Good day, everyone. And welcome to the Genesco First Quarter Fiscal 2023 Conference Call. Just a reminder, today's call is being recorded. I will now like to turn the call over to Darryl MacQuarrie, Senior Director of FP&A. Please go ahead, sir.

Good morning, everyone. And thank you for joining us to discuss our first quarter fiscal 2023 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, supply chain issue and the current economic environment 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 and the attachments to this morning's press release and in schedules available on the company's home page, under Investor Relations in the quarterly earnings section. I want to remind everyone that 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 progress we are making on our strategic initiatives to drive the business this fiscal year. And Tom George, Chief Financial Officer, who will review the quarterly financials in more detail, and provide guidance for fiscal ’23. Now I'd like to turn the call over to Mimi.

Thanks, Darryl. Good morning, everyone. And thank you for joining us today. Following record results in fiscal ’22, the new year is off to a very good start. While the year ago period post a difficult comparison due to government stimulus fueled consumer spending. We are very pleased with our recent performance and the long-term trajectory of our business as we navigate some near term turbulence and move past the COVID era fiscal tailwind. We continue to experience healthy demand for our merchandise offerings, which reflects our leadership positions in the teen and young adult footwear space, and other segments of the consumer market we serve. The strong connections we have forged with our customers and our ability to successfully evolve with the ever changing fashion desires of our consumers. Our footwear focus strategy has created a more resilient business that is fundamentally stronger than prior to the pandemic. And we are excited about our growth prospects going forward. These efforts coupled with the dedication and ingenuity of our outstanding people have allowed us to outperform pre-pandemic sales and profitability despite more challenging economic conditions, inventory shortfalls and tax refund delays, which historically have benefited our Q1 performance. Overall, for the first quarter, we exceeded both top and bottom line expectations with notable strengths at Schuh and in our branded business. And had we had the inventory to fulfill demand at Journeys, our performance would have been even stronger. These results underscore the progress we have made positioning the company for profitable growth through a heightened focus on increasing digital penetration, improving the economics of our store channel and growing our branded sales. A few key highlights of the quarter include compared with pre-pandemic Q1 fiscal ’20, revenue up 5%, despite having 90 fewer stores, and adjusted operating income up…

Thanks, Mimi. As Mimi discussed, we were pleased with our performance during the quarter, particularly compared to expectations. And we continue to feel confident in the ability of our footwear focused strategy to drive strong results. Turning now to the specifics for the quarter, in light of a number of store closures last year during Q1, in particular, the UK and Canada, and our policy of removing any store closed for seven consecutive days from comparable sales. We believe that overall sales is a more meaningful reflection of our total business in Q1. Consolidated revenue was $521 million, down 3% to last year as we anniversary the significant stimulus distributor the year ago. Journeys which was the biggest beneficiary of that stimulus last year, and was impacted by inventory delays this year was down 16%, partially offset by Schuh, up 28%, J&M, up 46% and Licensed Brands, up 5%. From a channel perspective, we drove increases in both the store and wholesale channels. With the store channel buoyed by Schuh having its stores fully open this year, versus open just 19% of the quarter last year. And consumers have a more appetite to return to stores as they resume more normal activities. We ended the quarter with 30 fewer stores versus a year ago as we optimize our store footprint and drive productivity in our existing store state. Digital sales as expected were down versus last year. However, direct still held on to 70% of its gains and was up roughly 75% over pre-pandemic. E-commerce sales accounted for 19% of total retail sales, down from 25% last year, but up from 11% in fiscal year ‘20. Total wholesale sales increased, driven by increases at both J&M and Licensed Brands. J&M strong increase was driven by the positive reaction to its…

[Operator Instructions] Our first question today is from Steven Marotta of CL King and Associates.

Good morning, Mimi and Tom. Congrats also on a terrific first quarter and start to the year. At Journeys and Schuh, you mentioned shift towards casual styles versus fashion athletic. Can you talk a little bit about if there's any differential in gross margin there? Also in the carryover styles from winter that might be sold in the third quarter during the back to school season, is there any delta in those gross margins versus your normal third quarter Delta, third quarter gross margin? Thanks.

So, Steve, with the shift to casual versus fashion athletic, we have been really pleased, I think we've been talking about that we typically go through fashion cycle with Journeys, which allows us to refresh our overall product mix. And our merchants are just excellent at being able to discern what our teens want. And coming out of the pandemic, we have seen a real shift into casual away from retro athletic, fashion athletic as we call that. And it's actually a positive for gross margins, many of the casual brands that we carry have a better margin profile than some of the athletic brands that we do carry. And then also, we saw an opportunity that it with some of the late arrivals from winter that we went ahead and took the receipt of that product, it's really great core product, and we were able to get it at last year's prices. And as you can imagine, this year's prices are not going to be as favorable as our last year's prices. And so we have booked that inventory. It is as I said, core product. And we expect that we can have a very positive margin profile with those as well.

That's helpful. You also spoke about the acceleration in May at Journeys. Did you feel similar tailwinds to the other concepts as well in the quarter to date period?

So in Journeys, we were very hampered by the lack of inventory as we went into this quarter. I think we can remind you that we were down about 20% in Journeys, and we were missing some of the core winter styles that ended up arriving late. And then spring arrivals were also late as well. And so as a result of that, we have seen really nice sequential improvement in our Journeys business in every month that has gone by. In Johnston & Murphy, we have also seen just very positive results, as you can imagine, I mean, if you think about a year ago, believe it or not, we were just getting vaccinated. And the Johnson & Murphy customer was just coming back to life. So we saw a very strong first quarter, we've seen continued strength in the second quarter. For Schuh, we've got continued strength in our business. However, last year, if you looked at Schuh business, our stores were closed between February and basically Christmas to Easter. And so it's a little bit hard to tell exactly where Schuh is shaking out just because we're anniversarying, the reopening of stores. And so we're going against very, very strong numbers from last year and continue to perform nicely.

The next question is from Mitch Kummetz of Seaport Research.

Yes, thanks. Let me add my congratulations as well. Tom, on the guide for Q2, you're saying sales down less than Q1. I'm just kind of penciling that out a little bit. Q1 on a three year basis sales were up 5%. I think what you're saying on Q2 kind of implies that on a three year basis, Q2 is up maybe low double digits. So that is pretty good acceleration over Q1 on a three year. Is that kind of what you're seeing through the early part of the quarter based on the acceleration that you guys referenced?

Yes. So regarding the Q2 guide, Mitch, it's more, what we're thinking about there for the Q2 guide is more high single digit growth on a two year basis to sort of clear that up.

What about on a three year basis? Since we're going back to 2020?

Yes. I was referring to our fiscal year end ’20, our second quarter then.

Okay.

On a three year basis, it is –

More a like –

Well lower than double digit.

Yes. Low teens for that three year.

Is that, yes, and is that kind of what you guys are seeing through the early part of May, based on the acceleration that you talked about?

We are seeing double digit gains in May so far.

So far. Okay.

We've also just also to remind you we also added a number of licenses in our licensed brands business. And so that adds to growth as well. So even beyond what we're seeing, with growth on the retail side, it's a good step up because of the increased volume from that part of the business.

As a follow up to that, maybe can you say on the full year guide that you've provided sales guide. How much incremental volume you're bringing in from those new licenses? Do you have any sense of that?

Yes. I think that you can get a pretty good measure, when you look to last year's growth. I think if you look at our licensed brands business, we added over $100 million of sales. We expect them, this is a year for us to digest that growth, and really work on profitability since we grew so significantly. We've been very pleased with the performance of our Levi's license. And this is the year that we're just digesting, we've added a starter, and it's an atonic license, which are just getting out of the gate as well. And so I wouldn't look for the great growth that we had last year. But this is a digest and improve the bottom line.

Okay, and then just the last question on the margins. So, Tom, you're now looking for gross margin to be down 60 to 80 basis points from last year. It sounds like you're expecting the promo environment to normalize. I guess I'm wondering, are you starting to see that already? Or is that just a conservative assumption given how you sort of view the balance of the year, and also within that kind of 60 to 80 basis points? How much of that is product margins being down? Is it like 50 or can you maybe just help me out a little bit there?

So why don't I start by just talking about the promotional environment so far. And last year, Mitch, was just incredible. I think that what we all saw is essentially new markdowns. And this year, we are factoring in some markdown. So basically, consumers would come into the store, they would buy whatever we had. And therefore, and because inventory levels were so low, we basically could clear out any product that we had. And so part of the change this year is inserting a more normalized level of markdowns, we haven't yet seen that. You saw the pickup in Q1 on gross margin, but what we are anticipating because we're seeing a little bit of consumer coming in, and not being as willing to just take whatever's there, they are becoming a bit more selective this year, and I think it is with the ability to be in a better inventory position. And then certainly when you look at this environment, we serve a customer that is not relatively more fluent customer. They're not super price sensitive, they really out to look for fashion that they would like, and therefore we are able to typically have very, very full-price selling model, which we anticipate will continue. We do though, however, as we think about going through the year, there's certainly hard to be a consumer and not look at food prices and gas prices. And so we think that there may be a mindset shift on the part of the consumer. And so as we think about reintroducing some promotional activity, we basically give offers to our best customers, and really think about how we induce them to come back for repeat purchases, and we think that will likely be appropriate as we go through the year. We haven't seen a whole lot of that just yet, but we're just thing could and thinking that will happen.

The next question is a follow up question from Steven Marotta of CL King and Associates.

Hello again. Mimi, I want to ask you about your ability to capture a younger customer at Johnson & Murphy. You mentioned in the prepared remarks that customer count is up. Can you talk a little bit about tactically what you're doing? First of all, how you define a younger customer? And secondly, tactically what you're doing there and what you'll continue to do to attract a broader audience?

Sure. So younger customer, as I defined on the call is under 35. And when you think about the Johnson & Murphy customer, the Johnson & Murphy customer is in a very good place, our customers overall have gotten much more used to comfort and what once you experience comfort, as you know, Steve, you just don't want to go back. And so we have done a really, our J&M team has done an extraordinary job, through the course of the pandemic, taking advantage of the opportunity to pivot harder, into more casual, more comfortable products, it's just really terrific product with special technical features. We've got proprietary chassis systems, they're just very, and our comfort technology is fantastic. We've got foam for comfort, we've got a flexible outsole. Technology is revolutionizing our offering. And I think that's really resonating with our young consumers. So, first of all, the product is right. And the product is something that is appealing to that younger customer. And then we have ramped up our overall spending on marketing. And much of the marketing we're doing is really very much around product stories and telling these product stories. And much of the marketing we're doing also is through digital marketing. And so we're finding these channels that we can get positive reactions from this younger consumer base, and have had great success of bringing younger customers into the fold. I think in the past that Johnson & Murphy has always been a great aspirational brand for successful people. And I think we continue to sell dress footwear, or we think that is more pent-up demand than a trend. But it's our casual and our casual athletic product coupled with our apparel offering which is grown as well. And that is the younger customer and access point into the brand that they have enjoyed.

That's helpful. And more broadly, how does your marketing budget this year across brands, compared to last year?

Yes, so this year overall, I know that over the last, since pre-pandemic, really, and we're kind of measuring it over that period of time. Our overall marketing budget is up 60%. And we have been certainly driving our digital marketing to be able to grow our E-commerce sales. But we have also embarked on more investment in our overall brand marketing, not just for our Johnson & Murphy brand, but also for our retail brands. I think that as you think about Journeys and Schuh as a brand. In the past, we have opened retail stores. And that's been a lot of our marketing to create the presence for the customer. But we do know that Journeys and Schuh are the destination for fashion footwear for our teens. And no matter what's popular, no matter what's in fashion. We are -- we validate their choices for fashion. And so it's really appropriate as we think about our marketing efforts to also invest in brand marketing for our retail concepts.

The next question is a follow up from Mitch Kummetz of Seaport Research.

Yes, thanks for taking my follow up. Mimi, you talked about better access at Schuh. I was hoping you could just elaborate on that. Does that mean you're now getting access to brands you didn't have access to before? Or is it just better allocations of existing brands? And then also the Schuh business on the sales side continues to run up double digits versus pre-pandemic. And I'm just curious to know how much of that is just the strength of that marketplace versus share gain that you're seeing and if its share gain, maybe you could talk little bit about the share gain too?

Sure. So Schuh is a key player in the retail space, a top 10 footwear retailer. The business has performed so well in the pandemic. We have advanced digital capabilities, which helped a lot when stores were closed. We were almost able to replace our closed door sales with our digital sales because Schuh was such a solid performer but then when stores were opening and closing which they did much more frequently in the UK than they did in the US. Our team at Schuh executed quite well. The market is, as you have indicated, has been hit hard by COVID. And the retail landscape has really changed pretty profoundly. There have been lots of administrations, lots of retail square footage that has closed. And so when I talked about better access at Schuh, really talking for the most part about better access within the brands that we currently sell. We are also introducing some new brands, but it is moving up tiers within the brands that we sell, because of that strong performance. We've invested a lot in our purpose pillars, in our marketing efforts and in driving digital. And that has and really speaking to our team consumer. And that messaging has resonated with our brands. They've seen how we can connect with that customer. They like our Schuh Club program that allows us to learn even more about our customer. And so it is increased access and moving up tiers. Many brands took the opportunity during the pandemic, to tighten up distribution to eliminate tertiary distribution. And so we are benefitting quite well from the fact that there's less product out there in the marketplace. And that not only do we still have access to what we had access to before, but our access is gaining.

There are no further questions at this time. I'd like to turn the floor back to Mimi Vaughn for closing comments.

Thank you for joining us today. Have a great Memorial Day weekend. And we look forward to speaking with you on our next call.

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