Genesco(GCO) - 2021 Q3 - Quarterly Report

Part I. Financial Information This section presents the company's unaudited financial statements, management's discussion, market risk, and internal controls Item 1. Financial Statements (unaudited) This section presents unaudited condensed consolidated financial statements, including balance sheets, income, cash flows, equity, and notes on accounting policies, COVID-19, and segment performance Condensed Consolidated Balance Sheets | Metric | Oct 31, 2020 (in thousands) | Feb 1, 2020 (in thousands) | Nov 2, 2019 (in thousands) | | :----- | :-------------------------- | :------------------------- | :------------------------- | | Total Assets | $1,536,500 | $1,680,478 | $1,785,492 | | Total Liabilities | $1,066,528 | $1,061,135 | $1,212,044 | | Total Equity | $469,972 | $619,343 | $573,448 | Condensed Consolidated Statements of Operations | Metric | 3 Months Ended Oct 31, 2020 (in thousands) | 3 Months Ended Nov 2, 2019 (in thousands) | 9 Months Ended Oct 31, 2020 (in thousands) | 9 Months Ended Nov 2, 2019 (in thousands) | | :----- | :----------------------------------------- | :---------------------------------------- | :----------------------------------------- | :---------------------------------------- | | Net sales | $479,280 | $537,263 | $1,149,729 | $1,519,487 | | Gross margin | $225,504 | $264,202 | $512,648 | $745,643 | | Operating income (loss) | $8,184 | $25,943 | $(169,828) | $37,989 | | Net Earnings (Loss) | $7,466 | $18,899 | $(146,347) | $25,822 | | Diluted EPS | $0.52 | $1.30 | $(10.31) | $1.60 | Condensed Consolidated Statements of Comprehensive Income | Metric | 3 Months Ended Oct 31, 2020 (in thousands) | 3 Months Ended Nov 2, 2019 (in thousands) | 9 Months Ended Oct 31, 2020 (in thousands) | 9 Months Ended Nov 2, 2019 (in thousands) | | :----- | :----------------------------------------- | :---------------------------------------- | :----------------------------------------- | :---------------------------------------- | | Net earnings (loss) | $7,466 | $18,899 | $(146,347) | $25,822 | | Total other comprehensive income (loss) | $(440) | $8,599 | $(8,332) | $(1,620) | | Comprehensive income (loss) | $7,026 | $27,498 | $(154,679) | $24,202 | Condensed Consolidated Statements of Cash Flows | Metric | 9 Months Ended Oct 31, 2020 (in thousands) | 9 Months Ended Nov 2, 2019 (in thousands) | | :----- | :----------------------------------------- | :---------------------------------------- | | Net cash provided by operating activities | $51,302 | $2,806 | | Net cash provided by (used in) investing activities | $(18,132) | $77,342 | | Net cash used in financing activities | $(1,757) | $(191,318) | | Net increase (decrease) in cash and cash equivalents | $33,643 | $(111,529) | | Cash and cash equivalents at end of period | $115,061 | $55,826 | Condensed Consolidated Statements of Equity | Metric | Balance Feb 1, 2020 (in thousands) | Balance Oct 31, 2020 (in thousands) | | :----- | :--------------------------------- | :---------------------------------- | | Total Equity | $619,343 | $469,972 | | Retained Earnings | $378,572 | $231,001 | | Accumulated Other Comprehensive Loss | $(31,668) | $(40,000) | Notes to Condensed Consolidated Financial Statements (unaudited) This section provides detailed notes on the company's accounting policies, the impact of COVID-19, asset impairments, debt, and segment performance Note 1 Summary of Significant Accounting Policies This note outlines the basis of presentation for the unaudited financial statements, describes the company's operations, and details key accounting policies - Genesco Inc. operates 1,476 retail stores across the U.S., Puerto Rico, Canada, the United Kingdom, and the Republic of Ireland, under banners such as Journeys, Journeys Kidz, Little Burgundy, Johnston & Murphy, and Schuh, in addition to e-commerce and wholesale operations[21] - The company's four reportable business segments are Journeys Group, Schuh Group, Johnston & Murphy Group, and Licensed Brands[22] - Adopted ASU No. 2018-13 (fair value measurement disclosure) and ASU No. 2016-13 (credit losses) in the first quarter of Fiscal 2021, with no material impact on the Condensed Consolidated Financial Statements[31][32] Note 2 COVID-19 This note details the significant operational and financial impacts of the COVID-19 pandemic, including store closures, revenue reductions, asset impairments, and government relief benefits - Temporary store closures and reduced customer traffic due to COVID-19 resulted in material reductions in revenues and operating income during the first three quarters of Fiscal 2021[33][34] - Recorded a $79.3 million goodwill impairment charge for Schuh Group and a $5.3 million trademark impairment charge in the first quarter of Fiscal 2021 due to the impact of COVID-19[35] - Qualified payroll tax credits from the CARES Act and other foreign governmental packages reduced selling and administrative expenses by approximately $7.0 million (Q1), $3.8 million (Q2), and $1.8 million (Q3) in Fiscal 2021; UK government programs provided property tax relief of approximately $1.6 million (Q1), $3.9 million (Q2), and $3.9 million (Q3) in Fiscal 2021[38] - Recorded additional valuation allowance adjustments of $2.0 million in the UK jurisdiction in Q1 Fiscal 2021 due to anticipated losses, and excluded the UK tax jurisdiction from the annual effective tax rate estimate for Fiscal 2021[39] Note 3 Goodwill and Other Intangible Assets This note details changes in goodwill and other intangible assets, reporting a full impairment of Schuh Group's goodwill and a trademark impairment in Q1 FY21 due to COVID-19 - Goodwill attributed to Schuh Group was fully impaired, resulting in a $79.3 million charge in the first quarter of Fiscal 2021, due to qualitative indicators of impairment including a significant decline in stock price and market capitalization from the COVID-19 pandemic[41] - Recorded a trademark impairment of $5.3 million in the first quarter of Fiscal 2021, affecting Journeys Group and Johnston & Murphy Group, based on a royalty savings approach[45] | Metric | February 1, 2020 (in thousands) | October 31, 2020 (in thousands) | | :----- | :------------------------------ | :------------------------------ | | Total Goodwill | $122,184 | $38,129 | Note 4 Asset Impairments and Other Charges This note reports pretax charges for retail store asset impairments, totaling $6.4 million in Q3 FY21 and $16.0 million for the first nine months of Fiscal 2021 - Recorded pretax charges of $6.4 million in the third quarter of Fiscal 2021 for retail store asset impairments[49] - Recorded pretax charges of $16.0 million in the first nine months of Fiscal 2021, including $5.3 million for trademark impairment and $11.1 million for retail store asset impairments, partially offset by a $(0.4) million gain from the Togast acquisition earnout release[49] [Note 5 Inventories](index=18&type=section&id=Note