INDUSTRY NEWS

NASHVILLE—Genesco (NYSE: GCO), which sells footwear under the Johnston & Murphy and Dockers brands, has released third quarter reports for 2009 that should give investors reason for optimism. The company reported earnings from continuing operations for the third quarter ended October 31, 2009, of $11.5 million compared to earnings from continuing operations of $9.0 million for the third quarter ended November 1, 2008.

Robert J. Dennis, president and chief executive officer of Genesco, said, "We are pleased with our third quarter earnings, which exceeded expectations thanks to improved gross margin and solid expense leverage, despite the lack of a sustained sales trend in the quarter. Comparable store sales for the first three weeks of November are down 3 percent from the same period last year. Nevertheless, given the consumer's continued willingness to shop during the peak sales periods throughout the current economic downturn, the relatively easier comparisons later in the quarter, and our strong merchandise position, we remain optimistic about the holiday selling season.

"We are raising our fiscal 2010 guidance to reflect our strong third quarter results, and now expect earnings per share of $1.78 to $1.84 for the year. This guidance assumes fourth quarter earnings per share of $1.07 to $1.13, based on flat to slightly positive fourth quarter comparable store sales compared with -5 percent last year and subject to the same adjustments as our previous guidance."

Fiscal 2010 third quarter earnings reflected pretax charges of $2.6 million, or $0.07 per diluted share, primarily related to fixed asset impairments. In addition, the third quarter of fiscal 2010 reflected additional interest expense due to the adoption in the first quarter of fiscal 2010 of FSP APB 14-1, a new accounting standard applicable to the company's convertible debt. Fiscal 2009 third quarter earnings included charges associated with merger related expenses, asset impairment and lease terminations, and other legal matters, and a higher effective tax rate. Fiscal 2009 earnings also included a restatement of interest expense required by the adoption of APB 14-1, which required retroactive application resulting in additional interest costs.

Adjusted for the listed items in both periods, earnings from continuing operations were $12.3 million, or $0.53 per diluted share, for the third quarter of fiscal 2010, compared to earnings from continuing operations of $9.5 million, or $0.43 per diluted share, for the third quarter of fiscal 2009. For consistency with fiscal 2010's previously announced earnings expectations, which did not reflect the listed items, the company believes that disclosure of earnings from continuing operations adjusted for those items will be useful to investors.

Net sales for the third quarter of fiscal 2010 were $390 million, essentially even with the third quarter of fiscal 2009. Comparable store sales in the third quarter of fiscal 2010 decreased by 2 percent. Comparable store sales in the Journeys Group decreased by 2 percent, the Hat World Group increased by 1 percent, Underground Station decreased by 6 percent, and Johnston & Murphy Retail decreased by 2 percent.

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