Good day everyone and welcome to the Genesco First Quarter Fiscal 2025 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.

Good morning, everyone, and thank you for joining us to discuss our First Quarter Fiscal 2025 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 its most recent 10-K and 10-Q filings, for 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 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.

Thank you, Darryl. Good morning, everyone. Thanks for joining us. While the year is unfolding largely as we expected, we were pleased to deliver first quarter top and bottom-line results that were ahead of our most recent guidance. Sales at Journeys came in a bit ahead of expectations, paving the way for the more significant progress we're working with urgency to achieve for back to school and holiday. Clean inventories and the benefits of our cost reduction and store optimization efforts contributed to the beat as well. Journey's results more than offset some pressure at Schuh and Johnston and Murphy which were both up against robust multi-year comparisons and both affected by a delayed start to the spring selling season. Overall the consumer environment remains choppy. Consumers continue to show a willingness to shop when there's a reason, like we saw at Easter, and retreat when there's not. In addition, faced with ongoing inflationary pressure, they remain quite selective, shopping almost exclusively for key footwear items and brands. When the product is exactly what they want, they're buying, and when it's not, they're moving on. Since the pandemic, we've taken major actions to evolve in response to the substantial change in our consumer shopping behavior. We've also demonstrated a strong track record over time of successfully evolving our businesses, emerging even stronger when confronted with economic and consumer disruption. Two recent examples are we reimagined J&M's product assortment and branding in response to the shift to casual accelerated by the pandemic, and we sharpened our focus on the Schuh consumer with elevated product and marketing to achieve market share gains and record sales. We're taking many of the same actions with Journeys and I'm confident we will achieve the same success. Turning around Journeys business remains our number one priority.…

Thanks Mimi. We are pleased we kicked off the year with progress on our initiatives and delivered better financial results for the quarter than we anticipated. Journeys and Genesco Brands Group outperformed our expectations in sales, gross margins, and expenses offsetting a profit impact from sales pressure in our Schuh and J&M businesses. Looking ahead, the efforts we are making to return to growth while better containing expenses will position us for healthier productivity and profitability. Turning to results, consolidated revenue for the quarter was $458 million, better than our expectations and down approximately 5% compared to last year. The stores we closed last year had a negative 1% net impact on total sales, most of it from Journeys. Positively, these closures resulted in improved overall fleet productivity. In addition, the progress we've made in our digital business helped offset some of the top-line pressure on our stores. Finally, Genesco Brands Group sales were down as expected and accounted for about a third of the overall sales decrease, as we streamline and reposition this business. Total company comps were down 5%. By channel total store comps were down 7%, while direct comps were up 3%, with digital sales accounting for 23% of total retail sales up from 21% last year. Overall adjusted gross margin was up 30 basis points compared to last year with disciplined inventory management driving lower markdowns and a greater mix of direct to consumer sales offsetting some product mix pressures. By division Journeys gross margin was up 40 basis points versus last year due primarily to lower markdowns. Schuh’s gross margin was down 180 basis points, driven mainly by brand sales mix shift. J&M's gross margin was up 70 basis points, driven largely by lower warehouse cost. Lastly, Genesco Brands' adjusted gross margin was up 150…

Thank you. At this time we'll be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Mitch Kummetz with Seaport Research. Please proceed with your question.

Yes, thanks for taking my questions. Got about a handful. I want to start with a couple questions around the guidance and then maybe you have [work my way] (ph) a little bit bigger picture on the strategy. I am curious, for 2Q, Tom, you said comps similar to 1Q, and I'm specifically thinking about the Journeys business. The comp was down 5 in 1Q, so basically down 5 in 2Q, I know the guide for Journeys for the full year on sale is a mid-single digit decline in your closing stores. Can you talk a little bit about, given the progress that you expect to make in the back half with Journeys, how you expect journeys to comp in the back half, do you think you can get to a positive comp by maybe the fourth quarter? Can you maybe speak to that a little bit?

Yeah, Good question, Mitch. On the second quarter, I want to comment a little bit on that as well. We think it's appropriate to be more cautious with the second quarter, given the pressures we're seeing with the Vulcanized business on Journeys and some of the pressures we're seeing in the Schuh business and the Johnston & Murphy business. So we think it's appropriate to make a more cautious view. In the back half with Journeys, we do feel that the third quarter there still could be some challenges there. Again, it's a little bit of a leaky bucket kind of concept that the vulcanized will be under pressure, but we feel we've got a substantial amount of new relevant product coming in to be able to mitigate that, but we are taking a cautious view on the comp there and hoping to get to a positive comp in the third quarter, but that could be challenging. But the fourth quarter, we do feel that we're going to have a positive comp, albeit small in the fourth quarter.

Okay, that's very helpful. And then on the margins, you guys definitely beat plan on margins in the first quarter. I think you made a slight change to your SG&A assumption for the full year. But I guess I'm a little surprised maybe you're not being more optimistic on margins in terms of the full year guidance based on kind of the outperformance in the first quarter. Can you maybe speak to why that is? I don't know if there were any maybe -- SG&A shifts out of 1Q into 2Q, but maybe talk about some of the conservatism around market relative to the 1Q outperformance.

Mitch, thanks for your question. It's Mimi, and I'll hand it over to Tom in a minute. But what we saw in the first quarter and that was very positive for our business is a lower amount of markdowns than we believed we needed to take. And I think that's a real testament to how clean our inventory is and how well we have been managing inventory. We are looking at some mixed shift where we are seeing a shift in mixed of overall product that will put some pressure on gross margin. And so that's what we are looking at. However, it is a real positive story with higher average selling prices. And so as we see a shift out of vulcanized product into the assortment and diversified ranges of product and brands that we've been talking about, then we see a pick-up in ASPs. And so it's a positive gross margin story for the year. And then for SG&A expense, I think there are a few puts and takes that -- put us more in the neighborhood of where we'd end-up being.

Yeah, in the end with the traction we're getting with the cost savings programs and continuing with the store closures, we actually improved the SG&A due leverage guidance [some] (ph). And then back to Mimi's comments on the margin, they were dead on. And that shift from vulcanized to other product, there's an impact on the Schuh business as well. So that's the Journeys and Schuh impact. So we thought that first quarter was, while we outperformed, there were lower margins. Again, a testament to our inventory management. But that said, we think it's best to be more cautious there going forward. And then generally speaking, the wholesale business, which Johnston & Murphy has a wholesale business in our Genesco Brands Group. We want to take a more cautious view on that going forward as well. Because the wholesale accounts, getting feedback that's not just for us, but generally speaking, for the entire industry. So just wait and see how the next few months go. Then they'll be in a better position to evaluate their reorder rates.

And then on the assortment pivot at Journey, it sounds like you're making progress already, and I can appreciate that there are long lead times to these things and that it takes a while for the new leadership to really have an impact. But is there any way to sort of quantify how much turnover you're seeing in the assortment. Like by the time that you get to the back half, is it going to be, you know, 50% different than what it was a year ago? And like, once you sort of achieve the full pivot, is there any way, again, to kind of quantify how much has changed through that process? I don't know, if that's a fair question, but I'm just trying to better understand kind of how that moves along and how different things are going to be when you're at the point where you know you're happy with the changes you've made.

Mitch, you've got your perspective is exactly right on what's going on and some of the lead times that we need. We are very excited to have Andy Gray on Board and his perspective as a merchant and his commercial perspective and brand relationships are just great additions to our strong team here. And so we see fashion broadening and we see teens embracing more wearing occasions and this is in both fashion, athletic and casual which we can serve both sides of the market. And it's an opportunity to fill our customers closets with things they didn't have before. And so our team has been pretty narrow, focused on vulcanized product on a couple of major brands. And so we're well-positioned to take advantage of this move. And you know us over the years that we just continue to evolve our fashion to where the teen is going. There's also an interest in apparel, which is really positive to see in teen apparel. And there's a greater appetite for newness and freshness. And a lot of times our footwear follows into apparel. And so we have been moving into the assortment that we know will drive our business. We got some good reads in the first quarter by pulling forward some of our product and really being able to amplify the assortments during our peak periods. And that bodes well for the back half. And so you will see that there is a pretty significant change in our assortment and it's lots of brands that we're building into, it's not just one or two that we are excited about. And so there should be some pretty significant change in our assortment. Chris Santaella, our new Chief Merchant at Journeys and the team have seriously hustled to make major improvements in the back half. And again, we've been encouraged by the consumer reaction to those product changes so far.

And then maybe just as a quick follow-up to that before I get into some bigger picture stuff. You mentioned vulcanized a number of times, and you're sort of over exposure to vulcanized historically. Again, is there any way to quantify how that's shifting – I don’t know 30%, 40% of your business today, and once we get to the back half, it's 20% and then once all this is kind of completed, it's down to 10%? Like, is there any sort of thing that we can be looking at there?

Yeah, just to get some perspective on that, Mitch, we have been known as a destination for some of that vulcanized product. And the consumer has really gravitated toward that over the past several years. It was a mix of lower price point product and just really versatile. And so we typically go through these fashion shifts where the consumer finds something new and we provide something new to them. And so you will see that vulcanized will be a materially smaller part of our mix, but it's not going away. There's certainly still interest in vulcanized products that lots of other brands, lots of other brands that offer sandals, lots of other brands in the athletic side of the world are gaining lots of interest and lots of traction. This is a positive because for a while our consumer was just really not motivated to buy anything. I think some of the innovation that didn't take place during the pandemic, our brands are catching up on, and we're excited about what we're seeing.

And then, Mimi, in your prepared remarks, talking about some of the strategies and journeys, You mentioned the importance of segmentation and differentiation. Can you talk a little bit about more about what that means for that business? I don't know if you're referring to exclusives or can you just sort of big picture, where do you see Journeys going in terms of the segmentation sort of differentiating itself from some of the competition?

Mitch, thanks for that question. So reinvigorating the product in the near term -- is the near term goal to start building the momentum that we need. But at the same time, we are taking a look at more specifically at who our consumer is. And what's been distinctive about Journeys is that we provide a place that the team can go by both their fashion athletic and their casual assortment. So we're so much more lifestyle positioned and we've carved out an important place in the competitive set that is focused more on girls, focused more on that teen girl, which is a really important consumer that our brands want to serve, and also focused not just on the athletic part of the market, which many of our competition does quite well. And so we've got a unique place within the environment, and a unique place within the mall. This unique value proposition positions us as a fashion authority to come back and to serve our consumers. And so when we think about our different consumer segments, all teens aren't alike. Some tend to wear a more diversified assortment. Some tend to like athletic more. Some are fashion leaders that are ahead of the game and some are fashion followers. And so by being able to work all of the great investments that we have made against CRM and against data and against understanding our consumer, we're able to leverage that into more specific marketing around the diversification that we provide in our product line. And so we are excited about that end-to-end strategy of thinking about our consumer segments, providing product that is relevant for the different segments, and then marketing to those specific segments. And that's what's underway right now.

You started to answer my last question because my last question has to do with loyalty and the analytics. So I think you said 2.5 million members in the Journeys Loyalty Program. Can you talk about how that's building? And because it's a relatively new program for Journeys. And again, if there are any sort of takeaways from Schuh that you think could be applied to Journeys. And when will the analytics really kick in to where you can do better targeted marketing and all of those fun things at Journeys.

So Mitch, the All Access program, which is the Journeys program, you can go ahead and sign up online if you haven't already. We fully launched that in our stores last July. So it hasn't even been a year and we have had 2.5 million members sign up. And the success we've had with Schuh has been, because that program has been a couple of years in the running. The Journeys customer trusts us a lot. They're excited to hear from us and so that's a real measure of how quickly we've been able to sign people up. You can get a welcome gift, you can get nice perks like free shipping, you can earn points. But what is most compelling is that we are seeing that the spend is greater because the frequency is greater with people who have joined our loyalty program. And that really is the biggest benefit. And so our loyalty program is hooked to our CRM program and we've built a data analytics capability that goes along with this. And so understanding our customers as well in the digital world, as we have traditionally done in the physical world will give us a chance to engage with our customers more frequently, to drive higher customer lifetime value. We're already seeing some of those benefits at Schuh where we are a bit ahead of this. And so it's an important part of how we'll be able to conserve, how we'll be able to serve our consumer better going forward and also engage with our customers.

Great. Thanks, guys, and good luck.

Thanks for your questions, Mitch.

Thank you.

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

Hello, and thank you for taking my call. I guess my first question would be, on your new Johnston & Murphy marketing campaign, can you talk about any of the early reads there and then is the program like helping attracting some younger customers?

I'm glad you've seen that new campaign. We're pleased with that -- that new campaign. And it is centered around leveraging the great heritage of the Johnston & Murphy brand. There are not a lot of 175-year-old brands out there, but with a really modern twist. And so we have gotten good feedback that all -- that campaign has been in the market for a little over a month. And it speaks to both of those things, how much evolution we've made over time. And we are pleased with the results in Johnston & Murphy since the pandemic. It's one of the most exciting areas and opportunities of growth for us. The pandemic gave us a chance to pivot harder into casual and comfortable product. It's really terrific product that has great styling, but has a lot of proprietary technology. And the technology is what's been revolutionizing our offering. And so we've been investing in product. It's a chance to sell consumers more hybrid product. We've been known for dress product but this is -- this is dressier uppers on very comfortable bottoms. The reality is that our brand awareness for Johnston and Murphy is on the lower side versus peers. And so it's product first to get the product to be really special product. And then this marketing campaign that we have been wrapping around the product is to build awareness and the repositioning that we've done for the brand. We are getting younger. We are attracting younger customers into the brand and we see a lot of opportunity. We've added in a number of different categories to Johnston & Murphy against apparel and accessories and have been growing those. And so it's a real lifestyle brand that our consumers have been telling us that they like buying us across lots of categories. And so we're going to reach a wider audience to tell J&M's story and educate the consumer and appeal to a younger cohort at the same time that we are retaining the customers that we've been able to traditionally serve.

Thank you. And then on, I know it was touched on, but is there anything else to add on the strategic initiative that Journeys and just how it positions the brand in the longer term?

Sure, so you know I've talked about the product initiatives quite a bit and have talked about some of the customer segmentation. There are a number of other elements around the Journeys plan and importantly it's building and promoting Journeys as a leading retail brand. And we're improving our brand presence in our stores and online and on social. And digital is an important part of this as well. And we've had great success growing our digital business. There's a real opportunity here. Schuh is at 40%, Journeys is at less than half of that. And so there's a visual refresh of the website that we have lined up, and our All Access program as well. And so when we think about building the Journeys brand, it is about just calling attention to Journeys as a great retail brand in addition to the brands that we sell. We've got a creative agency on board that is crafting that story that we will reveal later this year. As I said, it's improving our brand presence. It's really using all of the aspects of digital and all of the great work that we've done with CRM and data analytics. In addition to that, I talked about just leveraging our people. Stores are an important part of our customer journey, and in today's retail world, service can be a real differentiator. And so our people in our stores are great ambassadors for our brand. They are very into fashion. They love telling the fashion stories. And so we are thinking of ways that we can engage them around the great changes that we're making on the product side and also on the storytelling side.

And then I guess last one for me, anything worth noting on add-on purchases?

Sure. So, you know, I think the biggest thing to call out is that what we have been seeing is we have been seeing higher average selling prices. And the higher average selling prices are a really positive thing. And so that is translating into higher ticket prices, higher ticket averages. And that's been a positive thing. Where we have put a lot of focus on add-on sales is that we launched buy online pick up in store last year and it's a good opportunity. We're seeing a 10 plus percent rate of our online sales moving to BOPUS and we're focusing a lot on attachment when the customer comes into the store. It's an opportunity to put some add-on sales there, and as the customers trying on their shoes, what we have found is that we're quite successful at being able to sell them another pair of shoes. And so that's been an area of attention.

Thank you.

Thank you. 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. We are looking forward to you joining us for our second quarter earnings call.

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