price points and allows us to hit some styling that we couldn't otherwise hit. So, we like what we're seeing so far. The pandemic delayed our ability to capitalize on this investment, but the first quarter and the strength of the sales and the bottom line, I think show where the opportunity is and we acquired a few other licenses and I think the infrastructure exists for us to plug additional licenses into. So, I'd asked Tom, if he would add anything to this opportunity.

Jon, I would say we're excited about this opportunity. It's a good driver of return on invested capital. It's a very asset-light model. The arrangement we have a Togast provides a lot of capabilities from a sourcing point of view. So, we're doing well with that business. We've got a strong order book and we really like how that's progressing.

Yes, great. Just one more, Tom, if I could, thinking about first half performance here. If I'd back out some of the one-time benefits you highlighted. It looks like operating margins still trailing fiscal 2020 in the first half. So, how should we think about maybe the full year getting back to that 4.5% operating margin level you had for the full year of fiscal 2020 and then growing from there?

Yes. So Jon, I think that we're clearly not out of the pandemic and there are a couple of our businesses, Johnston & Murphy and Schuh in particular that would not have been operating at full strength during the first quarter. And so when you think about it, Schuh stores were open for only 20% of their time and yet, in spite of that, the strength of digital was so good that we almost met fiscal 2020's sales level. So, you can imagine that there is just more to come with the opening of stores and continued strength of the digital business. And then Johnston & Murphy, we've talked also about the fact that consumer went into hibernation. And so, we were very pleased to see how much that business grew and strengthened over the course of the first quarter. It's going to take a little bit of time. I think that that is largely some of the drivers that give us the opportunity going forward and fortunately, the strength of Journeys and licensed brands were able to even overcome the time that we need for those businesses to recover and deliver a very strong first quarter performance. And so, I'll ask Tom to add to that.

Yes, I think I don't have much more to add to that. That's a great, great summary of what opportunity we see going forward and continue to improve our operating margins. We talked about the license brands business, there's further opportunity to improve the digital penetration with Journeys. We like where the competitive positions, both Journeys and Schuh have in their marketplaces. We see further opportunity to improve the margins that Schuh into the Johnston and Murphy. I think we got the right team in place here to be able to recover from the pandemic and we've got some good items at Johnston & Murphy that are getting a lot of traction and they're selling well. So, we liked the opportunity and the ability to have our Johnston & Murphy business recover. And keep in mind, it's a branded business so we have that better margins, we already have the omnichannel distribution strategy put in place. So, we see a lot of tailwinds in place for us to be able to start improving our operating margins.

Yes and I think that to have imagined, we could be back to the pre-pandemic operating margin levels. So quickly, is something that is certainly within our line of sight more so because of how quickly the economy has opened up. I think when you think about our overall formula for profitability, we talked on the call about a great opportunity for growth in our digital business, which has healthy double-digit operating margins and a chance to get even better with size and scale. The opportunity to reshape our cost structure in our store channel, we had signed up for rents that were outsized given the shift to online and the pandemic's disruption to retail along with a significant number of our leases coming up for renewal as Tom talked about, 40% of our leases coming up for renewal, has given us a chance to reduce rents even faster, which is the most important part of reshaping our cost structure. And so when you think about our ability to get to pre-pandemic levels and perhaps beyond, those are the real drivers. And the bottom line is that we mostly believe that that opportunity exists because of the competitive strength of our businesses that we've discussed.

It's all are very helpful. Thank you very much.

Thank you. At this time, we have reached the end of the question-and-answer session. Now I'll turn the call over to Mimi Vaughn for closing remarks.

Great. Thank you, everybody, for joining us today. We hope you have a great holiday weekend.

Thank you.

Thank you. This will conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.