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Text: These statements reflect the participants' expectations as of today, but actual results could be different.
Participants also expect to refer to certain adjusted financial measures during the call.
We hope that you are all staying safe and healthy.
I'd like to begin by welcoming Tom, who with almost 30-years of CFO experience and deep roots in brands and retail, has been a tremendous addition to our team as we drive the recovery in our business and the return to profitable growth.
We concluded an incredibly challenging year with a fourth quarter that exceeded our expectations across the board.
Our performance was driven by record digital revenue and superb all-around results at Journeys, highlighted by our stronger-than-anticipated store volume.
As it did throughout fiscal '21, our organization successfully navigated difficult operating conditions to serve our customers this time during the all-important holiday selling season.
I could not be more proud of how well our teams have also executed during the pandemic.
They have faced each new challenge in a very dynamic environment with tenacity and ingenuity while operating under protocols to ensure our highest priority, the health and safety of each other and our customers.
Before we get into a review of fourth-quarter performance, I'd like to highlight some of the major accomplishments from fiscal '21.
Starting with the significant and unfamiliar task of efficiently closing and then swiftly reopening our entire fleet of nearly 1,500 retail locations, some of them multiple times.
Capitalizing on the accelerated shift to online spending, achieving record digital revenue of $450 million, an increase of almost 75% year over year while also fueling record profitability for this channel, driving record conversion rates in stores, helping us to partially offset the impact from lower traffic levels and store closures.
Increasing market share in Journeys and Schuh, which represent a large majority of our revenue with their ability to retain sales in this face of the pandemic disruption.
Conserving capital and reducing operating expenses by 15% compared with fiscal '20, generating cash flow of over $130 million to ensure healthy liquidity.
And so finally, delivering sequential improvement every quarter.
In particular, bottom line results reflect the strong foundation we built for the digital channel prior to the pandemic.
Our online business generated double-digit operating margins before COVID-19 due to our focus on full price selling, disciplined marketing spend and shipping and return policies to reinforce profitability.
Our overall performance under difficult circumstances also reflects the strong competitive positions of our retail concepts prior to COVID-19 and our success capitalizing on opportunities to further strengthen the leadership positions of our teen and young adult footwear businesses.
In today's channel-less world, where our consumer can shop anywhere the consumer wants, Journeys and Schuh's results underscore the tremendous loyalty they've developed with their existing customers and compelling proposition they offer new customers.
So turning now to the fourth quarter.
The work we did to have the right assortments and right holiday campaigns helped deliver Q4 results then are ahead of expectations in spite of some store closures not anticipated in the U.K. and Canada and supply chain delays and disruption.
While we continue to face softer traffic levels than one year ago across our retail businesses, Journeys stores posted a nice improvement compared with the third quarter as more shoppers visited Journeys locations during the peak weeks leading up to Christmas.
Our store teams once again drove very strong levels of the customer conversion to help materially offset the headwinds from less traffic.
Meanwhile, our business online, especially mobile, experienced very strong gains in both traffic and conversion, with new customers, again, driving increased volumes.
New website visitors were up 40%, contributing an almost 50% growth in new customer purchases, and we delivered another strong quarter of this digital growth with comps up 55%.
The combination of these factors led to a total revenue decrease of 6% versus last year, with stores open about 90% of the possible days in the quarter.
This result was better than we expected due mainly to the stronger store sales at Journeys and that represents a meaningful improvement from last quarter's 11% decline in Q2's 20% decline.
While gross margins were down compared to last year, the gap narrowed for the third consecutive quarter and the sequential improvement was driven by an increase at Journeys due to the strong full price selling.
As a result of decisive cost containment actions, along with onetime benefits, including substantial rent abatements recognized in the quarter, we drove total expenses down twice as much as revenue on a percentage basis.
Inclusive of the rent abatements, operating income was up year over year.
By tightly managing inventory throughout the year, we had the flexibility and confidence to bring in new fresh product.
However, much lower year-end numbers that also reflect the disruption in the supply chain which caused delays, especially at Journeys and Schuh, where we would have liked to have received product earlier.
Turning now to discuss each business in more detail.
Let's start with Journeys and begin by congratulating our team on its impressive results across the board.
Journeys delivered record operating profit in the biggest quarter of the year in the midst of a pandemic.
Fourth-quarter top line results matched last year's levels as the merchant team skillfully interpreted trends making the right product calls and its store and digital teams delivered an exceptional customer experience.
When our stores were open this year, Journeys that customers were enthusiastic to shop our physical locations and engage with our people.
And over the holidays, we were pleased by the strong appetite to shop our stores.
With replenishment orders for many key styles arriving post holiday, combined with the first wave of these checks from the December stimulus program delivered early in the new year, the business accelerated as January progressed, leading to a strong finish to the quarter.
Comfort reigns as the fashion choice of the pandemic and Journeys' offering of casual product continued to resonate strongly with consumers.
While teens always have a big complement of fashion athletic footwear in the closets when fashion swings toward non-athletic or what we call casual footwear, Journeys' is especially well positioned among its competition to deliver this assortment.
This Fall and winter, our consumers' appetite for the Boots began early and our boot business was good.
And our casual business was even better, especially in women's and kids.
Following a good back-to-school season, Schuh came into the fourth quarter with this positive momentum and a strong assortment of high demand brands and styles.
with Schuh stores closed for about two-thirds of the possible days in the quarter.
Fortunately, with best-in-class digital abilities, Schuh was able to capture a significant portion of lost store volume through its digital channel, and total sales were down only 13%, capping off a year in which Schuh, like Journeys, gained market share.
As with Journeys, Schuh's casual assortment gained ground over its fashion-athletic assortment with the boots and casual strong throughout the quarter and women's leading the way.
Meanwhile, Johnston & Murphy's casual footwear offering and apparel categories were, again, the bright spots for the brand in what still remained a very tough environment due to the work-from-home trend and significantly fewer social gatherings during the pandemic.
The plan going forward is to accelerate the work started years ago to evolve J&M into a footwear first lifestyle brand, with a range of footwear and apparel from dressier to more casual.
Despite the challenging year, and there were some solid proof points that this strategy continues to gain traction including the success in the innovative XC4 collection through the relaunch of golf.
For the upcoming year, J&M has focused 90% of new product development on our expansion of its casual offering to include casual athletic, leisure, rugged, outdoor and performance.
We brought in a new Head of Product Development, who brings a successful track record developing casual brands to aid in these efforts.
And so as our customer returns to work and socializing, which we hope will be sooner than later, J&M's assortment will be ready for the post-pandemic lifestyle and further void by J&M core customers increased level of savings during the pandemic.
So turning now to the current quarter.
Early February extended January's positive momentum until we hit the offset of income tax refunds, which were delayed by a few weeks this year.
Nevertheless, February sales came in, and in line with our expectations, and in March, we have seen an uptick as refunds began to catch up.
Looking ahead, while great progress is being made on this front, we expect the environment to remain fluid in the near-term until the vaccine is more fully rolled out.
In terms of how this shapes our results, it means the first half will show an improvement to last year, given easier comparisons due to the COVID shutdowns, but we will still be under pressure from store closures especially in the U.K., which is expected to be shut down until shortly after Easter.
We anticipate store traffic will also continue to be affected across all geographies this spring.
These dynamics will further pressure our results in these low volume months, when in normal times, fixed operating expenses makes it challenging to breakeven.
Stimulus will help, we will see how much, and we are also optimistic about a greater recovery in the back half.
But what we're most excited about is we see opportunities to solidify the digital gains we've made and capitalize on the ongoing industry consolidation to further expand our market share.
As many challenges as COVID-19 has now created for our company, it has also provided us the real opportunity to transform our business at a faster pace.
We've learned a lot and will work hard to accelerate the initiatives and investments we plan to also achieve these goals and exceed the expectations of the consumer whose needs have advanced.
We were pleased with our performance in Q4 as we handily exceeded our expectations in all facets of operating results.
Building upon our strong return to profitability in the Q3, sequential improvements compared to the prior quarters in revenue, gross margin and SG&A due to some help from rent abatements, drove higher operating income than last year.
A higher tax rate offset the higher operating income, resulting in adjusted earnings per share of $2.76, compared to $3.09 last year.
Turning to the specifics for the quarter.
While comps were up 1%, consolidated revenue was $637 million, down 6% compared to last year, driven by continued pressure at J&M and the impact from store closures during the quarter.
A robust e-commerce comp of 55% was really offset by a decline in-store revenue of 19%, driven by a comp decline of 10%.
While our stores were closed for 10% of the possible operating days during the quarter.
Digital sales increased to 27% of our retail business from 17% last year.
Consolidated gross margin was 45.8%, down 110 basis points from last year.
As we have experienced all year, increased shipping to fulfill direct sales that pressured the gross margin rate in all our businesses totaling 80 basis points of the overall decline.
Notably, Journeys' gross margin increased 210 basis points driven by lower markdowns.
Schuh's gross margin decreased 410 basis points due to the increased e-comm shipping expense.
J&M's gross margin decrease of 1,690 basis points was due to more closeouts at wholesale, higher markdowns at retail and incremental inventory reserves.
So, finally, the combination of lower revenue at J&M, typically the highest gross margin rate of our businesses and the revenue growth of licensed brands typically our lowest gross margin rate negatively impacted the overall mix by 50 basis points.
The largest year-over-year savings came from the occupancy costs, driven in large part by the execution of about $18 million of rent abatements with our landlord partners who provided support for the time stores were closed and savings from the U.K. government program, which provides property tax relief.
The next largest areas of savings came from the reduction in-store salaries -- store selling salaries, driven by our effective use of workforce management tools and from lower bonus expense.
These savings were partially offset by increased marketing expenses needed to drive traffic in both stores and online.
We took the most significant cost actions at J&M evident by the 29% reduction in SG&A in the Q4 and our 25% reduction for the full year.
In addition to the rent abatement savings, our organization has been intently focused on a multiyear effort centered around occupancy cost, and we have achieved even greater traction with the pandemic.
We negotiated 123 renewals this year and achieved a 23% reduction in cash rent or 22% on a straight-line basis in North America.
This was on top of an 11% of cash rent reduction or 8% on a straight-line basis for 160 renewals last year.
These renewals are for an even shorter-term averaging approximately one and a half years compared to the three-year average that we saw last year, with almost one-third of our fleet coming up for renewal in the next 24 months, this will remain a key priority for us going forward.
In summary, the fourth quarter's adjusted operating income was $64.7 million versus last year's $59.3 million.
Our adjusted non-GAAP tax rate for the fourth quarter was 37.5%.
Tax initiatives under the CARES Act and then other provisions generated a onetime $65 million permanent income tax benefit for Fiscal year-end '21.
This permanent benefit is excluded for non GAAP reporting.
Turning now to the balance sheet.
Q4 total inventory was down 20% on sales that were down 6%.
The levels of Journeys and Schuh are also lower than we would like given the delays in the supply chain.
For the fourth quarter, our ending net cash position was $182 million, $100 million higher than the third quarter's level, driven by strong cash generation from operations.
The year-end cash balance that benefited from both the lower inventory levels as well as rent payables that will be trued up once remaining COVID related deals are fully completed and executed.
Capital expenditures were $6 million as our spend remains focused on digital and omnichannel and depreciation and amortization was $11 million.
We closed 16 stores and opened none during the fourth quarter, capping off the full year in which we closed 33 stores and opened 13.
Now looking forward to fiscal '22, given the uncertainty remaining within this pandemic, we are not providing specific guidance for Q1 or the full fiscal year.
That said, I do want to share some high-level thoughts on how we are thinking about our business.
To do this, we think it's best to use the pre-pandemic fiscal '20 as the reference point as there is simply too much noise in our fiscal '21 results, for drawing informative comparisons for future expectations.
Thinking about Q1 revenue, although we expect a nice recovery compared to fiscal '21, we will be below fiscal '20 levels.
This is mainly due to Schuh with major store closures expected through the most of Q1 and continued pressure on J&M.
Directionally, the overall sales decline for Q1 compared to fiscal-year end '20 could be in the neighborhood of the 11% decline we experienced in the past third quarter.
We will have more stores closed than in the fourth quarter.
Our view does not really contemplate additional store closures or restrictions beyond what we know today.
In addition, we have not included any stimulus from the most recent bill in our forward-thinking, which historically is a tailwind.
Gross margin rates for Q1 will be below fiscal '20 levels, more than that 210 basis point decline we experienced this past third quarter.
The increase in closed stores will drive higher e-commerce penetration and the higher shipping costs that come with it.
Additionally, we anticipate the negative headwind from J&M to continue into Q1.
Now we expect SG&A dollars in Q1 to be below FY '20 Q1 levels, inclusive of some onetime benefits.
However, there will be some deleveraging due to the sales volume likely in the neighborhood of 100 basis points.
This is driven by closed stores and lower store volumes as the fixed store occupancy expense causes deleverage.
In summary, it will be really difficult to turn a profit in Q1 as is typical during our lower volume quarters of the year.
Combined with the seasonality of our business, we are expecting more than 100% of our full year earnings to also come from the third and fourth quarters.
Even though we are expecting an overall loss in Q1 since that loss is generated in foreign jurisdictions for which there is no-tax benefit, we expect a tax expense related to a small amount of U.S. earnings in Q1.
The annual tax rate is expected to be approximately 32%.
For fiscal '22, capital expenditures will be between $35 million and $40 million and centered on digital and omnichannel investments, which comprised about 75% of this amount.
Mimi will talk further about the initiatives for the coming year.
This does not include another $16 million net of tenant allowance related to the move to a new headquarters location, which were delayed because of the pandemic.
But which was precipitated by the landlord's plan to demolish our current building.
We estimate depreciation and amortization at $48 million.
We currently plan to open up to 15 new stores, mainly at Journeys.
New store leases will be designed to minimize our risk by including landlord support on the build out costs variable rent and kick out opportunities.
We currently plan on closing about 35 stores, but discount could go up or down based on our ability to obtain short-term lease deals at attractive rents.
Our strong year-end cash position enables us to invest in our business.
We had now moderated capital expenditures with the onset of the pandemic and expect to catch up with some of our initiatives.
In addition we plan to increase our inventory levels to drive increased back half sales.
These investments will be funded by our earnings and a net inflow of cash from our tax planning initiatives.
Also, we anticipate this year's numbers will include bonus expense.
As a reminder, our EVA program pays for year-over-year improvement and we paid no bonus in the year we just finished.
For this year, we are assuming an average of 14.6 million shares outstanding this assumes no stock buybacks under our current $100 million Board authorization, of which $90 million is remaining.
And now turning to discuss in general, our cost structure.
Given the accelerated shift of our business from stores to digital and impact from the pandemic, we must reshape our cost structure.
Initially, we believe we can reduce operating expenses by as much as around $25 million to $30 million, approximately 3% on an annualized basis.
This is a good start to a multiyear profit improvement plan to rebound from the pandemic and to enable investments in growth, while also at the same time, improving operating margins and return on invested capital.
We will provide more detail as the year progresses.
I have been extremely impressed with the talent and drive of the team since I arrived.
I'm confident that we have the right people who are focused on the right priorities to drive the organization forward as we move into the next fiscal year.
As I said, COVID-19, and has provided us the opportunity to transform our business at a faster pace as we emerge from the pandemic and to build our company into an even stronger position.
With online behavior advancing by several years, we need to accelerate these many of our digital and omnichannel initiatives in our pipeline.
The investments we have made paid huge dividends this year, importantly, as a footwear-focused company, digital provides the platform to drive profitable growth across all our concepts.
The pandemic also drove or hastened a number of our consumer trends that play into the sweet spots of our two largest businesses, Journeys and Schuh, such as an increased emphasis on comfort and greater casualization.
While this was already the direction Johnston & Murphy was headed, we're accelerating progress here as well.
A year ago, I have described the outcome of our five-year planning process and the six strategic growth pillars around which we aligned our business.
While the past year only reinforce that we are focused on the right areas, we reevaluated our initiatives to take further advantage of the significant changes that are under way in our industry.
I'll walk you through the pillars and briefly highlight select initiatives for fiscal '22.
The first pillar is build deeper consumer insights to strengthen customer relationships and brand equity.
Data-driven consumer insights and the more robust CRM capabilities are key to driving our next big wave of growth.
Not only do we have robust information for our online customers.
But in North America, 70-plus percent of store customers trust us enough to give us their data as well, providing a very strong foundation on which we continue to build.
We also implemented a completely new CRM system in fiscal '21 at Schuh, aimed at increasing frequency of shopping and average order value.
Our new campaigns delivered results that exceeded our expectations.
This new CRM system will create the basis for the launch in fiscal '22 of the loyalty program that incentivizes customers to consolidate their purchases across brands at Schuh, through recognition and rewards.
Likewise, over at Journeys, we just finished an evaluation of how to take Journeys' CRM capabilities to the next level and enable us to introduce a loyalty program for Journeys in the future.
The second pillar is intensify product innovation and trend insight efforts.
I've talked about J&M's product innovation, which then uses proprietary technology to differentiate the brand from competitors as it fast tracks development of a broader casual offering.
Additionally, we're excited to reap the benefits of last year's Togast acquisition, which advanced our strategy of growing the branded side of Genesco.
Beyond acquiring new talent and additional sourcing these capabilities, we secured the rights to the Levi's footwear license for men's, women's and kids in the U.S.
We are leaning in not only to the gender, but also the category opportunities in areas like slippers, flip flops and slides.
Levi's is one of the most recognized consumer brands with our heritage dating back almost 170 years.
The Levi's brand halo and casual aesthetic are a perfect fit with pandemic fashion preferences and we are very optimistic about the growth prospects here as demand in the channels for this product returns.
Next, I'll discuss the third and fourth pillars together.
Accelerate digital to grow direct-to-consumer and maximize the relationship between what's physical and digital, with a series of initiatives we have under way.
While we doubled e-commerce in the five years leading up to the pandemic, we aim to double the business again in a much shorter period by leveraging the 75% comp increase we achieved last year.
And to do this, in North American stores, we're launching the initial rollout of BOPUS, an offering we've had in the U.K. that drives around 20% of Schuh's online purchases and steers customer traffic to its stores.
As the lines between physical and digital further blur, we're tackling last mile innovation by also rolling out this capability, along with buy online, ship to store and ultimately, offerings important to our customers like curbside pickup.
The foundational project for this effort was last fall's upgrade of our inventory, locating and order brokering system which provides the requisite improved inventory accuracy.
Building on this, we will install new store point-of-sale software and hardware to accelerate the digitization of our stores and provide a platform for new capabilities, including mobile checkout, line busting and features to make non selling tasks more efficient.
These projects plus the completion of another bespoke e-commerce picking module at the Journeys distribution center comprise the greater part of our capital spend in fiscal '22 and which Tom highlighted as being significantly more concentrated in the digital and supply chain.
The fifth pillar is reshape the cost base to reinvest for future growth.
So, as our business transforms, we require a cost structure that supports an omnichannel business, while our stores remain a critical strategic asset in this omnichannel world, we've been working to evolve historical rent and selling salary models.
Tom just took you through our cost initiatives, and I want to reinforce that working with our landlord partners to find a solution that rightsizes rent to match traffic levels is a big part of this endeavor.
Finally, the sixth pillar pursue synergistic acquisitions that add growth and create shareholder value, we are also pursuing reactively rather than proactively until we recover further from the pandemic.
So now to conclude, as I reflect on my first year as CEO, I have been truly amazed by these executional excellence and resilience of our entire organization as we navigated a year like none other.
Genesco's success can be traced directly back to you who have stepped up in so many ways right from the very beginning of the pandemic.

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compname reports q4 non-gaap earnings per share from continuing operations of $2.76.
q4 non-gaap earnings per share from continuing operations $2.76.
q4 same store sales rose 1 percent.
q4 sales $637 million versus refinitiv ibes estimate of $617.6 million.

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