Q4 2024 Genesco Inc Earnings Call
Good day, everyone and welcome to the Tesco fourth quarter fiscal 2024 conference call.
Operator: Good day everyone, and welcome to the Genesco fourth quarter fiscal 2024 conference call. Just a reminder, today's call is being recorded.
Just a reminder, today's call is being recorded.
Operator: I'll now turn the call over to Darryl MacQuarrie, Senior Director of FP&A. Good morning, everyone, and thank you for joining us to discuss our fourth 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 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.
Now I'll turn the call over to Dow Macquarie Senior director of S. P N a.
Darryl MacQuarrie: Go ahead Sir.
Speaker Change: Good morning, everyone and thank you for joining us to discuss our fourth quarter fiscal 'twenty four results.
Speaker Change: Participants on the call expect to make forward looking statements, reflecting our expectations as of today, but actual results could be different.
Darryl MacQuarrie: <unk> 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.
Darryl MacQuarrie: Participants also expect to refer to certain adjusted financial measures during the call all.
Darryl MacQuarrie: 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.
Darryl MacQuarrie: 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.
Darryl MacQuarrie: We have also posted a presentation summarizing our results here as well.
Darryl MacQuarrie: With me on the call today is Mimi Vaughn Board Chair, President and Chief Executive Officer.
Darryl MacQuarrie: And Tom George Chief Financial Officer.
Mimi Eckel Vaughn: Now I'd like to turn the call over to me.
Mimi Eckel Vaughn: Thanks, Darryl. Good morning, everyone, and thank you for joining us. Fiscal 24 highlighted how substantially our consumer shopping behavior has changed since the pandemic. Back in fiscal 22, consumers were flush with cash thanks to fiscal stimulus and spent heavily in the footwear category, which led to a record year for journeys. As we entered fiscal 24, we saw a pronounced drop in purchases at the beginning of the year and have been working to close the gap ever since. The forward buying dynamic, along with a period of higher inflation that followed, competitive discounting to clear elevated athletic footwear inventories, and a general lack of innovation in footwear, made for a difficult operating environment that remained challenging as we progressed through fiscal 24. Throughout the year, these evolving purchase patterns led to greater volatility and made it hard to forecast demand, particularly for journeys. In the fourth quarter, after a strong Black Friday and a solid kickoff to the holiday season, sales were negatively impacted by a more selective customer that shopped almost exclusively for key footwear items, coupled with a marked shift away from boots.
Mimi Eckel Vaughn: Thanks, Darryl and good morning, everyone and thank you for joining us.
Mimi Eckel Vaughn: Fiscal 'twenty four highlighted how substantially our consumer shopping behavior has changed since the pandemic.
Mimi Eckel Vaughn: In fiscal 'twenty to consumers, who are flush with cash thanks to fiscal stimulus and spent heavily in the footwear category, which led to a record year for journeys.
Mimi Eckel Vaughn: As we entered fiscal 'twenty four we saw a pronounced drop in purchases at the beginning of the year and had been working to close the gap ever since.
Mimi Eckel Vaughn: The forward buying dynamic along with a period of higher inflation that followed.
Mimi Eckel Vaughn: <unk> discounting to clear elevated athletic footwear inventories and a general lack of innovation in footwear made for a difficult operating environment that remains challenging as we progress through fiscal 'twenty four.
Mimi Eckel Vaughn: Throughout the year these evolving purchase patterns led to greater volatility and made it hard to forecast demand, particularly for journeys.
Mimi Eckel Vaughn: In the fourth quarter after a strong black Friday and solid kickoff to the holiday season sales were negatively impacted by a more selective customer that shops almost exclusively for key footwear items, coupled with a market shift away from the.
Mimi Eckel Vaughn: As we got into the month of January, the combination of softer-than-anticipated sales due to disruptive winter storms and higher-than-anticipated expenses at journeys was what drove EPS below our most recent guidance. Throughout the quarter, our core product assortment was much more under pressure than we originally expected at the beginning of Q4. We expect this dynamic to carry into this current year. And given our limited ability to now impact product for spring, we believe it will remain a significant headwind in the first half, despite facing easier comparisons. We are clearly disappointed with these results.
Mimi Eckel Vaughn: As we got into the month of January the combination of softer than anticipated sales due to disruptive winter storms and higher than anticipated expenses at journeys is what drove EPS below our most recent guidance.
Throughout the quarter, our core product assortment was much more pressured than we originally expected at the beginning of Q4.
Mimi Eckel Vaughn: We expect this dynamic to carry into this current year and given our limited ability to know impact product for spring. We believe it will remain a significant headwind in the first half despite facing easier compares.
Speaker Change: We are clearly disappointed with these results however, I want to stress that we face challenging times before and consistently demonstrated a strong track record of turning around our businesses to emerge even stronger when confronted with economic and consumer disruption.
Mimi Eckel Vaughn: However, I want to stress that we have faced challenging times before and consistently demonstrated a strong track record of turning around our businesses to emerge even stronger when confronted with economic and consumer disruption. Our response to the pandemic and recent turnarounds at SHU and J&M, evidenced by another year of record sales for both, are clear examples of this, and I'm confident we will achieve the same success with Journey. It's also important to note, despite a very difficult operating climate, in fiscal 24, our overall sales declined only low single digits, and our gross margin compressed by just 30 basis points. The sensitivity of our model is such that smaller movements in sales are magnified with quite a bit of de-leverage against our largely fixed cost base. Coupled with our low share count, this had a substantial effect on our bottom line. However, the inverse is true as well.
Speaker Change: Our response to the pandemic and recent turnarounds at Schuh and J N N evidenced by another year of record sales for both are clear examples of this and I am confident we will achieve the same success with journeys.
Speaker Change: It's also important to note despite a very difficult operating climate in fiscal 'twenty for our overall sales declined only low single digits and our gross margin compressed by just 30 basis points.
Speaker Change: Sensitivity of our model is such that smaller movements in sales are magnified with quite a bit of deleverage against our largely fixed cost base.
Speaker Change: Coupled with our low share count this had a substantial effect on our bottom line.
However, the inverse is true as well.
Mimi Eckel Vaughn: In a sales growth environment, as we've demonstrated before, our model provides significant leverage and earnings upside potential. Our cost savings initiatives are aimed at improving this further. However, as we turn the page to Fiscal 25, the operating environment remains difficult.
And our sales growth environment as we demonstrated before our model provides significant leverage and earnings upside potential our cost savings initiatives are aimed at improving this further.
As we turn the page to fiscal 'twenty five the operating environment remains difficult given the steeper challenges in our core business. We now have more work to do in our assortment.
Mimi Eckel Vaughn: Given the steeper challenges in our core business, we now have more work to do in our assortment. As such, we're counting on more time for a Journey's Rebound. All that said, we have a very clear understanding of what we need to achieve.
Speaker Change: As such we're counting on more time for our journeys rebound.
Speaker Change: All that said, we have a very clear understanding of what we need to achieve journeys continued turnaround is our number one priority.
Mimi Eckel Vaughn: Journeys continues, Turnaround is our number one priority. With the right new leadership already in place and a strong team overall, we're better positioned than ever to accomplish this task. As I've said before, while positioned strategically with a spotlight focus on the teen, no other retailer serves this customer quite the same as Journeys. It is the one-stop shop for a broad range of both casual and athletic brands.
Speaker Change: With the right new leadership already in place and a strong team overall, we're better positioned than ever to accomplish this task.
Speaker Change: I've said before well positioned strategically with a spotlight focused on the teen no. Other retailer serves this customer quite the same as journeys journeys is the one stop shop for a broad range of both casual and athletic brands. This.
Mimi Eckel Vaughn: This unique proposition as the destination for teen fashion footwear, particularly for the teen girl, remains solidly intact. As fashion broadens and teens are embracing multiple wearing occasions, we will achieve success with a more diversified assortment that addresses these needs and fills out our customers' closets. Importantly, we already have the backing of our consumer, who consistently scores Journeys higher than key competitors in market research, and our brand partners, who are demonstrating exceptional support. Under Andy Gray's leadership, the Journeys team is working to dramatically accelerate the pace of improvement in response to how the consumer has changed. With a strong merchant background, excellent vendor relationships, and expertise in brand building and product innovation, Andy's insights have already proven tremendously valuable. We're working with great urgency. However, these efforts will take some time given the footwear industry's lead time.
Speaker Change: This unique proposition as the destination for teen fashion footwear, particularly for the teen girl remains solidly intact.
Speaker Change: As fashion broadens and teens are embracing multiple wearing occasions, we will achieve success with a more diversified assortment that addresses these needs and sales at our customers' closets importantly, we already have the backing of our consumer who consistently scores journeys higher than key competitors and market research.
Speaker Change: And our brand partners, who are demonstrating exceptional support.
Speaker Change: Under Andy Grays leadership, the journeys team is working to dramatically accelerate the pace of improvement in response to how the consumer has changed.
Speaker Change: With a strong merchant background excellent vendor relationships and expertise in brand building and product innovation and these insights has already proven tremendously valuable.
Speaker Change: We are working with great urgency. However, these efforts will take some time given footwear industry lead times.
Mimi Eckel Vaughn: Already in the works, though, they will set the stage for more significant progress for back-to-school and especially for holidays. I will discuss some of these initiatives in more detail shortly. But first, I'd like to point out some important highlights from the quarter and year beyond the record sales years SHU and J&M delivered. We grew our comparable digital business by five percent in Q4, eight percent for the year, and expanded digital penetration in fiscal 24 to 23 percent versus 20 percent a year ago. We launched Journey's all-access loyalty program and buy online, pick up, and store in North America with encouraging initial results. Focus was a bright spot in Journeys and its first holiday in operation, accounting for almost 30% of e-commerce sales in the week leading up to Christmas.
Speaker Change: Already in the works, though they will set the stage for a more significant progress for back to school and especially for holiday I will discuss some of these initiatives in more detail shortly but first I'd like to point out some important highlights from the quarter and year beyond the record sales years Schuh and Jane.
Speaker Change: Them deliver we grew our comparable digital business by 5% in Q4, 8% for the year and expanded digital penetration in fiscal 'twenty, 4% to 23% versus 20% a year ago, We launched journeys all access loyalty program and buy online pickup in store.
Speaker Change: In North America to encouraging initial results.
Speaker Change: <unk> was a bright spot in journeys in its first holiday in operation accounting for almost 30% of E Commerce sales in the week, leading up to Christmas.
Mimi Eckel Vaughn: Importantly, we made further progress right-sizing our inventory journeys, ending Q4 with inventory down over 20% to last year, enabling us to generate strong cash flow and enter the new fiscal year in a very clean position. This also helped us deliver solid gross margins ahead of expectations and positions as well as buy into the product we need to drive journey sales. Furthermore, we continue to advance our strategies to position the business for better productivity and profitability. We closed nearly 100 underperforming Journey stores and are evaluating up to 50 more closures this fiscal year as we reshape the footprint to align with the shopping patterns of today's consumers.
Speaker Change: Importantly, we made further progress right sizing our inventory journeys ended Q4 with inventory down over 20% to last year, enabling us to generate strong cash flow and enter the new fiscal year in a very clean position. This also helped us deliver solid gross margins ahead of.
Speaker Change: Patients and positions us well to buy into the product we need to drive journeys sales.
Speaker Change: Furthermore, we continue to advance our strategies to position the business for better productivity and profitability we.
Speaker Change: We closed nearly 100 underperforming journeys stores and are evaluating up to 50 more closures. This fiscal year as we reshape the footprint to align with the shopping patterns of today's consumer.
Mimi Eckel Vaughn: And we made substantial progress in realigning our cost base and are now targeting an increased run rate of $45 to $50 million in annual savings by the end of this year. Now for color on our individual businesses, starting with journeys. While we were pleased that sales once again improved sequentially in Q4, as they have in every quarter this year, results nonetheless fell short of our initial expectations. Following a strong Thanksgiving weekend, business decelerated in December as customer shopping trends remained choppy. That said, store traffic was positive, and consumers responded well to the newness in our assortment, which tells us that Journeys remains a key destination for our team. However, a decline in conversion outweighed this, given our consumers' selective appetite for key items. Once we ran out of high-demand products, we were not able, as we usually are, to motivate an alternate purchase, and discounting did not drive enough sales to be effective. This was evident in boots.
Speaker Change: And we made substantial progress in realigning our cost base and are now targeting an increased run rate of $45 million to $50 million in annual savings by the end of this year.
Speaker Change: And now for color on our individual businesses, starting with journeys, while we were pleased with sales once again improved sequentially in Q4 as they have in every quarter. This year results. Nonetheless fell short of our initial expectations.
Speaker Change: Following a strong Thanksgiving weekend business decelerated in December as customer shopping trends remained choppy.
Speaker Change: That said store traffic was positive and consumers responded well to the newness in our assortment, which tells us that journeys remains a key destination for our team. However, a decline in conversion outweighed this given our consumers selective appetite for key items. Once we ran out of high demand.
Speaker Change: <unk>, we were not able as we usually are to motivate an alternate purchase and discounting did not drive enough sales to be effective.
Speaker Change: This was evident in boots, while we planned our boot business down in anticipation of a challenging season. It was weaker the impacted.
Mimi Eckel Vaughn: While we planned our boot business down in anticipation of a challenging season, it was weaker than expected. Because of both warm weather and style preferences, food sales, which typically represent 50% of Journey's holiday business, were down 20% during the holiday period. And, as I mentioned, we experienced more pressure than we expected in our core assortment, including vulcanized products. The overall sales decline in Q4 was confined to stores, as Journey's digital business performed quite well, up mid-single digits versus last year. We tested numerous engagement and traffic driving programs with all ACCESS members, increased SMS usage, and increased influencer and paid social campaigns to generate awareness and drive conversion.
Speaker Change: By both warm weather and style preferences boot sales, which typically represent 50% of journeys holiday business were down 20% during the holiday period and as I mentioned, we experienced more pressure than we expected in our core assortment, including Balkanized product.
Speaker Change: The overall sales decline in Q4 was confined to stores as journeys digital business performed quite well up mid single digits versus last year.
Speaker Change: We tested numerous engagement and traffic driving programs with all access members increased SMS usage and increased influencer and paid social campaigns to generate awareness and drive conversion in fact, as we exited the year. We saw some acceleration in total comps in January led <unk>.
Speaker Change: The journeys E com, which increased 35% during the month.
Speaker Change: Moving to the U K, despite experiencing a slowdown in Q4 comps against a difficult compare schuh delivered an exceptional year with strong comp growth throughout the first nine months, our efforts to strengthen shoes value proposition has differentiated the business from competitors.
Mimi Eckel Vaughn: In fact, as we exited the year, we saw some acceleration in total comps in January, led by Journeys Ecom, which increased 35% during the month. Moving to the UK, despite experiencing a slowdown in Q4 comps against a difficult comparison, SHU delivered an exceptional year with strong comp growth throughout the first nine months. Our efforts to strengthen SHU's value proposition have differentiated the business from competitors, grabbing the attention of new customers, and enhancing our brand relationships and access to top-tier products. That said, sales in Q4 were challenged by a tough boot business coupled with a more cautious UK consumer that, despite recessionary economic challenges, was also more discriminating in their purchases. The pressure was primarily in stores as SHU's e-com business remained positive in the quarter, accounting for over 40% of total sales.
Speaker Change: Grabbing the attention of new customers and enhancing our brand relationships and access to top tier product.
Speaker Change: That said sales in Q4 were challenged by a tough boot business, coupled with a more cautious UK consumer that against recessionary economic challenges was also more discriminating in their purchases.
Speaker Change: The pressure was primarily in stores issues E. Comm business remained positive in the quarter accounting for over 40% of total sales.
Speaker Change: <unk> also remained a bright spot with sales up 8%, while non footwear categories saw strong growth of 35%.
Speaker Change: Even amidst a difficult operating environment shoe held strong market share as of mid January she maintained its number 10 ranked in total UK footwear market share. According to Kantar a position to tell since May 2023, after moving up three spots during the year.
Loyalty has played a key role in strengthening <unk> market position currently accounting for roughly 30% of total sales shoe club members now stand at $2 3 million and are more engaged than non loyalty customers purchasing more frequently.
Mimi Eckel Vaughn: Kids also remained a bright spot with sales up 8%, while non-footwear categories saw strong growth of 35%. Even amidst a difficult operating environment, SHU held strong market share. As of mid-January, SHU maintained its number 10 rank in total UK footwear market share, according to Kantar, a position it's held since May 2023, after moving up three spots during the year. Loyalty has played a key role in strengthening SHU's market position. Currently accounting for roughly 30% of total sales, SHU club members now stand at 2.3 million and are more engaged than non-loyalty customers, purchasing more frequently.
Speaker Change: Turning to Johnston <unk> Murphy the business was a standout over holiday with a record fourth quarter as we continued to invest to drive growth.
Speaker Change: Compelling product and strong sales of non footwear led to nicely positive comps demonstrated a solid recovery from the ERP implementation challenges in Q3.
Speaker Change: However, relative to the run rate over holiday sales were pressured by the disruptive January winter storms, our efforts to re imagine Jane M. As a more comfortable lifestyle brand with products suited for today's more casual preferences is resonating really well with our consumers in.
Speaker Change: In Q4, <unk> direct to consumer business was strong across all channels E com retail and factory.
Mimi Eckel Vaughn: Turning to Johnston & Murphy, the business was a standout over the holiday season with a record fourth quarter as we continued to invest to drive growth. Compelling product and strong sales of non-footwear led to nicely positive comps, demonstrating a solid recovery from the ERP implementation challenges in Q3. However, relative to the run rate over the holiday, sales were pressured by the disruptive January winter storm. Our efforts to reimagine J&M as a more comfortable lifestyle brand with products suited for today's more casual preferences are resonating really well with our consumers. In Q4, J&M's direct-to-consumer business was strong across all channels, e-com, retail, and factory.
Speaker Change: Although the casual and casual athletic categories were key drivers in <unk> footwear business apparel and accessories were an even bigger callout in Q4 apparel and accessories increased 18% driven by strong growth in Blazers, and outerwear and accounted for almost half of Jane and DTC sales.
Speaker Change: Yes.
Speaker Change: JM is a great example of how we've taken our strong DTC capabilities built in retail and applied them to our branded concept.
Speaker Change: With the work of repositioning to an updated multi category lifestyle brand paying dividends JM is positioned to drive meaningful growth with opportunities across categories age demographics geographies and gender.
As the cornerstone of our branded platform the future for this business is incredibly bright.
Mimi Eckel Vaughn: Although the casual and casual-athletic categories were key drivers in J&M's footwear business, apparel and accessories were an even bigger call-out in Q4. Apparel and accessories increased 18 percent, driven by strong growth in blazers and outerwear, and accounted for almost half of J&M's DTC sales. J&M is a great example of how we've taken our strong DTC capabilities built in retail and applied them to a branded concept. With the work of repositioning to an updated multi-category lifestyle brand paying dividends, J&M is positioned to drive meaningful growth with opportunities across categories, age demographics, geographies, and gender. As the cornerstone of our branded platform, the future for this business is incredibly bright. Now, switching back to journeys, Andy and his team have taken a deep dive into the business and put sharper focus on a turnaround program and growth strategy that will impact the customer through product marketing and experience. And today I'll highlight some key initiatives for this fiscal year, which are a mix of both strategic acceleration and disciplined expense management. Number one, drive product leadership and create marketplace differentiation.
Speaker Change: Now switching back to journeys, Andy and team have taken a deep dive on the business and put sharper focused on a turnaround program and growth strategy that will impact the customer through product marketing and experience and today I will highlight some key initiatives for this fiscal year, which are a mix of both strategic accelerators.
Speaker Change: Ration and disciplined expense management.
Speaker Change: Number one drive product leadership and create marketplace differentiation.
Speaker Change: To continue improving journeys footwear leadership and assortment, we're implementing new strategies led by our recently appointed chief merchant to meaningfully increased product access and boost investment in key fashion athletic and casual brands.
Speaker Change: This includes diversifying and adding new key styles with our existing brand partners, increasing our leadership position with all our key brands enhancing in store, social and digital exposure to build awareness with our customer to shop journeys for these brands and working to add brands beyond those were traditionally known for.
Speaker Change: Sure.
Speaker Change: Number two build the journeys brand and enhance the omni experience, we are intensifying efforts to build and promote journeys as an industry leading retail brand. We're currently onboarding a new creative agency to develop a new brand communication strategy, we plan to roll this out in the back part of the.
Mimi Eckel Vaughn: To continue improving Journey's footwear leadership and assortment, we're implementing new strategies led by our recently appointed Chief Merchant to meaningfully increase product access and boost investment in key fashion, athletic, and casual brands. This includes diversifying and adding new key styles with our existing brand partners, increasing our leadership position with all our key brands, enhancing in-store social and digital exposure to build awareness with our customers about shop journeys for these brands, and working to add brands beyond those we're traditionally known for. Number two, build a Journeys brand and enhance the Omni experience.
Speaker Change: The year, along with an updated brand mission vision and purpose and.
Speaker Change: In parallel, we're improving journeys brand presence and upgrading the customer.
Speaker Change: Experience with quick actions in both stores and online, including refreshed messaging and visuals that telecom Houston brand story across channels and social we're excited about the investment, we're making to personalize and improve the timeliness and relevance of our marketing communication as well we're also evolve.
Speaker Change: <unk> the all access loyalty program, where we signed up over 2 million members is six months continuing to provide an exciting feature rich program that differentiate journeys generates valuable consumer insights and encourages consumers to consolidate purchases across brands with us.
Mimi Eckel Vaughn: We're intensifying efforts to build and promote Journeys as an industry-leading retail brand. We're currently onboarding a new creative agency to develop a new brand communication strategy. We plan to roll this out in the second half of the year, along with an updated brand mission, vision, and purpose. In parallel, we're improving Journey's brand presence and upgrading the customer experience with quick actions in both stores and online, including refreshed messaging and visuals that tell a cohesive brand story across channels and social. We're excited about the investment we're making to personalize and improve the timeliness and relevance of our marketing communications as well. We're also evolving the All Access Loyalty Program, where we've signed up over two million members in six months, and we continue to provide an exciting feature-rich program that differentiates Journeys, generates valuable consumer insights, and encourages consumers to consolidate purchases across brands with us. And finally, we'll ultimately pursue an updated store concept and next generation design to further enrich the customer experience. And number three, leverage the power of our people.
Speaker Change: Finally, we will ultimately pursue an updated store concept and next generation design to further enrich the customer experience.
Number three leverage the power of our people.
Speaker Change: This initiative Leverages the expertise of our store employees to set us apart by providing excellent service as a differentiator.
Speaker Change: Over the past year, we've introduced new capabilities, including mobile point of sale and focus to improve efficiency and customer engagement and this year will further improve training and execution and rollout additional features like data informed suggestive selling.
Speaker Change: Number four optimized to drive operational and cost efficiencies.
Speaker Change: We're implementing several initiatives here, including continued efforts to optimize the store footprint closing unproductive stores and redirecting traffic in sales, while strategically opening mall and off mall locations and prioritized optimization projects focused on selling salaries rent expense inventory management.
Speaker Change: In digital marketing spend efficiency.
Speaker Change: Yes.
In summary, overall I want to emphasize my beliefs, and our team's ability to reshape our business unlock journeys considerable earnings potential.
Speaker Change: In addition, we're executing new initiatives to accelerate growth for shoe and Jane M. In fiscal 'twenty five all building off our footwear focused strategy I'll discuss a few select examples.
Mimi Eckel Vaughn: This initiative leverages the expertise of our store employees to set us apart by providing excellent service as a differentiator. Over the past year, we've introduced new capabilities, including mobile point-of-sale and BOPUS, to improve efficiency and customer engagement. And this year, we'll further improve training and execution and roll out additional features like data-informed suggested selling. Number four, optimize to drive operational and cost efficiencies.
Speaker Change: With the data capture rate of 75% plus for customers in North America, and growing loyalty and affinity programs across our concepts. We're augmenting our understanding of our customers' needs and driving up repeat purchase rates using our CRM platforms and more advanced analytics.
Speaker Change: For <unk> we're.
Speaker Change: Cited for the launch of the brands refreshed marketing campaigns. This spring powered by our New agency. This campaign aims to increase overall brand awareness and heat and attract a broader and younger consumer while also changing the perception that Jane M is still primarily address shoe resource.
Mimi Eckel Vaughn: We're implementing several initiatives here, including continued efforts to optimize the store footprint, closing unproductive stores, and redirecting traffic and sales, while strategically opening mall and off-mall locations and prioritizing optimization projects focused on selling salaries, rent expense, inventory management, and digital marketing spend efficiency. In summary, overall, I want to emphasize my belief in our team's ability to reshape our business and unlock Journey's considerable earnings potential. In addition, we're executing new initiatives to accelerate growth for SHU and J&M in fiscal 25, all building off our footwear focus strategy. I'll discuss a few select examples.
Speaker Change: <unk>, social media content and organic social campaigns are key drivers of these efforts along with new digital and in store Rollouts.
Speaker Change: Finally building out the shoe club loyalty offering will accelerate member sign ups and customer engagement.
Speaker Change: Turning now to our outlook for fiscal 'twenty five we continue to navigate volatile consumer behavior and are not assuming any significant change in the near term as I mentioned, we anticipate a difficult first half with significant pressure in Q1, given the product challenges at journeys and are planning the back half to be much.
Speaker Change: Stronger than the front as we make an aggressive push to reposition our assortment.
Speaker Change: Our guidance for the year reflects this view with the expected front half results impacting our ability to further grow EPS in fiscal 'twenty, five but with a product build we're putting in place setting us up well for fiscal 'twenty six and beyond.
Mimi Eckel Vaughn: With a data capture rate of 75% plus for customers in North America and growing loyalty and affinity programs across our concepts, we're enhancing our understanding of our customers' needs and driving up repeat purchase rates using our CRM platforms and more advanced analytics. For J&M, we're excited for the launch of the brand's refreshed marketing campaigns this spring. Powered by a new agency, this campaign aims to increase overall brand awareness and heat and attract a broader and younger consumer, while also changing the perception that J&M is still primarily a dress shoe resource. Revamped social media content and organic social campaigns are key drivers of these efforts, along with new digital and in-store rollout. Finally, building out the shoe club loyalty offering will accelerate member signups and customer engagement.
Speaker Change: And before closing I'd like to say that while this past year has truly tested us I am extremely proud of our resilience and drive to overcome the challenges we faced none of this would be possible without our incredible talented people I'd like to thank you all for your tremendous efforts and for all the great work you will be.
Speaker Change: Doing in the coming year and with that I'll turn it over to Tom.
Thomas A. George: Thanks, Mimi the headwinds in journeys along with the inclement weather, we faced in January had a greater impact on our fourth quarter.
Thomas A. George: Financial performance than we initially anticipated.
Thomas A. George: Relative to our revised guidance for net earnings per share result was below our expectations, primarily due to expense pressures.
Thomas A. George: <unk>, coupled with the lost store traffic in earnings, resulting from January's, unusually impactful snow and ice storms.
Thomas A. George: Going ahead. The efforts, we've made and continue to make to contain expenses and drive productivity will better position us to withstand this pressure and emerge even stronger as.
Thomas A. George: Sales growth from terms.
Thomas A. George: Turning to results for the quarter consolidated revenue was $739 million up approximately 2% compared to last year drill.
Mimi Eckel Vaughn: Turning now to our outlook for fiscal 25, we continue to navigate volatile consumer behavior and are not assuming any significant change in the near term. As I mentioned, we anticipate a difficult first half with significant pressure in Q1, given the product challenges it faces, and are planning the back half to be much stronger than the front as we make an aggressive push to reposition our assortment. Our guidance for the year reflects this view, with the expected front-half results impacting our ability to further grow EPS in fiscal 25, but with a product build we're putting in place, setting us up well for fiscal 26 and beyond. Before closing, I'd like to say that while this past year has truly tested us, I'm extremely proud of our resilience and drive to overcome the challenges we faced. None of this would be possible without our incredible, talented people. I'd like to thank you all for your tremendous efforts and for all the great work you will be doing in the coming year. And with that, I'll turn it over to you. Thanks, Mimi.
Thomas A. George: Driven by sales increases in all divisions other than journeys.
Thomas A. George: Excluding the 50 <unk> week total sales declined 2%.
Thomas A. George: Relative to our expectations sales were largely in line with our revised guidance with the exception of <unk>, which was especially impacted by january's weather disruptions.
Thomas A. George: Total comps were down 4% for journeys, although comps were negative 5% the business continued to improve sequentially.
Thomas A. George: <unk> comps were down 5% driven by stores, even with the January shortfall GM comps increased to healthy 8%.
Thomas A. George: By channel total store comps were down 7%, while direct comps were up 5%.
Thomas A. George: With digital sales accounted for 27% of total retail sales up from 25% last year.
Thomas A. George: We ended the quarter was 69 fewer stores versus a year ago.
Thomas A. George: Largely the result of closing underperforming journeys stores as we optimize our store footprint and drive productivity in our remaining store fleet.
Thomas A. George: Overall gross margin was down 10 basis points compared to last year, which was ahead of our expectations due to lower planned promotions at journeys.
Thomas A. George: The headwinds and journeys, along with the inclement weather we faced in January, had a greater impact on our fourth-quarter financial performance than we initially anticipated. Relative to our revised guidance, the net earnings per share result was below our expectations, primarily due to expense pressures at Journeys, coupled with the lost store traffic and earnings resulting from January's unusually impactful snow and ice storm. Looking ahead, the efforts we've made and continue to make to contain expenses and drive productivity will better position us to withstand this pressure and emerge even stronger as sales growth returns. Turning to results for the quarter, consolidated revenue was $739 million, up approximately 2% compared to last year, driven by sales increases in all divisions other than Journey. Excluding the 53rd week, total sales declined 2%.
Thomas A. George: With our consumer focused on purchasing key items discounting was not as effective in driving sales. So we moderated our promotional stance.
Thomas A. George: Relative to last year journeys gross margin was down 30 basis points due primarily to product mix shift shoes gross margin was down 10 basis points to last year, while <unk> gross margin was up 70 basis points, driven largely by lower freight expense and a favorable mix shift to retailers.
Thomas A. George: <unk> wholesale.
Thomas A. George: Partially offset by higher retail markdowns.
Thomas A. George: Lastly, genesco brands gross margin was up 420 basis points as we lap last year's freight and logistics cost pressures and benefited from price increases this year.
Thomas A. George: Moving down the P&L adjusted SG&A expense was 41, 1% of sales 170 basis points above last year.
Thomas A. George: Relative to our expectations, sales were largely in line with our revised guidance, with the exception of J&M, which was especially impacted by January's weather disruption. Total comps were down 4%. For Journeys, although comps were negative 5%, the business continued to improve sequentially; shoe comps were down 5%, driven by stores. Even with the January shortfall, J&M comps increased a healthy 8%. By channel, total store comps were down 7% while direct comps were up 5%, with digital sales accounting for 27% of Polar retail sales, up from 25% last year.
Thomas A. George: With roughly 60 basis points of the increase attributable to the 50 <unk> week.
Thomas A. George: While the 50 <unk> week added to our top line. It was a low sales volume week that was particularly dilutive to our bottom line.
Thomas A. George: Adjusting for the 50 <unk> week SG&A expenses were relatively flat in absolute dollars compared to last year. Despite additional variable expenses associated with our direct sales growth, reflecting the impact and benefit of our cost savings initiatives.
<unk> operating expenses relative to our guidance was primarily driven by journeys. In addition to the incremental cost to support higher than expected drug sales product returns towards vendors resulted in greater than anticipated wage and freight pressure.
Thomas A. George: Finally, we experienced additional store expenses.
Thomas A. George: <unk> occupancy cost.
Thomas A. George: Lowering overall occupancy cost and reducing the amount of fixed expense in the store channel remains a key priority.
Thomas A. George: We ended the quarter with 69 fewer stores versus a year ago, largely the result of closing underperforming journey stores as we optimize our store footprint and drive productivity in our remaining store fleet. Overall gross margin was down 10 basis points compared to last year, which was ahead of our expectations due to lower plan promotions. With our consumer focused on purchasing key items, discounting was not as effective in driving sales, so we moderated our promotional stand. Relative to last year, Journey's gross margin was down 30 basis points due primarily to product mix shifts. Hsu's gross margin was down 10 basis points compared to last year, while JNN's gross margin was up 70 basis points, driven largely by lower freight expense and a favorable mix shift to retail versus wholesale, partially offset by higher retail markets. Lastly, Genesco's gross margin was 420 basis points, as we lagged last year's freight and logistics cost pressures and benefited from price increases this year. Moving down the P&L, adjusted SG&A expense was 41.1% of sales.
Q4, we achieved a 15% reduction in straight line rent expense on 47 lease renewals across the company with an average term of approximately three years.
Thomas A. George: This brings our full year fiscal 'twenty four renewals to 202, resulting in 15.
Thomas A. George: 15% reduction in straight line rent expense with over 50% of our fleet coming up for renewal in the next couple of years. We continue to have a lot of runway to capture additional savings. Although we've made nice headway on rent savings and savings on selling salaries productivity and hours.
Thomas A. George: Higher hourly wages has been an offset and remains a pressure point due to minimum wage and competitive increases.
Thomas A. George: And we continue to work to mitigate that.
Thomas A. George: In summary for the fourth quarter, we realized adjusted operating income of $38 5 million.
Thomas A. George: Third to adjusted operating income was 51 million for Q4 of last year.
Thomas A. George: This all resulted in adjusted diluted earnings per share of $2 59.
For the quarter versus earnings per share of $3 six last year.
For the 50 <unk> week operating income was an estimated loss of $2 6 million or approximately <unk> 18.
Thomas A. George: 170 basis points above last year, with roughly 60 basis points of the increase attributable to the 53rd week. While the 53rd week added to our top line, it was a low sales volume week that was particularly dilutive to our bottom line. Adjusting for the 53rd week, SG&A expenses were relatively flat in absolute dollars compared to last year.
Thomas A. George: For sure.
Thomas A. George: Turning now to capital allocation and the balance sheet. We ended the quarter in a slightly positive net cash position and generated approximately $108 million of free cash flow.
Thomas A. George: We ended the year with clean inventories down 17% from last year.
Thomas A. George: With respect to journeys, we worked with our brand partners to adjust inventory levels.
Thomas A. George: <unk> us to end the quarter with inventories, 22% lower than last year, and well positioned to bring newness and freshness to the assortment.
Thomas A. George: Despite additional variable expenses associated with our direct sales growth reflecting the impact and benefit of our cost savings. The increase in operating expenses relative to our guidance was primarily driven by travel. In addition to the incremental cost of support higher than expected direct sales, product returns to our vendors resulted in greater than anticipated wage and freight pressure. Finally, we experienced additional store expenses, including occupancy costs.
Thomas A. George: In addition, our strong cash flow balance sheet liquidity under our revolving line of credit provides the financial capacity to support all of our strategic efforts.
Thomas A. George: Capital expenditures in Q4 were $10 million with investments, primarily directed to retail stores and our digital.
Thomas A. George: It'll in Omnichannel initiatives, we opened five stores, which were primarily off mall and closed 24.
Thomas A. George: Lowering overall occupancy costs and reducing the amount of fixed expenses in the store channel remains a key priority. In Q4, we achieved a 15% reduction in straight-line rent expense on 47 lease renewals across the company with an average term of approximately three years. This brings our full-year fiscal 24 renewals to 202, resulting in a 15% reduction in straight-line rent expenses. With over 50% of our fleet coming up for renewal in the next couple of years, we continue to have a lot of runway to capture additional savings. Although we've made nice headway on rent savings and savings on selling salaries, productivity, and hours, higher hourly wages have been an offset and remain a pressure point due to minimum wage and competitive increases, and we continue to work to mitigate that.
Thomas A. George: Ending the quarter with 1341 total stores.
Thomas A. George: Lastly, we didn't repurchase any shares during the quarter bought back 10% over the year in our current authorization remains at $52 million.
Thomas A. George: Over the past five years, we have repurchased almost 50% of our outstanding shares.
Thomas A. George: Regarding cost savings when you combine our efforts to increase the variability of our cost structure with savings under our cost savings plan, we made meaningful progress on expense reductions in fiscal 'twenty four.
Thomas A. George: Our updated plan now targets a reduction in annualized run rate before.
Thomas A. George: Vesting of $45 million to $50 million by the end of fiscal 'twenty five.
Thomas A. George: Which is above our original target of $40 million, we expect savings from reduced store reps selling salary productivity gains.
Thomas A. George: <unk> warehouse and logistics costs and reduce freight costs from inventory optimization initiatives with respect to store closures. We closed 94 journeys stores in fiscal 'twenty for roughly 8% of the total fleet.
Thomas A. George: In summary, for the fourth quarter, we realized adjusted operating income of $38.5 million compared to adjusted operating income of $51 million for Q4 last year. This all resulted in adjusted diluted earnings per share of $2.59 for the quarter versus earnings per share of $3.06 last year. For the 53rd week, operating income was an estimated loss of $2.6 million, or approximately $0.18 per share.
Thomas A. George: These were primarily mall based locations.
Thomas A. George: For fiscal 'twenty five we are aiming to close up to 50 more journeys stores.
Savings from these closures will eliminate approximately $14 million of annualized cost for SG&A expense, which adds to the roughly $25 million of annualized savings from the stores closed. This past year and is in addition to the $45 million to $50 million of run rate savings, we expect to achieve by the end of this year.
Thomas A. George: The goal of these cost savings and store closure programs is to gain better expense leverage and operating margin expansion, even with modest increases in sales now turning to guidance.
Thomas A. George: Turning now to capital allocation on the balance sheet, we ended the quarter in a slightly positive net cash position and generated approximately $108 million of free cash flow. We ended the year with clean inventories down 17% from last year. With respect to journeys, we worked with our brand partners to adjust inventory levels, enabling us to end the quarter with inventories 22% lower than last year and well-positioned to bring newness and freshness to the assortment. In addition, our strong cash flow, balance sheet, and liquidity under our revolving line of credit provide the financial capacity to support all our strategic efforts. Capital expenditures in Q4 were $10 million, with investments primarily directed to retail stores and our digital and omni-channel initiatives. We opened five stores, which were primarily off-mall, and closed 24, ending the quarter with 1,341 total stores.
Thomas A. George: Recognizing that we're starting this year in a difficult position given the product challenges we are facing.
Thomas A. George: I'd like to start providing some specifics around Q1.
Thomas A. George: Starting with the top line, we don't expect to see the demand curve improve within journeys core product assortment, which makes up a sizeable portion of our spring business.
Thomas A. George: That pressure will make it difficult to drive sales growth.
Thomas A. George: As such we expect a mid to high single digit sales decline versus last year, driven primarily by journeys.
Thomas A. George: And to a lesser extent genesco brands group.
Thomas A. George: Regarding Q1 gross margins, we expect an overall gross margin decrease of.
Thomas A. George: A 40% to 50 basis points, mostly due to product mix shifted journeys and schuh.
As Q1 is also one of our lower volume quarters with expenses at minimum levels and largely fixed the sales decline will result in roughly 320 to 350 basis points of SG&A deleverage, resulting in an earnings per share loss of approximately $1 10 since more than we lost in Q.
Thomas A. George: Lastly, we didn't repurchase any shares during the quarter, but we locked back 10% over the year, and our current authorization remains at $52 million. During the past five years, we have repurchased almost 50% of our outstanding shares. Regarding cost savings, when you combine our efforts to increase the variability of our cost structure with savings under our cost savings plan, we made meaningful progress on expense reductions in fiscal 24. Our updated plan now targets a reduction in annualized run rate before reinvesting of $45 to $50 million by the end of fiscal 25, which is above our original target of $40 million. We expect savings from reduced store rents, selling salary productivity gains, reduced warehouse and logistics costs, and reduced Freight Costs from the Inventory Optimization Initiative. With respect to store closures, we closed 94 Journey stores in fiscal 24, or roughly 8% of the total fleet. These were primarily mall-based locations.
Thomas A. George: One last year moving to the full year, while we are confident that our turnaround strategy at journeys can begin to drive improvements in the back half.
Thomas A. George: Especially for holiday.
Thomas A. George: Since this is a transition year for journeys, we believe it's prudent to adopt a cautious view throughout fiscal 'twenty five with.
Thomas A. George: With opportunity for our more significant rebound.
Thomas A. George: <unk> 2006.
Thomas A. George: We are also taking a more conservative view for shoe and Jane M is that both cycle robust multi year compares.
Thomas A. George: Taking this all into account, we expect fiscal 'twenty five total sales to decrease 2% to 3% or down 1% to 2% when excluding the 50 <unk> week last year.
Thomas A. George: Variance between the high and the low end of the range is primarily due to uncertainty in the consumer and macro environments, particularly in the U K regarding EPS, we expect adjusted earnings per share in the range of 60 to $1.
Thomas A. George: We expect the challenging first half to give way to positive earnings in the back half.
Thomas A. George: Back to school and holiday to give us the opportunity to generate profitability on the higher sales net net we expect improvement over last year to be weighted to Q4 as further pivoting the journeys assortment will take time.
Thomas A. George: At Fiscal 25, we are aiming to close up to 50 more Journey stores. Savings from these closures will eliminate approximately $14 million of annualized costs from SG&A expense, which adds to the roughly $25 million of annualized savings from the stores closed this past year and is in addition to the $45 to $50 million of run rate savings we expect to achieve by the end of this year. The goal of these cost savings and store closure programs is to gain better expense leverage and operating margin expansion, even with modest increases in sales. Now, turning the guide.
Thomas A. George: We expect gross margin rates to be flat to up 10 basis points for the year with improvement at shoe mitigating some product and channel mix pressure at journeys.
Thomas A. George: As a percentage of sales, we expect adjusted SG&A to range from deleverage of 30 basis points to flat.
Thomas A. George: With the cost reduction efforts I described earlier and the other actions working to partially offset deleverage on fixed expenses.
Thomas A. George: All of these inputs result in an operating margin that is in the range of fiscal 'twenty four as operating margin our guidance assumes no additional share repurchases, which results in fiscal 'twenty five average shares outstanding.
Thomas A. George: Recognizing that we're starting this year in a difficult position given the product challenges we are facing, I'd like to start providing some specifics around Q1, starting with the top line. We don't expect to see the demand curve improve within Journey's core product assortment, which makes up a sizable portion of our spring business. That pressure will make it difficult to drive sales growth. As such, we expect a mid to high single-digit sales decline versus last year driven primarily by Journeys and to a lesser extent, Genesco Brand. Regarding Q1 gross margins, we expect an overall gross margin decrease of 40 to 50 basis points, mostly due to product makeshifts at Journeys and Shoe.
Thomas A. George: Of approximately $11 3 million and we expect the tax rate to be approximately two.
Thomas A. George: 26%.
Thomas A. George: Closing, we're taking aggressive actions to accelerate our journeys turnaround.
Thomas A. George: Those efforts will take a little time to create impact in the P&L. We believe they will best position us to unlock journeys considerable earnings potential.
Thomas A. George: Turning to growth and create meaningful shareholder value.
Speaker Change: Operator, we're now ready to open the call for questions.
Speaker Change: Thank you we will now begin.
A question and answer session.
Speaker Change: If you'd like to ask a question today. Please press star one from your telephone keypad and a confirmation tone will indicate your line is in the question queue.
Speaker Change: You May press Star two if you would like to withdraw your question from the queue.
Speaker Change: All participants are using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Speaker Change: Please we poll for questions. Thank you.
Speaker Change: Thank you and our first question is from the line of Jeff <unk> with B Riley Securities. Please proceed with your questions.
Thomas A. George: As Q1 is also one of our lower volume quarters with expenses at minimum levels and largely fixed, the sales decline will result in roughly 320 to 350 basis points of SG&AD leverage, resulting in an earnings per share loss of approximately $1.10 more than we lost in Q1 last year. Moving to the full year, we are confident that our turnaround strategy at Journeys can begin to drive improvements in the back half, especially for the holiday season. Since this is a transition year for journeys, we believe it's prudent to adopt a cautious view throughout fiscal 25, with the opportunity for a more significant rebound in fiscal 26. We're also taking a more conservative view for SHU and J&M as they both cycle robust multi-year comparisons. Taking this all into account, we expect fiscal 25 total sales to decrease.
Jeff: Good morning, guys. Thanks for taking the question.
Jeff: Kind of a three parter here first off.
Jeff: In January it appears that journey sales actually got better if you look at the.
Jeff: Prerelease comp was down six it ended up being down five.
Jeff: There was bad I was wondering if you could just expound upon that and then just building on that you referenced Tom in your <unk>.
Jeff: Gripped.
Jeff: <unk> challenges I'm, just kind of curious product challenges for the first half first quarter, what specifically those are.
Speaker Change: And then the big kind of head scratch your question is.
Speaker Change: The implication was that.
Speaker Change: And the thought of its sales was the issue, but it appears that its expenses and you referenced unanticipated expenses and just to put.
Speaker Change: Put a point on this.
Speaker Change: 2019, you did $317 million of gross profit dollars. This year, you did $342 million.
Less stores, but your SG&A is $43 million higher so it appears that the issue here might be expenses more than it is sales or gross profit. So I was wondering if you could unpack that for us.
Thomas A. George: 2% to 3% or down 1% to 2% when excluding the 53rd week last year. The variance between the high and the low end of the range is primarily due to uncertainty in the consumer and macro environments. We expect a challenging first half to give way to positive earnings in the back half; back to school on holiday gives us the opportunity to generate profitability on higher sales. Net-net, we expect improvement over last year to be weighted to Q4 as further pivoting the journey's assortment will take time. We expect gross margin rates to be flat to up 10 basis points for the year, with improvement at SHU mitigating some product and channel mix pressure.
Speaker Change: Thanks.
Speaker Change: Jeff. Thank you for all those questions and let's take them one at a time.
You asked about in January journeys sales got better and in fact in January <unk>.
Jeff: <unk> sales did get better I'll, just remind you of the cadence of the quarter that we started out nicely in November with a.
Jeff: Very nice Black Friday weekend, and then sales side gave some back in December and then picked up in January and I'll also say that in December in particular, we saw that the customer is coming to our stores.
Jeff: Traffic was up but in fact, we.
Jeff: They were very focused on select items and we're shopping only for those things those must have key items and we always can convert our customers to other things, but it was challenging this year just given some of the other other pressures economic pressures and so as we got into January we saw.
Thomas A. George: As a percentage of sales, we expect adjusted SG&A to range from a de-leverage of 30 basis points to flat, with the cost reduction efforts I described earlier and other actions working to partially offset de-leverage on fixed expenses. All these inputs result in an operating margin that is in the range of Fiscal 24's operating margin. Our guidance assumes no additional share repurchases, which results in Fiscal 25 average shares outstanding of approximately $11.3 million, and we expect the tax rate to be approximately 26%.
Jeff: <unk> that.
Jeff: What really took off was our e-commerce business, we have been working to grow E. Com over the last many years and we're delighted to see some of the growth there were a lot of winter storms in our journeys customer went online we were driving some of those sales with clearance product and so there was some appetite for clearance product as well I would say that.
Jeff: Jonathan that's what helped that's what helps US would help that January and then just talking about product challenges that are specific to Q1 before I hand, it over to Tom We have made a lot of progress on journeys over the course of this year, where we started the year.
Operator: In closing, we are taking aggressive actions to accelerate our journey's turnaround. While those efforts will take a little time to create impact in the P&L, we believe they will best position us to unlock Journey's considerable earnings potential, return to growth, and create meaningful shareholder value. Operator, we are now ready to open the call for questions. Thank you. We'll now be conducting the question and answer session. If you'd like to ask a question today, please press star 1 on your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to withdraw your question from the queue.
Thomas A. George: We came into the year and after relatively flat flattish sales a year before saw a pretty significant drop as the consumer just had a great appetite for newness and wanted to buy different things than they had been buying before we had some record years.
Thomas A. George: Coming out of the pandemic and I think the pendulum swung back the other way and so we have been working all year to be able to fill that gap that started down 14% and again, we've made a lot of progress here.
Thomas A. George: What we do see here is that.
Thomas A. George: That journeys sells a it's the destination where teens go for a variety of product.
Operator: For participants who are using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment, please, while we poll for questions. Thank you, and our first question is from the line of Jeff Lick with B Riley Securities. Good morning, guys. Thanks for taking the question. I've got a three-parter here.
Thomas A. George: Both fashion athletic and also the.
Thomas A. George: Casual product that we have been talking about in journeys is quite well positioned to take advantage of this.
Thomas A. George: What we saw is that the.
Thomas A. George: The product that we knew was hot and with sell in that we chased into for the fourth quarter sold a very nicely, but what we also saw is that some of the core product that we expected better sell through rates on there was not as much take up on the part of the consumer and that's the product that we're talking about.
Jeff Lick: First off, you know, in January, it appears that journey sales actually got better. You know, if you look at... Pre-release, Comp was down six; it ended up being down five. You know, weather was bad.
Mimi Eckel Vaughn: I was wondering if you could expound on that. And then, just building on that, you referenced product challenges in your script. I'm just kind of curious, you know, product challenges for the first half, first quarter, what specifically those are. And then the big kind of head-scratcher question is that, you know, the implication was, you know, or the thought was, sales were the issue, but it appears that it's expenses, and you referenced unanticipated expenses. And just to put a point on this, you know, in 2019, you did 317 million dollars in gross profit dollars. This year, you did 342 million dollars, excluding stores, but your SG&A is 43 million higher. So it appears that the issue here might be expenses more than it is sales or gross profit. So I was wondering if you could unpack that for us. Jeff, thank you for all those questions. And let's take them one at a time.
Thomas A. George: We are going to have challenges on and in the first half of the year and just given that the product lead times.
Thomas A. George: We've got a new head of journeys, they've got a new chief merchant and journeys. They are both chasing aggressively into product that we believe is going to move the needle even further.
Thomas A. George: And they have merchant backgrounds, and they bring the right expertise and the right.
Thomas A. George: Right relationships to improve even further on the relationships that we have and so we're chasing into additional product that will really hit in the back part of the year, we see fashion broadening and teens embracing just more wearing occasions and I think over the longer term that is going to be good for.
Thomas A. George: For us both on the fashion athletic and on the casual side and so there are some interesting things happening on the apparel side as well and it's chasing into the greater appetite for newness and freshness and then specifically around the brands that we know are really resonating with the consumer today and will be resonating with it.
Thomas A. George: Consumer as we anticipate we go through the year and I will turn it over to Tom for his last question, Jeff Let me try to tackle on the expenses and hit some of the points. So I think the first one was an understanding of the expenses in January and we did have some additional expenses.
Mimi Eckel Vaughn: So you asked if Journey's sales got better in January, and in fact, in January, Journey's sales did get better. I'll just remind you of the cadence of the quarter that we started out nicely in November, with a very nice Black Friday weekend.
Thomas A. George: More than we originally anticipated and journeys and it was around the store channels. Some of it was the the occupancy cost for journeys and some of Thats related to just some of the final timing of some store closures there as well as we had some additional cost in January over and above what we expected prop.
Mimi Eckel Vaughn: And then sales gave some back in December and then picked up in January. And I'll also say that in December, in particular, we saw that customers were coming to our stores, traffic was up, but in fact, they were very focused on select items and were shopping only for those things, those must-have key items. And we can always convert our customers to other things, but it was challenging this year, just given some of the other economic pressures. And so as we got into January, we saw that what really took off was our e-commerce business. We've been working to grow e-com over the last few years, and we're delighted to see some of the growth. There were a lot of winter storms, and our Journey's customers went online.
Thomas A. George: <unk> seen some significant returns to vendors and as a result of that the good news is we got our inventories down at the end of the year at journeys is down about 22% related to the prior year. So there was some return on those additional expenses.
Thomas A. George: Then there was just some of the other additional store expenses related to even the labor to process that return to vendor.
So that's the January number.
Thomas A. George: When you look at expenses relative to COVID-19, our fiscal year 'twenty important thing to point out there is theres been a huge transformation in the business and that theres been a huge movement towards our direct business.
Thomas A. George: And all in all our businesses, especially journeys with that growth in our E. Commerce business. There is an investment operating expenses so.
Mimi Eckel Vaughn: We were driving some of those sales with clearance product, and so there was some appetite for clearance product as well. I would say that that's what helped January. And then just talking about product challenges that are specific to Q1, before I hand it over to Tom. We have made a lot of progress on Journey over the course of this year. Where we started the year, we came into the year, and after relatively flattish sales the year before, saw a pretty significant drop as the consumer just had a great appetite for newness and wanted to buy different things than they had been buying. Before that, we had some record years coming out of the pandemic, and I think the pendulum swung back the other way.
Thomas A. George: You need to consider that when you are considering.
Thomas A. George: The growth in expenses and I think another thing to point out on expenses in terms of when you look at our guide going forward to next year and you can see that that implies a significant reduction in our expenses going forward. So we feel good where we're at on expenses and when you look at that guide you.
Thomas A. George: You can see the traction we're getting taken expenses out and just another thing back on fiscal year 'twenty four we got a lot of traction within the journeys store channel taking expenses out so.
Speaker Change: Good follow up then.
Speaker Change: Jeff.
Jeff: With regards to the final timing of store closers returns to vendors.
Jeff: That's associated there I mean, it seems like it might have been tempted attempting to kind of put those are nonrecurring, which you did not.
Speaker Change: Any thoughts there and what maybe any guidance as to what that amount might have been.
Speaker Change: Yes.
Speaker Change: It's normal course, so we really those are situations, we can't necessarily put them down into nonrecurring. So we were hoping to use.
Mimi Eckel Vaughn: And so we have been working all year to be able to fill that gap that started at 14%. And again, we've made a lot of progress here. What we do see here is that Journey's sells a variety of products, both fashion, athletic, and also the casual products that we have been talking about. And Journey's is quite well-positioned to take advantage of this. What we saw is that the product that we knew was hot and would sell and that we chased into for the fourth quarter sold very nicely. But what we also saw is that some of the core products that we expected better sell-through rates on, there was not as much take-up on the part of the consumers. And that's the product that we're talking about that we are going to have challenges with in the first half of the year. And just given the product lead times, we've got a new head of Journey. We've got a new chief merchant at Journey's.
Speaker Change: The conference call here to get into conversations about some of it was onetime type of thing, yes, we had.
Speaker Change: Aggressive push and I think the great news is that we are in terrific shape and our inventories earnings is down more than 20% and so that and we did that without having to take an excessive amount of markdowns and so are really clean we've got.
Ample open to buy to chase into the product that we know we will bring in during the course of the year and so I think that that's that's the positive and we had a chance to be able to push back more inventory that didn't work to our brand partners have been exceptional working with us and are excited about being able to work with us to bring new styles.
Speaker Change: And in and to bring in.
Speaker Change: To feed some of the trends like Cogs in the fashion athletic that that we see a lot of appetite for.
Speaker Change: Okay. Thanks very much.
Speaker Change: Taking up too much time, so ill, let some others ask some questions best of luck in Q1.
Speaker Change: Thank you.
Speaker Change: Our next question is from the line of Cory <unk> with Jefferies. Please proceed with your question.
Cory: Good morning, and thanks for taking my question.
Cory: Mimi longer term in nature curious to how you think about the go forward margin trajectory for the business and what the right margin profile for.
Mimi Eckel Vaughn: They are both chasing aggressively into product that we believe is going to move the needle even further. And they have merchant backgrounds, and they bring the right expertise and the right relationships to improve even further on the relationships that we have. And so we're chasing additional product that will really hit in the back part of the year. We see fashion broadening, and teens embracing just more wearing occasions.
Cory: For the enterprise might be.
Cory: More broadly and what are the building blocks to get you to that level over a multi year time horizon.
Speaker Change: Alright, Thank you for the question.
Speaker Change: To talk about the different parts of our business. We were delighted to see that boasts Johnston <unk> Murphy and schuh had.
Speaker Change: Back to back record years, we have done a lot of work there that consumer changed a lot during the pandemic.
Mimi Eckel Vaughn: And I think over the longer term, that is going to be good for us, both on the fashion and athletic side. And so there are some interesting things happening on the apparel side as well. And it's the chasing into a greater appetite for newness and freshness. And then specifically around the brands that we know are really resonating with the consumer today and will be resonating with the consumer as we anticipate we go through the year. And I will turn it over to Tom for the last question. Thank you.
Speaker Change: Are those businesses were quite challenged a couple of years ago and we.
Speaker Change: <unk> put our heads down and did the work to really turn around those businesses and took the actions around product and marketing and technology to be able to get those businesses back to.
Speaker Change: Mid single digit levels of operating income, where they have achieved historically and so what we're talking about right now is journeys and.
Speaker Change: Journeys value proposition is very strong.
Thomas A. George: In January, over and above what we expected, processing some significant returns to vendors, and as a result of that, the good news is we got our inventories down at the end of the year at journeys down about 22% related to the prior year. So there was some return on those additional expenses. And then there were just some other additional store expenses related even to labor to process that return to the vendor. So that's the January number.
Speaker Change: Been through many cycles before where we have come out ahead of.
Speaker Change: This time around it was unique because there's so many factors at play and we do believe it's a cycle that we're in we have a lot of confidence in the journeys business. It's the go to place for teens.
Speaker Change: It plays such an important role and just there.
Speaker Change: Their selection of fashion footwear items, our brand relationships are terrific as well, we're very important to our brands and we've got some terrific dialog going on with our brands today to talk about bringing in new product to be able to fill the appetite for our teams. The next.
Thomas A. George: When you look at expenses relative to calendar 19, our fiscal year 20, an important thing to point out is that there's been a huge transformation in the business in that there's been a huge movement towards our direct business in all our businesses, especially journeys. With that growth in our e-commerce business, there's an investment operating, so you need to consider that when you're considering the growth in expenses.
Speaker Change: I would say is that journeys is a really resilient business. If you go back and you look at our track record of navigating both economic headwinds and fashion shifts.
Speaker Change: We have successfully navigated that.
Speaker Change: In the recent past and in the last recent past as well and the beauty of our model is that we can shift into brands that are hot we can rotate the assortment and theres a lot of leverage in our business. So structurally speaking.
Thomas A. George: And I think another thing to point out on expenses, in terms of when you look at our guide going forward to next year, you can see that that implies a significant reduction in our expenses going forward. So we feel good where we're at on expenses. And when you look at that guide, you can see the traction we're getting, taking expenses out. And just another thing back in fiscal year 24, we got a lot of traction within the Journey's store channel, and we feel good where we are. Yeah, I'm curious with regard to the final timing of store closures returns to vendors, you know, the labor that's associated there. I mean, it seems like it might have been tempting to kind of put those in non-recurring, which you did not. Any thoughts there? And perhaps any guidance as to what that amount might have been? You know, it's a normal course.
Speaker Change: Things that have changed is what Tom talked about that there is a lot more opportunity for digital and our digital business is not only profitable, but it's nicely accretive because we've got double digit profitability within digital we have a chance to grow journeys digital business shoe is at 40.
Speaker Change: 8% journeys is less than half of that so that will certainly help over the longer term.
Speaker Change: And we've taken a lot of actions to bring our cost base down you will see that and journeys overall P&L both by closing less productive stores and also by working on productivity and overall expenses and so that allows us to leverage at very low levels of comp, they're really big issue.
Thomas A. George: So really, those are situations we can't necessarily put them down as non-recurring. So, you know, we were hoping to use the conference call here to get into conversations about some of those one-time type of things. Yeah, we had an aggressive push, and I think the great news is that we are in terrific shape in our inventory; journeys are down more than 20%. And so we did that without having to take an excessive amount of markdowns. And so we're really clean.
Speaker Change: Here and Tom talked about that as well is that our.
Speaker Change: <unk> leverage the expense base on the negative store comp and so the solution to that is to build that back and to drive sales and so when we when we talk about the most important initiatives. It is around driving sales is around being able to do.
Speaker Change: Drive newness and freshness into the product assortment to drive store sales and online sales and I see no reason why we won't go back to historical levels of profitability for journeys certainly in the mid single digit range and it takes positive comps should be able to get us there maybe one more thing I'd add Corey.
Mimi Eckel Vaughn: We've got ample open to buy to chase into the product that we know we will bring in during the course of the year. And so I think that that's a positive, and we have a chance to be able to push back more inventory that didn't work to our brand partners, who've been exceptional at working with us and are excited about being able to work with us to bring new styles in and to bring in, you know, to feed some of the trends like clogs and the fashion athletic that we see a lot of appetite for. Okay, no, thanks very much.
Speaker Change: On the branded side of the business Johnston <unk> Murphy and our Genesco branded group, where we're getting a lot of traction in terms of improving our gross margins and we have a roadmap going forward to continue to improve our gross margins on the branded side of the business. So thats as well as a driver going forward to improve the overall.
Company operating margin.
Speaker Change: Great.
Jeff Lick: I'm taking up too much time, so let some others ask some questions. Best of luck in Q1. All right, thank you. Our next question is from the line of Corey Tarlowe with Jefferies. Please proceed with your question. Good morning, and thanks for taking my question. Mimi, longer term in nature, curious how you think about the go-forward margin trajectory for the business and what the right margin profile for the Enterprise might be more broadly, and what are the building blocks to get you to that level over a multi-year time horizon? Corey, thank you for the question. To talk about the different parts of our business, we were delighted to see that both Johnston Murphy and SHU had, you know, back to back record years. We have done a lot of work there; the consumer changed a lot during the pandemic. Both of those businesses were quite challenged a couple years ago.
Speaker Change: And just to double click on.
Speaker Change: Gross margin.
Speaker Change: It sounds like there is the expectation or.
Speaker Change: Sales to be down this.
Speaker Change: This year, but gross margin to be up.
Thomas A. George: So Tom.
Could you just maybe walk through.
Thomas A. George: How to get to that.
From the first quarter through the full year and what are the underlying drivers are and maybe rank the drivers it because.
Speaker Change: Let me start and then I'll hand, it to Tom but.
Speaker Change: I think we have been in a position where we kept our inventory is really clean.
Thomas A. George: Through the course of the year. So we haven't seen any we haven't taken markdowns at all near the level of others in our industry and in fact, we outperformed gross margin in the fourth quarter. So we don't like and by the way the industry is more cleaned up than it was when we started the fourth quarter and so we.
Don't anticipate that we will have a lot of pressure from markdowns given how clean our inventories are theres, a little bit of pressure from mix because of the <unk>.
Corey Tarlowe: And we put our heads down and did the work to really turn around those businesses and took the actions around product, marketing, and technology to be able to get those businesses back to, you know, mid single-digit levels of operating income where they achieved historically. And so what we're talking about right now is journeys. And, you know, the journeys value proposition is very strong. We've been through many cycles before where we have come out ahead. This time around, it was unique because there were so many factors at play. And we do believe it's a cycle that we're in. We have a lot of confidence in the journeys business. It's the go-to place for teams.
Thomas A. George: Brand mix in both in both journeys and schuh, but that's offset by some other initiatives that we have underway to help on gross margins. So I think we are anticipating it will be up a bit and I'll hand, it to Tom to talk about that in total we expect it to be flat to up a bit for the year end.
Thomas A. George: <unk> hit on one of the bigger points in terms of the promotional environment, we're expecting on the journey side. Another thing to consider is with our shoe business. We continue to work and have initiatives in place to continue to drive gross margin improvement there as well. So we will see some of that some of that is freight contracts, we've renegotiated and we've got more efficiency within.
Thomas A. George: Our distribution centers so both in the U S and the UK that will allow us to have more efficient warehouse warehousing and distribution expense and then.
Mimi Eckel Vaughn: It plays such an important role in just their selection of fashion footwear items. Our brand relationships are terrific as well. We're very important to our brands, and we've got some terrific dialogue going on with our brands today to talk about bringing in new products to be able to fill the appetite of our teams. The next thing I'd say is that journeys is a really resilient business. If you go back and look at our track record of navigating both economic headwinds and fashion shifts, we have successfully navigated that, you know, in the recent past and in the less recent past as well. And the beauty of our model is that we can shift into brands that are hot; we can rotate the assortment.
Thomas A. George: On the branded side of the business, we expect to see them some improved margins there as well, but one thing to point out in terms of the cadence in that in the first quarter, we're expecting some some decline in gross margin and thats, mainly around the <unk> mix in both journeys and schuh in the firm.
Thomas A. George: Quarter and that seems to moderate as the rest of the year goes by.
Speaker Change: Great. Thank you so much for all the color.
Speaker Change: Thank you. Our next question will be coming from the line of Mitch <unk> with Seaport Research. Please proceed with your questions.
Mitch: Yes. Thank you can you guys hear me, okay, I'm, having some phone issues.
Mitch: We can we can okay.
Mitch: I've got a handful of questions I'm going to maybe distribute one by one.
Mimi Eckel Vaughn: And there's a lot of leverage in our business. So structurally speaking, the things that have changed are what Tom talked about, that there's a lot more opportunity for digital. And our digital business is not only profitable, but it's nicely accretive because we've got double-digit profitability within digital, we have a chance to grow journeys. The digital business shoe is at 40%, and journeys is less than half of that. So that will certainly help over the longer term. And we've taken a lot of actions to bring our cost base down, you will see that in the journeys overall P&L, both by closing less productive stores and also by working on productivity and overall expenses. And so that allows us to leverage at very low levels of comp.
Mitch: First one on journeys you mentioned the sequential improvement in four Q is that continued.
Mitch: Through February or have you seen the business kind of fall back again.
Mitch: So when you.
Think about the fourth quarter I just talked about January picked up is that the key here Mitch is that what emerged over the holidays is that our consumer move further away from core product.
Mitch: And while we made improvement in terms of the winter assortment that we brought in and the newness and the freshness of the core product that the consumer move further away from and that is core product that we anticipated to carry into the spring and that's really what we have been focused on in terms of.
Mimi Eckel Vaughn: The really big issue here, and Tom talked about that as well, is that our, you know, we've deleveraged the expense base on the negative store comp. And so the solution to that is to build that back and drive sales. And so when we talk about the most important initiatives, it is around driving sales, it is around being able to drive newness and freshness into the product assortment to drive store sales and online sales. And I see no reason why we won't go back to historical levels of profitability for journeys, certainly in the mid single-digit range, and it takes positive comps to be able to get us there. Maybe one more thing I'd add, Corey, is on the branded side of the business, Johnson & Murphy and our Genesco branded group, we're getting a lot of traction in terms of improving our gross margins.
Mitch: Our outlook for the first quarter that we would have pressure as a result of that and so we wouldn't anticipate that that trend would pick up further we have had nice sequential improvement, but we expect that will sort of be where we are at least for the first quarter of the year that will improve a little bit as we can bring product in an effect.
Mitch: The trend in the back part of the second year, even more pick up in the third quarter and we have a huge push in the fourth quarter just given the overall lead times four.
Mitch: Sure.
Mitch: Our footwear, which are in the range of six months.
Mitch: And then on journeys, so you're expecting journeys comp to be down mid singles for the year I believe if I read the presentation correctly. It sounds like from a sales standpoint, you expect the most pressure in one Q. So what is your plan for journeys in the first quarter are you expecting it to be down like double digits.
Speaker Change: No no unexpected they'll be down double digits for the year I think we just need to check that number I don't think we got a year of southern Europe bolts I'm not sure. We came out with a number for journey specifically I know you gave total company guidance for the year, but in the first quarter.
Mimi Eckel Vaughn: And we have a roadmap going forward to continue to improve our gross margins on the branded side of the business. So that's as well as a driver going forward to improve the overall company operating. Great, thanks. And then just to double click on gross margins, sounds like there's the expectation for failed to be down here, but gross margin on the up. So, could you just maybe walk through it?
Speaker Change: For journeys.
Speaker Change: We could expect that to be mid down mid to high single digits in the first quarter.
Speaker Change: Okay.
Speaker Change: So it looks like in my presentation.
Speaker Change: Not far from where our presentation, you've got journeys down mid single digits might get stuck on a sales comp side.
Mimi Eckel Vaughn: How to get to that from the first quarter through the full year and what the underlying drivers are and maybe rank the drivers if you could. Let me start and then I'll hand it to Tom. But, you know, I think we have been in a position where we've kept our inventories really clean through the course of the year. So, we haven't seen any markdowns at all near the level of others in our industry. And in fact, we outperformed gross margin in the fourth quarter. So we don't, and, by the way, the industry is more cleaned up than it was when we started the fourth quarter. And so we don't anticipate that we will have a lot of pressure from markdowns given how clean our inventories are.
Speaker Change: Yes.
Oh <unk> Brian.
Brian: Right, that's correct that would be cause of the stores that we have clubs that are that are.
Brian: Away from say that it's not a comp but are not productive predict modest right.
Speaker Change: Okay, and then on <unk> I know that you're lapping some difficult comps in the first.
Speaker Change: Half of the year you guys were I think double digit comp last year in the first half. So how are you thinking about the shape of shoe for the year, just given tougher comparison in the first half and then thats using in the backyard.
Speaker Change: Yes, that's exactly right. So in the first half we expect the most pressure issue because if you look at the stack.
Speaker Change: Comps, we had really a pretty spectacular stack comps in the first half over over the last the last several years and so we expect continued pressure in schuh, particularly because the economic environment has been tougher.
Mimi Eckel Vaughn: There's a little bit of pressure on mix because of the, you know, the brand mix and both in both journeys and shoes, but that's offset by some other initiatives that we have underway to help with gross margin. So I think we're, we're anticipating it will be up a bit and I'll hand it to Tom to talk about that. Yeah, in total, we expect it to be flat up a bit for the year, and Mimi hit on one of the bigger points in terms of the promotional environment we're expecting on the journey side. Another thing to consider is with our shoe business; we continue to work on and have initiatives in place to continue to drive gross margin improvement there as well. So we'll see some of that.
Speaker Change: In the second quarter, we actually expect that key ease off a bit and we see opportunity in the back part of the year for shoe with holiday and.
Speaker Change: And also back to school.
Speaker Change: The environment.
Speaker Change: Inflation is coming down they've had higher inflation than we've had.
Speaker Change: Their inflation efforts overall are gaining traction we expect that that will show up in the consumer's appetite for purchasing in the back part of the year. There also have been mandatory wage increases in the U K that will take hold and we expect a brighter picture for the <unk>.
Thomas A. George: Yeah, and some of that is great contracts we've renegotiated. We've got more efficiency within our distribution centers. So both in the US and the UK, that will allow us to have more efficient warehouse, warehousing, and distribution expenses.
Speaker Change: Tumor in the back part of the year overall Schuh has just been taking market share and operating in a very difficult environment.
Speaker Change: The overall retail sales in the U K or down.
Speaker Change: For the holiday period, and we expect that as the consumer groups and we get into spring selling that there is appetite for spring product and some sandal product and that will be able to leverage that into the back part of the year. So so you're right. It's it's.
Thomas A. George: And then on the branded side of the business, we expect to see some improved margins there as well. But one thing to point out in terms of the cadence is that for the first quarter, we're expecting some decline in gross margin, and that's mainly around the IMO mix in both journeys and shoes in the first quarter. And that seems to be going to moderate as the rest of the year goes by. Great. Thank you so much for all you do.
Speaker Change: It's a.
Speaker Change: Or difficult front part of the year building into a more positive on that part of the year.
Speaker Change: And then maybe lastly, I'm just trying to better understand.
Speaker Change: Your confidence and an uptick in the journeys business for the back half because for holiday.
Speaker Change: Obviously boots were weak.
Speaker Change: But also you talked about selling out of key items and then for the first half of the year spring.
Corey Tarlowe: Thank you. Our next questions will be coming from the line of Mitch Kummetz of Seaport Research. Pleased to see you with your questions. Yes, thank you. Can you guys hear me okay?
Speaker Change: Talking about challenges in the core business. So when you look at the back half.
Speaker Change: From a key item standpoint are you anticipating better access and allocations to those key items and then also in terms of the core business are you seeing some inflection there do you think that you talked about vulcanize being difficult before <unk> like are you anticipating the vulcanize biz.
Mitchel John Kummetz: I'm having some phone issues. We can. We can. I've got a handful of questions. I'm going to maybe just do these one by one.
Mimi Eckel Vaughn: First on Journeys, you mentioned the sequential improvement in 4Q. Has that continued through February, or have you seen the business kind of fall back? Yeah, so when you think about the fourth quarter, I just talked about January picking up a bit.
Speaker Change: It is getting better or are you pivoting to other things other products that you consider to be core to you'd be better better.
Speaker Change: Represented in core product because of some shift to other types of products do you understand what kind of I'm trying to get at is how much of this is just a better allocation of key items versus something happening in the core that's different in the back half versus the first half.
Mimi Eckel Vaughn: The key here, Mitch, is that what emerged over the holidays is that our consumer moved further away from our core product. And while we made improvements in terms of the winter assortment that we brought in and the newness and the freshness, it's the core product that the consumer moved further away from. And that is the core product that we anticipated to carry into the spring. And that's really what we have been focused on in terms of our outlook for the first quarter, knowing that we'd have pressure as a result of that. And so we wouldn't anticipate that the trend would pick up further.
Speaker Change: So a lot of questions in there match, but we are absolutely anticipating that we are going to be getting better allocations of product. We are absolutely anticipating that we are going to be shifting into brands and increasing the assortment.
Speaker Change: The brands that are working and we've got line of sight into what those are we've actually got line of sight into a bigger order book.
Based on the actions that we have already taken when I think about the strength of our journeys merchant relationships, we have doubled down on that by bringing in even in <unk>.
Mimi Eckel Vaughn: We have had nice sequential improvement, but we expect that we'll sort of be where we are, at least for the first quarter of the year. That will improve a little bit as we can bring product in and affect the trend in the back part of the second year, with even more pickup in the third quarter. And we have a huge push in the fourth quarter, just given the overall lead times for footwear, which are in the range of six months. And then on journeys, so you're expecting journeys comp to be down by bid singles for the year, I believe, if I read the presentation correctly. It sounds like from a sales standpoint that you expect the most pressure in one queue. So what is your plan for journeys in the first quarter? Are you expecting it to be down like double digits? No, we're not expecting it to be down double digits. And for the year, I think we just need to check that number. Yeah, I don't think we can.
Speaker Change: Even more expertise.
Speaker Change: <unk>, our new chief merchant and that that Andy have and the relationships that they have with the brands that are really important and so it's a full court press to.
Speaker Change: Get more allocation of items that we are excited about.
Speaker Change: Of diversifying across our mix with brands that are working today. It is moving the assortment.
To a different mix for sure and we absolutely do not anticipate that core products that we've been selling traditionally will rebound that the vulcanize product that I referenced will be rebounding. It is putting in additional product on the athletic side and.
Speaker Change: Also on the casual side.
Thomas A. George: For the year, Mitch, I'm not sure we came out with a number for journeys specifically. I know we gave total comfort guidance for the year, but for the first quarter, you know, for journeys, we could expect that to be down mid to high single digits in the first quarter. It looks like in the presentation.
Speaker Change: To be able to build a sales through the course of the year.
Speaker Change: Okay. That's helpful. I appreciate the color so thanks and good luck.
Speaker Change: Alright, Thanks you.
Speaker Change: Thank you.
Metro: At this time I will turn the floor back to metro for any further remarks.
Metro: Alright, Thank you for joining us today, we look forward to you joining us on future calls, where we're going to talk about the progress that we are making within our journeys business and and thanks again.
Thomas A. George: Not far from where we've been. In the presentation, you've got journeys down mid-single digits, but I guess that's on the sales side, not the comp side. That's correct.
Mitchel John Kummetz: That's because of the stores that we've closed that are, you know, away from sales but are not productive. Right, that's right. Okay, and then on Shu, I know that you're lapping some difficult comps in the first half of the year. You guys were, I think, double-digit comps last year in the first half. So how are you thinking about the shape of SHU for the year, just given tougher competition in the first half and then that easing in the back half? Yeah, that's exactly right.
Metro: Yes.
Speaker Change: This will conclude today's conference you may disconnect. Your lines at this time. Thank you for your participation and have a wonderful day.
Mimi Eckel Vaughn: So in the first half, we expect the most pressure on SHU because, if you look at the stacked comps, we have had really pretty spectacular stacked comps in the first half over the last several years. And so we expect continued pressure on SHU, particularly because the economic environment has been tougher. In the second quarter, we actually expect that to ease off a bit, and we see opportunity in the back part of the year for SHU with the holiday season and also back to school. The environment, you know, inflation is coming down. They've had higher inflation than we have.
Mimi Eckel Vaughn: Their inflation efforts overall are gaining traction, and we expect that that will show up in the consumer's appetite for purchasing in the latter part of the year. There have also been mandatory wage increases in the UK that will take hold, and we expect a brighter picture for the consumer in the back part of the year. Overall, SHU has just been taking market share and operating in a very difficult environment, and overall retail sales in the UK were down for the holiday period, and we expect that as the consumer regroups and we get into spring selling, there will be an appetite for spring product and some sandal product, and that we' You're right.
Mimi Eckel Vaughn: It's a more difficult front part of the year building into a more positive back part of the year. And then, maybe lastly, I'm just trying to better understand your confidence in an uptick in the journeys business for the back half, because for the holiday season, I mean, obviously, boots were weak, but you talked about selling out of key items. And then for the first half of the year, spring, you're talking about challenges in the core business. So when you look at the back half, from a key item standpoint, are you anticipating better access and allocations to those key items? And then also in terms of the core business, are you seeing some inflection there? Do you think that, you know, you talked about Vulcanize being difficult for Q, like are you anticipating the Vulcanize business getting better?
[music].
Mimi Eckel Vaughn: Or are you pivoting to other things, other products that you consider to be core that you'd be better, better, you know, represented in core products because of some shift to other types of products? How much of this is just a better allocation of key items versus, you know, something happening in the core that's different in the back half versus the first half? So, a lot of questions there, Mej, but we are absolutely anticipating that we are going to be getting better allocations of product. We are absolutely anticipating that we are going to be shifting into brands and increasing the assortment in the brands that are working, and we've got a line of sight into what those are. We've actually got a line of sight into a bigger order book based on the actions that we have already taken.
Mimi Eckel Vaughn: When I think about the strength of our journey's merchant relationships, we have doubled down on that by bringing in even more expertise that our new chief merchants and Andy have and the relationships that they have with the brands that are really important. And so, it's a full court press to get more allocation of items that we are excited about, and to diversify across our mix with brands that are working today. It is moving the assortment into a different mix for sure, and we absolutely do not anticipate that core products that we've been selling traditionally will rebound, that the vulcanized product that I referenced will rebound. It is putting in additional product on the athletic side and also on the casual side to be able to build sales through the course of the year. Okay, that's helpful. I appreciate the color.
Mitchel John Kummetz: So thanks and good luck. All right, thank you. Thank you. At this time, I will turn the floor back to Mattra for any further remarks. Great, thank you for joining us today. We, we look forward to you joining us on on future calls where we're going to talk about the progress that we are making within our journeys business and and thanks again. This will conclude today's conference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day, for more information visit www.genesco.com for more information visit www.genesco.com for more information visit www.genesco.com for more information visit www.genesco.com for more information visit www.genesco.com for more information visit www.genesco.com for more information visit www.genesco.com for more information visit www.genesco.com for more information visit www.genesco.com for more information visit www.genesco.com ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? Sound Recording by C????? ????? I am the secret Is that Is that You Is that You Yes I'm so Yes I'm so Yes I'm so Yes I'm so Yes I'm so Yes I'm so Yes I'm so I'm so Yes I'm so Yes I'm so Yes I'm so, © The Ultimate Parody Site!
Operator: I'll now turn the call over to Darryl MacQuarrie, Senior Director of FP&A. Good morning, everyone, and thank you for joining us to discuss our fourth 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 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.
Speaker Change: [music].
Darryl MacQuarrie: 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.
Mimi Eckel Vaughn: Good morning, everyone, and thank you for joining us. Fiscal 24 highlighted how substantially our consumer shopping behavior has changed since the pandemic. Back in fiscal 22, consumers were flush with cash thanks to fiscal stimulus and spent heavily in the footwear category, which led to a record year for Journey. As we entered fiscal 24, we saw a pronounced drop in purchases at the beginning of the year and have been working to close the gap ever since. The forward buying dynamic, along with a period of higher inflation that followed, competitive discounting to clear elevated athletic footwear inventories, and a general lack of innovation in footwear, made for a difficult operating environment that remained challenging as we progressed through Fiscal 24. Throughout the year, these evolving purchase patterns led to greater volatility and made it hard to forecast demand, particularly for journeys. In the fourth quarter, after a strong Black Friday and a solid kickoff to the holiday season, sales were negatively impacted by a more selective customer that shopped almost exclusively for key footwear items, coupled with a marked shift away from boots.
Mimi Eckel Vaughn: As we got into the month of January, the combination of softer-than-anticipated sales due to disruptive winter storms and higher-than-anticipated expenses at journeys was what drove EPS below our most recent guidance. Throughout the quarter, our core product assortment was much more under pressure than we originally expected at the beginning of Q4. We expect this dynamic to carry into this current year, and given our limited ability to now impact product for spring, we believe it will remain a significant headwind in the first half, despite facing easier comparisons. We are clearly disappointed with these results.
Mimi Eckel Vaughn: However, I want to stress that we have faced challenging times before and consistently demonstrated a strong track record of turning around our businesses to emerge even stronger when confronted with economic and consumer disruption. Our response to the pandemic and recent turnarounds at SHU and J&M, evidenced by another year of record sales for both, are clear examples of this, and I'm confident we will achieve the same success with Journey. It's also important to note, despite a very difficult operating climate, in fiscal 24, our overall sales declined only low single digits, and our gross margin compressed by just 30 basis points. The sensitivity of our model is such that smaller movements in sales are magnified with quite a bit of de-leverage against our largely fixed cost base. Coupled with our low share count, this had a substantial effect on our bottom line. However, the inverse is true as well.
Mimi Eckel Vaughn: In a sales growth environment, as we've demonstrated before, our model provides significant leverage and earnings upside potential. Our cost savings initiatives are aimed at improving this further. However, as we turn the page to Fiscal 25, the operating environment remains difficult.
Mimi Eckel Vaughn: Given the steeper challenges in our core business, we now have more work to do in our assortment. As such, we're counting on more time for a Journeys Rebound. All that said, we have a very clear understanding of what we need to achieve.
Speaker Change: [music].
Mimi Eckel Vaughn: Continued, turnaround is our number one priority. With the right new leadership already in place and a strong team overall, we're better positioned than ever to accomplish this task. As I've said before, well positioned strategically with a spotlight focus on the team, no other retailer serves this customer quite the same as Journeys. It is the one-stop shop for a broad range of both casual and athletic brands.
Speaker Change: Good day, everyone and welcome to the ESCO fourth quarter fiscal 2020 for a conference call.
Speaker Change: Just a reminder, today's call is being recorded.
Speaker Change: Now I'll turn the call over to Dow Macquarie Senior director of F. P N a.
Darryl MacQuarrie: Go ahead Sir.
Darryl MacQuarrie: Good morning, everyone and thank you for joining us to discuss our fourth quarter fiscal 'twenty four results.
Mimi Eckel Vaughn: This unique proposition as the destination for teen fashion footwear, particularly for the teen girl, remains solidly intact. As fashion broadens and teens are embracing multiple wearing occasions, we will achieve success with a more diversified assortment that addresses these needs and fills out our customers' closets. Importantly, we already have the backing of our consumer, who consistently scores Journeys higher than key competitors in market research, and our brand partners, who are demonstrating exceptional support. Under Andy Gray's leadership, the Journeys team is working to dramatically accelerate the pace of improvement in response to how the consumer has changed. With a strong merchant background, excellent vendor relationships, and expertise in brand building and product innovation, Andy's insight has already proven tremendously valuable. We're working with great urgency. However, these efforts will take some time given the footwear industry's lead time.
Darryl MacQuarrie: Participants on the call expect to make forward looking statements, reflecting our expectations as of today, but actual results could be different.
Darryl MacQuarrie: <unk> 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.
Darryl MacQuarrie: 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.
Darryl MacQuarrie: We have also posted a presentation summarizing our results here as well.
Darryl MacQuarrie: With me on the call today is Mimi Vaughn Board Chair, President and Chief Executive Officer.
Darryl MacQuarrie: And Tom George Chief Financial Officer.
Mimi Eckel Vaughn: Now I'd like to turn the call over to me.
Mimi Eckel Vaughn: Thanks, Darryl and good morning, everyone and thank you for joining us.
Mimi Eckel Vaughn: Fiscal 'twenty four highlighted how substantially our consumer shopping behavior has changed since the pandemic.
Mimi Eckel Vaughn: Already in the works, though, they will set the stage for more significant progress for back-to-school and especially for holidays. I will discuss some of these initiatives in more detail shortly. But first, I'd like to point out some important highlights from the quarter and year beyond the record sales years SHU and J&M delivered. We grew our comparable digital business by 5% in Q4, 8% for the year, and expanded digital penetration in fiscal 24 to 23% versus 20% a year ago. We launched Journey's all-access loyalty program and buy online, pick up in store in North America with encouraging initial results. Bopas was a bright spot in Journeys and its first holiday in operation, accounting for almost 30% of e-commerce sales in the week leading up to Christmas.
In fiscal 'twenty to consumers, who are flush with cash thanks to fiscal stimulus and spent heavily in the footwear category, which led to a record year for journeys.
Mimi Eckel Vaughn: As we entered fiscal 'twenty four we saw a pronounced drop in purchases at the beginning of the year and had been working to close the gap ever since.
Mimi Eckel Vaughn: The forward buying dynamic along with a period of higher inflation, that's powered competitive discounting to clear elevated athletic footwear inventories and a general lack of innovation in footwear made for a difficult operating environment that remained challenging as we progress through fiscal 'twenty four.
Mimi Eckel Vaughn: Throughout the year these evolving purchase patterns led to greater volatility and made it hard to forecast demand, particularly for journeys.
Mimi Eckel Vaughn: In the fourth quarter after a strong black Friday and solid kickoff to the holiday season sales were negatively impacted by a more selective customer that shops almost exclusively for key footwear items, coupled with a market shift away from the.
Mimi Eckel Vaughn: Importantly, we made further progress right-sizing our inventory. Journeys ended Q4 with inventory down over 20% from last year, enabling us to generate strong cash flow and enter the new fiscal year in a very clean position. This also helped us deliver solid gross margins ahead of expectations and positions as well as to buy into the product we need to drive journey sales. Furthermore, we continue to advance our strategies to position the business for better productivity and profitability. We closed nearly 100 underperforming Journey stores and are evaluating up to 50 more closures this fiscal year as we reshape the footprint to align with the shopping patterns of today's consumers.
Mimi Eckel Vaughn: As we got into the month of January the combination of softer than anticipated sales due to disruptive winter storms and higher than anticipated expenses at journeys is what drove EPS below our most recent guidance.
Mimi Eckel Vaughn: Throughout the quarter, our core product assortment was much more pressure than we originally expected at the beginning of Q4.
Mimi Eckel Vaughn: We expect this dynamic to carry into this current year and given our limited ability to know impact product for spring. We believe it will remain a significant headwind in the first half despite facing easier compares.
Speaker Change: We are clearly disappointed with these results however, I want to stress that we face challenging times before and consistently demonstrated a strong track record of turning around our businesses to emerge even stronger when confronted with economic and consumer disruption.
Mimi Eckel Vaughn: And we made substantial progress in realigning our cost base and are now targeting an increased run rate of $45 to $50 million in annual savings by the end of this year. Now for color on our individual businesses, starting with journeys. While we were pleased that sales once again improved sequentially in Q4, as they have in every quarter this year, results nonetheless fell short of our initial expectations. Following a strong Thanksgiving weekend, business decelerated in December as customer shopping trends remained choppy. That said, store traffic was positive, and consumers responded well to the newness in our assortment, which tells us that Journeys remains a key destination for our team. However, a decline in conversion outweighed this, given our consumers' selective appetite for key items. Once we ran out of high-demand products, we were not able, as we usually are, to motivate an alternate purchase, and discounting did not drive enough sales to be effective. This was evident in boots.
Our response to the pandemic and recent turnarounds at Schuh and J N N evidenced by another year of record sales for both are clear examples of this and I am confident we will achieve the same success with journeys.
Speaker Change: It's also important to note despite a very difficult operating climate in fiscal 'twenty for our overall sales declined only low single digits and our gross margin compressed by just 30 basis points.
Speaker Change: The sensitivity of our model is such that smaller movements in sales are magnified with quite a bit of deleverage against our largely fixed cost base couple.
Speaker Change: Coupled with our low share count this had a substantial effect on our bottom line.
Speaker Change: However, the inverse is true as well <unk>.
Speaker Change: And our sales growth environment as we've demonstrated before our model provides significant leverage and earnings upside potential our cost savings initiatives are aimed at improving this further.
Mimi Eckel Vaughn: While we planned our boot business down in anticipation of a challenging season, it was weaker. Because of both warm weather and style preferences, food sales, which typically represent 50% of Journey's holiday business, were down 20% during the holiday period. And, as I mentioned, we experienced more pressure than we expected in our core assortment, including vulcanized products. The overall sales decline in Q4 was confined to stores, as Journey's digital business performed quite well, up mid-single digits versus last year. We tested numerous engagement and traffic driving programs with all ACCESS members, increased SMS usage, and increased influencer and paid social campaigns to generate awareness and drive conversion.
Speaker Change: As we turn the page to fiscal 'twenty five the operating environment remains difficult given the steeper challenges in our core business. We now have more work to do in our assortment.
Speaker Change: As such we're counting on more time for our journeys rebound.
Speaker Change: All that said, we have a very clear understanding of what we need to achieve journeys continued turnaround is our number one priority.
Speaker Change: With the right new leadership already in place and a strong team overall, we're better positioned than ever to accomplish this task.
Speaker Change: I've said before well positioned strategically with a spotlight focused on the teen no. Other retailer serves this customer quite the same as journeys journeys is the one stop shop for a broad range of both casual and athletic brands.
Speaker Change: This unique proposition as the destination for teen fashion footwear, particularly for the teen girl remains solidly intact.
Mimi Eckel Vaughn: In fact, as we exited the year, we saw some acceleration in total comps in January led by Journey's e-comp, which increased 35% during the month. Moving to the UK, despite experiencing a slowdown in Q4 comps against a difficult comparison, SHU delivered an exceptional year with strong comp growth throughout the first nine months. Our efforts to strengthen SHU's value proposition have differentiated the business from competitors, grabbing the attention of new customers, and enhancing our brand relationships and access to top-tier products. That said, sales in Q4 were challenged by a tough boot business coupled with a more cautious UK consumer that, despite recessionary economic challenges, was also more discriminating in their purchases. The pressure was primarily in stores as SHU's e-com business remained positive in the quarter, accounting for over 40% of total sales. Kids also remained a bright spot with sales up 8%, while non-footwear categories saw strong growth of 35%. Even amidst a difficult operating environment, SHU held strong market share. As of mid-January, SHU maintained its number 10 rank in total UK footwear market share, according to Kantar, a position it's held since May 2023, after moving up three spots during the year.
Speaker Change: As fashion broadens and teams are embracing multiple wearing occasions, we will achieve success with a more diversified assortment that addresses these needs and sales at our customers' closets importantly, we already have the backing of our consumer who consistently scores journeys higher than key competitors and market research.
Speaker Change: And our brand partners, who are demonstrating exceptional support.
Speaker Change: Under Andy Grays leadership, the journeys team is working to dramatically accelerate the pace of improvement in response to how the consumer has changed.
Speaker Change: With a strong merchant background excellent vendor relationships and expertise in brand building and product innovation and these insights has already proven tremendously valuable.
Speaker Change: We are working with great urgency. However, these efforts will take some time given footwear industry lead times.
Speaker Change: Already in the works, though they will set the stage for a more significant progress for back to school and especially for holiday.
Speaker Change: I'll discuss some of these initiatives in more detail shortly but first I'd like to point out some important highlights from the quarter and year beyond the record sales years, Schuh and JM deliver we grew our comparable digital business by 5% in Q4, 8% for the year and.
Speaker Change: Expanded digital penetration in fiscal 'twenty, 4% to 23% versus 20% a year ago, We launched journeys all access loyalty program and buy online pickup in store in North America to encouraging initial results.
Mimi Eckel Vaughn: Loyalty has played a key role in strengthening the shoe market position; currently accounting for roughly 30% of total sales, shoe club members now stand at 2.3 million and are more engaged than non-loyalty customers, purchasing more frequently. Turning to Johnston & Murphy, the business was a standout over the holiday season with a record fourth quarter as we continued to invest to drive growth. Compelling product and strong sales of non-footwear led to nicely positive comps, demonstrating a solid recovery from the ERP implementation challenges in Q3. However, relative to the run rate over the holiday, sales were pressured by the disruptive January winter storm. Our efforts to reimagine J&M as a more comfortable lifestyle brand with products suited for today's more casual preferences are resonating really well with our consumers. In Q4, J&M's direct-to-consumer business was strong across all channels, e-com, retail, and factory.
Speaker Change: <unk> was a bright spot in journeys in its first holiday in operation accounting for almost 30% of E Commerce sales in the week, leading up to Christmas.
Speaker Change: Importantly, we made further progress right sizing our inventory journeys ended Q4 with inventory down over 20% to last year, enabling us to generate strong cash flow and enter the new fiscal year in a very clean position. This also helped us deliver solid gross margins ahead of.
Speaker Change: Patients and positions us well to buy into the product we need to drive journeys sales.
Speaker Change: Furthermore, we continued to advance our strategies to position the business for better productivity and profitability we.
Speaker Change: We closed nearly 100 underperforming journeys stores and are evaluating up to 50 more closures. This fiscal year as we reshaped the footprint to align with the shopping patterns of today's consumer.
Speaker Change: And we made substantial progress in realigning our cost base and are now targeting an increased run rate of $45 million to $50 million in annual savings by the end of this year.
Mimi Eckel Vaughn: Although the casual and casual-athletic categories were key drivers in J&M's footwear business, apparel and accessories were an even bigger call-out in Q4. Apparel and accessories increased 18%, driven by strong growth in blazers and outerwear, and accounted for almost half of J&M's DTC sales. J&M is a great example of how we've taken our strong DTC capabilities built in retail and applied them to a branded concept. With the work of repositioning to an updated multi-category lifestyle brand paying dividends, J&M is positioned to drive meaningful growth with opportunities across categories, age demographics, geographies, and gender. As the cornerstone of our branded platform, the future for this business is incredibly bright. Now switching back to journeys, Andy and his team have taken a deep dive into the business and put sharper focus on a turnaround program and growth strategy that will impact the customer through product marketing and experience. And today I'll highlight some key initiatives for this fiscal year, which are a mix of both strategic acceleration and disciplined expense management. Number one, drive product leadership and create marketplace differentiation.
Speaker Change: And now for color on our individual businesses, starting with journeys, while we were pleased with sales once again improved sequentially in Q4 as they have in every quarter. This year results. Nonetheless fell short of our initial expectations.
Speaker Change: Following a strong Thanksgiving weekend business decelerated in December as customer shopping trends remained choppy.
Speaker Change: That said store traffic was positive and consumers responded well to the newness in our assortment, which tells us that journeys remains a key destination for our team. However, a decline in conversion outweighed this given our consumers selective appetite for key items. Once we ran out of high demand.
Speaker Change: <unk>, we were not able as we usually are to motivate an alternate purchase and discounting did not drive enough sales to be effective.
Speaker Change: This was evident in boots, while we planned our boot business down in anticipation of a challenging season. It was weaker the impacted.
Speaker Change: By both warm weather and style preferences boot sales, which typically represent 50% of journeys holiday business were down 20% during the holiday period and as I mentioned, we experienced more pressure than we expected in our core assortment, including Vulcanize product.
Speaker Change: The overall sales decline in Q4 was confined to stores as journeys digital business performed quite well up mid single digits versus last year.
Mimi Eckel Vaughn: To continue improving Journey's footwear leadership and assortment, we're implementing new strategies led by our recently appointed Chief Merchant to meaningfully increase product access and boost investment in key fashion, athletic, and casual brands. This includes diversifying and adding new key styles with our existing brand partners, increasing our leadership position with all our key brands, enhancing in-store social and digital exposure to build awareness with our customers about shop journeys for these brands, and working to add brands beyond those we're traditionally known for. Number two, build a journeys brand and enhance the omni experience.
Speaker Change: We tested numerous engagement and traffic driving programs with all access members increased SMS usage and increased influencer and paid social campaigns to generate awareness and drive conversion in fact, as we exited the year. We saw some acceleration in total comps in January led <unk>.
Speaker Change: Journeys E com, which increased 35% during the month.
Speaker Change: Moving to the UK, despite experiencing a slowdown in Q4 comps against a difficult compare schuh delivered an exceptional year with strong comp growth throughout the first nine months, our efforts to strengthen shoes value proposition has differentiated the business from competitors.
Mimi Eckel Vaughn: We're intensifying efforts to build and promote Journeys as an industry-leading retail brand. We're currently onboarding a new creative agency to develop a new brand communication strategy. We plan to roll this out in the second half of the year, along with an updated brand mission, vision, and purpose. In parallel, we're improving Journey's brand presence and upgrading the customer experience with quick actions in both stores and online, including refreshed messaging and visuals that tell a cohesive brand story across channels and social. We're excited about the investment we're making to personalize and improve the timeliness and relevance of our marketing communications as well. We're also evolving the All Access Loyalty Program, where we've signed up over 2 million members in six months.
Speaker Change: Grabbing the attention of new customers and enhancing our brand relationships and access to top tier product.
Speaker Change: That said sales in Q4 were challenged by a tough boot business, coupled with a more cautious UK consumer that against recessionary economic challenges was also more discriminating in their purchases.
Speaker Change: The pressure was primarily in stores issues E. Comm business remained positive in the quarter accounting for over 40% of total sales.
Speaker Change: Kids also remained a bright spot with sales up 8%, while non footwear categories saw strong growth of 35%.
Speaker Change: Even amidst a difficult operating environment shoe held strong market share as of mid January shoe maintained its number 10 ranked in total UK footwear market share. According to Kantar a position to tell since May 2023, after moving up three spots during the year.
Mimi Eckel Vaughn: Continuing to provide an exciting feature-rich program that differentiates Journeys, generates valuable consumer insights, and encourages consumers to consolidate purchases across brands with us. And finally, we'll ultimately pursue an updated store concept and next generation design to further enrich the customer experience. And number three, leverage the power of our people. This initiative leverages the expertise of our store employees to set us apart by providing excellent service as a differentiator.
Speaker Change: Loyalty has played a key role in strengthening <unk> market position currently accounting for roughly 30% of total sales shoe club members now stand at $2 3 million and are more engaged than non loyalty customers purchasing more frequently.
Speaker Change: Turning to Johnston <unk> Murphy the business was a standout over holiday with a record fourth quarter as we continued to invest to drive growth.
Compelling product and strong sales of non footwear led to nicely positive comps demonstrated a solid recovery from the ERP implementation challenges in Q3.
Mimi Eckel Vaughn: Over the past year, we've introduced new capabilities, including mobile point-of-sale and BOPUS, to improve efficiency and customer engagement. And this year, we'll further improve training and execution and roll out additional features like data-informed suggested selling. Number four, optimize to drive operational and cost efficiency.
Speaker Change: However, relative to the run rate over holiday sales were pressured by the disruptive January winter storms, our efforts to re imagine JM is a more comfortable lifestyle brand with products suited for today's more casual preferences is resonating really well with our consumers in.
Speaker Change: In Q4, <unk> direct to consumer business was strong across all channels E com retail and factory.
Mimi Eckel Vaughn: We're implementing several initiatives here, including continued efforts to optimize the store footprint, closing unproductive stores, and redirecting traffic and sales while strategically opening mall and off-mall locations. In summary, overall, I want to emphasize my belief in our team's ability to reshape our business and unlock Journey's considerable earnings potential. In addition, we're executing new initiatives to accelerate growth for SHU and J&M in fiscal 25, all building off our footwear focus strategy. I'll discuss a few select examples.
Speaker Change: Although the casual and casual athletic categories were key drivers in <unk> footwear business apparel and accessories were an even bigger callout in Q4 apparel and accessories increased 18% driven by strong growth in Blazers, and outerwear and accounted for almost half of JM DTC sales.
Speaker Change: Yes.
Speaker Change: JM is a great example of how we've taken our strong DTC capabilities built in retail and applied them to a branded concept.
Speaker Change: With the work of repositioning to an updated multi category lifestyle brand paying dividends Jane M is positioned to drive meaningful growth with opportunities across categories age demographics geographies and gender.
Speaker Change: As the cornerstone of our branded platform the future for this business is incredibly bright.
Mimi Eckel Vaughn: With a data capture rate of 75% plus for customers in North America and growing loyalty and affinity programs across our concepts, we're enhancing our understanding of our customers' needs and driving up repeat purchase rates using our CRM platforms and more advanced analytics. For J&M, we're excited for the launch of the brand's refreshed marketing campaigns this spring. Powered by a new agency, this campaign aims to increase overall brand awareness and heat and attract a broader and younger consumer, while also changing the perception that J&M is still primarily a dress shoe resource.
Speaker Change: Now switching back to journeys, Andy and team have taken a deep dive on the business and put sharper focused on a turnaround program and growth strategy that will impact the customer through product marketing and experience and today I will highlight some key initiatives for this fiscal year, which are a mix of both strategic accelerators.
Speaker Change: <unk> and disciplined expense management.
Speaker Change: Number one drive product leadership and create marketplace differentiation.
Speaker Change: To continue improving journeys footwear leadership and assortment, we're implementing new strategies led by our recently appointed chief merchant to meaningfully increased product access and boost investment in key fashion athletic and casual brands.
Mimi Eckel Vaughn: Revamp social media content and organic social campaigns are key drivers of these efforts, along with new digital and in-store rollout. Finally, building out the shoe club loyalty offering will accelerate member signups and customer engagement. Turning now to our outlook for Fiscal 25, we continue to navigate volatile consumer behavior and are not assuming any significant change in the near term. As I mentioned, we anticipate a difficult first half with significant pressure in Q1 given the product challenges it faces and are planning the back half to be much stronger than the front as we make an aggressive push to reposition our assortment. Our guidance for the year reflects this view, with the expected front-half results impacting our ability to further grow EPS in fiscal 25, but with the product build we're putting in place, setting us up well for fiscal 26 and beyond.
Speaker Change: This includes diversifying and adding new key styles with our existing brand partners, increasing our leadership position with all our key brands enhancing in store, social and digital exposure to build awareness with our customer to shop journeys for these brands and working to add brands beyond those were traditionally known for.
Sure.
Speaker Change: Number two build the journeys brand and enhance the omni experience, we're intensifying efforts to build and promote journeys as an industry leading retail brand. We're currently onboarding a new creative agency to develop a new brand communication strategy, we plan to roll this out in the back part of the.
Speaker Change: The year, along with an updated brand mission vision and purpose and.
Speaker Change: In parallel, we're improving journeys brand presence and upgrading the customer.
Speaker Change: Customer experience with quick actions in both stores and online, including refreshed messaging and visuals that telecom Houston brand story across channels and social we're excited about the investment, we're making to personalize and improve the timeliness and relevance of our marketing communications as well we're all.
Mimi Eckel Vaughn: Before closing, I'd like to say that while this past year has truly tested us, I'm extremely proud of our resilience and drive to overcome the challenges we faced. None of this would be possible without our incredible, talented people. I'd like to thank you all for your tremendous efforts and for all the great work you will be doing in the coming year. And with that, I'll turn it over to Mimi.
Speaker Change: So evolving the all access loyalty program, where we signed up over 2 million members is six months continuing to provide an exciting feature rich program that differentiate journeys generates valuable consumer insights and encourages consumers to consolidate purchases across brands with us.
Thomas A. George: The headwinds and journeys, along with the inclement weather we faced in January, had a greater impact on our fourth-quarter financial performance than we initially anticipated. Relative to our revised guidance, the net earnings per share result was below our expectations, primarily due to expense pressures at Journeys, coupled with the lost store traffic and earnings resulting from January's unusually impactful snow and ice storm. Looking ahead, the efforts we've made and continue to make to contain expenses and drive productivity will better position us to withstand this pressure and emerge even stronger as sales growth returns. Turning to results for the quarter, consolidated revenue was $739 million, up approximately 2% compared to last year, driven by sales increases in all divisions other than Journey. Excluding the 53rd week, total sales declined 2%.
Speaker Change: Finally, we will ultimately pursue an updated store concept and next generation design to further enrich the customer experience.
Speaker Change: Number three leverage the power of our people. This initiative leverages the expertise of our store employees to set us apart by providing excellent service as a differentiator over.
Speaker Change: Over the past year, we've introduced new capabilities, including mobile point of sale and focus to improve efficiency and customer engagement and this year, we will further improve training and execution and rollout additional features like data informed suggestive selling.
Speaker Change: Number four optimized to drive operational and cost efficiencies.
Speaker Change: We're implementing several initiatives here, including continued efforts to optimize the store footprint closing unproductive stores and redirecting traffic in sales, while strategically opening mall and off mall locations and prioritized optimization projects focused on selling salaries rent expense inventory management.
Thomas A. George: Relative to our expectations, sales were largely in line with our revised guidance, with the exception of J&M, which was especially impacted by January's weather disruption. Total comps were down 4%. For journeys, although comps were negative 5%, the business continued to improve sequentially. Shoe comps were down 5% driven by storage.
Speaker Change: In digital marketing spend efficiency.
Speaker Change: In summary, overall I want to emphasize my belief and our team's ability to reshape our business unlock journeys considerable earnings potential.
Speaker Change: In addition, we're executing new initiatives to accelerate growth for shoe and Jane M. In fiscal 'twenty five all building off our footwear focused strategy I'll discuss a few select examples.
Thomas A. George: Even with the January shortfall, J&M comps increased a healthy 8%. By channel, total store comps were down 7% while direct comps were up 5%, with digital sales accounting for 27%, and total retail sales up from 25% last year. We ended the quarter with 69 fewer stores versus a year ago, largely the result of closing underperforming journey stores as we optimize our store footprint and drive productivity in our remaining store fleet. Overall gross margin was down 10 basis points compared to last year, which was ahead of our expectations due to lower plan promotions. With our consumer focused on purchasing key items, discounting was not as effective in driving sales, so we moderated our promotional stance. Relative to last year, Journey's gross margin was down 30 basis points due primarily to product mix shifts.
Speaker Change: With the data capture rate of 75% plus for customers in North America, and growing loyalty and affinity programs across our concepts. We're augmenting our understanding of our customers' needs and driving up repeat purchase rates using our CRM platforms and more advanced analytics.
Speaker Change: For <unk>, we're excited for the launch of the brands refreshed marketing campaigns. This spring powered by a new agency. This campaign aims to increase overall brand awareness and heat and attract a broader and younger consumer while also changing the perception that Jane M is still primarily address shoe.
Speaker Change: Resource.
Speaker Change: <unk>, social media content and organic social campaigns are key drivers of these efforts along with new digital and in store Rollouts.
Speaker Change: Finally building out the shoe club loyalty offering will accelerate member sign ups and customer engagement.
Speaker Change: Turning now to our outlook for fiscal 'twenty five we continue to navigate volatile consumer behavior and are not assuming any significant change in the near term as I mentioned, we anticipate a difficult first half with significant pressure in Q1, given the product challenges at journeys and are planning the back half to be much.
Thomas A. George: Chu's gross margin was down 10 basis points compared to last year, while JNN's gross margin was up 70 basis points, driven largely by lower freight expense and a favorable mix shift to retail versus wholesale, partially offset by higher retail markets. Lastly, Genesco's gross margin was up 420 basis points as we lagged last year's freight and logistics cost pressures and benefited from price increases this year. Moving down the P&L, adjusted SG&A expense was 41.1% of sales.
Speaker Change: Stronger than the front as we make an aggressive push to reposition our assortment.
Speaker Change: Our guidance for the year reflects this view with the expected front half results impacting our ability to further grow EPS in fiscal 'twenty, five but with a product build we're putting in place setting us up well for fiscal 'twenty and beyond.
Thomas A. George: 170 basis points above last year, with roughly 60 basis points of the increase attributable to the 53rd week. While the 53rd week added to our top line, it was a low sales volume week that was particularly dilutive to our bottom line. Thus, suggesting for the 53rd week, SG&A expenses were relatively flat in absolute dollars compared to last year.
Speaker Change: And before closing I'd like to say that while this past year has truly tested us I am extremely proud of our resilience and drive to overcome the challenges we faced none of this would be possible without our incredible talented people I'd like to thank you all for your tremendous efforts and for all the great work you will be due.
Thomas A. George: Despite additional variable expenses associated with our direct sales growth reflecting the impact and benefit of our cost savings. The increase in operating expenses relative to our guidance was primarily driven by journeys, in addition to the incremental cost of support higher than expected direct sales, product returns to our vendors resulted in greater than anticipated wage and freight pressure. Finally, we experienced additional store expenses, including IKIP and CCAR. Lowering overall occupancy costs and reducing the amount of fixed expenses in the store channel remains a key priority. In Q4, we achieved a 15% reduction in straight-line rent expense on 47 lease renewals across the company with an average term of approximately three years.
Doing in the coming year and with that I'll turn it over to Tom.
Thomas A. George: Thanks, Mimi the headwinds in journeys along with the inclement weather we faced in January had a greater impact on our fourth quarter <unk>.
Thomas A. George: <unk> performance than we initially anticipated.
Thomas A. George: Relative to our revised guidance. The net earnings per share result was below our expectations, primarily due to expense pressures at journeys coupled with the lost store traffic in earnings, resulting from january's, unusually impactful snow and ice storms looking.
Thomas A. George: Looking ahead. The efforts, we have made and continue to make to contain expenses and drive productivity.
Thomas A. George: Better position us to withstand this pressure and emerge even stronger.
Thomas A. George: Sales growth returns.
Thomas A. George: This brings our full-year fiscal 24 renewals to 202, resulting in a 15% reduction in straight-line rent expenses. With over 50% of our fleet coming up for renewal in the next couple years, we continue to have a lot of runway to capture additional savings. Although we've made nice headway on rent savings and savings on selling salaries, productivity, and hours, higher hourly wages have been an offset and remain a pressure point due to minimum wage and competitive increases, and we continue to work to mitigate that. In summary, for the fourth quarter, we realized adjusted operating income of $38.5 million compared to adjusted operating income of $51 million for Q4 last year. This all resulted in adjusted diluted earnings per share of $2.59 for the quarter versus earnings per share of $3.06 last year. For the 53rd week, operating income was an estimated loss of $2.6 million, or approximately $0.18 per share.
Speaker Change: Turning to results for the quarter.
Speaker Change: <unk> revenue was $739 million up approximately 2% compared to last year driven.
Speaker Change: Driven by sales increases in all divisions other than journeys.
Speaker Change: Excluding the 50 <unk> week total sales declined 2%.
Relative to our expectations sales were largely in line with our revised guidance with the exception of <unk>, which was especially impacted by january's weather disruptions.
Speaker Change: Total comps were down 4% for journeys, although comps were negative 5% the business continued to improve sequentially.
Speaker Change: <unk> comps were down 5% driven by stores, even with the January shortfall GM comps increased to healthy 8%.
Speaker Change: By channel total store comps were down 7%, while direct comps were up 5% with digital sales accounted for 27%.
Speaker Change: Retail sales up from 25% last year.
Speaker Change: We ended the quarter was 69 fewer stores versus a year ago, largely the result of closing underperforming journey stores as we optimize our store footprint and drive productivity in our remaining store fleet.
Speaker Change: Overall gross margin was down 10 basis points compared to last year, which was ahead of our expectations due to lower planned promotions at journeys with our consumer focused on purchasing key items discounting was not as effective in driving sales. So we moderated our promotional stance.
Thomas A. George: Turning now to capital allocation on the balance sheet, we ended the quarter in a slightly positive net cash position and generated approximately $108 million of free cash flow. We ended the year with clean inventories down 17% from last year. With respect to journeys, we worked with our brand partners to adjust inventory levels, enabling us to end the quarter with inventories 22% lower than last year and well positioned to bring newness and freshness to the assortment. In addition, our strong cash flow, balance sheet, and liquidity under our revolving line of credit provide the financial capacity to support all our strategic efforts. Capital expenditures in Q4 were $10 million, with the investments primarily directed to retail stores and our digital and omni-channel initiatives. We opened five stores, which were primarily off-mall, and closed 24, ending the quarter with 1,341 total stores.
Speaker Change: Relative to last year journeys gross margin was down 30 basis points due primarily to product mix shift shoes gross margin was down 10 basis points to last year, while <unk> gross margin was up 70 basis points, driven largely by lower freight expense and a favorable mix shift to retailers.
Speaker Change: <unk> wholesale.
Speaker Change: Partially offset by higher retail markdowns lastly, genesco brands gross margin was up 420 basis points as we lap last year's freight and logistics cost pressures and benefited from price increases this year.
Speaker Change: Moving down the P&L adjusted SG&A expense was 41, 1% of sales 170 basis points above last year with roughly 60 basis points of the increase attributable to the 50 <unk> week.
While the 50 <unk> week added to our top line. It was a low sales volume week that was particularly dilutive to our bottom line.
Thomas A. George: Lastly, we didn't repurchase any shares during the quarter, but we locked back 10% over the year, and our current authorization remains at $52 million. During the past five years, we have repurchased almost 50% of our outstanding shares. Regarding cost savings, when you combine our efforts to increase the variability of our cost structure with savings under our cost savings plan, we made meaningful progress on expense reductions in fiscal 24. Our updated plan now targets a reduction in annualized run rate before reinvesting of $45 to $50 million by the end of fiscal 25, which is above our original target of $40 million. We expect savings from reduced store rents, selling salary productivity gains, reduced warehouse and logistics costs, and reduced Freight Costs from the Inventory Optimization Initiative. With respect to store closures, we closed 94 Journey stores in fiscal 24, or roughly 8% of the total fleet. These were primarily mall-based locations.
Speaker Change: Adjusting for the 50 <unk> week SG&A expenses were relatively flat in absolute dollars compared to last year. Despite additional variable expenses associated with our direct sales growth, reflecting the impact and benefit of our cost savings initiatives.
Speaker Change: Kris and operating expenses relative to our guidance was primarily driven by journeys. In addition to the incremental cost to support higher than expected drug sales product returns towards vendors resulted in greater than anticipated wage and freight pressure.
Speaker Change: Finally, we experienced additional store expenses.
Speaker Change: Including occupancy cost.
Speaker Change: Lowering the overall occupancy cost and reducing the amount of fixed expense in the store channel remains a key priority.
Speaker Change: In Q4, we achieved a 15% reduction in straight line rent expense on 47 lease renewals across the company with an average term of approximately three years.
Speaker Change: This brings our full year fiscal 'twenty four renewals to 202, resulting in 15.
Speaker Change: 15% reduction in straight line rent expense with over 50% of our fleet coming up for renewal in the next couple of years. We continue to have a lot of runway to capture additional savings. Although we've made nice headway on rent savings and savings on selling salaries productivity and hours.
Thomas A. George: At Fiscal 25, we are aiming to close up to 50 more Journey stores. Savings from these closures will eliminate approximately $14 million of annualized costs from SG&A expense, which adds to the roughly $25 million of annualized savings from the stores closed this past year and is in addition to the $45 to $50 million of run rate savings we expect to achieve by the end of this year. The goal of these cost savings and store closure programs is to gain better expense leverage and operating margin expansion, even with modest increases in sales. Now, turning the guide.
Speaker Change: Higher hourly wages has been an offset and remains a pressure point due to minimum wage and competitive increases.
And we continue to work to mitigate that.
Speaker Change: In summary for the fourth quarter, we realized adjusted operating income of $38 5 million compared to adjusted operating income of 51 million for Q4 of last year.
Speaker Change: This all resulted in adjusted diluted earnings per share of $2 59 for.
Speaker Change: For the quarter versus earnings per share of $3 <unk> last year.
Speaker Change: For the 50 <unk> week operating income was an estimated loss of $2 6 million or approximately <unk> 18 per share.
Speaker Change: Turning now to capital allocation and the balance sheet. We ended the quarter in a slightly positive net cash position and generated approximately $108 million of free cash flow.
Thomas A. George: Recognizing that we're starting this year in a difficult position given the product challenges we are facing, I'd like to start providing some specifics around Q1, starting with the top line. We don't expect to see the demand curve improve within Journey's core product assortment, which makes up a sizable portion of our spring business. That pressure will make it difficult to drive sales growth. As such, we expect a mid to high single-digit sales decline versus last year driven primarily by Journeys and to a lesser extent, Genesco Brands. Regarding Q1 gross margins, we expect an overall gross margin decrease of $40 to $50 basis points, mostly due to product makeshifts at Journeys and Shoe.
Speaker Change: We ended the year with clean inventories down 17% from last year.
Speaker Change: With respect to journeys, we work with our brand partners to adjust inventory levels.
Speaker Change: Enabling us to end the quarter with inventories, 22% lower than last year, and well positioned to bring newness and freshness to the assortment. In addition, our strong cash flow balance sheet liquidity under our revolving line of credit.
Speaker Change: <unk> has the financial capacity to support all of our strategic efforts.
Speaker Change: Capital expenditures in Q4 were $10 million with investments, primarily directed to retail stores and our digital and Omnichannel initiatives. We opened five stores, which were primarily off mall and closed 24 ending.
Speaker Change: Ending the quarter with 1341 total stores.
Speaker Change: Lastly, we didn't repurchase any shares during the quarter bought back 10% over the year in our current authorization remains at $52 million.
Thomas A. George: As Q1 is also one of our lower volume quarters with expenses at minimum levels and largely fixed, the sales decline will result in roughly 320 to 350 basis points of SG&AD leverage, resulting in an earnings per share loss of approximately $1.10 more than we lost in Q1 last year. Moving to the full year, we are confident that our turnaround strategy at Journeys can begin to drive improvements in the back half, especially for the holiday season. Since this is a transition year for journeys, we believe it's prudent to adopt a cautious view throughout fiscal 25, with opportunities for a more significant rebound in fiscal 26. We're also taking a more conservative view for SHU and J&M as they both cycle robust multi-year comparisons. Taking this all into account, we expect fiscal 25 total sales to decrease; we're down 2% to 3% or down 1% to 2% when excluding the 53rd week last year. The variance between the high and the low end of the range is primarily due to uncertainty in the consumer and macroeconomic environment. , and Dan H.
Speaker Change: Over the past five years, we have repurchased almost 50% of our outstanding shares.
Speaker Change: Regarding cost savings when you combine our efforts to increase the variability of our cost structure with savings under our cost savings plan, we've made meaningful progress on expense reductions in fiscal 'twenty four.
Speaker Change: Our updated plan now targets a reduction in annualized run rate before reinvesting of $45 million to $50 million by the end of fiscal 'twenty five.
Speaker Change: Which is above our original target of $40 million, we expect savings from reduced store rents selling salary productivity gains.
Speaker Change: Warehouse and logistics costs and reduce freight costs from inventory optimization initiatives with respect to store closures. We closed 94 journeys stores in fiscal 'twenty for roughly 8% of the total fleet.
Speaker Change: These were primarily mall based locations.
Speaker Change: For fiscal 'twenty five we are aiming.
Aiming to close up to 50 more journeys stores savings from these closures will eliminate approximately $14 million of annualized cost for SG&A expense, which adds to the roughly $25 million of annualized savings from the stores closed. This past year and is in addition to the $45 million to $50 million of run rate.
Speaker Change: Savings, we expect to achieve by the end of this year.
Thomas A. George: .. .. .. .. ...
Thomas A. George: , Back to school on holiday gives us the opportunity to generate profitability on higher sales. Net-net, we expect improvement over last year to be weighted to Q4 as further pivoting the journey's assortment will take time. We expect gross margin rates to be flat to up 10 basis points for the year, with improvement at SHU mitigating some product and channel mix pressure. Adjourned.
Speaker Change: The goal of these cost savings and store closure programs is to gain better expense leverage and operating margin expansion, even with modest increases in sales now turning to guidance.
Speaker Change: Recognizing that we're starting this year in a difficult position given the product challenges we are facing.
Speaker Change: I'd like to start providing some specifics around Q1.
Speaker Change: Starting with the topline.
Speaker Change: We don't expect to see the demand curve improve within journeys core product assortment, which makes up a sizeable portion of our spring business.
Speaker Change: That pressure will make it difficult to drive sales growth.
Thomas A. George: As a percentage of sales, we expect adjusted SG&A to range from D leverage of 30 basis points to flat, with the cost reduction efforts I described earlier and other actions working to partially offset de-leverage on fixed expenses. All these inputs result in an operating margin that is in the range of Fiscal 24's operating margin. Our guidance assumes no additional share repurchases, which results in Fiscal 25 average shares outstanding of approximately $11.3 million, and we expect the tax rate to be approximately 26%.
Speaker Change: As such we expect a mid to high single digit sales decline versus last year, driven primarily by journeys.
Speaker Change: And to a lesser extent genesco brands group.
Regarding Q1 gross margins, we expect an overall gross margin decrease of.
Speaker Change: A 40% to 50 basis points, mostly due to product mix shift at journeys and Schuh. As Q1 is also one of our lower volume quarters with expenses at minimum levels and largely fixed the sales decline will result in roughly 320 to 350 basis points of SG&A deleverage, resulting in it.
Speaker Change: Earnings per share loss of approximately $1 10 since more than we lost in Q1 last year moving to the full year. While we are confident that our turnaround strategy at journeys can begin to drive improvements in the back half.
Operator: In closing, we are taking aggressive actions to accelerate our journey's turnaround. While those efforts will take a little time to create impact in the P&L, we believe they will best position us to unlock Journey's considerable earnings potential, return to growth, and create meaningful shareholder value. Operator, we are now ready to open the call for questions. Thank you. We will now be conducting the question and answer session. If you'd like to ask a question today, please press star 1 on your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to withdraw your question from the queue.
Speaker Change: Especially for a holiday.
Speaker Change: Since this is a transition year for journeys, we believe it's prudent to adopt a cautious view throughout fiscal 'twenty five with.
Speaker Change: With opportunity for our more significant rebound.
Speaker Change: <unk> 2006.
Speaker Change: We're also taking a more conservative view for shoe and Jane M. As they both cycle robust multi year compares.
Speaker Change: This all into account, we expect fiscal 'twenty five total sales to decrease 2% to 3% or down 1% to 2% when excluding the 50 <unk> week last year the <unk>.
Speaker Change: <unk> between the high and the low end of the range is primarily due to uncertainty in the consumer and macro environments, particularly in the UK regarding EPS, we expect adjusted earnings per share in the range of 60 to $1.
Operator: For participants who are using speaker equipment, it may be necessary to pick up your handset before pressing the start key. One moment, please, while we poll for questions. Thank you, and our first question is from the line of Jeff Lick with B Riley Securities. Good morning, guys. Thanks for taking the question. I've got a three-parter here.
Speaker Change: Expect the challenging first half to give way to a positive earnings in the back half.
Back to school and holiday to give us the opportunity to generate profitability on the higher sales net net we expect improvement over last year to be weighted to Q4 as further pivoting the journeys assortment will take time.
Speaker Change: We expect gross margin rates to be flat to up 10 basis points for the year with improvement at shoe mitigating some product and channel mix pressure at journeys.
Speaker Change: As a percentage of sales, we expect adjusted SG&A to range from deleverage of 30 basis points to flat.
Jeff Lick: First off, you know, in January, it appears that journey sales actually got better. You know, if you look at Pre-release, Comp was down six, it ended up being down five. You know, weather was bad.
Speaker Change: With the cost reduction efforts I described earlier and the other actions working to partially offset deleverage on fixed expenses.
Speaker Change: All of these inputs result in an operating margin that is in the range of fiscal 'twenty four as operating margin guide.
Mimi Eckel Vaughn: I was wondering if you could expound on that. And then, just building on that, you referenced product challenges in your script. I'm just kind of curious, you know, product challenges for the first half, first quarter, what specifically those are. And then the big kind of head-scratcher question is that, you know, the implication was, or the thought was, sales were the issue, but it appears that it's expenses, and you referenced unanticipated expenses. And just to put a point on this, you know, in 2019, you did 317 million dollars This year, you did 342 million, excluding stores, but your SG&A is 43 million higher. So it appears that the issue here might be expenses more than it is sales or gross profit. So I was wondering if you could unpack that for us. Jeff, thank you for all those questions. And let's take them one at a time.
Speaker Change: Guidance assumes no additional share repurchases, which results in fiscal 'twenty five average shares outstanding of.
Speaker Change: Of approximately $11 3 million and we expect the tax rate to be approximately two.
Speaker Change: 26%.
Speaker Change: Closing, we're taking aggressive actions to accelerate our journey is turnaround.
Speaker Change: Those efforts will take a little time to create impact in the P&L. We believe they will best position us to unlock journeys considerable earnings potential.
Speaker Change: Turn to growth and create meaningful shareholder value.
Speaker Change: Operator, we're now ready to open the call for questions.
Speaker Change: Thank you well now be conducting a question and answer session.
Speaker Change: Do you like to ask a question today. Please press star one from your telephone keypad and a confirmation tone will indicate your line is in the question queue.
Speaker Change: You May press star two if you'd like to withdraw your question from the queue.
Speaker Change: For participants are using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Speaker Change: One moment. Please we poll for questions. Thank you.
Thank you and our first question is from the line of Jeff Lick with B Riley Securities. Please proceed with your questions.
Mimi Eckel Vaughn: So you asked if Journey's sales got better in January, and in fact, in January, Journey's sales did get better. I'll just remind you of the cadence of the quarter that we started out nicely in November, with a very nice Black Friday weekend, and then sales gave some back in December, and then picked up in January.
Jeff Lick: Good morning, guys. Thanks for taking the question.
Jeff Lick: Kind of a three parter here first off.
Jeff Lick: In January it appears that journey sales actually got better if you look at.
Jeff Lick: The pre release.
Speaker Change: <unk> was down six it ended up being down five.
Weather was bad I was wondering if you could just expound upon that and then just building on that you referenced Tom in your <unk>.
Mimi Eckel Vaughn: And I'll also say that in December, in particular, we saw that customers coming to our stores, traffic was up, but in fact, they were very focused on select items and were shopping only for those things, those must-have key items. And we can always convert our customers to other things, but it was challenging this year, just given some of the other pressures, economic pressures. And so as we got into January, we saw that what really took off with our e-commerce business. We've been working on e-com for the last many years, and we're delighted to see some of the growth. There were a lot of winter storms, and our Journey's customers went online.
Script product challenges I'm, just kind of curious product challenges for the first half first quarter, what specifically those are the big kind of head scratch. Your question does it.
Speaker Change: The implication was that.
Speaker Change: What is the thought that the sales was the issue, but it appears that its expenses and you referenced unanticipated expenses and just to.
Speaker Change: Put a point on this.
Speaker Change: 2019, you did $317 million of gross profit dollars. This year, you did $342 million.
Speaker Change: I have less stores, but your SG&A is $43 million higher so it appears that the issue here might be expenses more than it is sales or gross profit. So I was wondering if you could unpack that for us.
Speaker Change: Yes.
Speaker Change: Jeff. Thank you for all those questions and let's take them one at a time. So you asked about in January journeys sales got better and in fact in January.
Mimi Eckel Vaughn: We were driving some of those sales with clearance product, and so there was some appetite for clearance product as well. I would say that that's what helped January. And then just talking about product challenges that are specific to Q1, before I hand it over to Tom, we have made a lot of progress on Journey's over the course of this year. Where we started the year, we came into the year, and after relatively flattish sales the year before, saw a pretty significant drop, as the consumer just had a great appetite for newness and wanted to buy different things than they had been buying before. We had some record years coming out of the pandemic, and I think the pendulum has swung back the other way.
Speaker Change: Journeys sales did get better I'll, just remind you of the cadence of the quarter that we started out nicely in November with a.
Speaker Change: Very nice Black Friday weekend, and then sales gave some back in December and then picked up in January and I'll also say that in December in particular, we saw that the customer thats coming to our stores.
Speaker Change: Traffic was up but in fact, we they were very focused on select items and we're shopping only for those things those must have key items and we always can convert.
Mimi Eckel Vaughn: And so we have been working all year to be able to fill that gap that started at 14%. And again, we've made a lot of progress here. What we do see here is that Journey's sells a variety of products, both fashion, athletic, and also the casual products that we have been talking about.
Speaker Change: Our customers to other things, but it was challenging this year just given some of the other other pressures economic pressures and so as we got into January we saw that.
Speaker Change: What really took off was our e-commerce business, we have been working to grow E. Com over the last many years and we're delighted to see some of the growth there were a lot of winter storms.
Mimi Eckel Vaughn: And Journey's is quite well positioned to take advantage of this. What we saw is that the product that we knew was hot and would sell, and that we chased into for the fourth quarter, sold very nicely. But what we also saw is that some of the core products that we expected better sell-through rates on, there was not as much take-up on the part of the consumer.
Speaker Change: Journeys customer went online we were driving some of those sales with clearance product and so there was some appetite for clearance product as well I would say that.
Speaker Change: That's what helped that's what helps that's what helped January and then just talking about product challenges that are specific to Q1 before I hand, it over to Tom We have made a lot of progress on journeys over the course of this year, where we started the year we came in.
Mimi Eckel Vaughn: And that's the product that we're talking about that we are going to have challenges with in the first half of the year. And just given the product lead times, we've got a new head of Journey's. We've got a new chief merchant at Journey's.
Thomas A. George: The year end after relatively flat flattish sales a year before saw a pretty significant drop as the consumer just had a great appetite for newness and wanted to buy different things than they had been buying before we had some record years.
Mimi Eckel Vaughn: They are both chasing aggressively into product that we believe is going to move the needle even further. And they have merchant backgrounds, and they bring the right expertise and the right relationships to improve even further on the relationships that we have. And so we're chasing additional product that will really hit in the back part of the year. We see fashion broadening, and teens embracing just more wearing occasions.
Thomas A. George: Coming out of the pandemic and I think the pendulum swung back the other way and so we have been working all year to be able to fill that gap that started down 14% and again, we've made a lot of progress here.
Thomas A. George: We do see here is that.
Thomas A. George: That journeys sells a it's the destination where teens go for a variety of product.
Mimi Eckel Vaughn: And I think over the longer term, that is going to be good for us, both on the fashion and athletic side. And so there are some interesting things happening on the apparel side as well. And it's the chase into the greater appetite for newness and freshness, and then specifically around the brands that we know are really resonating with the consumer today and will be resonating with the consumer as we anticipate we go through the year.
Thomas A. George: Both fashion athletic and also the.
Thomas A. George: Casual product that we have been talking about in journeys is quite well positioned to take advantage of this.
Thomas A. George: What we saw is that.
Thomas A. George: The product that we knew was hot and with sell in that we chased into for the fourth quarter sold a very nicely, but what we also saw is that some of the core product that we expected better sell through rates on there was not as much take up on the part of the consumer and that's the product that we're talking about.
Jeff Lick: Yeah, Jeff, let me try to tackle it on the expenses and hit some of the points. I think the first one was an understanding of the expenses in January. And we did have some additional expenses more than we originally anticipated in Journey's, and it was around the store channel. Some of it was the occupancy costs for Journey's, and some of that was related to just some of the final timing of some store closures there, as well as some additional costs. In January, over and above what we expected, we processed some significant returns to vendors, and as a result of that, the good news is we got our inventories down at the end of the year, and journeys down about 22% compared to the prior year. So there was some return on those additional expenses. And then there were just some other additional store expenses related even to labor to process that return to the vendor. So that's the January number.
Thomas A. George: We are going to have challenges on and in the first half of the year and just given that the product lead times.
Thomas A. George: We've got a new head of journeys, they've got a new chief merchant and journeys. They are both chasing aggressively into product that we believe is going to move the needle even further.
Thomas A. George: And they have merchant backgrounds, and they bring the right expertise and the right.
Thomas A. George: Alright relationships to improve even further on the relationships that we have and so we're chasing into additional product that will really hit in the back part of the year, we see fashion broadening and teens embracing just more wearing occasions and I think over the longer term that is going to be good.
Thomas A. George: For us both on the fashion athletic and on the casual side and so there are some interesting things happening on the apparel side as well and it's chasing into the greater appetite for newness and freshness and then specifically around the brands that we know are really resonating with the consumer today and will be resonating with.
Thomas A. George: When you look at expenses relative to calendar 19, our fiscal year 20, an important thing to point out is that there's been a huge transformation in the business in that there's been a huge movement towards our direct business in all our businesses, especially journeys. With that growth in our e-commerce business, there's an investment operating, so you need to consider that when you're considering the growth in expenses.
Thomas A. George: The consumer as we anticipate we go through the year and I will turn over to Tom.
Thomas A. George: Last question, Jeff, Let me try to tackle on the expenses and hit some of the points. So I think the first one was an understanding of the expenses in January and we did have some additional expenses more than we originally anticipated and journeys and it was around the store channels. Some of it was the.
Thomas A. George: And I think another thing to point out on expenses, in terms of when you look at our guide going forward to next year, you can see that that implies a significant reduction in our expenses going forward. So we feel good where we're at on expenses, and when you look at that guide, you can see the traction we're getting taking expenses out. And just another thing back in fiscal year 24, we got a lot of traction within the Journey store channel taking expenses out, and feel good where we're at. I'm curious with regard to the final timing of store closures, returns to vendors, you know, the labor that's associated there. I mean, it seems like it might have been tempting to kind of put those in non-recurring, which you did not. Any thoughts there? And perhaps any guidance as to what that amount might have been?
Thomas A. George: The occupancy cost for journeys and some of that's related to just some of the final timing of some store closures there as well as we had some additional cost in January over and above what we expected processing some significant returns to vendors and as a result of that the good news is we got.
Thomas A. George: Our inventories down at the end of the year at journeys is down about 22% related to the prior year. So there was some return on those additional expenses and then there was just some of the other additional store expenses related to even the labor to process that return to vendor.
Thomas A. George: That's the January number when you look at expenses relative to COVID-19, our fiscal year 'twenty.
Thomas A. George: <unk> thing to point out there is theres been a huge transformation in the business and that theres been a huge movement towards our direct business.
Thomas A. George: All in all our businesses, especially journeys.
Thomas A. George: The growth in our E Commerce business, there is an investment operating expenses.
Thomas A. George: It's normal course, so those are situations we can't necessarily put them down as non-recurring. So, you know, we were hoping to use the conference call here to get into conversations about some of those one-time type of things. Yeah, we had an aggressive push, and I think the great news is that we are in terrific shape in our inventory. And so we did that without having to take an excessive amount of markdowns, and so we're really clean.
So.
Thomas A. George: That you need to consider that when you are considering.
The growth in expenses and I think another thing to point out.
Thomas A. George: On expenses in terms of when you look at our guide going forward to next year and you can see that that implies a significant reduction in our expenses going forward. So we feel good where we're at on expenses and when you look at that guide you can see the traction we're getting taken expenses out and just another thing.
Thomas A. George: Back on fiscal year 'twenty four we got a lot of traction within the journeys store channel taking expenses out so.
Feel good where we're at follow up then.
Speaker Change: Jeff Tom I'm, just curious with regards to the final timing of store closers returns to vendors.
Mimi Eckel Vaughn: We've got ample open to buy to chase into the product that we know we will bring in during the course of the year. And so I think that that's a positive, and we have a chance to be able to push back more inventory that didn't work to our brand partners, who've been exceptional at working with us and are excited about being able to work with us to bring new styles in and to bring in, you know, to feed some of the trends like clogs and the fashion athletic that we see a lot of appetite for. Okay, no, thanks very much.
Speaker Change: The labor that's associated there I mean, it seems like it might have been tempted attempting to kind of put those are nonrecurring, which you did not.
Speaker Change: Any thoughts there and what maybe any guidance as to what that amount might have been.
Speaker Change: Yes.
Speaker Change: It's normal course, so we really those are situations, we can't necessarily put them down into nonrecurring. So we were hoping to use the conference call here to get into conversations about some of it was one time type of thing, yes, we had.
Speaker Change: Aggressive push and I think the great news is that we are in terrific shape and our inventories earnings was down more than 20% and so that and we did that without having to take an excessive amount of markdowns and so are really clean we've got.
Speaker Change: Ample open to buy to chase into the product that we know we will bring in during the course of the year and so I think that that's that's the positive and we had a chance to be able to push back more inventory that didn't work to our brand partners have been exceptional working with us and are excited about being able to work with us to bring new styles.
Jeff Lick: I'm taking up too much time, so let some others ask some questions. Best of luck in Q1. All right, thank you. Our next question is from the line of Corey Tarlowe with Jeffries.
Corey Tarlowe: Please proceed with your question. Good morning, and thanks for taking my question. Mimi, longer term in nature, curious about the go forward margin trajectory for the business and what the right margin profile is. What are the building blocks to get you to that level over a multi-year time horizon? Corey, thank you for the question. To talk about the different parts of our business, we were delighted to see that both Johnston Murphy and SHU had, you know, back to back record years. We have done a lot of work there; the consumer changed a lot during the pandemic. Both of those businesses were quite challenged a couple years ago.
And in and to bring in.
Speaker Change: To feed some of the trends like clogs and the fashion athletic that that we see a lot of appetite for.
Speaker Change: Okay. Thanks very much.
Speaker Change: Taking up too much time, so I'll, let some others ask some questions best of luck in Q1.
Speaker Change: Thank you.
Speaker Change: Our next question is from the line of Cory <unk> with Jefferies. Please proceed with your question.
Cory: Good morning, and thanks for taking my question.
Cory: Mimi longer term in nature curious to how you think about the go forward margin trajectory for the business and what the right margin profile for the enterprise might be.
Cory: More broadly and what are the building blocks to get you to that level over a multiyear time horizon.
Speaker Change: Alright, Thank you for the question.
Speaker Change: To talk about the different parts of our business. We were delighted to see that boasts Johnston <unk> Murphy and schuh had.
Speaker Change: Back to back record years, we have done a lot of work there that consumer changed a lot during the pandemic.
Mimi Eckel Vaughn: And we put our heads down and did the work to really turn around those businesses and took the actions around product, marketing, and technology to be able to get those businesses back to, you know, mid single-digit levels of operating income where they achieved historically. And so what we're talking about right now is journeys. And, you know, the journeys value proposition is very strong. We've been through many cycles before where we have come out ahead. This time around, it was unique because there were so many factors at play. And we do believe it's a cycle that we're in. We have a lot of confidence in the journeys business. It's the go-to place for teams.
Speaker Change: Are those businesses were quite challenged a couple of years ago.
Speaker Change: And we put our heads down and did the work to really turn around those businesses and took the actions around product and marketing and technology to be able to get those businesses back to.
Speaker Change: Mid single digit levels of operating income, where they have achieved historically and so what we're talking about right now is journeys and.
Speaker Change: Journeys value proposition is very strong.
Speaker Change: Been through many cycles before where we have come out ahead.
Speaker Change: At this time around it was unique because there's so many factors at play and we do believe it's a cycle that we're in we have a lot of confidence in the journeys business. It's the go to place for teens.
Mimi Eckel Vaughn: It plays such an important role in just their selection of fashion footwear items. Our brand relationships are terrific as well. We're very important to our brands, and we've got some terrific dialogue going on with our brands today to talk about bringing in new products to be able to fill the appetite of our teams. The next thing I'd say is that journeys is a really resilient business. If you go back and look at our track record of navigating both economic headwinds and fashion shifts, we have successfully navigated that, you know, in the recent past and in the less recent past as well. And the beauty of our model is that we can shift into brands that are hot; we can rotate the assortment.
Speaker Change: It plays such an important role in just there.
Speaker Change: Their selection of fashion footwear items, our brand relationships are terrific as well, we're very important to our brands and we've got some terrific dialog going on with our brands today to talk about bringing in new product to be able to fill the appetite for our teams. The next thing.
Speaker Change: I would say is that journeys is a really resilient business. If you go back and you look at our track record of navigating both economic headwinds and fashion shifts.
Speaker Change: We have successfully navigated that.
Speaker Change: In the recent past and in the last recent past as well and the beauty of our model is that we can shift into brands that are hot we can rotate the assortment and theres a lot of leverage in our business. So structurally speaking.
Mimi Eckel Vaughn: And there's a lot of leverage in our business. So structurally speaking, the things that have changed are what Tom talked about, that there's a lot more opportunity for digital. And our digital business is not only profitable, but it's nicely accretive because we've got double-digit profitability within digital, we have a chance to grow journeys. The digital business shoe is at 40%, and journeys is less than half of that. So that will certainly help over the longer term. And we've taken a lot of actions to bring our cost base down, you will see that in the journeys overall P&L, both by closing less productive stores and also by working on productivity and overall expenses. And so that allows us to leverage at very low levels of comp.
Speaker Change: Things that have changed is what Tom talked about that there is a lot more opportunity for digital and our digital business is not only profitable, but it's nicely accretive because we've got double digit profitability within digital we have a chance to grow journeys digital business. She was at 40.
Speaker Change: Percent journeys is less than half of that so that will certainly help over the longer term.
And we've taken a lot of actions to bring our cost base down you will see that in journeys overall P&L, both by closing less productive stores and also by working on productivity and overall expenses and so that allows us to leverage at very low levels of comp, they're really big issue.
Mimi Eckel Vaughn: The really big issue here, and Tom talked about that as well, is that we've de leveraged the expense base on the negative store comp. And so the solution to that is to build that back and drive sales. And so when we talk about the most important initiatives, it is around driving sales, it is around being able to drive newness and freshness into the product assortment to drive store sales and online sales.
Speaker Change: Here and Tom talked about that as well is that our.
Speaker Change: <unk> deleverage the expense base on the negative store comp and so the solution to that is to build that back and to drive sales and so when we when we talk about the most important initiatives. It is around driving sales is around being able to do.
Speaker Change: To drive newness and freshness into the product assortment to drive store sales and online sales and I see no reason why we won't go back to historical levels of profitability for journeys certainly in the mid single digit range and it takes positive comps should be able to get us there maybe one more thing I'd add.
Mimi Eckel Vaughn: And I see no reason why we won't go back to historical levels of profitability for journeys, certainly in the mid single-digit range, and it takes positive comps to be able to get us there. Maybe one more thing I'd add, Corey, is on the branded side of the business. Johnson and Murphy and our Genesco branded group, we're getting a lot of traction in terms of improving our gross margins. And we have a roadmap going forward to continue to improve our gross margins on the branded side of the business. So that's as well as a driver going forward to improve the overall company operating. Great, thanks. And then just to double click on gross margins, sounds like there's the expectation for fail to be down here, but gross margin on the up. So, could you just maybe walk through?
Speaker Change: Corey is on the branded side of the business Johnston <unk> Murphy and our Genesco branded group.
Speaker Change: We're getting a lot of traction in terms of improving our gross margins and we have a roadmap going forward to continue to improve our gross margins on the branded side of the business. So that's as well as a driver going forward to improve the overall company operating margin.
Speaker Change: Great.
Speaker Change: And just to double click on.
Speaker Change: Gross margin.
Speaker Change: It sounds like there is the expectation or.
Speaker Change: Sales to be down this.
Speaker Change: This year, but gross margin to be up.
Speaker Change: So.
Speaker Change: Could you just maybe walk through.
Thomas A. George: how to get to that from the first quarter through the full year, and what the underlying drivers are, and maybe rank the drivers at the coach. Yeah, let me start, and then I'll hand it to Tom. But, you know, I think we have been in a position where we've kept our inventories really clean through the course of the year. So we haven't seen any markdowns at all near the level of others in our industry. And in fact, we outperformed gross margin in the fourth quarter. So we don't, and, by the way, the industry is more cleaned up than it was when we started the fourth quarter. And so we don't anticipate that we will have a lot of pressure from markdowns given how clean our inventories are.
Speaker Change: How to get to that.
From the first quarter through the full year and what are the underlying drivers are and maybe rank the drivers if he could.
Speaker Change: And let me start and then I'll hand, it to Tom, but I think we have been in a position where we have kept our inventory is really clean.
Thomas A. George: Through the course of the year. So we haven't seen any we haven't taken markdowns at all near the level of others in our industry and in fact, we outperformed gross margin in the fourth quarter. So we don't and by the way the industry is more cleaned up than it was when we started the fourth quarter and so we.
Thomas A. George: Don't anticipate that we will have a lot of pressure from markdowns given how clean our inventories are theres, a little bit of pressure from mix because of the the.
Mimi Eckel Vaughn: There's a little bit of pressure on mix because of the, you know, the brand mix and both in both journeys and shoes, but that's offset by some other initiatives that we have underway to help on gross margin. So I think we're, we're anticipating it will be up a bit and I'll hand it to Tom to talk about that. Yeah, in total, we expect it to be flat to up a bit for the year, and Mimi hit on one of the bigger points in terms of the promotional environment we're expecting on the journey side. Another thing to consider is with our shoe business; we continue to work on and have initiatives in place to continue to drive gross margin improvement there as well. So we'll see some of that.
Thomas A. George: The brand mix in both.
Thomas A. George: Journeys and schuh, but thats offset by some other initiatives that we have underway to help on gross margin. So I think we are anticipating it will be up a bit and I'll hand to Tom to talk about that in total we.
Thomas A. George: Expect it to be flat to up a bit for the year and maybe you hit on one of the bigger points in terms of the promotional environment. We're expecting on the journey side. The other thing to consider is with our shoe business. We continue to work and have initiatives in place to continue to drive gross margin improvement there as well so we will see some of that.
Thomas A. George: Some of that is great contracts we've renegotiated. We've got more efficiency within our distribution centers. So both in the US and the UK, that will allow us to have more efficient warehouse, warehousing, and distribution expenses.
Thomas A. George: Some of that is freight contracts, we've renegotiated we value more efficiency within our distribution centers. So both in the U.
Thomas A. George: In the UK that will allow us to have more efficient warehouse warehousing and distribution expense and then.
Thomas A. George: And then on the brand side of the business, we expect to see some improved margins there as well. But one thing to point out in terms of the cadence is that in the first quarter, we're expecting some decline in gross margin, and that's mainly around the IMO mix in both journeys and shoes in the first quarter. And that seems to moderate as the rest of the year goes by. Great, thank you so much for all the help. Our next questions will be coming from the line of Mitch Kummetz, Seaport Research.
Thomas A. George: On the branded side of the business, we expect to see some improved margins there as well, but one thing to point out in terms of the cadence in that in the first quarter were expecting it.
Thomas A. George: Some decline in gross margin and Thats, mainly around the iron loan mix in both journeys and schuh in the first quarter and that seems to moderate as the rest of the year goes by.
Speaker Change: Great. Thank you so much for all the color.
Speaker Change: Thank you. Our next question will be coming from the line of Mitch <unk> with Seaport Research. Please proceed with your questions.
Mitchel John Kummetz: I'm pleased to see you with your questions. Yes, thank you. Can you guys hear me okay? I'm having some phone issues.
Mitch: Yes. Thank you can you guys hear me, okay, I'm, having some phone issues.
Operator: We can. We can. I've got a handful of questions.
Mitch: We can we can okay.
Mitch: I've got a handful of questions I'm going to maybe just do these one by one.
Mitchel John Kummetz: I'm going to maybe just do these one by one. First, on Journeys, you mentioned the sequential improvement in 4Q. Has that continued through, you know, through February, or have you seen business kind of fall back? Yeah, so when you think about the fourth quarter, I just talked about January picking up a bit. The key here, Mitch, is that what emerged over the holidays is that our consumer moved further away from core products. And while we made improvements in terms of the winter assortment that we brought in and the newness and the freshness, it's the core product that the consumer moved further away from.
Mitch: First one on journeys you mentioned the sequential improvement in.
Mitch: For Q is that continued through.
Mitch: Through February or have you seen the business kind of fall back again.
So when you.
Mitch: Think about the fourth quarter I, just talked about January picked up a bit.
Mitch: The key here Mitch is that what emerged over the holidays is that our consumer move further away from core product.
Mitch: And while we made improvement in terms of the winter assortment that we brought in and the newness and the freshness of the core product that the consumer moves further away from and that is core product that we anticipated to carry into the spring and that's really what we have been focused on in terms of.
Mimi Eckel Vaughn: And that is a core product that we anticipated to carry into the spring. And that's really what we have been focused on in terms of our outlook for the first quarter, knowing that we'd have pressure as a result of that. And so we wouldn't anticipate that trend would pick up further.
Mitch: Our outlook for the first quarter that we would have pressure as a result of that and so we wouldn't anticipate that that trend would pick up further we have had nice sequential improvement, but we expect that will sort of be where we are at least for the first quarter of the year that will improve a little bit as we can bring product in an effect.
Mimi Eckel Vaughn: We have had nice sequential improvement, but we expect that we'll sort of be where we are, at least for the first quarter of the year. That will improve a little bit as we can bring product in and affect the trend in the back part of the second year, and even more pick up in the third quarter. And we have a huge push in the fourth quarter, just given the overall lead times for footwear, which are in the range of six months. And then on journeys, so you're expecting journeys comp to be down by bid singles for the year, I believe, if I read the presentation correctly. It sounds like from a sales standpoint that you expect the most pressure in one queue. So what is your plan for journeys in the first quarter? Are you expecting it to be down like double digits? No, we're not expecting it to be down double digits. And for the year, I think we just need to check that number. Yeah, I don't think we can do it for the year.
Mitch: The trend in the back part of the second year, even more pick up in the third quarter and we have a huge push in the fourth quarter just given the overall lead times four.
Mitch: Sure.
Mitch: Our footwear, which are in the range of six months.
Mitch: And then on journeys, so you're expecting journeys comp to be down mid singles for the year I believe if I read the presentation correctly. It sounds like from a sales standpoint, you expect the most pressure in one queue. So what is your plan for journeys in the first quarter are you expecting it to be down like double digits.
Speaker Change: No no unexpected that'll be down double digits.
Speaker Change: For the year I think we just need to check that number I don't think we were a year or so a year ago. So I'm not sure. We came out with a number for journey specifically I know you gave total company guidance for the year, but the first quarter.
Thomas A. George: I'm not sure we came out with a number for journeys specifically. I know we gave total comfort guidance for the year. But for the first quarter, you know, for journeys, we could expect that to be down mid to high single digits in the first quarter. Okay.
Speaker Change: For journeys.
Speaker Change: We could expect that to be mid down mid to high single digits in the first quarter.
Thomas A. George: Yeah, it looks like in the presentation. Not far from where we've been. In the presentation, you've got journeys down mid-single digits, but I guess that's on the sales side, not the comp side. That's correct. That's because of the stores that we've closed that are, that are, you know, away from sales but are not productive. Right. That's right. Okay, and then on SHU, I know that you're lapping some difficult comps in the first half of the year. You guys were, I think, double-digit comp last year in the first half.
Speaker Change: Okay.
Speaker Change: It looks like in the presentation.
Speaker Change: Not far from where our presentation <unk> got journeys down mid single digits, but I guess, that's on the sales side and on the comp side.
Speaker Change: <unk>.
Speaker Change: Yes.
Speaker Change: Oh, Brian.
Brian: Right, that's correct that would be cause of the stores that we've closed that are that are.
Speaker Change: To away from say that it's not a comp but are not productive product right that's right.
Speaker Change: Okay, and then on shoe I know that you are lapping some difficult comps in the first.
Speaker Change: Half of the year you guys were I think double digit comp last year in the first half. So how are you thinking about the shape of shoe for the year just given tougher compares in the first half and then that's using in the backyard.
Mitchel John Kummetz: So how are you thinking about the shape of SHU for the year, just given tougher competition in the first half and then that easing in the back half? Yeah, that's exactly right. So in the first half, we expect the most pressure on SHU because if you look at the stacked comps, we have had really pretty spectacular stacked comps in the first half over the last several years. And so we expect continued pressure on SHU, particularly because the economic environment has been tougher. In the second quarter, we actually expect that to ease off a bit, and we see opportunity in the back part of the year for SHU with the holiday season and also back to school. The environment, you know; inflation is coming down. They've had higher inflation than we have had.
Speaker Change: Yes, that's exactly right. So in the first half we expect the most pressure issue because if you look at the stacked comps, we had really a pretty spectacular stack comps in the first half over over the last the last several years and so we expect continued pressure in schuh, particularly because.
Speaker Change: The economic environment has been tougher.
Speaker Change: In the second quarter, we actually expect that key ease off a bit and we see opportunity in the back part of the year for shoe with holiday and.
Speaker Change: And also back to school.
Speaker Change: The environment.
Speaker Change: Inflation is coming down they've had higher inflation than we've had.
Mimi Eckel Vaughn: Their inflation efforts overall are gaining traction, and we expect that that will show up in the consumer's appetite for purchasing in the latter part of the year. There have also been mandatory wage increases in the UK that will take hold, and we expect a brighter picture for the consumer in the back part of the year. Overall, SHU has just been taking market share and operating in a very difficult environment, and overall retail sales in the UK were down for the holiday period, and we expect that as the consumer regroups and we get into spring selling, there will be an appetite for spring product and some sandal product, and that we' You're right.
Speaker Change: Their inflation efforts overall are gaining traction we expect that that will show up.
Speaker Change: In the consumer's appetite for purchasing in the back part of the year. There also have been mandatory wage increases in the UK that will take hold and we expect a brighter picture for the consumer in the back part of the year overall Schuh has just been taking market share and operator.
Speaker Change: <unk> in a very difficult environment and the overall retail sales in the U K or down for the holiday period, and we expect that as the consumer groups and we get into spring selling that there is appetite for spring product and some sandal product and that will be.
Speaker Change: To leverage that into the back part of the year. So so you're right. It is.
Speaker Change: It's a.
Mimi Eckel Vaughn: It's a more difficult front part of the year building into a more positive back part of the year. And then, maybe lastly, I'm just trying to better understand your confidence in an uptick in the journeys business for the back half, because for the holiday season, I mean, obviously boots were weak, but you talked about selling out of key items. And then for the first half of the year, spring, you're talking about challenges in the core business. So when you look at the back half, from a key item standpoint, are you anticipating better access and allocations to those key items? And then also in terms of the core business, are you seeing some inflection there? Do you think that, you know, you talked about Vulcanize being difficult for Q, like, are you anticipating the Vulcanize business getting better?
Speaker Change: Our difficult front part of the year building into a more positive on that part of the year.
Speaker Change: And then maybe lastly, I'm just trying to better understand.
Speaker Change: Your confidence and an uptick in the <unk>.
Speaker Change: Journeys business for the back half because for holiday.
Speaker Change: Obviously boots were weak.
Speaker Change: But also you talked about selling out of key items and then for the first half of the year spring.
Speaker Change: We're talking about challenges in the core business. So when you look at the back half.
Speaker Change: From a key item standpoint are you anticipating better access and allocations to those key items and then also in terms of the core business are you seeing some inflection there do you think that you talked about vulcanize being difficult before <unk> like are you anticipating the vulcanize.
Speaker Change: Is this getting better or are you pivoting to other things other products that you consider to be core that you'd be better better.
Mimi Eckel Vaughn: Or are you pivoting to other things, other products that you consider to be core that you'd be better, better, you know, represented in core products because of some shift to other types of products? How much of this is just a better allocation of key items versus, you know, something happening in the core that's different in the back half versus the first half?
Speaker Change: <unk> represented in core product because of some shift to other types of products do you understand what kind of I'm trying to get at is how much of this is just a better allocation of key items versus something happening in the core that's different in the back half versus the first half.
Mimi Eckel Vaughn: So, a lot of questions there, Mej, but we are absolutely anticipating that we are going to be getting better allocations of product. We are absolutely anticipating that we are going to be shifting into brands and increasing the assortment in the brands that are working, and we've got a line of sight into what those are. We've actually got line of sight into a bigger order book based on the actions that we have already taken. When I think about the strength of our journey's merchant relationships, we have doubled down on that by bringing in even more expertise that our new chief merchant, Andy, and the relationships that they have with the brands that are really important. And so, it's a full court press to get more allocation of items that we are excited about, and to diversify across our mix with brands that are working today.
Speaker Change: So a lot of questions and they are matched but we are absolutely anticipating that we are going to be getting better allocations of product. We are absolutely anticipating that we are going to be shifting into brands and increasing the assortment.
Speaker Change: And the brands that are working and we've got line of sight into what those are we've actually got line of sight into a bigger order book faced.
Speaker Change: Based on the actions that we have already taken when I think about the strength of our journeys merchant relationships, we have doubled down on that by bringing in even.
Speaker Change: Even more expertise that our new chief merchant and that that Andy have and the relationships that they have with the brands that are really important and so it's a full court press to get more allocation of items that we are excited about diversifying.
Speaker Change: Across our mix with brands that are working today. It is moving the assortment into a different mix for sure and we absolutely do not anticipate that core products that we've been selling traditionally will rebound that the bulk of <unk> product that IRA.
Mimi Eckel Vaughn: It is moving the assortment into a different mix for sure, and we absolutely do not anticipate that core products that we've been selling traditionally will rebound, that the vulcanized product that I referenced will rebound. It is putting in additional product on the athletic side and also on the casual side to be able to build sales through the course of the year.
Speaker Change: Reference will be rebounding it is putting in additional product on the athletic side and also on the casual side.
Speaker Change: To be able to build a sales through the course of the year.
Mitchel John Kummetz: Okay, that's helpful; I appreciate the color. So, thanks and good luck. All right, thank you. Thank you. At this time, I will turn the floor back to Mattra for any further remarks. Great, thank you for joining us today. We look forward to you joining us on future calls where we're going to talk about the progress that we are making within our journeys business and, thanks again. This will conclude today's conference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.
Speaker Change: Okay. That's helpful. I appreciate the color so thanks and good luck.
Speaker Change: Alright, thank you.
Speaker Change: Thank you.
At this time I will turn the floor back to metro for any further remarks.
Speaker Change: Alright, Thank you for joining us today, we look forward to you joining us on future calls, where we're going to talk about the progress that we are making within our journeys business and.
Speaker Change: And thanks again.
Speaker Change: This will conclude today's conference you may disconnect. Your lines at this time. Thank you for your participation and have a wonderful day.