Good day, everyone, and welcome to Genesco's Third Quarter Fiscal 2024 Conference Call. Just a reminder, today's call is being recorded. I will now 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 third quarter fiscal '24 results. Participants on the call expect to make forward-looking statements reflecting our 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 it's most recent 10-K and 10-Q filings or some of the factors that could cause differences from the expectations reflected in the forward-looking statements made today. Participants also expect to refer to certain adjusted financial measures during the call. All non-GAAP financial measures are reconciled to their GAAP counterparts in the attachments to this morning's press release, and in the schedules available on the company's website in the Quarterly Results section. We have also posted a presentation summarizing our results here as well. With me on the call today is Mimi Vaughn, Board Chair, President and Chief Executive Officer; and Tom George, Chief Financial Officer. Now I'd like to turn the call over to Mimi.

Thanks, Darryl, good morning, everyone. And thank you for joining us. Before I discuss third quarter performance, earlier this week we announced the appointment of Andy Gray as Journeys New President. Andy is an exceptional and experienced leader who brings invaluable expertise in brand building, product innovation, and the other areas essential to building Journeys business for the future. Andy's connection to youth culture and the strong brand relationships he's built over his accomplished career make him the ideal person to lead the talented team we have in place at Journeys, as we work to elevate the business and unlock the great potential we see ahead. I look forward to his partnership, and I'm excited for him to join recently appointed COO, Mike Sypert to drive success going forward. Welcome, Andy. Now moving to results. Following a later start to back-to-school, sales picked up early in the third quarter and were generally tracking to our expectations. However, we saw a market change in trend in October as the later change of seasons muted initial demand and delayed the start of the selling season for fall products. In addition, our branded businesses were impacted by disruption related to the implementation of a new ERP system, contributing to lower overall results than we anticipated for the quarter. Despite these headwinds, we were pleased that sales trends within our Journeys business continued to show sequential improvement, and Schuh and Johnston & Murphy delivered record third quarter sales. The operating environment remained challenging as ongoing inflationary pressures and economic uncertainty continued to impact discretionary spending. As we've seen throughout this year, consumers continue to make tough choices on where to spend their dollars, often choosing other categories over discretionary purchases. And when they do shop, they're doing so closer to need and are carefully…

Thanks Mimi. Our third quarter financial performance not only reflects the challenges and hurdles we faced but also the progress we continued to make. As we now round out the fiscal year and begin to look to fiscal '25 we believe our solid foundation and increased efforts around financial discipline will position us to drive stronger results. Turning to our results for the quarter consolidated revenue was 579 million down 4% compared to last year and down 5% on a constant currency basis, mainly driven by the sales to client Journeys. Relative to our expectations better sales transit Journeys were offset by lower than expected sales and associated deleverage on expenses in our branded businesses and Schuh. Total comps were down 4%. Although still negative we were pleased to see another sequential improvement in the trend Journeys. Meanwhile comps at Schuh and J&M remained positive despite the later seasonal transition and our branded businesses dealing with its ERP conversion challenges. By channel total store comps were down 7% while direct comps were up 8%, by business Schuh total comps increased 5%, J&M total comps increased 1% and Journeys total comps were down 8%. Overall gross margin was in line with our expectations, down 60 basis points as compared to last year. By business Journeys gross margin was down 110 basis points mostly due to the expected increase in promotional activity including introductory coupons for Journeys loyalty program along with some next shift. Schuh gross margin was up 100 basis points as the division benefited from reduced duties from its new Ireland based distribution center as well as a more elevated product assortment mix. J&M's gross margin was down 210 basis points due to a more normalized markdown and closeout cadence versus last year. J&M had much more inventory available to…

[Operator Instructions] Thank you. Our first question is from the line of Mitchel Kummetz with Seaport Research. Please proceed with your question.

Yes, thanks for taking my questions. I guess I've got a few. Maybe when you guys reported 2Q, you raised your gross margin outlook and part of that was because of you were expecting improvement in the Journeys for key gross margin with more newness kind of flowing into the assortment. I think you also made a comment at the time that like the consumers looking for two things must have product or good deals and I'm wondering, what's changed from three months ago is the newness, not performing as well or is what I would maybe call sort of non-newness in the assortment. Is that just requiring? You know deeper discounts to move the product. Can you just maybe sort of elaborate on that?

Thanks for your question Mitch. And there really has been quite a lot going on and we've seen a lot of ups and downs in the consumer environment over the last few months and absolutely, the newness is working. Our merchants have done a phenomenal job chasing into product that is resonating with the consumer and that is selling through quite nicely. What we saw and I'm going to take you through I'm going to take you to October and then bring you into November and bring you to into Black Friday just to give you a sense of where we are. But starting in October, traffic was out there but conversion was tough and I think we and anybody else who sells fall products and sells boots, really saw that the consumer was not motivated to spend in October. They were looking but you know for us boots represent 40% to 50% of our mixed in the fourth quarter and so if your boot sales aren't coming through then that's what made for October. We saw a market change in November where with colder weather there was a lot of good positive traffic in all of our retail concepts and if you were out over Black Friday, it was a joyful experience I mean people were out, people were shopping in the malls. There was seem to just be pent-up excitement for shopping but what we also saw is that our brands in particular were really promotional. We were as promotional as we thought we would be over Black Friday and really in the third quarter, but we saw that, the inventory buildup from some of the slower sales and footwear over the course of the year caused some of our brands to say that they were going to deviate from that pricing and get more promotional. Now that promotional activity worked well. It drove sales and so with traffic and some of the promotion on the right product, there's a bifurcation in the market here Mitch where the must-have items are flying off at full price. But anything else needs some encouragement in order to move. And so as we have evaluated that and it's a bit of a have and a have-not world these days within our brand world. The footwear category is lining up to be more promotional this holiday and what you'll see in our guidance is that we are driving more sales and that we are going to be taking a few more markdowns to be able to get there. What we're anticipating and what we're hopeful for is that this will be the final push through the year to clear through the inventory overhang in the market and that we all - we for sure will be able that we all as an industry will be able to start next year clean.

That's helpful. And then Mimi you talked about some of the some of the strategies at Journey's, I think one of them you said repositioning the assortment kind of got the impression that this was more maybe significant than kind of the typical tweaks that you guys are always making in terms of the assortment the merchandising. Again, can you maybe speak more to that? Is this what exactly are you looking to do in terms of repositioning the assortment there? What's the aim to that strategy?

Yes, so Mitch we, we're the destination for where teens go to buy their fashion footwear and we always have a great supply of the best items that people are - that our teens are looking for and that our customer is looking for. Our customers hanging in there. They're being very discerning when it comes to retail spend and the choices of what they're spending on. I think that all of the comments and I don't know that we're deviating from our merchandising trends but what we did see at the beginning of this year is that our consumer had a huge appetite for newness and that's what we're chasing into and that's what we've chased into for the back part of the year and that's what is driving our sales and the improvement. We're quite pleased at the improvement from where we started at the beginning of the year in Journeys to the point we are right now where you know, we're having the best results of the year and a big pickup. So it really is that we're chasing into this newness. We're working with our brands in order to further differentiate our assortment to have more of the must-have product to have more exclusives and to continue to get in front of the consumer as the destination of choice.

And then lastly just in terms of the uptick in promotional activity, I mean you did mention that boots are a large percentage of your mix in for Q and that the season got off to a slow start. It looks like the Journeys inventory is actually in good shape. But in terms of its content, are you guys sitting on a few too many boots and as part of the promotional strategy in order to kind of work through maybe some excess inventory there is not that - that not the case.

Yes, I would say that we want to make sure that we have enough dry powder Mitch to be able to move on whatever items that we need to move on for as the holiday unfolds and certainly, you know, I think that we were in the third quarter and certainly over the course of November. We saw good sales in Journeys and so in spite of some of the lower boot sales, we were selling other products that the consumer was interested in buying. When we've had these cold spurts at least, here and as in much of the rest of the country, we've had cold spurts and has gotten warm and cold spurts and it's gotten warm again and in those cold spurts, we do see sell through of boots and we see a pickup in boots. And so we know that it will be cold. We know the consumer we believe the consumer is going to be out shopping around holiday and we'll move the boot inventory that we have and then we'll take them whatever marks we need to at the end of the season.

Thank you. Our next question are from the line of Mantero Moreno-Cheek with Jefferies. Please proceed with your questions.

Hi, thank you for taking our call. I just wanted to see if you could describe the differences between the U.S. and U.K. consumers. There any trends really worth calling out between those two and can we expect those trends to continue in the next year?

Thank you for your question. And so interestingly the U.S. market and the U.K. market have tracked it from an economic point of view similarly in terms of high inflation. And the consumer having to make choices. Our shoe business has had an exceptional year has outperformed the market has moved up three places in terms of ranking in overall market share and so we've been out punching the competition. Most recently and so I think if you have product that the consumer wants and if you have product that resonates with the consumer, then consumers who are making choices among items that they're spending on, you can motivate - you can motivate that that that purchase. What we've seen most recently is that across the board there was a slowdown with the start of the fall selling season and we have seen a turnaround there in the U.S. with really robust Black Friday sales. Our store traffic was up, stores were the great highlight of the Black Friday weekend. But altogether this consumer in the United States was out to shop. We had a very strong Black Friday weekend in the U.K. last year. Right now we think that the U.K. consumer is waiting holding out typically the U.K. market goes - goes on sale before Christmas. We think there may be some hold back in the U.K. market and that's the difference right now is that the U.S. showed a lot of pick up in traffic over the Black Friday weekend and the U.K. we think that there will be, the season has to unfold further. Altogether the way the consumers acting is that they'll pay up for the must-have product, but other than that, they really are seeking the value that I talked about.

Thank you. And then another follow - or a quick follow-up. Are there any supply chain or material costs that are headwinds at the moment and if they are, are there any that will turn to tailwinds next year? Thank you.

Yes, I would say at this point in time we feel really good about the supply chain in the cost that we're going to expect going forward. This year we're getting a lot of relief on freight logistics cost in our branded business. And that was the big headwind last year, as well as air freight to get it product in. So we're starting to see improvement in our gross margins in our branded business as a result of the reduced rate logistics cost and really not a headwind at all is all the efforts we're making in our branded business from a sourcing perspective and a design and development perspective and a cost estimating perspective. We expect good gross margin expansion going forward from that perspective. And then on the retail business that - we in our - we really think that we're in a good position with all our branded partners and we don't see any headwinds they're going forward.

The cost pressure that we've been facing has been around wages. And so a lot of the initiatives that we are talking about is to be able to make our use of labor more efficient. And so in our distribution centers, we've been adding automation and that has helped to bend the curve on just overall wage increases. In our stores, we have spent a lot of time on store time studies where we are looking to get much more efficient within our stores take out the non-productive hours and shift the labor into selling, and we're seeing that pay some dividends. We've started on that work in Journeys and in Schuh we are doubling down on our efforts there but that's where we're seeing a lot of the of the overall cost pressure for this year that with work we're doing we anticipate that we will make progress in this area for the coming year.

Thank you and best of luck in the rest of quarter.

Thank you.

Thank you. At this time, I'll turn the floor back to Mimi for any closing remarks.

Thank you for joining us today. Wishing everybody the best of the holiday season and look forward to talking with you in the New Year.

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