Good day, everyone, and welcome to the Genesco Fourth Quarter Fiscal 2022 Conference Call. Just a reminder, today's call is being recorded. I'll now turn the call over to Darryl MacQuarrie, Senior Director of FP&A. Please go ahead, sir. Darryl MacQuarrie;Senior Director, FP&A: Good morning, everyone, and thank you for joining us to discuss our fourth quarter and full year 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 and supply chain issues 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 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, Board Chair, President and Chief Executive Officer, who will begin our prepared remarks with an overview of the period and the outlook for fiscal '23; and Tom George, Chief Financial Officer, who will review the quarterly financials in more detail, provide guidance for fiscal '23 and then turn the call back to Mimi, who will discuss strategic initiatives to drive our business in the coming year. Now, I'd like to turn the call over to Mimi.

Thanks, Darryl. Good morning, everyone. Thank you for joining today. A very strong holiday season concluded an outstanding year. Throughout fiscal '22, we accelerated our recovery from the pandemic and delivered record results for our footwear companies even as we navigated a number of acute challenges. Despite multiple COVID variants, bottlenecks across the supply chain, labor shortages and higher costs, we capitalized on the opportunity of a strong consumer spending environment to drive our business forward. Our exceptional results underscore the earnings power of our business model, the solid foundation for growth we built through the strong competitive positions of our retail and branded concepts and the successful execution of our footwear-focused strategy. My sincere thanks and congratulations to our incredible teams across the company for achieving this great success. There are several key achievements that defined the year. We grew revenue more than 35% over last year and 10% over fiscal '20. Gross margin expansion and meaningful expense leverage drove record operating income for our footwear businesses as we achieved an operating margin above 6%. We generated $240 million of operating cash flow, putting us in a great position to further invest in our business and return over $80 million to shareholders through share repurchases equal to 9% of outstanding shares, and we delivered record adjusted earnings per share of $7.62, an increase of more than 65% over fiscal '20. Additional highlights include capitalizing on the accelerated shift to online spending and holding on to last year's almost 75% gain to reach almost $0.5 billion of digital sales, growing our branded wholesale business by almost $90 million versus 2 years ago, while improving profitability, adding new licenses and strengthening retail partnerships and increasing store revenues over 40% from last year and nearly achieving fiscal '20 levels despite having 55…

Thanks, Mimi. I would like to echo Mimi's remarks regarding the continued success of our key strategies and our amazing people. With the year now behind us, we feel even more confident in our portfolio and the ability of our footwear-focused strategy to drive strong results. Throughout the year, we saw continued strength in all our businesses, culminating in a strong Q4, which was driven by our team's ability to execute the strategies put in place. Before I get into the details of the quarter, I want to again remind you as we have done throughout the year that we believe comparing to our pre-pandemic fiscal year '20, 2 years ago, typically provides the more difficult and often most meaningful assessment of our business. However, when comparing to fiscal year '20, keep in mind how our strategy has changed our business. E-commerce has become a larger percentage of sales along with wholesale sales for Licensed Brands. These changes come with an overall lower gross margin rate due to the impact of direct shipping expenses and the expansion of our wholesale volume. However, this should be more than offset with lower SG&A from these businesses. While these changes are reshaping the P&L, they have a net positive impact on operating margins and an added benefit of a less capital-intensive business model. Turning now to the specifics for the quarter. Consolidated revenue was $728 million, up 7% compared to fiscal '20. Journeys grew 2%, while Schuh grew 12% on a constant currency basis, and we more than tripled our Licensed Brands business. As for J&M, the quarter started off strong in November, but supply chain challenges led to a significant lack of inventory, which led to J&M sales being down 12% for the quarter. From a channel perspective, we experienced increases in…

Thank you, Tom. The results Tom detailed clearly demonstrate that our footwear-focused strategy is advancing our business in this ever-changing environment. This strategy, implemented before the pandemic, leverages our team's significant direct-to-consumer expertise across footwear, retail and brands and the synergies between platforms. Driving this strategy are 6 strategic pillars that emphasize continued investment in digital and omnichannel, deepening our consumer insights, driving product innovation, reshaping our cost base and pursuing synergistic acquisitions, all to transform our business and exceed the expectations of today's consumer whose needs have rapidly advanced. We continually refine our focus within the 6 pillars to take further advantage of the major changes underway in our industry. Before we get to Q&A, let me walk you through the pillars and briefly highlight select initiatives for fiscal '23. The first pillar is accelerate digital to grow the direct-to-consumer channel. The investments we have made paid huge dividends and contributed meaningfully to our results these past 2 years as we achieved e-commerce sales growth of almost 80% over this time. Importantly, our online business generates operating margins well into the double-digits due to our focus on full price selling, disciplined marketing spend and shipping and return policies to reinforce profitability. This year, we are increasing our IT investments and resources to support digital. We also believe continued enrichment of the digital shopping experience through fit refinement, try-on augmented reality and shop-the-look features will further add to digital growth in fiscal '23. After a successful virtual try-on pilot program with Journeys this past year, we plan to roll out that program across all brands in the upcoming year. Additionally, we accelerated automation to support omnichannel growth and we'll benefit from last year's go-live of our new carton-on-demand system and bespoke e-commerce packing module. Lastly, we will add to our…

[Operator Instructions] Our first question comes from the line of Steve Marotta with C.L. King & Associates.

Mimi and Tom, congratulations on closing out a terrific fiscal year. Mimi, you implied earlier that embedded in your guidance are for a more normalized promotional environment as the year progresses. And do you see that just generally because supply lines will be catching up with demand? Or do you see it a little bit more as a leveling of demand? Or -- just wanted to know why you think just from an industry perspective that the gross margins that have been -- or merchandise margins that have been posted, that a little bit will come off of that.

Thank you, Steve. So as far as gross margins go, if you think about the cadence of the year last year, what we saw is there was such robust demand and limited supply that in the quarters in which we normally take markdowns, that is the second and the fourth quarters, that we essentially took no markdowns. It was very much an unprecedented environment. And I think it coincided with the opening of the country as the COVID vaccines were rolling out and then just an exuberant demand on the part of the consumer, really fueled by stimulus. And so as we come into this year and we compare to historical margins, we've learned a lot. We actually think that we will have better margins on a business-by-business basis, but that we are going to give back some from last year just because of the unusual environment that sustained new markdowns. Our merchants are fantastic, but they have set us up to know that we shouldn't expect to have no markdowns again this year.

Very understandable. Can you talk about -- considering these issues with another well-known mall-based footwear retailer, maybe you can discuss your risk mitigation strategies in an effort to avoid similar challenges that they might be feeling currently.

Thanks for that question. Journeys is really different and I just want to talk about how different Journeys is. What Journeys and Schuh represent is the place for teens and young adults to go buy their fashion footwear. What we are all about is that teen relationship, and we own the teen relationship and when they think about buying fashion footwear, they think about our concepts. We're really known as the fashion authority. We validate the choices that teens make, which is really important. They know that what they buy at Journeys that they'll be fashion-right and that's a really important offering to give to teens who are nervous about going to school and making sure that they're -- they've got the right shoes on. They very much like our curated assortment. They like our service model. They think our salespeople are cool. They're very edgy. They look very fashionable. Our teens are in a phase of discovery, and we have the allocated product that our teens really want. And importantly, we are not dependent on any one brand. As I said, 10 or more brands typically make up 80% of what we sell with more brands constituting the remaining 20%. If you walk into our stores or you visit our website, it speaks to our consumer, it uniquely speaks to our consumer, our young consumer. Branded websites or branded stores stretch beyond our core consumer. They're more about the brand, they're less about the consumer because they're appealing to a number of consumer segments. One thing we know for certain about the Journeys business is that fashion is going to rotate. Whatever is popular today is not going to be popular tomorrow. And so what our merchants are incredibly good at is discerning those trends, testing brands and styles, knowing what to scale, importantly, knowing when to get out of particular brands. And I think that's the key skill that keeps our teens coming back and back again because they know that we're going to have the right assortment. So fashion rotation and the ability to serve a teen customer so effectively through, really, decades with evolving case is a competitive advantage for us, and it's instituted within our merchant talent and capabilities. And Schuh is very much the same thing that minding the ins and outs of fashion and brand rotation is what has us stand out from others.

That's very helpful. Maybe if I could just sneak one more in. Considering risk mitigation again and what's going on currently in Ukraine, has Schuh felt any collateral impact from that, either from consumers from a retail traffic standpoint or a digital traffic standpoint? And how do you see that maybe progressing over the next 2 or 3 months and how it could affect Schuh?

We haven't yet seen a specific impact at Schuh. You saw what an extraordinary back-to-school and holiday period that Schuh has had, and that has carried into this fiscal year. I think where we would see the biggest impact is really in higher gas prices. Like the U.S., the U.K. has experienced quite a bit of inflation for all of the same reasons that we have experienced it. And that consumer in the U.K. will also be sensitive to just overall inflation and then specifically gas prices. There is a tourist element and a tourist element from Europe in addition from broader Europe, but that was impacted by COVID. And so our business has been operating without that effect. And so I really do think it depends on how long this conflict lasts and whether or not a diplomatic resolution can be achieved fairly quickly.

Our next question comes from the line of Mitch Kummetz with Seaport Global Securities.

Let me add my congratulations as well. So I've got a few. To start with on operating margins, you guys landed at 6.3% this year. If my math is correct, I'm looking at around 5.4% to 5.8% next year, pre-COVID you were 4.5%. So how do you think about operating margin on a normalized basis? And kind of what are the puts and takes to get there?

Thank you, Mitch. Pre-pandemic, our operating margin was at 4.5%. And we had put a 6% target out there, and we were delighted that we hit this ahead of schedule, and it really shows that our business has the earnings power that we knew it had. But we know this year, as I just discussed, that we were helped by unprecedented full price selling. And so we'll give back a little bit. But first, just want to talk about how excited we are about the organic growth we have in our business because there's a very close link between that and operating margins. And so we've said 2% to 4% this year, but that's following a really robust year of growth. And going forward, we expect that we're going to be -- have growth in the mid-single-digits. And first, let me talk about this year, and then let me talk about subsequent years. We feel good about this year because while we picked up stimulus in the front half of the year, largely helped the Journeys business, we left significant sales on the table in the back half. I think our inventories held in there well. But at Christmas, we just hit the wall and feel like we left a lot of sales on the table. So when you think about this year, we're going to have fewer sales in the front part of the year, but a lot more sales in the back half of the year. And in fact, we left more sales on the table than we gained during stimulus. And the second thing is that price increases that we have taken are sticking, and so that gives us the confidence in this year. Our business is stronger post-pandemic. Our business has changed. This is a transition…

If I look at operating margin by operating group, Journeys for '22, I think, came in around 10.5%. So that's actually slightly better than prior peak. But your other 3 businesses are still well below prior peak, particularly J&M and Licensed. Now I know Licensed looks a lot different than it did prior peak. But how do you think about the operating margin opportunities in those businesses? I mean, can J&M get back to a 7%, can Licensed get back to 10%? Can you maybe just quickly address that?

Yes. So going business by business, when you look at Johnston and Murphy, Johnston & Murphy's historical operating margins were actually 10% and Brands margins are typically in the double-digit level. And as we talk about Johnston & Murphy's future being more wholesale-oriented and being more digital, then that allows us to lift operating margins beyond what we were able to achieve in the store channel. So getting back to a 10% certainly is achievable for Johnston & Murphy. This year is an investment year as we are investing in casual product. We've been very pleased with the growth we've seen on casual and we're investing in marketing. We've done a good job attracting the under-35-year-old customer, which is going to be key to lots of growth for the brand going forward. On the Schuh front, Schuh benefited from some -- a good amount of government aid last year, and we also had a number of rent concessions. And we -- that business also is stronger in the market, really taking advantage of consolidation in the market. But we're going to have a catch-up year as we anniversary those onetime pickups. And Schuh's operating margin, we do think that as we are able to drive gross margins, as we're able to leverage overall SG&A, bring down rent expense, that we should get back to our first step is to -- historically, we were achieving 5%, there's nothing fundamentally different in that business versus the Journeys business that would prevent Schuh from getting to Journeys' operating margins. And then finally, Licensed Brands was weighed down this year by a good amount of logistics costs. And so we expect better margins for next year and really to digest the sales that we had and achieve the earnings out of that business.

Mitch, maybe just to summarize, Mitch, I mean, we're on a solid foundation here to generate 6%. We've got opportunity to expand even further with the initiatives that Mimi has talked about. And business by business, Journeys is already a 10%-type business, Schuh, in the long run, is going to be lower than Journeys, mainly because of real estate cost because their gross margins are expanding. The Johnston & Murphy business is a more premium-priced omnichannel vertical brand that should be double-digits and our Licensed Brands business is a wholesale capital-light kind of business with a lot of opportunity and that should be a double-digit business as well. And on the central costs, we've done a good job, always keeping those below a 2% level. So we've got a good opportunity to grow the 6% to even higher levels.

Our next question comes from the line of Corey Tarlowe with Jefferies.

You mentioned this year would be an investment year in Johnston & Murphy, particularly in casual styles. What I'm wondering is, have you witnessed any improvement in dress as COVID cases have come down and restrictions have eased?

It's interesting that you asked that, Corey. And yes, we have seen improvement in dress, in fact. We have typically dominated the dress category. But what we're seeing is that we are viewing that to be just pent-up demand for events and for people who perhaps have looked at their shoes and say, "I really need a new pair of dress shoes." We actually don't think that there is a trend back into dress. Our J&M customer is in a good place. They've been saving a lot. They got used to comfort. And once you experience comfort, you really never go back. And we've got an opportunity here. The pandemic gave us a chance to reimagine Johnston & Murphy from a product point of view and the work that we're doing is really paying off. We've pivoted harder into comfort and casual. That category has grown more. The proof point of what we're doing is working, it's really the strong sell-through of our spring and our fall lines. And in November, we were up above our pre-pandemic levels of sales, driven by casual product, but simply ran out of product. So we're investing even more in product this year, more in casual. We'll continue to sell dress along with that. And our apparel and accessories business has been fantastic. It's now 40% of our business. So the prospects to double the size of the brand again, like we did coming out of the Great Recession, we would think is very much within our grasp.

That's great. And then with regard to the full year gross margin outlook, can you unpack how we should be thinking about the guidance, particularly as it relates to freight? I believe the gross margin has guided down 40 to 50 basis points. And then can you just discuss plans in place to offset this headwind and other inflationary pressures that you're witnessing?

Yes. To give you a little bit of insight on the down 40 to 50 basis points, as Mimi mentioned, most of -- a lot of that is related to the fact that this year, fiscal year '22, was just such a promotional -- lack of promotional environment that we just really don't think is sustainable going forward. Most of the pressure on the gross margin is going to be in the Q2 and Q4 periods because those are the normal periods where you have most markdowns. And on the freight and logistics side, we do have pressure in the first quarter of additional freight and logistics costs of about $10 million in the first quarter this year that is putting pressure on the first quarter. And then the second quarter, there is an additional $6 million to $7 million in the second quarter. So that puts a lot of pressure on the gross margin in the first half. What we're doing from a mitigation point of view is we're continuing to monitor the market, continuing to look at our current freight and logistics contracts, all the way from surface as well as our container cost contracts and continuing to look at ways to be creative from that perspective and continuing to look at potential alternatives, other methods of surface transportation as well as other methods of transportation. So we'll continue to -- obviously, that's a high priority, and we're continuing to work on that pretty much 24/7 to see what we can do to mitigate the risk of -- additional risk of these costs.

That's great. And if I could just sneak one more in. Can you maybe unpack what's embedded in the 2% to 4% revenue growth outlook with stores expected to be, I think, down slightly and square footage to be down 1%?

Yes. So I'll give you some perspective on that, Corey, from a total year perspective, relative to fiscal year '22. I think that's the best way to do that. We actually -- in the end, although we've got some lower stores -- lower amount of stores, we expect some growth in the store channel, driven by a couple of things. One of them, assuming -- and it's a reality, not an assumption now, the Schuh business, all their stores are soon to be opened now. So we'll see some good growth in the store channel from the Schuh business and some growth in the J&M business as we get more inventory. And even though there's some fewer stores, there are some new store openings with Journeys, and we'll see some growth in their stores as well. So net-net, the store channel will grow. There's somewhat of a little bit of a headwind on the direct business, primarily driven by the Schuh business because with all those stores now open, they'll come back some, off their digital business because of the go-to-the-stores. And then there's also, in Canada, we're assuming all those stores are going to be open. So that benefited the Journeys store growth as well. So that gives you a little bit of perspective on stores and digital. I'd hand it over to Mimi now.

So just by business, and I think to reinforce what Tom was saying that in Journeys, as we said, we will give up some sales in the front part of the year as we lap stimulus, but we'll pick up quite a lot of sales in the back part of the year when we reinventory and sales, we felt like we left on the table. So we think there is a little bit of upside in the Journeys business even in spite of stimulus. Schuh and Licensed Brands, we also think there is a little bit more growth in those businesses. But the biggest amount of growth is Johnston & Murphy. Johnston & Murphy was not back to pre-pandemic levels, and we believe that they will get there, which represents a meaningful amount of growth for Johnston & Murphy this year. We think the demand is there. It's just a matter of catching up with supply.

Ladies and gentlemen, that concludes our Question-and-Answer Session. I'll turn the floor back to Ms. Vaughn for any final comments.

Thank you for joining us today, and I look forward to talking to you on our next call.

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