THE BUSINESS OF GENESCO
Genesco Inc. is a leading retailer and wholesaler of branded footwear, apparel and accessories selling through 1,480
retail stores, including Journeys®, Journeys Kidz®, Little Burgundy® and Johnston & Murphy® in the U.S., Puerto Rico
and Canada, through Schuh® stores in the United Kingdom and the Republic of Ireland, and through e-commerce
websites and catalogs. In addition, we sell our wholesale footwear brands, primarily under our Johnston & Murphy®
brand, the H.S. Trask® brand, and the licensed Dockers®, Levi's®, and Bass® brands, as well as other brands.
TOTAL RETURN TO SHAREHOLDERS
INCLUDES REINVESTMENT OF DIVIDENDS
The graph below compares the cumulative total shareholder return on our common stock for the last five fiscal years with the
cumulative total return of (i) the S&P 500 Index and (ii) the S&P 1500 Footwear Index. The graph assumes the investment of
$100 in our common stock, the S&P 500 Index and the S&P 1500 Footwear Index at the market close on January 31, 2015 and
the reinvestment monthly of all dividends.
COMPARISON OF CUMULATIVE 5 YEAR TOTAL RETURN
250
200
150
100
50
0
1/31/15
Comparison of Cumulative Five Year Total Return
Genesco Inc.
S&P 500 Index
S&P 1500 Footwear Index
1/30/16
1/28/17
2/03/18
2/02/19
2/01/20
ANNUAL RETURN PERCENTAGE
Years Ending
Company / Index
Genesco Inc.
S&P 500 Index
S&P 1500 Footwear Index
1/30/16
-7.43
-0.67
29.33
1/28/17
-10.34
20.87
-11.31
2/03/18
-44.10
22.83
31.04
2/02/19
36.14
-0.06
20.33
2/01/20
-12.87
21.56
20.09
Company / Index
Genesco Inc.
S&P 500 Index
S&P 1500 Footwear Index
Base
Period
1/31/15
100
100
100
INDEXED RETURNS
Years Ending
1/30/16
92.57
99.33
129.33
1/28/17
83.00
120.06
114.71
2/03/18
46.40
147.48
150.32
2/02/19
63.16
147.40
180.88
2/01/20
55.03
179.17
217.22
*The S&P 1500 Footwear Index consists of Crocs, Inc., Deckers Outdoor Corporation, Nike, Inc., Skechers U.S.A., Inc., Steven Madden, Ltd. and Wolverine
World Wide, Inc.
CORPORATE INFORMATION
Annual Meeting of Shareholders
The 2020 Annual Meeting of Shareholders will be held in virtual format on Thursday, June 25, 2020, at 10:00 a.m. CDT. The
meeting will be conducted via a live webcast at www.meetingcenter.io/271553396, where shareholders will be able to vote
electronically and submit questions during the meeting. Information on the meeting’s access has been provided in our 2020
proxy statement and is listed on the 2020 proxy card.
Corporate Headquarters
Genesco Park
1415 Murfreesboro Road –P.O. Box 731
Nashville, Tennessee 37202-0731
Independent Auditors
Ernst & Young LLP
222 Second Avenue South, Suite 2100
Nashville, Tennessee 37201
Transfer Agent and Registrar
Communications concerning stock transfer, consolidating accounts, change of address and lost or stolen stock certificates
should be directed to the transfer agent. When corresponding with the transfer agent, shareholders should state the exact
name(s) in which the stock is registered and certificate number, as well as old and new information about the account.
Regular Mail
Computershare
P.O. Box 505000
Louisville, KY 40233-5000
UNITED STATES
Overnight Delivery
Computershare
462 South 4th Street
Suite 1600
Louisville, KY 40202
UNITED STATES
Questions & Inquiries via Computershare’s website:
www.computershare.com/investor
Computershare Phone: (877) 224-0366
Hearing Impaired/TDD: 1-800-952-9245
Investor Relations
Security analysts, portfolio managers or other investment community representatives should contact:
Dave Slater, Vice President, Financial Planning & Analysis and Investor Relations
Genesco Park, Suite 490 –P.O. Box 731
Nashville, Tennessee 37202-0731
(615) 367-7604
Other Information
A copy of any exhibits to the Annual Report on Form 10-K will be furnished to shareholders upon written request,
accompanied by a check in the amount of $15.00 payable to Genesco Inc., addressed to Director, Corporate Relations, Genesco
Inc., Genesco Park, Suite 490, P.O. Box 731, Nashville, Tennessee 37202-0731. Certifications by the Chief Executive Officer
and the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 have been filed as exhibits of our
2020 Annual Report on Form 10-K.
Common Stock Listing
New York Stock Exchange: GCO
Shareholder Information
Shareholder information may be accessed at www.genesco.com
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________________________________
FORM 10-K
(Mark One)
☒
☐
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the Fiscal Year Ended February 1, 2020
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
for the transition period from to
Commission File No. 1-3083
_____________________________________________________
Genesco Inc.
(Exact name of registrant as specified in its charter)
Tennessee
(State or other jurisdiction of
incorporation or organization)
62-0211340
(I.R.S. Employer
Identification No.)
Genesco Park, 1415 Murfreesboro Pike
Nashville, Tennessee
(Address of principal executive offices)
37217-2895
(Zip Code)
Registrant’s telephone number, including area code: (615) 367-7000
Securities Registered Pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol
Common Stock, $1.00 par value
GCO
Name of Exchange
on which Registered
New York Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Act:
Employees’ Subordinated Convertible Preferred Stock
________________________________________________________
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to
file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232-405 of this chapter)
during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes No
Indicate by check mark whether the registrant is a large accelerated filer; an accelerated filer; a non-accelerated filer; a smaller
reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller
reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒
Non-accelerated filer (Do not check if smaller reporting company)
Accelerated filer
Smaller reporting company ☐
Emerging Growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting standards provided pursuant to section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act.) Yes ☐ No
The aggregate market value of common stock held by nonaffiliates of the registrant as of August 3, 2019, the last business day
of the registrant’s most recently completed second fiscal quarter, was approximately $579,000,000. The market value
calculation was determined using a per share price of $36.50, the price at which the common stock was last sold on the New
York Stock Exchange on such date. For purposes of this calculation, shares held by nonaffiliates excludes only those shares
beneficially owned by officers, directors, and shareholders owning 10% or more of the outstanding common stock (and, in each
case, their immediate family members and affiliates).
As of March 13, 2020, 14,691,257 shares of the registrant’s common stock were outstanding.
Documents Incorporated by Reference
Portions of the proxy statement for the June 25, 2020 annual meeting of shareholders are incorporated into Part III by
reference.
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TABLE OF CONTENTS
PART I
Business
Item 1.
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2.
Item 3.
Item 4. Mine Safety Disclosures
Item 4A. Executive Officers
Properties
Legal Proceedings
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Selected Financial Data
Item 6.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Financial Statements and Supplementary Data
Item 8.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9.
Item 9A. Controls and Procedures
Item 9B. Other Information
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11.
Item 12.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14.
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Principal Accounting Fees and Services
Item 15. Exhibits and Financial Statement Schedules
Item 16.
Form 10-K Summary
PART IV
2
Cautionary Notice Regarding Forward-looking Statements
This annual report on Form 10-K (this "report") includes certain forward-looking statements, which include statements
regarding our intent, belief or expectations and all statements other than those made solely with respect to historical fact.
Actual results could differ materially from those reflected by the forward-looking statements in this report and a number
of factors may adversely affect the forward-looking statements and our future results, liquidity, capital resources or
prospects. These include, but are not limited to, risks related to public health and safety issues, including, for example,
the novel coronavirus ("COVID-19") outbreak which began in 2019, the level and timing of promotional activity
necessary to maintain inventories at appropriate levels, the timing and amount of any share repurchases by us, the
imposition of tariffs on products imported by us or our vendors as well as the ability and costs to move production of
products in response to tariffs, our ability to obtain from suppliers products that are in-demand on a timely basis and
effectively manage disruptions in product supply or distribution, unfavorable trends in fuel costs, foreign exchange rates,
foreign labor and material costs, and other factors affecting the cost of products, the effects of the British decision to exit
the European Union and other sources of weakness in the U.K. market, the effectiveness of our omnichannel initiatives,
costs associated with changes in minimum wage and overtime requirements, wage pressure in the U.S. and the U.K.,
weakness in the consumer economy and retail industry, competition and fashion trends in our markets, weakness in
shopping mall traffic, risks related to the potential for terrorist events, changes in buying patterns by significant
wholesale customers, our ability to continue to complete and integrate acquisitions, expand our business and diversify
our product base, retained liabilities associated with divestitures of businesses including potential liabilities under leases
as the prior tenant or as a guarantor of certain leases, and changes in the timing of holidays or in the onset of seasonal
weather affecting period-to-period sales comparisons. Additional factors that could cause differences from expectations
include the ability to open additional retail stores and to renew leases in existing stores and control or lower occupancy
costs, and to conduct required remodeling or refurbishment on schedule and at expected expense levels, our ability to
eliminate stranded costs associated with dispositions, our ability to realize anticipated cost savings, including rent
savings, deterioration in the performance of individual businesses or of our market value relative to our book value,
resulting in impairments of fixed assets, operating lease right of use assets or intangible assets or other adverse financial
consequences and the timing and amount of such impairments or other consequences, unexpected changes to the market
for our shares or for the retail sector in general, costs and reputational harm as a result of disruptions in our business or
information technology systems either by security breaches and incidents or by potential problems associated with the
implementation of new or upgraded systems, uncertainty regarding the expected phase out of the London Interbank
Offered Rate ("LIBOR"), and the cost and outcome of litigation, investigations and environmental matters that involve
us. For a full discussion of risk factors, see Item 1A, "Risk Factors".
ITEM 1, BUSINESS
General
PART I
Genesco Inc. ("Genesco", “Company”, "we", "our", or "us"), incorporated in 1934 in the State of Tennessee, is a leading
retailer and wholesaler of branded footwear, apparel and accessories with net sales for Fiscal 2020 of $2.2 billion.
During Fiscal 2020, we operated four reportable business segments (not including corporate): (i) Journeys Group,
comprised of the Journeys, Journeys Kidz and Little Burgundy retail footwear chains, e-commerce and catalog
operations; (ii) Schuh Group, comprised of the Schuh retail footwear chain and e-commerce operations; (iii) Johnston &
Murphy Group, comprised of Johnston & Murphy retail operations, e-commerce operations, catalog, Trask e-commerce
operations and wholesale distribution of products under the Johnston & Murphy® and H.S.Trask® brands; and
(iv) Licensed Brands, comprised of the licensed Dockers®, Levi's®, and Bass® brands, as well as other brands we license
for footwear.
Effective January 1, 2020, we completed the acquisition of substantially all the assets and the assumption of certain
liabilities of Togast LLC, Togast Direct, LLC and TGB Design, LLC (collectively, "Togast"). Togast specializes in the
3
the design, sourcing and sale of licensed footwear. We also entered into a new U.S. footwear license agreement with
Levi Strauss & Co. for the license of Levi's® footwear for men, women and children in the U.S. concurrently with the
Togast acquisition. The acquisition expands our portfolio to include footwear licenses for Bass®, ADIO and FUBU,
among others. Togast operates in our Licensed Brands segment. On February 2, 2019, we completed the sale of our
Lids Sports Group business. As a result, we reported the operating results of this business in loss from discontinued
operations, net in our Consolidated Statements of Operations for Fiscal 2019 and 2018. Unless otherwise noted, the
discussion that follows relates to continuing operations.
At February 1, 2020, we operated 1,480 retail footwear and accessory stores located primarily throughout the United
States and in Puerto Rico, but also including 93 footwear stores in Canada and 129 footwear stores in the United
Kingdom and the Republic of Ireland. We had originally planned to open a total of approximately 32 new retail stores
and to close approximately 21 retail stores in Fiscal 2021.
The outbreak of COVID-19 continues to grow in the U.S., U.K. and globally. The spread of COVID-19 has caused
public health officials to recommend precautions to mitigate the spread of the virus, especially when congregating in
heavily populated areas, such as malls and shopping centers. In consideration of the health and well-being of our
employees, customers and communities, and in support of efforts to contain the spread of the virus, we temporarily
closed our North American stores on March 18, 2020. In addition, on March 23, 2020, our stores in the United Kingdom
and Ireland were closed and on March 26, 2020, our UK e-commerce business was temporarily closed. Our e-commerce
operations in all of our North American brands remain open and ready to serve our customers. We will continue to
evaluate the timing of reopening our stores and UK e-commerce operations until such time as the stores can be opened
safely and in compliance with applicable laws and regulations, as developments continue to occur in this rapidly
changing environment. As a result, our planned new store openings for Fiscal 2021 could be delayed and may not occur
during Fiscal 2021 or thereafter and our planned store closings could be increased or delayed during Fiscal 2021 or
thereafter.
The following table sets forth certain additional information concerning our retail footwear and accessory stores during
the five most recent fiscal years:
Retail Stores
Beginning of year
Opened during year
Acquired during year
Closed during year
End of year
Fiscal
2016
Fiscal
2017
Fiscal
2018
Fiscal
2019
Fiscal
2020
1,460
54
37
(31 )
1,520
1,520
66
—
(32 )
1,554
1,554
59
—
(78 )
1,535
1,535
36
—
(59 )
1,512
1,512
12
—
(44 )
1,480
We also source, design, market and distribute footwear under our Johnston & Murphy® brand, the H.S. Trask® brand,
and the licensed Levi's®, Dockers® and Bass® brands, as well as other brands that we license for footwear to over 1,100
retail accounts in the United States, including a number of leading department, discount, and specialty stores.
Shorthand references to fiscal years (e.g., “Fiscal 2020”) refer to the fiscal year ended on the Saturday nearest January
31st in the named year (e.g., February 1, 2020). The terms "Company," "Genesco," "we," "our" or "us" as used herein
and unless otherwise stated or indicated by context refer to Genesco Inc. and its subsidiaries. All information contained
in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which is referred
to in this Item 1 of this report, is incorporated by such reference in Item 1. As discussed above, this report contains
forward-looking statements. Actual results may vary materially and adversely from the expectations reflected in these
statements. For a discussion of some of the factors that may lead to different results, see Item 1A, “Risk Factors” and
Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
4
Strategy
Across our company, we aspire to create and curate leading footwear brands that represent style, innovation and self-
expression and to be the destination for our consumers' favorite fashion footwear. Each of our businesses has a strong
strategic position grounded in a deep and ever-evolving understanding of the customers it serves. The strength of our
concepts and the advantages we have built over time have established long-lasting leadership positions that make our
footwear businesses outstanding on their own, but what they share through the benefit of synergies, makes them even
stronger together. We have aligned our business around six pillars; 1) build deeper consumer insights to strengthen
customer relationships and brand equity, 2) intensify product innovation and trend insight efforts, 3) accelerate digital to
grow direct-to-consumer, 4) maximize the relationship between physical and digital, 5) reshape the cost base to reinvest
for future growth, and 6) pursue synergistic acquisitions that add growth and create shareholder value. We anticipate
opening fewer new stores in the future, concentrating on locations that we believe will be most productive, as well as
closing certain stores, perhaps reducing the overall square footage and store count from current levels, but improving
productivity in our existing locations and investing in technology and infrastructure to support omnichannel and digital
retailing.
We have made acquisitions, including the acquisitions of the Schuh Group in June 2011, Little Burgundy in December
2015 and Togast in January 2020, and may pursue acquisition opportunities in the future. We anticipate that potential
acquisitions would either augment existing businesses or facilitate our entry into new businesses that are compatible with
our existing footwear businesses and core expertise.
More generally, we attempt to develop strategies to mitigate the risks we view as material, including those discussed
under the caption “Forward Looking Statements,” above, and those discussed in Item 1A, "Risk Factors". Among the
most important of these factors are those related to consumer demand. Conditions in the economy can affect demand,
resulting in changes in sales and, as prices are adjusted to drive sales and manage inventories, in gross margins. Because
fashion trends influencing many of our target customers can change rapidly, we believe that our ability to react quickly
to those changes has been important to our success. Even when we succeed in aligning our merchandise offerings with
consumer preferences, those preferences may affect results by, for example, driving sales of products with lower average
selling prices or products which are more widely available in the marketplace and thus more subject to competitive
pressures than our typical offering. Moreover, economic factors, such as persistent unemployment and any future
economic contraction and changes in tax policies, may reduce the consumer’s disposable income or his or her
willingness to purchase discretionary items, and thus may reduce demand for our merchandise, regardless of our skill in
detecting and responding to fashion trends. We believe our experience and discipline in merchandising and the buying
power associated with our relative size and importance in the industry segments in which we compete are important
factors in our ability to mitigate risks associated with changing customer preferences and other changes in consumer
demand.
Segments
Journeys Group
The Journeys Group segment accounted for 66% of our net sales in Fiscal 2020. Fiscal 2020 comparable sales,
including both store and direct sales, increased 4% from Fiscal 2019.
Journeys retail footwear stores target customers in the 13 to 22 year age group through the use of youth-oriented decor
and multi-channel media. Journeys stores carry predominately branded merchandise across a wide range of prices. The
Journeys Kidz retail footwear stores sell footwear and accessories primarily for younger children, toddler age to 12 years
old. Little Burgundy retail footwear stores sell footwear and accessories to fashion-oriented men and women in the 21 to
34 age group ranging from students to young professionals.
At February 1, 2020, Journeys Group operated 1,171 stores, including 899 Journeys stores, 233 Journeys Kidz stores and
39 Little Burgundy stores averaging approximately 1,975 square feet, located primarily in malls and factory outlet
centers throughout the United States, Puerto Rico and Canada, selling footwear and accessories for young men, women
5
and children. Journeys Group's e-commerce websites include the following: journeys.com, journeyskidz.com,
journeys.ca and littleburgundyshoes.com. In Fiscal 2020, the Journeys Group closed a net of 22 stores.
Schuh Group
The Schuh Group segment accounted for 17% of our net sales in Fiscal 2020. Comparable sales, including both store
and direct sales, increased 2% in Fiscal 2020.
Schuh stores target teenagers and young adults in the 16 to 24 age group, selling a broad range of branded casual and
athletic footwear along with a meaningful private label offering. At February 1, 2020, Schuh Group operated 129 Schuh
stores, averaging approximately 4,875 square feet, which include both street-level and mall locations in the United
Kingdom and the Republic of Ireland. Schuh Group's e-commerce website is schuh.co.uk. Schuh Group closed a net of
seven stores in Fiscal 2020.
Johnston & Murphy Group
The Johnston & Murphy Group segment accounted for 14% of our net sales in Fiscal 2020. Comparable sales for
Johnston & Murphy retail operations, including both store and direct sales, decreased 2% for Fiscal 2020. The majority
of Johnston & Murphy wholesale sales are of the Genesco-owned Johnston & Murphy brand, and all of the group’s retail
sales are of Johnston & Murphy branded products.
Johnston & Murphy Retail Operations. At February 1, 2020, Johnston & Murphy operated 180 retail shops and factory
stores primarily in the United States averaging approximately 1,900 square feet and selling footwear, apparel and
accessories primarily for men in the 35 to 55 age group, targeting business and professional customers. Johnston &
Murphy retail shops are located primarily in higher-end malls and airports nationwide and sell a broad range of men’s
dress and casual footwear, apparel and accessories. Women’s footwear and accessories are sold in select Johnston &
Murphy locations. We also sell Johnston & Murphy products directly to consumers through an e-commerce website and
a direct mail catalog. The websites are johnstonmurphy.com and johnstonmurphy.ca. Footwear accounted for 62% of
Johnston & Murphy retail sales in Fiscal 2020, with the balance consisting primarily of apparel and accessories.
Johnston & Murphy Group closed a net of three shops and factory stores in Fiscal 2020.
Johnston & Murphy Wholesale Operations. Johnston & Murphy men’s and women's footwear and accessories are sold at
wholesale, primarily to better department stores, independent specialty stores and e-commerce. Johnston & Murphy’s
wholesale customers offer the brand’s footwear for dress, dress casual, and casual occasions, with the majority of styles
offered in these channels selling from $100 to $195. Additionally, we offer the H.S. Trask brand, with men's and
women's footwear and leather accessories offered primarily through better independent retailers and department stores,
an e-commerce website, trask.com, and catalog. Suggested retail prices for Trask footwear typically range from $195 to
$495.
Licensed Brands
The Licensed Brands segment accounted for 3% of our net sales in Fiscal 2020. Licensed Brands sales include footwear
marketed under the Levi's® brand, Dockers® brand and Bass® brand, among others. The Levi's brand license was
entered into concurrently with the closing of the Togast acquisition. We have had the exclusive Dockers men’s footwear
license in the United States since 1991. We acquired the Bass® brand license in conjunction with the acquisition of
Togast. In addition, we renewed our men's Dockers footwear license for the United States. Dockers footwear is
marketed to men aged 30 to 55 through many of the same national retail chains that carry Dockers pants and sportswear
and in department and specialty stores across the country. Suggested retail prices for Dockers footwear generally range
from $50 to $90. Togast designs and sources licensed footwear under the Levi's® and Bass®brand names, among others,
and provides services for the sourcing of FUBU licensed footwear.
6
Manufacturing and Sourcing
We rely on independent third-party manufacturers for production of our footwear products sold at wholesale. We source
footwear and accessory products from foreign manufacturers located in Bangladesh, Brazil, Canada, China, Dominican
Republic, El Salvador, France, Germany, Hong Kong, India, Indonesia, Italy, Mauritius, Mexico, Nicaragua, Pakistan,
Portugal, Peru, Romania, Taiwan, and Vietnam. Our retail operations sell primarily branded products from third parties
who source primarily overseas.
Competition
Competition is intense in the footwear and accessory industries. Our retail footwear and accessory competitors range
from small, locally owned stores to regional and national department stores, discount stores, specialty chains, our
vendors with their own direct-to-consumer channels and online retailers. We also compete with hundreds of footwear
wholesale operations in the United States and throughout the world, most of which are relatively small, specialized
operations, but some of which are large, more diversified companies. Some of our competitors have resources that are
not available to us. Our success depends upon our ability to remain competitive with respect to the key factors of style,
price, quality, comfort, brand loyalty, customer service, store location and atmosphere, technology, infrastructure and
speed of delivery to support e-commerce and the ability to offer relevant products.
Licenses
We own our Johnston & Murphy® and H.S. Trask® brands and own or license the trade names of our retail concepts
either directly or through wholly-owned subsidiaries. The Dockers® footwear line, introduced in Fiscal 1993, is sold
under a license agreement granting us the exclusive right to sell men’s footwear under the trademark in the United
States, Canada and the Caribbean. The Dockers license agreement expires in 2024. Net sales of Dockers products were
approximately $47 million in Fiscal 2020 and approximately $56 million in Fiscal 2019. We entered into a new license
agreement with Levi Strauss & Co. in January 2020 for the right to sell men's, women's and children's footwear under
the Levi's® trademark in the United States and the Caribbean. The initial term of the license agreement with respect to
Levi's® trademarks is through November 30, 2024 with one additional four year renewal term. We license certain other
footwear brands, mostly in foreign markets. License royalty income was not material in Fiscal 2020.
Wholesale Backlog
Most of the orders in our wholesale divisions are for delivery within 150 days. Because most of our business is at-once,
the backlog at any one time is not necessarily indicative of future sales. As of February 29, 2020, our wholesale
operations had a backlog of orders, including unconfirmed customer purchase orders, amounting to approximately $24.7
million, compared to approximately $28.8 million on March 2, 2019. The backlog is somewhat seasonal, reaching a peak
in the Spring. We maintain in-stock programs for selected product lines with anticipated high volume sales. Our backlog
may be more vulnerable to cancellation than is typical due to COVID-19.
Employees
We had approximately 22,050 employees at February 1, 2020, approximately 150 of whom were employed in corporate
staff departments and the balance in operations. Retail stores employ a substantial number of part-time employees, and
approximately 16,400 of our employees were part-time at February 1, 2020.
Seasonality
Our business is seasonal with our investment in inventory and accounts receivable normally reaching peaks in the spring
and fall of each year and a significant portion of our net sales and operating earnings generated during the fourth quarter.
7
Environmental Matters
Our former manufacturing operations and the sites of those operations as well as the sites of our current operations are
subject to numerous federal, state, and local laws and regulations relating to human health and safety and the
environment. These laws and regulations address and regulate, among other matters, wastewater discharge, air quality
and the generation, handling, storage, treatment, disposal, and transportation of solid and hazardous wastes and releases
of hazardous substances into the environment. In addition, third parties and governmental agencies in some cases have
the power under such laws and regulations to require remediation of environmental conditions and, in the case of
governmental agencies, to impose fines and penalties. Several of the facilities owned by us (currently or in the past) are
located in industrial areas and have historically been used for extensive periods for industrial operations such as tanning,
dyeing, and manufacturing. Some of these operations used materials and generated wastes that would be considered
regulated substances under current environmental laws and regulations. We are currently involved in certain
administrative and judicial environmental proceedings relating to our former facilities. See Note 14 to the Consolidated
Financial Statements included in Item 8, "Financial Statements and Supplementary Data".
Available Information
We file reports with the Securities and Exchange Commission (“SEC”), including annual reports on Form 10-K,
quarterly reports on Form 10-Q and other reports from time to time. We are an electronic filer and the SEC maintains an
internet site at http://www.sec.gov that contains the reports, proxy and information statements, and other information
filed electronically. Our website address, which
is
http://www.genesco.com. We make available free of charge through the website annual reports on Form 10-K, quarterly
reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports as soon as reasonably
practicable after such material is electronically filed with or furnished to the SEC. Copies of the charters of each of our
Audit Committee, Compensation Committee, Nominating and Governance Committee as well as our Corporate
Governance Guidelines and Code of Ethics along with position descriptions for our board of directors (the "Board of
Directors" or the "Board") and Board committees are also available free of charge through the website. The information
provided on our website is not part of this report, and is therefore not incorporated by reference unless such information
is otherwise specifically incorporated elsewhere in this report.
textual reference only,
is provided as an
inactive
8
ITEM 1A, RISK FACTORS
Our business is subject to significant risks. You should carefully consider the risks and uncertainties described below and
the other information in this Form 10-K, including our Consolidated Financial Statements and the notes to those
statements. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties
that we do not presently know about or that we currently consider immaterial may also affect our business operations and
financial performance. If any of the events described below actually occur, our business, financial condition, cash flows or
results of operations could be adversely affected in a material way. This could cause the trading price of our stock to
decline, perhaps significantly, and you may lose part or all of your investment.
Competitive, Demand-Related and Reputational Risks
We are experiencing a material disruption to our business as a result of COVID-19 and our sales, supply chain and
financial results may be materially adversely impacted.
Our business is subject to risks, or public perception of risks, arising from public health and safety crises, including
pandemics, which might impact our wholesale and retail demand and supply chain. On March 18, 2020, we closed all of
our North American stores, on March 23, 2020, we closed all our stores in the United Kingdom and Republic of Ireland
and on March 26, 2020, we closed our e-commerce business in the UK in response to the COVID-19 pandemic. Our
wholesale partner stores have also closed or substantially reduced operating hours. The duration of the closures and their
impact over the longer term are uncertain and cannot be predicted at this time. The effects of the pandemic depend on
future developments outside our control such as the spread of the disease and the effectiveness of containment efforts.
Even if the pandemic does not continue for an extended period, our business could be materially adversely affected by
several additional factors related to the pandemic, including the following:
• The effects of the pandemic on the economy, including a recession, or an increase in unemployment levels could
result in customers having less disposable income which could lead to reduced sales of our products;
• The effects of COVID-19 could delay our release or delivery of new product offerings or require us to make
•
unexpected changes to our offerings;
“Shelter in Place” and other similar mandated or suggested isolation protocols could disrupt not only our brick
and mortar operations but our e-commerce operations as well, particularly if employees are not able to report to
work or perform their work from home;
• While we are making efforts to reduce operating costs and conserve cash, we may not be successful in doing so;
• We are undertaking discussions with our landlords and other vendors to obtain rent and other relief, but we may
not be successful in these endeavors. As a result we may be subject to litigation or other claims;
• We borrowed $184.3 million under our Credit Facility and £19.0 million on our U.K. A&R Agreement in March
2020, but that amount may not be adequate to provide necessary liquidity at the parent or subsidiary level if the
pandemic continues for an extended period of time, and we may not have access to additional sources of capital;
• After the pandemic has subsided, fear of COVID-19, re-occurrence of the outbreak or another pandemic or crisis
could cause customers to avoid public places where our stores are located such as malls, outlets, and airports;
• We have been forced to reduce our workforce, and as a result, there may be obstacles and delays in reopening
stores as we may have to hire and train a substantial number of new employees; and
• We may be required to revise certain accounting estimates and judgments such as, but not limited to, those
related to the valuation of goodwill, long-lived assets and deferred tax assets, which could have a material
adverse effect on our financial position and results of operations.
COVID-19 has also had a significant impact on China and other countries. We rely upon the facilities of our third-party
manufacturers in China as well as other countries to support our business. The outbreak has resulted in significant
governmental measures being implemented to control the spread of the virus, including, among others, restrictions on
manufacturing and the movement of employees in many regions of China and other countries. As a result of COVID-19
and the measures designed to contain the spread of the virus, our third-party manufacturers may not have the materials,
9
capacity, or capability to manufacture our products according to our schedule and specifications. If our third-party
manufacturers’ operations are curtailed, we may need to seek alternate manufacturing sources, which may be more
expensive. Alternate sources may not be available or may result in delays in shipments to us from our supply chain and
subsequently to our customers, each of which would affect our results of operations. While the disruptions and restrictions
on the ability to travel, quarantines, and temporary closures of the facilities of our third-party manufacturers and suppliers,
as well as general limitations on movement are expected to be temporary, the duration of the production and supply chain
disruption, and related financial impact, cannot be estimated at this time. Should the production and distribution closures
continue for an extended period of time, the impact on our supply chain could have a material adverse effect on our
results of operations and cash flows.
Consumer spending is affected by poor economic conditions and other factors and may significantly harm our
business, affecting our financial condition, liquidity, and results of operations.
The success of our business depends to a significant extent upon the level of consumer spending in general and on our
product categories. A number of factors may affect the level of consumer spending on merchandise that we offer,
including, among other things:
• general economic and industry conditions, including the risks associated with a recession in the U.S. and the
impact of the COVID-19 pandemic;
• weather conditions;
• economic conditions in the United Kingdom and the uncertainty surrounding, as well as the effects of, Brexit;
• energy costs, which affect gasoline and home heating prices;
• the level of consumer debt;
• pricing of products;
• interest rates;
• tax rates, refunds and policies;
• war, terrorism and other hostilities; and
• consumer confidence in future economic conditions.
Adverse economic conditions and any related decrease in consumer demand for discretionary items could have a material
adverse effect on our business, results of operations and financial condition. The merchandise we sell generally consists of
discretionary items. Reduced consumer confidence and spending may result in reduced demand for discretionary items
and may force us to take inventory markdowns, decreasing sales and making expense leverage difficult to achieve.
Demand can also be influenced by other factors beyond our control.
Moreover, while we believe that our operating cash flows and borrowing capacity under committed lines of credit will be
adequate for our anticipated cash requirements, if the economy were to experience a continued or worsening downturn, if
one or more of our revolving credit banks were to fail to honor its commitments under our credit lines or if we were
unable to draw on our credit lines for any reason, we could be required to modify our operations for decreased cash flow
or to seek alternative sources of liquidity, and such alternative sources might not be available to us. These same factors
could impact our wholesale customers, limiting their ability to buy or pay for merchandise offered by us.
Failure to protect our reputation could have a material adverse effect on our brand names.
Our success depends in part on the value and strength of the names of our business units. These names are integral to our
businesses as well as to the implementation of our strategies for expanding our businesses. Maintaining, promoting, and
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positioning our brands will depend largely on the success of our marketing and merchandising efforts and our ability to
provide high quality merchandise and a consistent, high quality customer experience. Our brands could be adversely
affected if we fail to achieve these objectives or if our public image or reputation were to be tarnished by negative
publicity or if adverse information concerning us is posted on social media platforms or similar mediums. Failure to
comply, or accusation of failure to comply, with ethical, social, health, product, labor, data privacy, and environmental
standards could also jeopardize our reputation and potentially lead to various adverse consumer and employee actions.
Any of these events could result in decreased revenue or otherwise adversely affect our business.
Our business involves a degree of risk related to fashion and other extrinsic demand drivers that are beyond our
control.
The majority of our businesses serve a fashion-conscious customer base and depend upon the ability of our buyers and
merchandisers to react to fashion trends, to purchase inventory that reflects such trends, and to manage our inventories
appropriately in view of the potential for sudden changes in fashion, consumer taste, or other drivers of demand. Failure
to execute any of these activities successfully could result in adverse consequences, including lower sales, product
margins, operating income and cash flows.
Our future success also depends on our ability to respond to changing consumer preferences, identify and interpret
consumer trends, and successfully market new products.
The industry in which we operate is subject to rapidly changing consumer preferences. The continued popularity of our
footwear and the development of new lines and styles of footwear with widespread consumer appeal, including consumer
acceptance of our footwear, requires us to accurately identify and interpret changing consumer trends and preferences, and
to effectively respond in a timely manner. Continuing demand and market acceptance for both existing and new products
are uncertain and depend on the following factors:
•
substantial investment in product innovation, design and development;
•
commitment to product quality; and
•
significant and sustained marketing efforts and expenditures, including with respect to the monitoring of
consumer trends in footwear specifically and in fashion and lifestyle categories generally.
In assessing our response to anticipated changing consumer preferences and trends, we frequently must make decisions
about product designs and marketing expenditures several months in advance of the time when actual consumer
acceptance can be determined. As a result, we may not be successful in responding to shifting consumer preferences and
trends with new products that achieve market acceptance. Because of the ever-changing nature of consumer preferences
and market trends, a number of companies in our industry experience periods of rapid growth, followed by declines, in
revenue and earnings. If we fail to identify and interpret changing consumer preferences and trends, or are not successful
in responding to these changes with the timely development or sourcing of products that achieve market acceptance, we
could experience excess inventories and higher than normal markdowns, returns, order cancellations or an inability to
profitably sell our products.
Our results may be adversely affected by declines in consumer traffic in malls.
The majority of our stores are located within shopping malls and depend to varying degrees on consumer traffic in the
malls to generate sales. Declines in mall traffic, whether caused by a shift in consumer shopping preferences or by other
factors, such as COVID-19, may negatively impact our ability to maintain or grow our sales in existing stores, which
could have an adverse effect on our financial condition or results of operations.
11
Our results of operations are subject to seasonal and quarterly fluctuations.
Our business is seasonal, with a significant portion of our net sales and operating income generated during the fourth
quarter, which includes the holiday shopping season. Because of this seasonality, we have limited ability to compensate
for shortfalls in fourth quarter sales or earnings by changes in our operations or strategies in other quarters. Our quarterly
results of operations also may fluctuate significantly based on such factors as:
• the timing of new store openings and renewals;
• the amount of net sales contributed by new and existing stores;
• the timing of certain holidays and sales events;
• changes in quarter end dates due to the 53 week year;
• changes in our merchandise mix;
• weather conditions that affect consumer spending; and
• actions of competitors, including promotional activity.
A failure to increase sales at our existing stores, given our high fixed expense cost structure, and in our e-commerce
businesses may adversely affect our stock price and impact our results of operations.
A number of factors have historically affected, and will continue to affect, our comparable sales results and gross margin,
including:
• consumer trends, such as less disposable income due to the impact of economic conditions and tax policies and
other factors;
• the lack of new fashion trends to drive demand in certain of our businesses and the ability of those businesses to
adjust to fashion changes on a timely basis;
• closing of department stores that anchor malls;
• closing of a significant number of non-anchor mall formats;
• competition;
• declining mall traffic due to changing customer preferences in the way they shop;
• timing of holidays including sales tax holidays and the timing of tax refunds;
• general regional and national economic conditions;
• inclement weather;
• changes in our merchandise mix;
• our ability to distribute merchandise efficiently to our stores;
• timing and type of sales events, promotional activities or other advertising;
• our ability to adapt to changing customer preferences in the ways they digitally shop;
• new merchandise introductions;
• access to allocated product from our vendors;
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• our ability to execute our business strategy effectively; and
• other external events beyond our control, such as COVID-19.
Our comparable sales have fluctuated in the past, including the composition of our comparable sales between store and
digital, and we believe such fluctuations may continue. The unpredictability of our comparable sales may cause our
revenue and results of operations to vary from quarter to quarter, and an unanticipated change in revenues or operating
income may cause our stock price to fluctuate significantly.
Changes in the retail industry could have a material adverse effect on our business or financial condition.
In recent years, the retail industry has experienced consolidation, store closures, bankruptcies and other ownership
changes. In the future, retailers in the United States and in foreign markets may further consolidate, undergo restructurings
or reorganizations, or realign their affiliations, any of which could decrease the number of stores that carry our products or
our licensees’ products or increase the ownership concentration within the retail industry. Changing shopping patterns,
including the rapid expansion of online retail shopping, have adversely affected customer traffic in mall and outlet centers,
particularly in North America. We expect competition in the e-commerce market will intensify. As a greater portion of
consumer expenditures with retailers occurs online and through mobile commerce applications, our brick-and-mortar
wholesale customers who fail to successfully integrate their physical retail stores and digital retail or otherwise compete
effectively in the e-commerce market may experience financial difficulties, including store closures, bankruptcies or
liquidations. We cannot control the success of individual malls, and an increase in store closures by other retailers may
lead to mall vacancies and reduced foot traffic. A continuation or worsening of these trends could cause financial
difficulties for one or more of our segments, which, in turn, could substantially increase our credit risk and have a material
adverse effect on our results of operations, financial condition and cash flows.
Our future success will be determined, in part, on our ability to manage the impact of the rapidly changing retail
environment and identify and capitalize on retail trends, including technology, e-commerce and other process efficiencies
that will better service our customers.
Our business is intensely competitive and increased or new competition could have a material adverse effect on us.
The retail footwear and accessory markets are intensely competitive. We currently compete against a diverse group of
retailers, including other regional and national specialty stores, department and discount stores, small independents and e-
commerce retailers, as well as our own vendors who are increasingly selling direct to consumers, which sell products
similar to and often identical to those we sell. Our branded businesses, selling footwear at wholesale, also face intense
competition, both from other branded wholesale vendors and from private label initiatives of their retailer customers. A
number of different competitive factors could have a material adverse effect on our business, including:
• increased operational efficiencies of competitors;
• competitive pricing strategies;
• expansion by existing competitors;
• expansion of direct-to-consumer by our vendors;
• entry by new competitors into markets in which we currently operate; and
• adoption by existing retail competitors of innovative store formats or sales methods.
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Investments and Infrastructure Risks
We face a number of risks in opening new stores and renewing leases on existing stores.
We expect to open new stores, both in regional malls, where most of the operational experience of our U.S. businesses
lies, and in other venues including outlet centers, major city street locations, airports and tourist destinations. We cannot
offer assurances that we will be able to open as many stores as we have planned, that any new store will achieve similar
operating results to those of our existing stores or that new stores opened in markets in which we operate will not have a
material adverse effect on the revenues and profitability of our existing stores. In addition to the risks already discussed
for existing stores, the success of our planned expansion will be dependent upon numerous factors, many of which are
beyond our control, including the following:
• our ability to identify suitable markets and individual store sites within those markets;
• the competition for suitable store sites;
• our ability to negotiate favorable lease terms for new stores and renewals (including rent and other costs) with
landlords in part due to the consolidation in the commercial real estate market;
• our ability to obtain governmental and other third-party consents, permits and licenses needed to construct and
operate our stores;
• the ability to build and remodel stores on schedule and at acceptable cost;
• the availability of employees to staff new stores and our ability to hire, train, motivate and retain store personnel;
• the effect of changes to laws and regulations, including minimum wage, over-time, and employee benefits laws
on store expense.
• the availability of adequate management and financial resources to manage an increased number of stores;
• our ability to adapt our distribution and other operational and management systems to an expanded network of
stores; and
• unforseen events, such as COVID-19, could prevent or delay store openings and impact our liquidity needed for
store openings.
Additionally, the results we expect to achieve during each fiscal quarter are dependent upon opening new and renewing
leases on existing stores on schedule. If we fall behind new store openings, we will lose expected sales and earnings
between the planned opening date and the actual opening and may further complicate the logistics of opening stores,
possibly resulting in additional delays, seasonally inappropriate product assortments, and other undesirable conditions.
Any acquisitions we make or new businesses we launch, as well as any dispositions of assets or businesses, involve a
degree of risk.
Acquisitions have been a component of our growth strategy in recent years, and we expect that we may continue to
engage in acquisitions or launch new businesses to grow our revenues and meet our other strategic objectives. If
acquisitions are not successfully integrated with our business, our ongoing operations could be adversely affected.
Additionally, acquisitions or new businesses may not achieve desired profitability objectives or result in any anticipated
successful expansion of the businesses or concepts, causing lower than expected earnings and cash flow and potentially
requiring impairment of goodwill and other intangibles. Although we review and analyze assets or companies we acquire,
such reviews are subject to uncertainties and may not reveal all potential risks. Additionally, although we attempt to
obtain protective contractual provisions, such as representations, warranties and indemnities, in connection with
acquisitions, we cannot offer assurance that we can obtain such provisions in our acquisitions or that they will fully
protect us from unforeseen costs of, or liabilities associated with, the acquisitions. We may also incur significant costs and
14
diversion of management time and attention in connection with pursuing possible acquisitions even if the acquisition is
not ultimately consummated.
Additionally, we have in the past decided and may in the future decide to divest assets or businesses. Following such
divestitures, we may retain or incur liabilities or costs relating to our previous ownership of the assets or business that we
sell. Any required payments on retained liabilities or indemnification obligations with respect to past or future asset or
business divestitures could have a material adverse effect on our business or results of operations. Dispositions may also
involve our continued financial involvement in the divested business, such as through transition services agreements and
guarantees. Under these arrangements, performance by the divested businesses or conditions outside our control could
adversely affect our business and results of operations.
Further, acquisitions and dispositions are often structured such that the purchase price paid or received by us, as
applicable, is subject to post-closing adjustments, whether as a result of net working capital adjustments, contingent
payments (i.e., earn-outs) or otherwise. Any such adjustments could result in a material change in the consideration paid
to or received by us, as applicable, in such transactions.
Goodwill recorded with acquisitions is subject to impairment which could reduce the Company's
profitability.
In connection with acquisitions, we record goodwill on our Consolidated Balance Sheets. This asset is not amortized but
is subject to an impairment test at least annually, where we have the option first to assess qualitative factors to determine
whether events and circumstances indicate that it is more likely than not that goodwill is impaired. If after such
assessment we conclude that the asset is not impaired, no further action is required. However, if we conclude otherwise,
we are required to determine the fair value of the asset using a quantitative impairment test that is based on projected
future cash flows from the acquired business discounted at a rate commensurate with the risk we consider to be inherent
in our current business model. We perform the impairment test annually at the beginning of our fourth quarter, or more
frequently if events or circumstances indicate that the value of the asset might be impaired.
Given the Schuh Group reporting unit has continued to perform below our projected operating results, as part of our
annual impairment assessment as of the first day of the fourth quarter, we performed a quantitative assessment to
determine if an impairment existed. We found that the result of the impairment test, which valued the business at
approximately $8.2 million in excess of its carrying value, indicated no impairment at that time. We may determine in
connection with future impairment tests that some or all of the carrying value of the goodwill may be impaired. Such a
finding would require a write-off of the amount of the carrying value that is impaired, which would reduce our
profitability in the period of the impairment charge. Holding all other assumptions constant as of the measurement date,
we noted that an increase in the weighted average cost of capital of 100 basis points would reduce the fair value of the
Schuh Group business by $10.0 million. Furthermore, we noted that a decrease in projected annual revenue growth by
one percent would reduce the fair value of the Schuh Group business by $6.9 million. However, if other assumptions do
not remain constant, the fair value of the Schuh Group business may decrease by a greater amount.
Deterioration in our market value, whether related to our operating performance or to disruptions in the equity markets or
deterioration in the operating performance of the business unit with which goodwill is associated, which could be caused
by events such as, but not limited to, COVID-19, could cause us to recognize the impairment of some or all of the $122.2
million of goodwill on our Consolidated Balance Sheets at February 1, 2020, resulting in the reduction of net assets and a
corresponding non-cash charge to earnings in the amount of the impairment.
Technology, Data Security and Privacy Risks
The operation of our business is heavily dependent on our information systems.
We depend on a variety of information technology systems for the efficient functioning of our business (including our
multiple e-commerce websites) and security of information. Much information essential to our business is maintained
15
electronically, including competitively sensitive information and potentially sensitive personal information about
customers and employees.
Despite our preventative efforts, our IT systems and websites may, from time to time be vulnerable to damage or
interruption from events such as difficulties in replacing or integrating the systems of acquired businesses, computer
viruses, security breaches and power outages.
Our insurance policies may not provide coverage for security breaches and similar incidents or may have coverage limits
which may not be adequate to reimburse us for losses caused by security breaches. We also rely on certain hardware and
software vendors, including cloud-service providers, to maintain and periodically upgrade many of these systems so that
they can continue to support our business. The software programs supporting many of our systems are licensed to us by
independent software developers. The inability of our employees and developers or our inability to continue to maintain
and upgrade these information systems and software programs could disrupt or reduce the efficiency of our operations. In
addition, costs and potential problems and interruptions associated with the implementation of new or upgraded systems
and technology or with maintenance or adequate support of existing systems could also disrupt or reduce the efficiency of
our operations or leave us vulnerable to security breaches.
We also rely heavily on our information technology staff. If we cannot meet our staffing needs in this area, we may not be
able to fulfill our technology initiatives or to provide maintenance on existing systems.
We are subject to payment-related risks that could increase our operating costs, expose us to fraud or theft, subject
us to fraud or theft, subject us to potential liability and potentially disrupt our business.
As a retailer who accepts payments using a variety of methods, including credit and debit cards, PayPal, and gift cards, we
are subject to rules, regulations, contractual obligations and compliance requirements, including payment network rules
and operating guidelines, data security standards and certification requirements, and rules governing electronic funds
transfers. The regulatory environment related to information security and privacy is increasingly rigorous, with new and
constantly changing requirements applicable to our business, and compliance with those requirements could result in
additional costs or accelerate these costs with additional legal and financial exposure for noncompliance. For certain
payment methods, including credit and debit cards, we pay interchange and other fees, which could increase over time
and raise our operating costs. We rely on third parties to provide payment processing services, including the processing of
credit cards, debit cards, and other forms of electronic payment. If these companies become unable to provide these
services to us, or if their systems are compromised, it could disrupt our business.
The payment methods that we offer also subject us to potential fraud and theft by persons who seek to obtain
unauthorized access to or exploit any weaknesses that may exist in the payment systems. We completed the
implementation of Europay, Mastercard and Visa ("EMV") technology and received certification in Fiscal 2018; however
future upgrades to our Company's systems could expose us to the fraudulent use of credit cards and increased costs,
including possible fines and restrictions on our Company's ability to accept payments by credit or debit cards, if we were
not to receive recertification. Because we accept debit and credit cards for payment, we are also subject to industry data
protection standards and protocols, such as the Payment Card Industry Data Security Standards (“PCI DSS”), issued by
the Payment Card Industry Security Standards Council. Additionally, we have implemented technology in our stores to
allow for the acceptance of EMV credit transactions and point-to-point encryption. Complying with PCI DSS standards
and implementing related procedures, technology and information security measures require significant resources and
ongoing attention. However, even if we comply with PCI DSS standards and offer EMV and point-to-point encryption
technology in our stores, we may be vulnerable to, and unable to detect and appropriately respond to, data security
breaches and data loss, including cybersecurity attacks or other breach of cardholder data.
In addition, the Payment Card Industry is controlled by a limited number of vendors who have the ability to impose
changes in the Payment Card Industry’s fee structure and operational requirements on us without negotiation. Such
changes in fees and operational requirements may result in our failure to comply with PCI DSS, and cause us to incur
significant unanticipated expenses.
16
A privacy breach, through a cybersecurity incident or otherwise, or failure to comply with privacy laws could
materially adversely affect our business.
As part of normal operations, we and our third-party vendors and partners, receive and maintain confidential and
personally identifiable information about our customers and employees, and confidential financial, intellectual property,
and other information. We regard the protection of our customer, employee, and company information as critical. The
regulatory environment surrounding information security and privacy is very demanding, with the frequent imposition of
new and changing requirements some of which involve significant costs to implement and significant penalties if not
followed properly. Despite our efforts and technology to secure our computer network and systems, a cybersecurity
breach, whether targeted, random, or inadvertent, and whether at the hands of cyber criminals, hackers, rogue employees
or other persons, may occur and could go undetected for a period of time, resulting in a material disruption of our
computer network, a loss of information valuable to our business, including without limitation customer or employee
personally identifiable information, and/or theft. A similar cybersecurity breach to the computer networks and systems of
our third-party vendors and partners, including those that are "cloud"-based, over which we have no control, may occur,
and could lead to a material disruption of our computer network and/or the areas of our business that are dependent on the
support, services and other products provided by our third-party vendors and partners. Our computer networks and our
business may be adversely affected by such a breach of our third-party vendors and partners, which could result in a
decrease in our e-commerce sales and/or a loss of information valuable to our business, including, without limitation,
personally identifiable information of customers or employees. Such a cyber-incident could result in any of the following:
• theft, destruction, loss, misappropriation, or release of confidential financial and other data, intellectual property,
customer awards or loyalty points, or customer or employee information, including personally identifiable
information such as payment card information, email addresses, passwords, social security numbers, home
addresses, or health information;
• operational or business delays resulting from the disruption of our e-commerce sites, computer networks or the
computer networks of our third-party vendors and partners and subsequent material clean-up and mitigation costs
and activities;
• negative publicity resulting in material reputation or brand damage with our customers, vendors, third-party
partners or industry peers;
• loss of sales, including those generated through our e-commerce websites; and
• governmental penalties, fines and/or enforcement actions, payment and industry penalties and fines and/or class
action and other lawsuits.
Any of the above risks, individually or in aggregation, could materially damage our reputation and result in lost sales,
governmental and payment card industry fines, and/or class action and other lawsuits. Although we carry cybersecurity
insurance, in the event of a cyber-incident, that insurance may not be extensive enough or adequate in scope of coverage
or amount to reimburse us for damages we may incur. Further, a significant breach of federal, state, provincial, local or
international privacy laws could have a material adverse effect on our reputation.
Operational, Supply Chain and Third Party Risks
Increased operating costs, including those resulting from potential increases in the minimum wage, could have an
adverse effect on our results.
Increased operating costs, including those resulting from potential increases in the minimum wage or wage increases
reflecting competition in relevant labor markets, store occupancy costs, distribution center costs and other expense items,
including healthcare costs, may reduce our operating margin, by making it more difficult to identify new store locations
that we believe will meet our investment return requirements and slow our ability to open stores. In addition, other
employment and healthcare law changes may increase the cost of provided retirement and healthcare benefits expenses.
17
Increases in our overall employment costs could have a material adverse effect on the Company’s business, results of
operations and financial and competitive position.
If we lose key members of management or are unable to attract and retain the talent required for our business, our
operating results could suffer.
Our performance depends largely on the efforts and abilities of members of our management team. Our executives have
substantial experience and expertise in our business and have made significant contributions to our growth and success.
The unexpected future loss of services of one or more key members of our management team could have an adverse effect
on our business. In addition, future performance will depend upon our ability to attract, retain and motivate qualified
employees, including store personnel and field management. If we are unable to do so, our ability to meet our operating
goals may be compromised. Finally, our stores are decentralized, are managed through a network of geographically
dispersed management personnel and historically experience a high degree of turnover. If we are for any reason unable to
maintain appropriate controls on store operations due to turnover or other reasons, including the ability to control losses
resulting from inventory and cash shrinkage, our sales and operating margins may be adversely affected. There can be no
assurance that we will be able to attract and retain the personnel we need in the future.
The loss of, or disruption in, one of our distribution centers and other factors affecting the distribution of
merchandise, including freight cost, could materially adversely affect our business.
Each of our divisions uses a single distribution center to handle all or a significant amount of its merchandise. Most of our
operations’ inventory is shipped directly from suppliers to our operations' distribution centers, where the inventory is then
processed, sorted and shipped to our stores or to our wholesale customers. We depend on the orderly operation of this
receiving and distribution process, which depends, in turn, on adherence to shipping schedules and effective management
of the distribution centers. Although we believe that our receiving and distribution process is efficient and well positioned
to support our current business and our expansion plans, we cannot offer assurance that we have anticipated all of the
changing demands that our expanding operations will impose on our receiving and distribution system, or that events
beyond our control, such as disruptions in operations due to fire or other catastrophic events, labor disagreements or
shipping problems (whether in our own or in our third party vendors’ or carriers’ businesses), will not result in delays in
the delivery of merchandise to our stores or to our wholesale customers or e-commerce/retail customers. In addition, we
add capacity to distribution centers by either leasing or building new distribution centers or adding capacity at existing
centers. Failure to execute on these initiatives may cause disruption in our business. We also make changes in our
distribution processes from time to time in an effort to improve efficiency and maximize capacity. We cannot assure that
these changes will not result in unanticipated delays or interruptions in distribution. We depend upon third parties for
shipment of a significant amount of merchandise. Interruptions in the services provided by third parties may occasionally
result from damage or destruction to our distribution centers; weather-related events; natural disasters; pandemics; trade
policy changes or restrictions; tariffs or import-related taxes; third-party strikes, lock-outs, work stoppages or slowdowns;
shipping capacity constraints; third-party contract disputes; military conflicts; acts of terrorism; or other factors beyond
our control. An interruption in service by third parties for any reason could cause temporary disruptions in our business, a
loss of sales and profits, and other material adverse effects.
Our freight cost is impacted by changes in fuel prices through surcharges. Fuel prices and surcharges affect freight cost
both on inbound freight from vendors to our distribution centers and outbound freight from our distribution centers to our
stores and wholesale customers. Increases in fuel prices and surcharges and other factors may increase freight costs and
thereby increase our cost of goods sold and selling and administrative expenses.
An increase in the cost or a disruption in the flow of our imported products could adversely affect our business.
Merchandise originally manufactured and imported from overseas makes up a large proportion of our total inventory. A
disruption in the shipping of our imported merchandise or an increase in the cost of those products may significantly
decrease our sales and profits. We may be unable to meet customer demands or pass on price increases to our customers.
In addition, if imported merchandise becomes more expensive or unavailable, the transition to alternative sources may not
18
occur in time to meet demand. Products from alternative sources may also be of lesser quality or more expensive than
those we currently import. Risks associated with our reliance on imported products include:
• disruptions in the shipping and importation of imported products because of factors such as:
▪ raw material shortages, work stoppages, strikes and political unrest;
▪ problems with oceanic shipping, including shipping container shortages and delays in ports;
• increased customs inspections of import shipments or other factors that could result in penalties causing
delays in shipments;
• economic crises, natural disasters, pandemics (including COVID-19), international disputes and wars;
and
•
increases in the cost of purchasing or shipping foreign merchandise resulting from:
• imposition of additional cargo or safeguard measures;
• denial by the United States of “most favored nation” trading status to or the imposition of quotas or
other restriction on imports from a foreign country from which we purchase goods;
▪ changes in import duties, import quotas and other trade sanctions; and
▪ increases in shipping rates.
A significant amount of the inventory we sell is imported from China, which has historically been subject to efforts to
increase duty rates or to impose restrictions on imports of certain products.
If we or our suppliers or licensees are unable to source raw materials or finished goods from the countries where we or
they wish to purchase them, either because of a regulatory change or for any other reason, or if the cost of doing so should
increase, it could have a material adverse effect on our sales and earnings.
A small portion of the products we buy abroad is priced in foreign currencies and, therefore, we are affected by
fluctuating currency exchange rates. In the past, we have entered into foreign currency exchange contracts with major
financial institutions to hedge these fluctuations. We may not be able to effectively protect ourselves in the future against
currency rate fluctuations. Even dollar-denominated foreign purchases may be affected by currency fluctuations to reflect
appreciation in the local currency against the dollar in the price of the products that they provide. See Item 7,
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” for more information about
our foreign currency exchange rate exposure and any hedging activities.
Data protection requirements are constantly evolving and these requirements could adversely affect our business
and operating results.
We have access to collect or maintain information about our customers, and the protection of that data is critical to our
business. The regulatory environment surrounding information security and privacy continues to evolve and new laws
increasingly are giving customers the right to control how their personal data is used. One such law is the European
Union's General Data Protection Regulation ("GDPR"). Our failure to comply with the obligations of GDPR could in the
future result in significant penalties which could have a material adverse effect on our business and results of operations.
Complying with GDPR and similar U.S. federal and state laws, including a potential federal privacy law, could also cause
us to incur substantial costs, forego a substantial amount of revenue or be subject to business risk associated with system
changes and new business processes.
We are dependent on third-party vendors and licensors for the merchandise we sell.
We do not manufacture the merchandise we sell, and our Licensed Brands business is dependent on third-party licenses.
This means that our product supply is subject to the ability and willingness of third-party suppliers to deliver merchandise
we order on time and in the quantities and of the quality we need. In addition, a material portion of our retail footwear
sales consists of products marketed under brands, belonging to unaffiliated vendors, which have fashion significance to
our customers. If those vendors were to decide not to sell to us or to limit the availability of their products to us, or if they
19
become unable because of economic conditions, COVID-19, work stoppages, strikes, political unrest, raw materials
supply disruptions, or any other reason to supply us with products, we could be unable to offer our customers the products
they wish to buy and could lose their business to competitors. Additionally, manufacturers are required to remain in
compliance with certain wage, labor and environment-related laws and regulations. Delayed compliance or failure to
comply with such laws and regulations by our vendors could adversely affect our ability to obtain products generally or at
favorable costs, affecting our overall ability to maintain and manage inventory levels.
Our manufacturing and distributing operations are subject to the risks of doing business abroad, including in
China, which could affect our ability to obtain products from foreign suppliers or control the costs of our products.
While we have taken action to diversify our sourcing base outside of China, because a portion of our products are
manufactured in China, the possibility of adverse changes in trade or political relations with China, political instability in
China, increases in labor costs, the occurrence of prolonged adverse weather conditions or a natural disaster such as an
earthquake or typhoon, or continuation of COVID-19 or the outbreak of another pandemic disease in China could
severely interfere with the manufacturing and/or shipment of our products and would have a material adverse effect on
our operations. Our business operations may be adversely affected by the current and future political environment in the
Communist Party of China. China’s government has exercised and continues to exercise substantial control over virtually
every sector of the Chinese economy through regulation and state ownership. Our ability to source products from China
may be adversely affected by changes in Chinese laws and regulations, including those relating to taxation, import and
export tariffs, raw materials, environmental regulations, land use rights, property and other matters. Under its current
leadership, China’s government has been pursuing economic reform policies that encourage private economic activity and
greater economic decentralization. There is no assurance, however, that China’s government will continue to pursue these
policies, or that it will not significantly alter these policies from time to time without notice. A change in policies by the
Chinese government could adversely affect our interests by, among other factors: changes in laws, regulations or the
interpretation thereof, confiscatory taxation, restrictions on currency conversion, imports or sources of supplies, or the
expropriation or nationalization of private enterprises. In addition, electrical shortages, labor shortages or work stoppages
may extend the production time necessary to produce our orders, and there may be circumstances in the future where we
may have to incur premium freight charges to expedite the delivery of product to our customers. If we incur a significant
amount of premium freight charges, our gross profit will be negatively affected if we are unable to pass on those charges
to our customers.
Legal, Regulatory, Global and Other External Risks
Use of social media may subject us to fines or other penalties.
There has been a substantial increase in the use of social media platforms and similar mediums, including blogs, social
media websites, and other forms of internet-based communications, which allow individuals access to a broad audience of
consumers and other interested persons. As laws and regulations rapidly evolve to govern the use of these platforms and
devices, the failure by us, our associates or third parties acting at our direction to abide by applicable laws and regulations
in the use of these platforms and mediums could adversely impact our reputation or subject us to fines or other penalties.
Establishing and protecting our intellectual property is critical to our business.
Our ability to remain competitive is dependent upon our continued ability to secure and protect trademarks, patents and
other intellectual property rights in the U.S. and internationally for all of our lines of business. We rely on a combination
of trade secret, patent, trademark, copyright and other laws, license agreements and other contractual provisions and
technical measures to protect our intellectual property rights; however, some countries’ laws do not protect intellectual
property rights to the same extent U.S. laws do.
Our business could be significantly harmed if we are not able to protect our intellectual property, or if a court found us to
be infringing on other persons’ intellectual property rights. Any future intellectual property lawsuits or threatened lawsuits
in which we are involved, either as a plaintiff or as a defendant, could cost us a significant amount of time and money and
distract management’s attention from operating our business. If we do not prevail on any intellectual property claims, then
20
we may have to change our manufacturing processes, products or trade names, any of which could reduce our
profitability.
Our business and results of operations are subject to a broad range of uncertainties arising out of world and
domestic events.
Our business and results of operations are subject to uncertainties arising out of world and domestic events, which may
impact not only consumer demand, but also our ability to obtain the products we sell, most of which are produced outside
the countries in which we operate. These uncertainties may include a global economic slowdown, changes in consumer
spending or travel, increase in fuel prices, and the economic consequences of pandemics, natural disasters, military action
or terrorist activities and increased regulatory and compliance burdens related to governmental actions in response to a
variety of factors, including but not limited to national security and anti-terrorism concerns and concerns about climate
change. Any future events arising as a result of terrorist activity or other world events may have a material adverse impact
on our business, including the demand for and our ability to source products, and consequently on our results of
operations and financial condition.
The increasing scope of our non-U.S. operations exposes our performance to risks including foreign, political, legal
and economic conditions and exchange rate fluctuations.
Our performance depends in part on general economic conditions affecting all countries in which we do business. In
March 2017, the United Kingdom announced its decision to exit the European Union ("Brexit"). The U.K. formally
withdrew from the European Union ("E.U.") on January 31, 2020; however, uncertainty remains as to what kind of post-
Brexit agreement between the U.K. and the E.U., if any, may be approved by the U.K. Parliament. Our business in the
U.K. may be adversely affected by the uncertainty surrounding the future relationship between the U.K. and the E.U.
Brexit and any uncertainty with respect thereto could adversely impact consumer demand and create significant currency
fluctuations. In addition, we could be adversely impacted by changes in trade policies, labor, tax or other laws and
regulations, intellectual property rights and supply chain logistics. We may incur additional costs as it addresses any such
changes.
We are also dependent on foreign manufacturers for the products we sell, and our inventory is subject to cost and
availability of foreign materials and labor. In addition to the other risks disclosed herein, demand for our product offering
in our non-U.S. operations is also subject to local market conditions. As a result, we can give no assurance that Schuh's or
our Canadian operations' future performance will not be adversely affected by economic conditions in their markets.
As we expand our international operations, we also increase our exposure to exchange rate fluctuations. Sales from stores
outside the U.S. are denominated in the currency of the country in which these operations or stores are located and
changes in foreign exchange rates affect the translation of the sales and earnings of these businesses into U.S. dollars for
financial reporting purposes. Additionally, inventory purchase agreements may also be denominated in the currency of the
country where the vendor resides.
As the U.S. dollar strengthens relative to foreign currencies, our revenues and profits are reduced when converted into
U.S. dollars and our margins may be negatively impacted by the increase in product costs. Although we typically have
sought to mitigate the negative impacts of foreign currency exchange rate fluctuations through price increases and further
actions to reduce costs, we may not be able to fully offset the impact, if at all. Our success depends, in part, on our ability
to manage these various foreign currency impacts as changes in the value of the U.S. dollar relative to other currencies
could have a material adverse effect on our business and results of operations.
The imposition of tariffs on our products could adversely affect our business.
Statements by the current presidential administration have introduced greater uncertainty with respect to tax and trade
policies, tariffs and regulations affecting trade between the United States and other countries. We source a significant
portion of our merchandise from manufacturers located outside the United States, including from China. The United
States has imposed tariffs on certain products imported into the U.S. from China. These tariffs and any additional tariffs
21
on imported products could result in an increase in prices for those products. In addition, the tariffs could also increase the
costs of our U.S. suppliers, causing our U.S. suppliers to also increase the costs of their products. If we are unable to pass
along increased costs to our customers, our gross margins could be adversely affected. Alternatively, tariffs may cause us
to shift production to other countries, resulting in significant costs and disruption to our business. The imposition of tariffs
by the United States also has resulted in the adoption of tariffs by China and could result in the adoption of tariffs by other
countries as well. A resulting trade war could have a significant adverse effect on world trade and the world
economy. Tariffs and any additional developments in tax policy or trade relations could have a material adverse effect on
our business, results of operations and liquidity.
Our ability to source our merchandise profitably or at all could be hurt if new trade restrictions are imposed,
existing trade restrictions become more burdensome or disruptions occur at our suppliers or at the ports.
Trade restrictions, including increased tariffs, safeguards or quotas, on footwear, apparel and accessories could increase
the cost or reduce the supply of merchandise available to us. We source our footwear and accessory products from foreign
manufacturers located in Bangladesh, Brazil, Canada, China, Dominican Republic, El Salvador, France, Germany, Hong
Kong, India, Indonesia, Italy, Mauritius, Mexico, Nicaragua, Pakistan, Portugal, Peru, Romania, Taiwan and Vietnam, and
our retail operations sell primarily branded products from third parties who source primarily overseas. The investments
we are making to develop our sourcing capabilities may not be successful and may, in turn, have an adverse impact on our
financial position and results of operations.
There are quotas and trade restrictions on certain categories of goods and apparel from China and countries that are not
subject to the World Trade Organization Agreement, which could have a significant impact on our sourcing patterns in the
future. In addition, political uncertainty in the United States may result in significant changes to United States trade
policies, treaties and tariffs, including trade policies and tariffs regarding China, including the potential disallowance of
tax deductions for imported merchandise or the imposition of additional unilateral tariffs on imported products. These
developments, or the perception that any of them could occur, may have a material adverse effect on global economic
conditions and the stability of global financial markets, and may significantly reduce global trade and, in particular, trade
between these nations and the United States. Any of these factors could depress economic activity, restrict our sourcing
from suppliers and have a material adverse effect on our business, financial condition and results of operations and affect
our strategy in Asia and elsewhere around the world. We cannot predict whether any of the countries in which our
merchandise is currently manufactured or may be manufactured in the future will be subject to additional trade
restrictions imposed by the U.S. and foreign governments, nor can we predict the likelihood, type or effect of any such
restrictions. Trade restrictions, including increased tariffs or quotas, embargoes, safeguards and customs restrictions
against items we source from foreign manufacturers could increase the cost, delay shipping or reduce the supply of
products available to us or may require us to modify our current business practices, any of which could hurt our
profitability.
We rely on our suppliers to manufacture and ship the products they produce for us in a timely manner. We also rely on the
free flow of goods through open and operational ports worldwide. Labor disputes at various ports or at our suppliers could
increase costs for us and delay our receipt of merchandise, particularly if these disputes result in work slowdowns,
lockouts, strikes or other disruptions.
We are subject to regulatory proceedings and litigation and to regulatory changes that could have an adverse effect
on our financial condition and results of operations.
We are party to certain lawsuits, governmental investigations, and regulatory proceedings, including the proceedings
arising out of alleged environmental contamination relating to historical operations of the Company and various suits
involving current operations as disclosed in Item 3, "Legal Proceedings" and Note 14 to the Consolidated Financial
Statements. If these or similar matters are resolved against us, our results of operations, our cash flows, or our financial
condition could be adversely affected. The costs of defending such lawsuits and responding to such investigations and
regulatory proceedings may be substantial and their potential to distract management from day-to-day business is
significant. Moreover, with retail operations in the United States, Puerto Rico, Canada, the United Kingdom, and the
22
Republic of Ireland, we are subject to federal, state, provincial, territorial, local and foreign regulations, which impose
costs and risks on our business. Numerous states and municipalities as well as the federal government of the U.S. are
proposing or have implemented changes to minimum wage, overtime, employee leave, employee benefit requirements
and other requirements that will increase costs. The Company and each of our subsidiaries that employ an average of 50
full-time employees in a calendar year are required to offer a minimum level of health coverage for 95% of our full-time
employees or be subject to a penalty. Changes in regulations could make compliance more difficult and costly, and failure
to comply with these requirements, including even a seemingly minor infraction, could result in liability for damages or
penalties.
New accounting guidance or changes in the interpretation or application of existing accounting guidance could
adversely affect our financial performance.
The implementation of new accounting standards could require certain systems, internal process and other changes that
could increase our operating costs, and also could result in changes to our financial statements. In particular, the
implementation of accounting standards related to leases, as issued by the Financial Accounting Standards Board
(“FASB”) is requiring us to make significant changes to our lease management and other accounting systems, and has
resulted in a material impact to our consolidated financial statements.
U.S. generally accepted accounting principles and related accounting pronouncements, implementation guidelines and
interpretations with regard to a wide range of matters that are relevant to our business involve many subjective
assumptions, estimates and judgments by our management. Changes in these rules or their interpretation or changes in
underlying assumptions, estimates or judgments by our management could significantly change our reported or expected
financial performance.
Financial Risks
A portion of our indebtedness is subject to floating interest rates.
Borrowings under our credit facility bear interest at varying rates, some of which are based on LIBOR, and expose us to
interest rate risk. If interest rates were to increase, our debt service obligations on the variable rate indebtedness referred
to above would increase even if the principal amount borrowed remained the same, and our net income and cash flows
will correspondingly decrease.
In addition, in 2017, the United Kingdom’s Financial Conduct Authority, which regulates LIBOR, announced that it
intends to phase out LIBOR by the end of 2021. It is unclear if LIBOR will cease to exist at that time or if new methods
of calculating LIBOR will be established such that it continues to exist after 2021. The expected phase out of LIBOR
could cause market volatility or disruption and may adversely affect our access to the capital markets and cost of
funding. Furthermore, while our credit facility contains provisions providing for alternative rate calculations in the event
LIBOR is unavailable, these provisions may be more expensive.
Changes in our effective income tax rate could adversely affect our net earnings.
A number of factors influence our effective income tax rate, including changes in tax law, tax treaties, interpretation of
existing laws, including the newly enacted Tax Cuts and Jobs Act of 2017 (the "Act"), and our ability to sustain our
reporting positions on examination. Changes in any of those factors could change our effective tax rate, which could
adversely affect our net earnings and liquidity. In addition, our operations outside of the United States may cause greater
volatility in our effective tax rate.
We continue to expect the United States Treasury and the Internal Revenue Service to issue regulations and other
guidance that could have a material impact on our effective tax rate in future periods.
23
Actions of activist shareholders could cause us to incur substantial costs, divert management’s attention and
resources, and have an adverse effect on our business.
Our shareholders may from time to time engage in proxy solicitations, advance shareholders proposals or otherwise
attempt to affect changes or acquire control over the Company. If activist shareholder activities ensue, our business could
be adversely affected because responding to proxy contests and reacting to other actions by activist shareholders can be
costly and time-consuming, disrupt our operations and divert the attention of management and our employees. For
example, we may be required to retain the services of various professionals to advise us on activist shareholder matters,
including legal, financial and communication advisors, the costs of which may negatively impact our future financial
results. In addition, perceived uncertainties as to our future direction, strategy or leadership created as a consequence of
activist shareholders initiatives may result in the loss of potential business opportunities, harm our ability to attract new
investors, customers, and employees, and cause our stock price to experience periods of volatility or stagnation.
ITEM 1B, UNRESOLVED STAFF COMMENTS
None.
24
ITEM 2, PROPERTIES
At February 1, 2020, we operated 1,480 retail footwear and accessory stores throughout the United States, Puerto Rico,
Canada, the United Kingdom and the Republic of Ireland. New shopping center store leases in the United States, Puerto
Rico and Canada typically are for a term of approximately 10 years. New store leases in the United Kingdom and the
Republic of Ireland typically have terms of between 10 and 15 years. We have leases with fixed base rental payments,
rental payments based on a percentage of retail sales over contractual amounts and others with predetermined fixed
escalations of the minimum rental payments based on a defined consumer price index or percentage.
The general location, use and approximate size of our principal properties are set forth below:
Location
Owned/Leased
Segment
Use
Lebanon, TN
Owned
Journeys
Group
Nashville, TN
Leased
Various
Distribution warehouse and
administrative offices
Executive & footwear
operations offices
Approximate
Area
Square Feet
563,000
306,455
(1)
Bathgate, Scotland
Chapel Hill, TN
Fayetteville, TN
Deans Industrial Estate,
Livingston, Scotland
Nashville, TN
Owned
Owned
Owned
Owned
Owned
Schuh
Group
Licensed
Brands
Johnston &
Murphy
Group
Schuh
Group
Journeys
Group
Distribution warehouse
244,644
Distribution warehouse
182,000
Distribution warehouse
178,500
Distribution warehouse and
administrative offices
106,813
Distribution warehouse
63,000
(1) We occupy approximately 97% of our current corporate headquarters building and sublease the remainder of
the building. The lease on the Nashville office expires in April 2022.
On February 10, 2020, we announced plans for our new corporate headquarters in Nashville, Tennessee. We entered into
a lease agreement for approximately 199,000 square feet of office space which will replace our current corporate
headquarters office lease. The term of the lease is 15 years, with two options to extend for an additional period of five
years each. We believe that all leases of properties that are material to our operations may be renewed, or that alternative
properties are available, on terms not materially less favorable to us than existing leases.
ITEM 3, LEGAL PROCEEDINGS
Environmental Matters
New York State Environmental Matters
In August 1997, the New York State Department of Environmental Conservation (“NYSDEC”) and the Company
entered into a consent order whereby we assumed responsibility for conducting a remedial investigation and feasibility
study and implementing an interim remedial measure with regard to the site of a knitting mill operated by a former
subsidiary of ours from 1965 to 1969. The United States Environmental Protection Agency (“EPA”), which assumed
primary regulatory responsibility for the site from NYSDEC, issued a Record of Decision in September 2007. The
Record of Decision specified a remedy of a combination of groundwater extraction and treatment and in-situ chemical
oxidation.
In September 2015, the EPA adopted an amendment to the Record of Decision eliminating the separate ground-water
extraction and treatment systems and the use of in-situ oxidation from the remedy adopted in the Record of Decision.
The amendment provides for the continued operation and maintenance of the existing wellhead treatment systems on
wells operated by the Village of Garden City, New York (the "Village"). It also requires us to perform certain ongoing
25
monitoring, operation and maintenance activities and to reimburse EPA's future oversight cost, involving future costs to
us estimated to be between $1.7 million and $2.0 million, and to reimburse EPA for approximately $1.25 million of
interim oversight costs. On August 15, 2016, the Court entered a Consent Judgment implementing the remedy provided
for by the amendment.
The Village additionally asserted that we are liable for the costs associated with enhanced treatment required by the
impact of the groundwater plume from the site on two public water supply wells, including historical total costs ranging
from approximately $1.8 million to in excess of $2.5 million, and future operation and maintenance costs which the
Village estimated at $126,400 annually while the enhanced treatment continues. On December 14, 2007, the Village
filed a complaint (the "Village Lawsuit") against us and the owner of the property under the Resource Conservation and
Recovery Act (“RCRA”), the Safe Drinking Water Act, and the Comprehensive Environmental Response, Compensation
and Liability Act (“CERCLA”) as well as a number of state law theories in the U.S. District Court for the Eastern
District of New York, seeking an injunction requiring the defendants to remediate contamination from the site and to
establish their liability for future costs that may be incurred in connection with it.
In June 2016 we reached an agreement with the Village providing for the Village to continue to operate and maintain the
well head treatment systems in accordance with the Record of Decision and to release its claims against us asserted in
the Village Lawsuit in exchange for a lump-sum payment of $10.0 million by us. On August 25, 2016, the Village
Lawsuit was dismissed with prejudice. The cost of the settlement with the Village and the estimated costs associated
with our compliance with the Consent Judgment were covered by our existing provision for the site. The settlement with
the Village did not have, and we expect that the Consent Judgment will not have, a material effect on our financial
condition or results of operations.
In April 2015, we received from EPA a Notice of Potential Liability and Demand for Costs (the "Notice") pursuant to
CERCLA regarding the site in Gloversville, New York of a former leather tannery operated by us and by other, unrelated
parties. The Notice demanded payment of approximately $2.2 million of response costs claimed by EPA to have been
incurred to conduct assessments and removal activities at the site. In February 2017, we entered into a settlement
agreement with EPS resolving their claim for past response costs in exchange for a payment by us of $1.5 million which
was paid in May 2017. Our environmental insurance carrier has reimbursed us for 75% of the settlement amount,
subject to a $500,000 self-insured retention. We do not expect any additional cost related to the matter.
Whitehall Environmental Matters
We have performed sampling and analysis of soil, sediments, surface water, groundwater and waste management areas at
our former Volunteer Leather Company facility in Whitehall, Michigan.
In October 2010, we entered into a Consent Decree with the Michigan Department of Natural Resources and
Environment providing for implementation of a remedial Work Plan for the facility site designed to bring the site into
compliance with applicable regulatory standards. The Work Plan's implementation is substantially complete and we
expect, based on our present understanding of the condition of the site, that our future obligations with respect to the site
will be limited to periodic monitoring and that future costs related to the site should not have a material effect on our
financial condition or results of operations.
Accrual for Environmental Contingencies
Related to all outstanding environmental contingencies, we had accrued $1.5 million as of February 1, 2020, $1.8
million as of February 2, 2019 and $3.0 million as of February 3, 2018. All such provisions reflect our estimates of the
most likely cost (undiscounted, including both current and noncurrent portions) of resolving the contingencies, based on
facts and circumstances as of the time they were made. There is no assurance that relevant facts and circumstances will
not change, necessitating future changes to the provisions. Such contingent liabilities are included in the liability arising
from provision for discontinued operations on the accompanying Consolidated Balance Sheets because it relates to
former facilities operated by us. We have made pretax accruals for certain of these contingencies, including
approximately $0.4 million in Fiscal 2020, $0.7 million in Fiscal 2019 and $0.6 million in Fiscal 2018. These charges
26
are included in loss from discontinued operations, net in the Consolidated Statements of Operations and represent
changes in estimates.
Other Legal Matters
On May 19, 2017, two former employees of our former Hat World subsidiary filed a putative class and collective action,
Chen and Salas v. Genesco Inc., et al., in the U.S. District Court for the Northern District of Illinois alleging violations
of the FLSA and certain Illinois and New York wages and hours laws, including, among others, failure to pay overtime
to store managers, and also seeking back pay, damages, statutory penalties, and declaratory and injunctive relief. On
March 8, 2018, the court granted us a motion to transfer venue to the U.S. District Court for the Southern District of
Indiana. On March 9, 2018, a former employee of our former Hat World subsidiary filed a putative class action in the
Superior Court of the Commonwealth of Massachusetts claiming violations of the Massachusetts Overtime Law,
M.G.L.C. 151§1A, by failing to pay overtime to employees classified as store managers, and seeking restitution, an
incentive award, treble damages, interest, attorneys’ fees and costs. We reached an agreement in principle to settle the
Chen and Salas and Massachusetts matters for payment of attorneys' fees and administrative costs totaling $0.4 million
plus total payments to members of the plaintiff class who opt to participate in the settlement of up to $0.8 million. The
proposed settlement has been approved by the court and the distribution of relief to class members is in process. We do
not expect that the proposed settlement will have a material adverse effect on our financial condition or results of
operations.
Other Matters
In the fourth quarter of Fiscal 2020, the IRS notified us on Letter 226-J, that we may be liable for an Employer Shared
Responsibility Payment (“ESRP”) in the amount of $4.2 million for the year ended December 31, 2017. The ESRP is
applicable to employers that had 50 or more full-time equivalent employees, did not offer minimum essential coverage
(“MEC”) to at least 95% of full-time employees (and their dependents) or did offer MEC to at least 95% of full time-
employees (and their dependents), which did not meet the affordable or minimum value criteria and had one or more
employees who claimed the Employee Premium Tax Credit (“PTC”) pursuant to the Affordable Care Act (the “ACA”).
The IRS determines which employers receive Letter 226-J and the amount of the proposed ESRP from information that
the employers complete on their information returns (IRS Forms 1094-C and 1095-C) and from the income tax returns of
their employees. Since the inception of the ACA, it has been our policy to offer MEC to all full-time employees and their
dependents. Based on our analysis, we responded to the IRS on January 15, 2020 asserting that we did offer MEC to at
least 95% of our full-time employees for each month of 2017 and noting that the discrepancy was caused by errors in the
electronic files uploaded through the ACA information return system. We are awaiting a response from the IRS and do
not believe we have a liability. As a result, we did not make an accrual for this matter for the year ended February 1,
2020.
In addition to the matters specifically described in this Item 3, we are a party to other legal and regulatory proceedings
and claims arising in the ordinary course of our business. While management does not believe that our liability with
respect to any of these other matters is likely to have a material effect on our financial statements, legal proceedings are
subject to inherent uncertainties and unfavorable rulings could have a material adverse impact on our financial
statements.
ITEM 4, MINE SAFETY DISCLOSURES
Not applicable.
ITEM 4A, INFORMATION ABOUT OUR EXECUTIVE OFFICERS
The officers of the Company are generally elected at the first meeting of the Board of Directors following the annual
meeting of shareholders and hold office until their successors have been chosen and qualified or until their earlier death,
resignation or removal. The name, age and office of each of the Company’s executive officers and certain information
relating to the business experience of each are set forth below:
27
Mimi Eckel Vaughn, 53, President and Chief Executive Officer. Ms. Vaughn joined the Company in September 2003 as
vice president of strategy and business development. She was named senior vice president, strategy and business
development in October 2006, senior vice president of strategy and shared services in April 2009 and senior vice
president - finance and chief financial officer in February 2015. In May 2019, Ms. Vaughn was named senior vice
president and chief operating officer and continued to serve as senior vice president - finance and chief financial officer
until Mel Tucker was appointed as her replacement in June 2019. In October 2019, Ms. Vaughn was appointed to
become president and chief executive officer of the Company on February 2, 2020. Prior to joining the Company,
Ms. Vaughn was executive vice president of business development and marketing, and acting chief financial officer from
2000 to 2001, for Link2Gov Corporation in Nashville. From 1993 to 1999, she was a consultant at McKinsey and
Company in Atlanta.
Melvin G. Tucker, 55, Senior Vice President - Finance and Chief Financial Officer. Mr. Tucker joined the Company in
June 2019 as senior vice president of finance and chief financial officer. Mr. Tucker most recently served as chief
financial officer of Century 21 Department Stores, a position he held since 2014. Prior to serving in that role, Mr. Tucker
served as chief financial officer of Bass Pro Shops from 2013 to 2014, as senior vice president of finance of PetSmart
from 2008 to 2013, and as vice president of financial planning and analysis of Circuit City from 2005 to 2008.
Danny Ewoldsen, 50, Senior Vice President. Mr. Ewoldsen is a 16-year Johnston & Murphy veteran. He joined
Johnston & Murphy in 2003 as vice president store operations and later promoted to vice president store and consumer
sales in 2006. He was named executive vice president, Johnston & Murphy Retail and E-Commerce in 2013, president
of Johnston & Murphy Group in January 2019 and named senior vice president of Genesco in July 2019. Prior to
joining Genesco, Mr. Ewoldsen was with Wilsons Leather from 1996 to 2002 serving in roles with increasing
responsibilities, including vice president of stores for the El Portal division.
Mario Gallione, 59, Senior Vice President. Mr. Gallione is a 42-year veteran of Genesco. He began his career as a
Jarman sales associate in 1977. He was promoted to manager and served in a variety of sales management positions
until 1987 when he was promoted as a merchandiser trainee and rose through the ranks to divisional merchandise
manager for Journeys in 1994 and vice president in 1998. In October 2006, he was named senior vice president, general
merchandise manager of Journeys Group. In 2010, he was named chief merchandising officer of Journeys Group. In
September 2017, Mr. Gallione was named president of Journeys and in July 2019, he was named senior vice president of
Genesco.
Scott E. Becker, 52, Senior Vice President - General Counsel and Corporate Secretary. In October 2019, Mr. Becker
joined the Company as senior vice president, general counsel, and corporate secretary. Prior to joining the Company, Mr.
Becker served in a variety of roles with increasing responsibility for Nissan Group of North America and Latin America
since 2006. Since 2009, he was a senior vice president with responsibilities for Nissan’s legal, government affairs,
finance, strategy and administration. From 2006 to 2009, he served as Nissan’s general counsel, corporate secretary and
vice president, legal and government affairs. Prior to joining Nissan, Mr. Becker served in various legal roles at Sears
Holdings Corporation. Mr. Becker began his legal career with several Chicago area law firms.
Parag D. Desai, 45, Senior Vice President of Strategy and Shared Services. Mr. Desai joined the Company in 2014 as
senior vice president of strategy and shared services. Prior to joining the Company, Mr. Desai spent 14 years with
McKinsey and Company, including seven years as a partner. Previously, Mr. Desai also held business development and
technology positions at Outpace Systems and Booz Allen & Hamilton.
Brently G. Baxter, 54, Vice President and Chief Accounting Officer. Mr. Baxter joined the Company in September 2019
as vice president and chief accounting officer. Mr. Baxter most recently served as group vice president, controller and
principal accounting officer for Sally Beauty Holdings, Inc., a position he held since 2017. From 2014 and 2016, he
served as senior vice president, controller and chief accounting officer for Stein Mart, Inc. From 2006 to 2014, he served
28
as vice president, accounting, treasury and corporate controller for PetSmart, Inc. From 2003 to 2006, Mr. Baxter served
as vice president and controller for Cracker Barrel Old Country Store, Inc.
Matthew N. Johnson, 55, Vice President and Treasurer. Mr. Johnson joined the Company in 1993 as manager,
corporate finance and was elected assistant treasurer in December 1993. He was elected treasurer in June 1996. He was
named vice president finance in October 2006 and renamed treasurer in April 2011 after a period of service as chief
financial officer of one of the Company's divisions. Prior to joining the Company, Mr. Johnson was a vice president in
of Chicago.
the
First National Bank
institutional
corporate
of The
division
banking
and
29
PART II
ITEM 5, MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Our stock is traded on the New York Stock Exchange under the symbol "GCO".
There were approximately 1,450 common shareholders of record on March 13, 2020.
We have not paid cash dividends to our holders of our Common Stock since 1973. Our ability to pay cash dividends to
our holders of common stock is subject to various restrictions. See Note 9 to the Consolidated Financial Statements
included in Item 8, "Financial Statements and Supplementary Data" for information regarding restrictions on dividends
and redemption of capital stock.
Recent Sales of Unregistered Securities
None.
Issuer Purchases of Equity Securities
None.
Equity Compensation Plan Information
Refer to Part III, Item 12, "Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters" included elsewhere in this report.
30
ITEM 6, SELECTED FINANCIAL DATA
Financial Summary - We completed the sale of Lids Sports Group on February 2, 2019. The operating results in the
table below have been adjusted to reflect Lids Sports Group in discontinued operations for all periods prior to Fiscal
2020. See Item 8, Note 16 to our Consolidated Financial Statements included in this Annual Report on Form 10-K for
additional information about discontinued operations.
In thousands except per common share data, Financial
Statistics and Other Data (End of Year)
Fiscal Year End
Results of Operations Data
Net sales
Depreciation and amortization
Operating income
Earnings from continuing operations before
income taxes
2020
2019
2018
2017
2016
$ 2,197,066
49,574
83,318
$ 2,188,553
52,161
81,817
$ 2,127,547
51,533
74,372
$ 2,020,831
49,943
107,793
$ 2,046,730
48,815
142,872
82,435
78,259
68,989
112,758
134,705
Earnings from continuing operations(1)
61,757
51,224
36,708
(Loss) earnings from discontinued operations, net
(373 )
(103,154 )
(148,547 )
Net earnings (loss)
Per Common Share Data
Earnings from continuing operations
Basic
Diluted
Discontinued operations
Basic
Diluted
Net earnings (loss)
Basic
Diluted
Balance Sheet and Cash Flow Data
Total assets
Long-term debt(2)
Non-redeemable preferred stock
Common equity
Capital expenditures
Financial Statistics
$
61,384
$
(51,930 ) $ (111,839 ) $
$
$
3.97
3.94
$
2.65
2.63
$
1.91
1.90
(0.02 )
(0.02 )
3.95
3.92
(5.33 )
(5.29 )
(2.68 )
(2.66 )
(7.73 )
(7.70 )
(5.82 )
(5.80 )
$
$
72,882
24,549
97,431
3.63
3.61
1.22
1.22
4.85
4.83
85,135
9,434
94,569
3.72
3.70
0.41
0.41
4.13
4.11
$ 1,680,478
14,393
1,009
618,334
29,767
$ 1,181,081
65,743
1,060
736,491
41,780
$ 1,315,353
88,385
1,052
828,122
98,609
$ 1,440,999
82,905
1,060
919,993
74,925
$ 1,540,057
111,765
1,077
954,079
76,982
Operating income as a percent of net sales
3.8 %
3.7 %
3.5 %
5.3 %
7.0 %
Book value per share (common equity divided by
common shares outstanding)
Working capital(3) (in thousands)
Current ratio(3)
$
$
42.07
146,248
1.4
38.55
$
$ 454,817
2.6
41.61
$
$ 438,020
2.7
46.31
$
$ 407,587
2.3
43.70
$
$ 447,504
2.4
Percent long-term debt to total capitalization
2.3 %
8.2 %
9.6 %
8.2 %
10.5 %
Other Data (End of Year)
Number of retail outlets(4)
Number of employees
1,480
22,050
1,512
21,000
1,535
20,900
1,554
21,200
1,520
19,000
31
(1)Reflected in earnings from continuing operations was a charge of $0.6 million for loss on early retirement of debt for
Fiscal 2019 and a gain of $12.3 million from the sale of SureGrip Footwear for Fiscal 2017.
Also reflected in earnings from continuing operations for Fiscal 2020, 2019, 2018, 2017 and 2016 were asset impairment
and other charges (gains) of $13.4 million, $3.2 million, $7.8 million, $(8.0) million and $2.7 million, respectively. See
Note 4 to the Consolidated Financial Statements for additional information.
(2)Long-term debt includes current obligations.
(3)Working capital as of February 1, 2020 was impacted by the adoption of ASC 842 which requires the current portion
of operating lease liabilities to be on the face of the Consolidated Balance Sheets. At February 1, 2020, current portion
of operating lease liabilities was $142.7 million.
(4)Includes 36 Little Burgundy stores added in Fiscal 2016 that were acquired on November 3, 2015.
32
ITEM 7, MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
For discussion of results of operations and financial condition pertaining to Fiscal 2019 and Fiscal 2018, see our Annual
Report on Form 10-K for the fiscal year ended February 2, 2019, Item 7. Management's Discussion and Analysis of
Results of Operations and Financial Condition.
Summary of Results of Operations
Our net sales increased 0.4% during Fiscal 2020 compared to Fiscal 2019. The increase reflected a 3% increase in
Journeys Group sales, partially offset by a 2% decrease in Schuh Group sales, a 4% decrease in Johnston & Murphy
Group sales and a 15% decrease in Licensed Brands sales. Excluding the impact of lower exchange rates, net sales
increased 1% during Fiscal 2020. Gross margin increased as a percentage of net sales from 47.8% in Fiscal 2019 to
48.4% in Fiscal 2020, reflecting gross margin increases as a percentage of net sales in all of our business segments.
Selling and administrative expenses were flat as a percentage of net sales at 44.0% in Fiscal 2020 and Fiscal 2019,
reflecting decreased expenses as a percentage of net sales in Journeys Group and Schuh Group, offset by increased
expenses as a percentage of net sales in Johnston & Murphy Group and Licensed Brands, while Corporate expenses
were flat. Operating income increased as a percentage of net sales from 3.7% in Fiscal 2019 to 3.8% in Fiscal 2020,
reflecting increased earnings in Journeys Group and Schuh Group, partially offset by decreased earnings in Johnston &
Murphy Group, Licensed Brands and Corporate in Fiscal 2020.
Significant Developments
Outbreak of COVID-19
The outbreak of COVID-19 continues to grow in the U.S., U.K. and globally, and related government and private sector
responsive actions may adversely affect our business operations. It is impossible to predict the effect and ultimate impact
of the COVID-19 pandemic as the situation is rapidly evolving. The spread of COVID-19 has caused public health
officials to recommend precautions to mitigate the spread of the virus, especially when congregating in heavily
populated areas, such as malls and shopping centers. In consideration of the health and well-being of our employees,
customers and communities, and in support of efforts to contain the spread of the virus, we temporarily closed our North
American stores on March 18, 2020. In addition, on March 23, 2020, our stores in the United Kingdom and Ireland
were closed and on March 26, 2020, our UK e-commerce business was temporarily closed. Our e-commerce operations
across all of our North American brands remain open and ready to serve our customers. We will continue to evaluate the
timing of reopening our stores and UK e-commerce operations until such time as the stores can be opened safely and in
compliance with applicable laws and regulations, as developments continue to occur in this rapidly changing
environment. There is significant uncertainty around the breadth and duration of these store closures and other business
disruptions related to COVID-19, as well as its impact on the U.S. and U.K. economies, consumer willingness to visit
malls and shopping centers, and employee willingness to staff our stores once they re-open. While we anticipate our
future results to be adversely impacted, the extent to which COVID-19 impacts our future results will depend on future
developments, which are highly uncertain and cannot be predicted, including new information which may emerge
concerning the severity of COVID-19 and the actions taken to contain it or treat its impact.
The Acquisition of Togast
Effective January 1, 2020, we completed the acquisition of substantially all the assets and the assumption of certain
liabilities of Togast. Togast specializes in the the design, sourcing and sale of licensed footwear. We also entered into a
new U.S. footwear license agreement with Levi Strauss & Co. for the license of Levi's® footwear for men, women and
children in U.S. concurrently with the Togast acquisition. The acquisition expands our portfolio to include footwear
licenses for Bass®, ADIO and FUBU, among others. Togast operates in our Licensed Brands segment.
33
The Sale of Lids Sports Group
We announced in February of 2018 that we were initiating a formal process to explore the sale of our Lids Sports Group
business. On December 14, 2018, we entered into a definitive agreement for the sale of Lids Sports Group to FanzzLids
Holdings, a holding company controlled and operated by affiliates of Ames Watson Capital, LLC. The sale was
completed on February 2, 2019 for $93.8 million cash, which consisted of a sales price of $100.0 million and working
capital adjustments of $6.2 million. Because the effective date of closing was a Saturday and we did not receive the cash
proceeds until February 4, 2019, the purchase price is reflected in accounts receivable at February 2, 2019. We recorded
a loss on the sale of Lids Sports Group of $98.3 million, net of tax, on the sale of these assets, representing the sales
price less the value of the Lids Sports Group assets sold and other miscellaneous charges, including divestiture
transaction costs, offset by a tax benefit on the loss. As a result of the sale, we met the requirements to report the results
of Lids Sports Group as discontinued operations, and reflected the loss in loss from discontinued operations, net in our
Consolidated Statements of Operations. The costs of the Lids Sports Group headquarters building, which was not
included in the sale, was reclassified to corporate and other. During the fourth quarter of Fiscal 2020, we completed the
sale of the Lids Sports Group headquarters building for a total of $17.7 million which included a gain on the sale of $0.6
million reported in asset impairments and other, net on our Consolidated Statements of Operations for the year ended
February 1, 2020. Unless otherwise noted, the discussion herein relates to continuing operations. See additional
information regarding the sale of Lids Sports Group in Item 8, Note 16, "Discontinued Operations", to our Consolidated
Financial Statements included in this Annual Report on Form 10-K.
Asset Impairment and Other Charges
We recorded a pretax charge to earnings of $13.4 million in Fiscal 2020, including $11.5 million pension settlement
expense and $3.1 million for retail store asset impairments, partially offset by a $(0.6) million gain on the sale of the
Lids Sports Group headquarters building, a $(0.4) million gain for lease terminations and a $(0.2) million gain related to
Hurricane Maria.
Postretirement Benefit Liability
In March 2019, our board of directors authorized the termination of the defined benefit pension plan. The termination
was completed in January 2020 with a pension settlement charge of $11.5 million which is included in asset impairments
and other, net on the Consolidated Statements of Operations for Fiscal 2020.
Comparable Sales
For purposes of this report, "comparable sales" are sales from stores open longer than one year, beginning with the first
day it has comparable sales (which we refer to in this report as "same store sales"), and sales from websites operated
longer than one year and direct mail catalog sales (which we refer to in this report as "comparable direct sales").
Temporarily closed stores are excluded from the comparable sales calculation if closed for more than seven days.
Expanded stores are excluded from the comparable sales calculation until the first day it has comparable prior year sales.
Current year foreign exchange rates are applied to both current year and prior year comparable sales to achieve a
consistent basis for comparison.
Results of Operations—Fiscal 2020 Compared to Fiscal 2019
Our net sales for Fiscal 2020 increased 0.4% to $2.20 billion from $2.19 billion in Fiscal 2019. The increase in net sales
was a result of increased sales in Journeys Group, partially offset by decreased sales in Schuh Group, Johnston &
Murphy Group and Licensed Brands. Comparable sales increased 3%, with stores up 1% and direct up 18%. Gross
margin increased 1.5% to $1.063 billion in Fiscal 2020 from $1.047 billion in Fiscal 2019, and increased as a percentage
of net sales from 47.8% in Fiscal 2019 to 48.4% in Fiscal 2020, primarily reflecting increased gross margin as a
percentage of net sales in all of our business segments. Selling and administrative expenses in Fiscal 2020 increased
0.5% from Fiscal 2019, but were flat as a percentage of net sales at 44.0%, primarily reflecting decreased expenses in
Journeys Group and Schuh Group, partially offset by increased expenses in Johnston & Murphy Group and Licensed
Brands, while Corporate was flat. Explanations of the changes in results of operations are provided by business segment
in discussions following these introductory paragraphs.
34
Earnings from continuing operations before income taxes (“pretax earnings”) for Fiscal 2020 were $82.4 million,
compared to $78.3 million for Fiscal 2019. Pretax earnings for Fiscal 2020 included an asset impairment and other
charge of $13.4 million for pension settlement expense and retail store asset impairments, partially offset by a gain on
the sale of the Lids Sports Group headquarters building, a gain on lease terminations and a gain related to Hurricane
Maria. Pretax earnings for Fiscal 2019 included an asset impairment and other charge of $3.2 million for retail store
asset impairments, other legal matters and hurricane losses, partially offset by a gain from Hurricane Maria. In addition,
pretax earnings included a $0.6 million charge for loss on early retirement of debt.
Net earnings for Fiscal 2020 were $61.4 million ($3.92 diluted earnings per share) compared to a net loss of $(51.9)
million ($2.66 diluted loss per share) for Fiscal 2019. Net earnings for Fiscal 2020 included a pretax charge of $0.4
million primarily for anticipated costs of environmental remedial alternatives related to former facilities operated by us.
The net loss for Fiscal 2019 included a net loss from discontinued operations of $103.2 million ($5.29 diluted loss per
share). Included in Fiscal 2019 discontinued operations was a $126.3 million pretax loss on the sale of Lids Sports
Group as well as a pretax charge of $0.7 million primarily for anticipated costs of environmental remedial alternatives
related to former facilities operated by us. The effective income tax rate was 25.1% for Fiscal 2020 compared to 34.5%
for Fiscal 2019. The effective tax rate for Fiscal 2020 was lower compared to Fiscal 2019 due to the benefit of
additional income taxed at lower jurisdictional statutory tax rates, partially offset by a reduction in U.S. federal tax
credits. See Item 8, Note 10, "Income Taxes", to our Consolidated Financial Statements included in this Annual Report
on Form 10-K for additional information.
Journeys Group
Net sales
Operating income
Operating margin
Fiscal Year Ended
2020
2019
%
Change
(dollars in thousands)
$ 1,460,253
114,945
$
$ 1,419,993
100,799
$
7.9 %
7.1 %
2.8 %
14.0 %
Net sales from Journeys Group increased 2.8% to $1.46 billion for Fiscal 2020 compared to $1.42 billion for Fiscal
2019. The increase reflected a 4% increase in comparable sales partially offset by a 3% decrease in average Journeys
stores operated (i.e. the sum of the number of stores open on the first day of the fiscal year and the last day of each fiscal
month during the year divided by thirteen) for Fiscal 2020. The comparable sales increase reflected a 5% increase in
footwear unit comparable sales, while the average price per pair of shoes was flat. The store count for Journeys Group
was 1,171 stores at the end of Fiscal 2020, including 233 Journeys Kidz stores, 46 Journeys stores in Canada and 39
Little Burgundy stores in Canada, compared to 1,193 stores at the end of Fiscal 2019, including 239 Journeys Kidz
stores, 46 Journeys stores in Canada and 41 Little Burgundy stores in Canada.
Journeys Group operating income for Fiscal 2020 increased 14.0% to $114.9 million, compared to $100.8 million for
Fiscal 2019. The increase in operating income was primarily due to (i) increased net sales, (ii) increased gross margin as
a percentage of sales, reflecting decreased markdowns and (iii) decreased expenses as a percentage of net sales reflecting
decreased rent and bonus expenses, partially offset by increased professional fees and marketing expense.
35
Schuh Group
Net sales
Operating income
Operating margin
$
$
Fiscal Year Ended
2020
2019
%
Change
(dollars in thousands)
$
$
373,930
4,659
382,591
3,765
1.2 %
1.0 %
(2.3 )%
23.7 %
Net sales from the Schuh Group decreased 2.3% to $373.9 million for Fiscal 2020, compared to $382.6 million for
Fiscal 2019. The sales decrease reflects primarily a decrease of $12.8 million in sales due to changes in foreign
exchange rates and a 2% decrease in average stores operated, partially offset by a 2% increase in comparable sales.
Schuh Group operated 129 stores at the end of Fiscal 2020 compared to 136 at the end of Fiscal 2019.
Schuh Group operating income increased 23.7% to $4.7 million in Fiscal 2020 compared to $3.8 million for Fiscal 2019.
The increase in earnings this year reflects (i) increased gross margin as a percentage of net sales due primarily to better
margins on sale priced products and (ii) decreased expenses as a percentage of net sales primarily due to decreased rent
and depreciation expenses, partially offset by increased marketing and compensation expenses. In addition, Schuh
Group's operating income was not materially impacted for Fiscal 2020 due to changes in foreign exchange rates.
Johnston & Murphy Group
Fiscal Year Ended
2020
2019
%
Change
Net sales
Operating income
Operating margin
$
$
(dollars in thousands)
$
$
300,850
17,702
313,134
20,385
5.9 %
6.5 %
(3.9 )%
(13.2 )%
Johnston & Murphy Group net sales decreased 3.9% to $300.9 million for Fiscal 2020 from $313.1 million for Fiscal
2019. The decrease reflected primarily a 2% decrease in comparable sales and a 1% decrease in average stores operated
for Johnston & Murphy retail operations and a 10% decrease in Johnston & Murphy wholesale sales. Unit sales for the
Johnston & Murphy wholesale business decreased 9% in Fiscal 2020 and the average price per pair of shoes decreased
1% for the same period. Retail operations accounted for 75.8% of the Johnston & Murphy Group's sales in Fiscal 2020,
up from 74.2% in Fiscal 2019. The comparable sales decrease reflected a 3% decrease in the average price per pair of
shoes, while footwear unit comparable sales were flat. The store count for Johnston & Murphy retail operations at the
end of Fiscal 2020 included 180 Johnston & Murphy shops and factory stores, including eight stores in Canada,
compared to 183 Johnston & Murphy shops and factory stores, including eight stores in Canada, at the end of Fiscal
2019.
Johnston & Murphy operating income for Fiscal 2020 decreased 13.2% to $17.7 million from $20.4 million for Fiscal
2019, primarily due to (i) decreased net sales and (ii) increased expenses as a percentage of net sales primarily due to
increased marketing expense, selling salaries and rent expense, partially offset by decreased bonus expense.
36
Licensed Brands
Net sales
Operating loss
Operating margin
$
$
Fiscal Year Ended
2020
2019
%
Change
(dollars in thousands)
$
$
61,859
(698 )
(1.1 )%
72,564
(488 )
(0.7 )%
(14.8 )%
(43.0 )%
Licensed Brands’ net sales decreased 14.8% to $61.9 million for Fiscal 2020 from $72.6 million for Fiscal 2019. The
sales decrease primarily reflects decreased sales of Dockers Footwear. Unit sales for Dockers Footwear decreased 13%
for Fiscal 2020 and the average price per pair of shoes decreased 4% for the same period.
Licensed Brands’ operating loss increased from $(0.5) million for Fiscal 2019 to $(0.7) million for Fiscal 2020, primarily
due to (i) decreased net sales and (ii) increased expenses as a percentage of net sales primarily due to increased
compensation expense, shipping and warehouse, freight and marketing expense, partially offset by decreased bonus and
royalty expenses.
Corporate, Interest Expenses and Other Charges
Corporate and other expense for Fiscal 2020 was $53.3 million compared to $42.6 million for Fiscal 2019. Corporate
expense in Fiscal 2020 included a $13.4 million charge in asset impairment and other charges, primarily for pension
settlement expense and retail store asset impairments, partially offset by a gain on the sale of the Lids Sports Group
headquarters building, a gain on lease terminations and a gain related to Hurricane Maria. Fiscal 2019 included a $3.2
million charge in asset impairment and other charges, primarily for retail store asset impairments, other legal matters and
hurricane losses, partially offset by a gain from Hurricane Maria. Excluding the charges listed above, corporate and
other expense increased slightly primarily due to increased professional fees partially offset by decreased expenses
associated with the former Lids Sports Group headquarters building.
Net interest expense decreased 61.7% from $3.3 million in Fiscal 2019 to $1.3 million in Fiscal 2020 primarily due to
increased interest income. Interest income increased $1.3 million due to the increase in average short-term investments.
37
Liquidity and Capital Resources
The following table sets forth certain financial data at the dates indicated and includes all operations of the Company.
Cash and cash equivalents
Working capital(1)
Long-term debt (includes current maturities)
Feb. 1, 2020
Feb. 2, 2019
Feb. 3, 2018
$
$
$
(dollars in millions)
167.4 $
454.8 $
65.7 $
81.4 $
146.2 $
14.4 $
39.9
438.0
88.4
(1) Working capital as of February 1, 2020 was impacted by the adoption of ASC 842 which requires the current portion of operating
lease liabilities to be on the face of the Consolidated Balance Sheets. At February 1, 2020, current portion of operating lease liabilities
was $142.7 million.
Working Capital
Our business is seasonal, with our investment in inventory and accounts receivable normally reaching peaks in the spring
and fall of each year. Historically, cash flow from operations has been generated principally in the fourth quarter of each
fiscal year.
Cash flow changes: (Includes discontinued operations
in Fiscal 2019)
Fiscal Year Ended
(dollars in millions)
February 1, 2020 February 2, 2019
Net cash provided by operating activities
$
Net cash provided by (used in) investing activities
Net cash used in financing activities
Effect of foreign exchange rate fluctuations on cash
Increase (decrease) in cash and cash equivalents
$
117.2 $
53.3
(256.5 )
0.1
(85.9 ) $
237.1 $
(56.5 )
(52.8 )
(0.4 )
127.4 $
Increase
(Decrease)
(119.9 )
109.8
(203.7 )
0.5
(213.3 )
Reasons for the major variances in cash provided by (used in) the table above are as follows:
Cash provided by operating activities was $119.9 million lower for Fiscal 2020 compared to Fiscal 2019, primarily
reflecting the following factors:
• A $126.2 million decrease in cash flow from the loss on sale of business in the prior year;
• A $53.4 million decrease in cash flow from changes in accounts payable reflecting changes in buying patterns
and vendor mix and the impact of an increase in accounts payable in discontinued operations in the prior year;
• A $41.5 million decrease in cash flow from changes in other accrued liabilities reflecting increased bonus
payments and increased tax payments related to discontinued operations; and
• A $27.4 million decrease in cash flow from changes in depreciation and amortization primarily related to
discontinued operations; partially offset by
• A $113.3 million increase in net earnings; and
• A $25.3 million increase in cash flow from changes in prepaids and other current assets reflecting decreases in
prepaid income taxes when compared to the prior year.
Cash provided by investing activities was $109.8 million higher for Fiscal 2020 primarily reflecting proceeds from the
sale of Lids Sports Group and the sale of the Lids headquarters building and decreased capital expenditures, partially
offset by the acquisition of Togast.
Cash used in financing activities was $203.7 million higher in Fiscal 2020 reflecting primarily increased share
repurchases compared to Fiscal 2019.
38
Sources of Liquidity
We have three principal sources of liquidity: cash flow from operations, cash and cash equivalents on hand and our
credit facilities discussed in Item 8, Note 7, "Long-Term Debt", to our Consolidated Financial Statements included in
this Annual Report on Form 10-K. We believe that cash and cash equivalents on hand, cash flow from operations and
availability under our credit facilities will be sufficient to cover our working capital, capital expenditures and stock
repurchases, if any, for the foreseeable future.
On March 19, 2020, we borrowed $150.0 million under our Credit Facility and we have subsequently borrowed another
$34.3 million. We did this as a precautionary measure to ensure funds are available to meet our obligations for a
substantial period of time. This borrowing was in response to the COVID-19 outbreak that caused public health officials
to recommend precautions that would mitigate the spread of the virus, including warning against congregating in heavily
populated areas such as malls and shopping centers, and led to the temporary closure of our North American stores on
March 18, 2020. We intend to hold the proceeds from the Credit Facility borrowings on our Consolidated Balance Sheets
and, in accordance with the terms of the Credit Facility, may use the proceeds in the future for working capital, general
corporate or other purposes as permitted by the Credit Agreement. In addition, on March 23, 2020, we closed our stores
in the United Kingdom and Ireland and on March 26, 2020, we closed our UK e-commerce operations. As of March 24,
2020, we have borrowed £19.0 million on our U.K. A&R Agreement. See Item 8, Note 18, "Subsequent Events", to our
Consolidated Financial Statements included in this Annual Report on 10-K for additional information pertaining to the
U.K. A&R Agreement.
Off-Balance Sheet Arrangements
None.
Contractual Obligations
The following tables set forth aggregate contractual obligations and commitments as of February 1, 2020.
(in thousands)
Contractual Obligations
Long-Term Debt Obligations
Operating Lease Obligations
Purchase Obligations(1)
Other Long-Term Liabilities
Total Contractual Obligations(2)
Payments Due by Period
$
Total
14,393 $
926,396
521,048
881
$
1,462,718 $
Less than 1
year
1 - 3
years
3 - 5
years
— $
180,314
521,048
172
701,534 $
14,393 $
322,624
—
343
337,360 $
— $
231,212
—
342
231,554 $
(in thousands)
Amount of Commitment Expiration Per Period
Commercial Commitments
Total Amounts
Committed
Less than 1
year
1 - 3
years
3 - 5
years
More
than 5
years
—
192,246
—
24
192,270
More
than 5
years
Letters of Credit
Total Commercial Commitments
$
$
9,324 $
9,324 $
9,324 $
9,324 $
— $
— $
— $
— $
—
—
(1) Represents open purchase orders for inventory.
(2) Excludes unrecognized tax benefits of $0.2 million due to their uncertain nature in timing of payments, if any.
The total accrued benefit liability for other postretirement benefit plans as of February 1, 2020, was $7.0 million. This
amount is impacted by, among other items, plan amendments and changes in plan demographics and assumptions.
Because the accrued liability does not represent expected liquidity needs, we did not include this amount in the
39
contractual obligations table. See Note 11 to our Consolidated Financial Statements included in Item 8, "Financial
Statements and Supplementary Data" for additional information related to other postretirement benefit plans.
Capital Expenditures
Capital expenditures were $29.8 million, $57.2 million and $127.9 million for Fiscal 2020, 2019 and 2018, respectively.
The $27.4 million decrease in Fiscal 2020 capital expenditures as compared to Fiscal 2019 is primarily due to decreased
new store openings in Fiscal 2020 as well as decreased capital expenditures as a result of discontinued operations. The
$70.7 million decrease in Fiscal 2019 capital expenditures as compared to Fiscal 2018 is primarily due to decreases of
capital expenditures in Journeys Group and Schuh Group as well as discontinued operations.
As a result of the outbreak of the COVID-19 pandemic, we expect total capital expenditures for Fiscal 2021 to be
reduced.
Future Capital Needs
As we manage through the impacts of the COVID-19 pandemic in Fiscal 2021, we have access to our existing cash, as
well as our available credit facilities to meet short-term liquidity needs. We believe that cash on hand, cash provided by
operations and borrowings under our Credit Facility and the U.K. A&R Agreement will be sufficient to support our near-
term liquidity. Extended temporary store and e-commerce closures may require access to additional credit.
We had total available cash and cash equivalents of $81.4 million and $167.4 million as of February 1, 2020 and
February 2, 2019, respectively, of which approximately $8.9 million and $20.8 million was held by our foreign
subsidiaries as of February 1, 2020 and February 2, 2019, respectively. Our strategic plan does not require the
repatriation of foreign cash in order to fund our operations in the U.S., and it is our current intention to indefinitely
reinvest our foreign cash and cash equivalents outside of the U.S. If we were to repatriate foreign cash to the U.S., we
would be required to accrue and pay U.S. taxes in accordance with applicable U.S. tax rules and regulations as a result of
the repatriation. Cash and cash equivalents included $59.6 million and $127.2 million of cash equivalents at February 1,
2020 and February 2, 2019, respectively. Cash equivalents are primarily institutional money market funds. Our $59.6
million of cash equivalents was invested in institutional money market funds which invest exclusively in highly rated,
short-term securities that are issued, guaranteed or collateralized by the U.S. government or by U.S. government
agencies and instrumentalities.
Common Stock Repurchases
We repurchased 4,570,015 shares at a cost of $189.4 million during Fiscal 2020 as part of three authorizations totaling
$325.0 million approved by the Board of Directors. We have $89.7 million remaining as of February 1, 2020 under our
current $100.0 million share repurchase authorization. We repurchased 968,375 shares at a cost of $45.9 million during
Fiscal 2019. We repurchased 275,300 shares at a cost of $16.2 million during Fiscal 2018.
Environmental and Other Contingencies
We are subject to certain loss contingencies related to environmental proceedings and other legal matters, including
those disclosed in Item 8, Note 14, "Legal Proceedings and Other Matters", to our Consolidated Financial Statements
included in this Annual Report on Form 10-K.
Financial Market Risk
The following discusses our exposure to financial market risk.
Outstanding Debt – We have $14.4 million of outstanding U.S. revolver borrowings at a weighted average interest rate
of 2.13% as of February 1, 2020. A 100 basis point increase in interest rates would increase annual interest expense by
$0.1 million on the $14.4 million revolver borrowings. On March 19, 2020, we borrowed $150.0 million under our
Credit Facility as a precautionary measure to ensure funds are available to meet our obligations for a substantial period
of time in response to the COVID-19 outbreak. Subsequently, we have borrowed an additional $34.3 million under our
Credit Facility. In addition, as of March 24, 2020, we have borrowed £19.0 million on our U.K. A&R Agreement.
40
Cash and Cash Equivalents – Our cash and cash equivalent balances are invested primarily in institutional money market
funds. We did not have significant exposure to changing interest rates on invested cash at February 1, 2020. As a result,
we consider the interest rate market risk implicit in these investments at February 1, 2020 to be low.
Summary – Based on our overall market interest rate exposure at February 1, 2020, we believe that the effect, if any, of
reasonably possible near-term changes in interest rates on our consolidated financial position, results of operations or
cash flows for Fiscal 2020 would not be material.
Accounts Receivable – Our accounts receivable balance at February 1, 2020 is concentrated in our wholesale businesses,
which sell primarily to department stores and independent retailers across the United States. In the wholesale
businesses, one customer accounted for 26%, three customers each accounted for 9% and one customer accounted for
6% of our total trade receivables balance, while no other customer accounted for more than 5% of our total trade
receivables balance as of February 1, 2020. We monitor the credit quality of our customers and establish an allowance
for doubtful accounts based upon factors surrounding credit risk of specific customers, historical trends and other
information, as well as customer specific factors; however, credit risk is affected by conditions or occurrences within the
economy and the retail industry, as well as company-specific information.
Foreign Currency Exchange Risk – We are exposed to translation risk because certain of our foreign operations utilize
the local currency as their functional currency and those financial results must be translated into United States dollars.
As currency exchange rates fluctuate, translation of our financial statements of foreign businesses into United States
dollars affects the comparability of financial results between years. Schuh Group's net sales and operating income for
Fiscal 2020 were negatively impacted by $12.8 million and positively impacted by $0.3 million, respectively, due to the
change in foreign exchange rates.
New Accounting Principles
Descriptions of recently issued accounting pronouncements, if any, and the accounting pronouncements adopted by us
during Fiscal 2020 are included in Note 2 to the Consolidated Financial Statements included in Item 8, "Financial
Statements and Supplementary Data".
Inflation
We do not believe inflation has had a material impact on sales or operating results during periods covered in this
discussion.
Critical Accounting Estimates
As a result of the economic and business impact of COVID-19, we may be required to revise certain accounting
estimates and judgments such as, but not limited to, those related to the valuation of goodwill, long-lived assets and
deferred tax assets, which could have a material adverse effect on our financial position and results of operations.
Inventory Valuation
In our footwear wholesale operations and our Schuh Group segment, cost for inventory that we own is determined using
the first-in, first-out ("FIFO") method. Net realizable value is determined using a system of analysis which evaluates
inventory at the stock number level based on factors such as inventory turn, average selling price, inventory level, and
selling prices reflected in future orders for footwear wholesale. We provide a valuation allowance when the inventory
has not been marked down to net realizable value based on current selling prices or when the inventory is not turning
and is not expected to turn at satisfactory levels.
In our retail operations, other than the Schuh Group segment, we employ the retail inventory method, applying average
cost-to-retail ratios to the retail value of inventories. Under the retail inventory method, valuing inventory at the lower of
cost or market is achieved as markdowns are taken or accrued as a reduction of the retail value of inventories.
Inherent in the retail inventory method are subjective judgments and estimates, including merchandise mark-on,
markups, markdowns and shrinkage. These judgments and estimates, coupled with the fact that the retail inventory
41
method is an averaging process, could produce a range of cost figures. To reduce the risk of inaccuracy and to ensure
consistent presentation, we employ the retail inventory method in multiple subclasses of inventory with similar gross
margins, and analyze markdown requirements at the stock number level based on factors such as inventory turn, average
selling price and inventory age. In addition, we accrue markdowns as necessary. These additional markdown accruals
reflect all of the above factors as well as current agreements to return products to vendors and vendor agreements to
provide markdown support. In addition to markdown allowances, we maintain reserves for shrinkage and damaged
goods based on historical rates.
Inherent in the analysis of both wholesale and retail inventory valuation are subjective judgments about current market
conditions, fashion trends and overall economic conditions. Failure to make appropriate conclusions regarding these
factors may result in an overstatement or understatement of inventory value. A change of 10% from the recorded
amounts for markdowns, shrinkage and damaged goods would have changed inventory by $0.7 million at February 1,
2020.
Impairment of Long-Lived Assets
We periodically assess the realizability of our long-lived assets, other than goodwill, and evaluate such assets for
impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be
recoverable. Asset impairment is determined to exist if estimated future cash flows, undiscounted and without interest
charges, are less than the carrying amount. Inherent in the analysis of impairment are subjective judgments about future
cash flows. Failure to make appropriate conclusions regarding these judgments may result in an overstatement or
understatement of the value of long-lived assets.
We annually assess our goodwill and indefinite lived trade names for impairment and on an interim basis if indicators of
impairment are present. Our annual assessment date of goodwill and indefinite lived trade names is the first day of the
fourth quarter.
In accordance with ASC 350, we have the option first to assess qualitative factors to determine whether events and
circumstances indicate that it is more likely than not that goodwill is impaired. If, after such assessment, we conclude
that the asset is not impaired, no further action is required. However, if we conclude otherwise, we are required to
determine the fair value of the asset using a quantitative impairment test. The quantitative impairment test for goodwill
compares the fair value of each reporting unit with the carrying value of the reporting unit with which the goodwill is
associated. If the fair value of the reporting unit is less than the carrying value of the reporting unit, an impairment
charge would be recorded for the amount, if any, in which the carrying value exceeds the reporting unit's fair value. We
estimate fair value using the best information available, and compute the fair value derived by a combination of the
market and income approach. The market approach is based on observed market data of comparable companies to
determine fair value. The income approach utilizes a projection of a reporting unit’s estimated operating results and cash
flows that are discounted using a weighted-average cost of capital that reflects current market conditions. A key
assumption in our fair value estimate is the weighted average cost of capital utilized for discounting our cash flow
projections in our income approach. The projection uses our best estimates of economic and market conditions over the
projected period including growth rates in sales, costs, estimates of future expected changes in operating margins and
cash expenditures. Other significant estimates and assumptions include terminal value growth rates, future estimates of
capital expenditures and changes in future working capital requirements. For additional information regarding
impairment of long-lived assets, see Item 8, Note 3, "Goodwill and Other Intangible Assets" and Note 4,"Asset
Impairments and Other Charges" to our Consolidated Financial Statements included in this Annual Report on Form 10-
K.
Revenue Recognition
In accordance with ASU 2014-09, "Revenue from Contracts with Customers (Topic 606)" ("ASC 606"), revenue shall be
recognized upon satisfaction of all contractual performance obligations and transfer of control to the customer. Revenue
is measured as the amount of consideration we expect to be entitled to in exchange for corresponding goods. The
majority of our sales are single performance obligation arrangements for retail sale transactions for which the transaction
price is equivalent to the stated price of the product, net of any stated discounts applicable at a point in time. Each sales
42
transaction results in an implicit contract with the customer to deliver a product at the point of sale. Revenue from retail
sales is recognized at the point of sale, is net of estimated returns, and excludes sales and value added taxes. Revenue
from catalog and internet sales is recognized at estimated time of delivery to the customer, is net of estimated returns,
and excludes sales and value added taxes. Wholesale revenue is recorded net of estimated returns and allowances for
markdowns, damages and miscellaneous claims when the related goods have been shipped and legal title has passed to
the customer. Actual amounts of markdowns have not differed materially from estimates. Shipping and handling costs
charged to customers are included in net sales. We elected the practical expedient within ASC 606 related to taxes that
are assessed by a governmental authority, which allows for the exclusion of sales and value added tax from transaction
price.
A provision for estimated returns is provided through a reduction of sales and cost of goods sold in the period that the
related sales are recorded. Estimated returns are based on historical returns and claims. Actual returns and claims in any
future period may differ from historical experience. Revenue from gift cards is deferred and recognized upon the
redemption of the cards. These cards have no expiration date. Income from unredeemed cards is recognized in our
Consolidated Statements of Operations within net sales in proportion to the pattern of rights exercised by the customer in
future periods. We perform an evaluation of historical redemption patterns from the date of original issuance to estimate
future period redemption activity.
Income Taxes
As part of the process of preparing our Consolidated Financial Statements, we are required to estimate our income taxes
in each of the tax jurisdictions in which we operate. This process involves estimating actual current tax obligations
together with assessing temporary differences resulting from differing treatment of certain items for tax and accounting
purposes, such as depreciation of property and equipment and valuation of inventories. These temporary differences
result in deferred tax assets and liabilities, which are included within our Consolidated Balance Sheets. We then assess
the likelihood that our deferred tax assets will be recovered from future taxable income. Actual results could differ from
this assessment if adequate taxable income is not generated in future periods. To the extent we believe that recovery of
an asset is at risk, valuation allowances are established. To the extent valuation allowances are established or increased
in a period, we include an expense within the tax provision in our Consolidated Statements of Operations. These
deferred tax valuation allowances may be released in future years when we consider that it is more likely than not that
some portion or all of the deferred tax assets will be realized. In making such a determination, we will need to
periodically evaluate whether or not all available evidence, such as future taxable income and reversal of temporary
differences, tax planning strategies, and recent results of operations, provides sufficient positive evidence to offset any
other potential negative evidence that may exist at such time. In the event the deferred tax valuation allowance is
released, we would record an income tax benefit for a portion or all of the deferred tax valuation allowance released. At
February 1, 2020, we had a deferred tax valuation allowance of $23.3 million.
Income tax reserves for uncertain tax positions are determined using the methodology required by the Income Tax Topic
of the Accounting Standards Codification (“Codification”). This methodology requires companies to assess each income
tax position taken using a two step process. A determination is first made as to whether it is more likely than not that the
position will be sustained, based upon the technical merits, upon examination by the taxing authorities. If the tax
position is expected to meet the more likely than not criteria, the benefit recorded for the tax position equals the largest
amount that is greater than 50% likely to be realized upon ultimate settlement of the respective tax position. Uncertain
tax positions require determinations and estimated liabilities to be made based on provisions of the tax law which may
be subject to change or varying interpretation. If our determinations and estimates prove to be inaccurate, the resulting
adjustments could be material to our future financial results. See Item 8, Note 10, "Income Taxes", to our Consolidated
Financial Statements included in this Annual Report on Form 10-K for additional information related to income taxes.
Leases
We recognize lease assets and corresponding lease liabilities for all operating leases on the Consolidated Balance Sheets
as described under ASU No. 2016-02, “Leases (Topic 842).” We evaluate renewal options and break options at lease
inception and on an ongoing basis, and include renewal options and break options that we are reasonably certain to
43
exercise in our expected lease terms for calculations of the right-of-use assets and liabilities. Approximately 2% of our
leases contain renewal options. To determine the present value of lease payments not yet paid, we estimate incremental
borrowing rates corresponding to the reasonably certain lease term. As most of our leases do not provide a determinable
implicit rate, we estimate our collateralized incremental borrowing rate based upon a synthetic credit rating and yield
curve analysis at the lease commencement or modification date in determining the present value of lease payments. For
lease payments in foreign currencies, the incremental borrowing rate is adjusted to be reflective of the risk associated
with the respective currency. See Item 8, Note 8, "Leases", to our Consolidated Financial Statements included in this
Annual Report on Form 10-K for additional information related to leases.
ITEM 7A, QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We incorporate by reference the information regarding market risk appearing under the heading “Financial Market Risk” in
Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations."
44
ITEM 8, FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets, February 1, 2020 and February 2, 2019
Consolidated Statements of Operations, each of the three fiscal years ended 2020, 2019 and 2018
Consolidated Statements of Comprehensive Income, each of the three fiscal years ended 2020, 2019 and 2018
Consolidated Statements of Cash Flows, each of the three fiscal years ended 2020, 2019 and 2018
Consolidated Statements of Equity, each of the three fiscal years ended 2020, 2019 and 2018
Notes to Consolidated Financial Statements
Page
46
4848
51
53
54
55
57
58
45
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Genesco Inc.
Opinion on Internal Control over Financial Reporting
We have audited Genesco Inc. and Subsidiaries' internal control over financial reporting as of February 1, 2020, based on
criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (2013 Framework) (the COSO criteria). In our opinion, Genesco Inc. and Subsidiaries (the Company)
maintained, in all material respects, effective internal control over financial reporting as of February 1, 2020, based on the
COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated balance sheets of Genesco Inc. and Subsidiaries as of February 1, 2020 and February 2, 2019, and
the related consolidated statements of operations, comprehensive income, cash flows, and equity for each of the three fiscal
years in the period ended February 1, 2020, and the related notes and financial statement schedule listed in the Index at Item 15,
and our report dated April 1, 2020 expressed an unqualified opinion thereon.
Basis for Opinion
The Company's management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report
on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control
over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
46
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Nashville, Tennessee
April 1, 2020
47
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Genesco Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Genesco Inc. (the Company) as of February 1, 2020 and
February 2, 2019, the related consolidated statements of operations, comprehensive income, cash flows and equity for each of
the three fiscal years in the period ended February 1, 2020, and the related notes and financial statement schedule listed in the
Index at Item 15 (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial
statements present fairly, in all material respects, the financial position of the Company at February 1, 2020 and February 2,
2019, and the results of its operations and its cash flows for each of the three fiscal years in the period ended February 1, 2020,
in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company's internal control over financial reporting as of February 1, 2020, based on criteria established in
Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(2013 framework) and our report dated April 1, 2020 expressed an unqualified opinion thereon.
Adoption of New Accounting Standards
As discussed in Notes 1, 2 and 8 to the consolidated financial statements, the Company changed its method of accounting for
leases in fiscal 2020 due to the adoption of Accounting Standard Update (“ASU”) 2016-02, “Leases (Topic 842)”. See below
for discussion of our related critical audit matter.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express
an opinion on the Company's consolidated financial statements based on our audits. We are a public accounting firm registered
with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement,
whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the
consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such
procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by management,
as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a
reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial
statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or
disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective or
complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated
financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate
opinions on the critical audit matters or on the accounts or disclosures to which they relate.
48
Description of the
Matter
How We
Addressed the
Matter in Our
Audit
Description of the
Matter
Valuation of Schuh Goodwill
At February 1, 2020, the Company had $84.1 million in goodwill associated with the Schuh reporting
unit. As discussed in Notes 1 and 3 to the consolidated financial statements, goodwill at the reporting
unit level is qualitatively or quantitatively tested for impairment at least annually, at the beginning of
the Company’s fourth fiscal quarter, or whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. The quantitative evaluation of goodwill impairment involves
the comparison of the fair value of the reporting unit to the carrying value of the reporting unit.
Auditing management’s annual goodwill impairment analysis was complex and judgmental due to the
significant estimation required by management in determining the fair value of the Schuh reporting
unit. In particular, the fair value estimates under the income approach are sensitive to significant
assumptions required to develop prospective financial information related to growth rates in sales,
costs, estimates of future expected changes in operating margins, capital expenditures and working
capital requirements. Other significant assumptions relate to estimating the weighted average cost of
capital utilized for discounting cash flow estimates and terminal period growth rates. These significant
assumptions are affected by expectations about future market or economic conditions. Management
also uses a market approach that considers valuations of comparable companies as an input in the
determination of the value of the reporting unit.
the Company’s Schuh goodwill
We obtained an understanding, evaluated the design and tested the operating effectiveness of controls
over
including controls over
management’s review of the significant assumptions described above. For example, we tested controls
over management’s identification of the Schuh reporting unit and management’s review of the
significant assumptions utilized within the fair value model, including the development of the
prospective financial information and determination of the weighted average cost of capital and
terminal period growth rates.
impairment review process,
To test the estimated fair value of the Schuh reporting unit, we performed audit procedures that
included, among others, involvement of our valuation specialists to assess fair value methodologies,
including the significant assumptions discussed above. Specifically, we compared significant
assumptions used by management to current industry economic trends. As part of this assessment, we
also compared the development of the weighted average cost of capital to rates for hypothetical market
participants based on the capital structure of the Company and its related peer group. We assessed the
historical accuracy of management’s estimates and performed sensitivity analyses of significant
assumptions to evaluate the changes in the fair value of the reporting unit that would result from
changes in the significant assumptions. We also evaluated the reasonableness of the market comparable
companies that management used in its market approach.
Adoption ASU 2016-02, “Leases (Topic 842)”
As discussed above and in Notes 1, 2 and 8 to the consolidated financial statements, the Company
adopted ASU 2016-02, “Leases (Topic 842)”, on February 3, 2019, which resulted in the recognition of
operating lease right-of-use assets and lease liabilities of $795.6 million and $855.3 million,
respectively. Since most of the Company’s leases do not provide a determinable implicit rate, the
Company developed certain significant assumptions to estimate the incremental borrowing rate (IBR),
which was used to calculate the operating lease right-of-use assets and lease liabilities upon adoption.
The operating lease right-of-use asset is inclusive of the impairments recorded upon adoption for store
operating lease right-of-use assets, which totaled $4.8 million and resulted in a decrease to retained
earnings of $4.2 million, net of tax.
Auditing the Company’s adoption of Topic 842 was complex and involved subjective auditor judgment
as certain aspects required management to exercise judgment in applying the new standard to its
portfolio of lease contracts. In particular, the estimate of the IBR at adoption is sensitive to significant
assumptions such as determination of synthetic credit rating, selection of associated benchmark yield
curve, and judgmental adjustments to reflect a collateralization and foreign currency adjustments.
Further, the fair value of those right-of-use assets that were part of an asset group with an indicator of
impairment involved judgment in order to determine the impairment to record upon adoption.
49
How We
Addressed the
Matter in Our
Audit
We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the
Company’s accounting for the adoption of Topic 842. For example, we tested controls over management’s
review of the IBR and determination of the fair value of right-of-use assets, including the significant
assumptions noted above.
To test the Company’s adoption of Topic 842, we performed audit procedures that included, among others,
involving our valuation specialists to assess management’s significant assumptions and methodology for
determining the IBR, including the development of a synthetic credit rating, assessing the selection of a
benchmark yield curve, and evaluating methodologies used to reflect a secured borrowing. We also assessed
management’s development of IBR ranges based on varying lease terms, including comparing the Company’s
IBRs to ranges developed independently by our valuation specialists, as well as performing tests of the IBR
application to remaining lease payments, with respect to the initial term of the lease. Further, we involved
valuation specialists to assess management’s significant assumptions and methodology for determining the fair
value of certain right-of-use assets with indicators of impairment, including, among others, the determination of
current market rents based on recent observable data.
/s/ Ernst & Young LLP
We have served as the Company's auditor since 2001.
Nashville, Tennessee
April 1, 2020
50
Genesco Inc.
and Subsidiaries
Consolidated Balance Sheets
In Thousands, except share amounts
Assets
Current Assets:
Cash and cash equivalents
Accounts receivable, net of allowances of $2,940 at February 1, 2020
and $2,894 at February 2, 2019
Inventories
Prepaids and other current assets
Total current assets
Property and equipment:
Land
Buildings and building equipment
Computer hardware, software and equipment
Furniture and fixtures
Construction in progress
Improvements to leased property
Property and equipment, at cost
Accumulated depreciation
Property and equipment, net
Deferred income taxes
Operating lease right of use asset
Goodwill
As of Fiscal Year End
February 1,
2020
February 2,
2019
$
81,418 $
167,355
29,195
365,269
32,301
508,183
7,360
63,493
140,503
128,542
9,593
342,592
692,083
(453,763 )
238,320
19,475
735,044
122,184
132,390
366,667
64,634
731,046
7,953
82,621
138,147
129,625
5,920
341,134
705,400
(428,025 )
277,375
21,335
—
93,081
Trademarks, net of accumulated amortization of zero at both
February 1, 2020 and February 2, 2019
Other intangibles, net of accumulated amortization of $1,988 at
February 1, 2020 and $4,680 at February 2, 2019
Other noncurrent assets
Total Assets
31,023
30,904
5,341
20,908
1,680,478 $
943
26,397
1,181,081
$
51
Genesco Inc.
and Subsidiaries
Consolidated Balance Sheets
In Thousands, except share amounts
Liabilities and Equity
Current Liabilities:
Accounts payable
Accrued employee compensation
Accrued other taxes
Accrued income taxes
Current portion – long-term debt
Current portion - operating lease liability
Other accrued liabilities
Provision for discontinued operations
Total current liabilities
Long-term debt
Long-term operating lease liability
Other long-term liabilities
Provision for discontinued operations
Total liabilities
Commitments and contingent liabilities
Equity
Non-redeemable preferred stock
Common equity:
Common stock, $1 par value:
Authorized: 80,000,000 shares
Issued/Outstanding:
As of Fiscal Year End
February 1,
2020
February 2,
2019
$
135,784 $
31,579
11,583
190
—
142,695
39,609
495
361,935
14,393
647,949
35,177
1,681
1,061,135
158,603
43,246
17,389
2,133
8,992
—
45,313
553
276,229
56,751
—
108,704
1,846
443,530
1,009
1,060
February 1, 2020 – 15,185,670/14,697,206
February 2, 2019 – 19,591,048/19,102,584
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Treasury shares, at cost (488,464 shares)
Total equity
Total Liabilities and Equity
15,186
274,101
378,572
(31,668 )
19,591
264,138
508,555
(37,936 )
(17,857 )
619,343
1,680,478 $
(17,857 )
737,551
1,181,081
$
The accompanying Notes are an integral part of these Consolidated Financial Statements.
52
Genesco Inc.
and Subsidiaries
Consolidated Statements of Operations
In Thousands, except per share amounts
Fiscal Year
Net sales
Cost of sales
Gross margin
Selling and administrative expenses
Asset impairments and other, net
Operating income
Loss on early retirement of debt
Other components of net periodic benefit cost
Interest expense, net:
Interest expense
Interest income
Total interest expense, net
Earnings from continuing operations before income taxes
Income tax expense
Earnings from continuing operations
Loss from discontinued operations, net of tax of $0.1 million,
$27.5 million and $22.7 million for Fiscal 2020, 2019 and 2018,
respectively
Net Earnings (Loss)
Basic weighted average common shares
Basic earnings (loss) per common share:
Continuing operations
Discontinued operations
Net earnings (loss)
Diluted weighted average common shares
Diluted earnings (loss) per common share:
Continuing operations
Discontinued operations
Net earnings (loss)
2020
2019
2018
$ 2,197,066 $ 2,188,553 $ 2,127,547
1,116,164
1,011,383
929,238
7,773
74,372
—
(29 )
1,141,497
1,047,056
962,076
3,163
81,817
597
(380 )
1,133,951
1,063,115
966,423
13,374
83,318
—
(395 )
3,339
(2,061 )
1,278
82,435
20,678
61,757
4,115
(774 )
3,341
78,259
27,035
51,224
5,420
(8 )
5,412
68,989
32,281
36,708
(373 )
61,384 $
(103,154 )
(148,547 )
(51,930 ) $
(111,839 )
15,544
19,351
19,218
3.97 $
(0.02 )
3.95 $
2.65 $
(5.33 )
(2.68 ) $
15,671
19,495
3.94 $
(0.02 )
3.92 $
2.63 $
(5.29 )
(2.66 ) $
1.91
(7.73 )
(5.82 )
19,282
1.90
(7.70 )
(5.80 )
$
$
$
$
$
The accompanying Notes are an integral part of these Consolidated Financial Statements.
53
Genesco Inc.
and Subsidiaries
Consolidated Statements of Comprehensive Income
In Thousands, except as noted
Net earnings (loss)
Other comprehensive income (loss):
Fiscal Year
2020
2019
2018
$
61,384 $
(51,930 ) $
(111,839 )
Pension liability adjustment net of tax of $2.1 million, $0.0 million and
$1.9 million for 2020, 2019 and 2018, respectively
6,035
123
5,189
Postretirement liability adjustment net of tax of $1.0 million, $1.6 million
and $0.1 million for 2020, 2019 and 2018, respectively
Stranded tax effect from tax reform
Foreign currency translation adjustments
Total other comprehensive income (loss)
Comprehensive Income (Loss)
(2,697 )
—
2,930
6,268
67,652 $
4,077
—
(12,944 )
(8,744 )
(60,674 ) $
(376 )
(2,234 )
19,521
22,100
(89,739 )
$
The accompanying Notes are an integral part of these Consolidated Financial Statements.
54
Genesco Inc.
and Subsidiaries
Consolidated Statements of Cash Flows
In Thousands
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss)
Adjustments to reconcile net earnings (loss) to net cash
provided by operating activities:
Depreciation and amortization
Amortization of deferred note expense and debt discount
Deferred income taxes
Provision for accounts receivable
Impairment of intangible assets
Impairment of long-lived assets
Restricted stock expense
Provision for discontinued operations
Loss on sale of business
Loss on pension plan termination
Other
Effect on cash from changes in working capital and other
assets and liabilities, net of acquisitions/dispositions:
Accounts receivable
Inventories
Prepaids and other current assets
Accounts payable
Other accrued liabilities
Other assets and liabilities
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures
Other investing activities
Acquisitions, net of cash acquired
Proceeds from (payments for) sale of businesses
Proceeds from asset sales
Net cash provided by (used in) investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of long-term debt
Borrowings under revolving credit facility
Payments on revolving credit facility
Shares repurchased related to share repurchase plan
Restricted shares withheld for taxes
Change in overdraft balances
Additions to deferred note cost
Other
Net cash used in financing activities
Effect of foreign exchange rate fluctuations on cash
Net Increase (Decrease) in Cash and Cash Equivalents
Cash and cash equivalents at beginning of year(1)
Cash and cash equivalents at end of year(1)
Supplemental information:
Interest paid
Income taxes paid
Cash paid for amounts included in measurement of operating lease liabilities
Operating leased assets obtained in exhange for new operating lease liabilities
55
Fiscal Year
2020
2019
2018
$
61,384 $
(51,930 ) $
(111,839 )
49,574
404
660
133
269
2,827
10,077
425
86
11,510
31
656
1,930
16,228
(10,333 )
(20,787 )
(7,904 )
117,170
(29,767 )
171
(33,524 )
98,677
17,751
53,308
(9,133 )
93,328
(135,403 )
(190,384 )
(2,355 )
(12,557 )
(7 )
—
(256,511 )
96
(85,937 )
167,355
81,418 $
3,005 $
4,899
188,247
80,078
76,939
593
272
116
5,736
5,823
13,437
743
126,321
—
1,751
6,312
2,684
(9,116 )
43,028
20,713
(6,279 )
237,143
(57,230 )
1,505
—
(1,088 )
310
(56,503 )
(1,650 )
284,473
(299,606 )
(44,935 )
(2,853 )
15,494
(359 )
(3,322 )
(52,758 )
(464 )
127,418
39,937
167,355 $
3,338 $
12,451
—
—
78,326
747
(15,584 )
853
182,211
2,670
13,505
552
—
—
1,857
835
31,606
(4,025 )
(7,337 )
(22,339 )
12,553
164,591
(127,853 )
—
—
—
252
(127,601 )
(9,289 )
515,560
(508,875 )
(16,163 )
(1,716 )
(22,498 )
(1,429 )
(3,000 )
(47,410 )
2,056
(8,364 )
48,301
39,937
5,350
37,471
—
—
$
$
(1) The cash flows related to discontinued operations in Fiscal 2019 and 2018 have not been segregated, and are included in the Consolidated Statements of Cash
Flows.
The accompanying Notes are an integral part of these Consolidated Financial Statements.
56
Genesco Inc.
and Subsidiaries
Consolidated Statements of Equity
In Thousands
Accumulated
Other
Comprehensive
Loss
Non
Controlling
Interest
Non-
Redeemable
Treasury
Shares
In Thousands
Balance January 28, 2017
Net loss
Other comprehensive income
Employee and non-employee
restricted stock
Restricted stock issuance
Restricted shares withheld for taxes
Shares repurchased
Stranded tax effect from tax reform
Other
Noncontrolling interest – gain
Balance February 3, 2018
Cumulative adjustment from ASC
606, net of tax
Net loss
Other comprehensive loss
Employee and non-employee
restricted stock
Restricted stock issuance
Restricted shares withheld for taxes
Shares repurchased
Other
Noncontrolling interest – loss
Balance February 2, 2019
Cumulative adjustment from ASC
842, net of tax
Net earnings
Other comprehensive income
Employee and non-employee
restricted stock
Restricted stock issuance
Restricted shares withheld for taxes
Shares repurchased
Other
Balance February 1, 2020
$
$
Non-
Redeemable
Preferred
Stock
1,060 $
—
—
—
—
—
—
—
(8 )
—
1,052
Common
Stock
20,354 $
—
—
—
357
(51 )
(275 )
—
7
—
20,392
—
—
—
—
—
—
—
8
—
1,060
—
—
—
—
—
—
390
(70 )
(968 )
(153 )
—
19,591
—
—
—
Additional
Paid-In
Capital
237,677 $
—
—
13,505
(357 )
51
—
—
1
—
250,877
—
—
—
13,437
(390 )
70
—
144
—
264,138
—
—
—
Retained
Earnings
731,111 $
(111,839 )
—
—
—
(1,716 )
(15,888 )
2,234
—
—
603,902
4,413
(51,930 )
—
—
—
(2,853 )
(44,977 )
—
—
508,555
(4,208 )
61,384
—
(51,292 ) $
—
22,100
—
—
—
—
—
—
—
(29,192 )
—
—
(8,744 )
—
—
—
—
—
—
(37,936 )
—
—
6,268
(17,857 ) $
—
—
—
—
—
—
—
—
—
(17,857 )
—
—
—
—
—
—
—
—
—
(17,857 )
—
—
—
—
—
—
—
(51 )
1,009 $
—
285
(56 )
(4,570 )
(64 )
15,186 $
10,077
(285 )
56
—
115
274,101 $
—
—
(2,355 )
(184,804 )
—
378,572 $
—
—
—
—
—
(31,668 ) $
—
—
—
—
—
(17,857 ) $
Total
Equity
922,521
(111,839 )
22,100
13,505
—
(1,716 )
(16,163 )
2,234
—
62
830,704
4,413
(51,930 )
(8,744 )
13,437
—
(2,853 )
(45,945 )
(1 )
(1,530 )
737,551
(4,208 )
61,384
6,268
10,077
—
(2,355 )
(189,374 )
—
619,343
1,468 $
—
—
—
—
—
—
—
—
62
1,530
—
—
—
—
—
—
—
—
(1,530 )
—
—
—
—
—
—
—
—
—
— $
The accompanying Notes are an integral part of these Consolidated Financial Statements.
57
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 1
Summary of Significant Accounting Policies
Nature of Operations
Genesco Inc. and its subsidiaries (collectively the "Company", "we", "our", or "us") business includes the sourcing and
design, marketing and distribution of footwear and accessories through retail stores in the U.S., Puerto Rico and Canada
primarily under the Journeys, Journeys Kidz, Little Burgundy and Johnston & Murphy banners and under the Schuh
banner in the United Kingdom and the Republic of Ireland; through catalogs and e-commerce websites including the
following: journeys.com, journeyskidz.com, journeys.ca, schuh.co.uk, schuh.ie, schuh.eu, johnstonmurphy.com,
trask.com and littleburgundyshoes.com and at wholesale, primarily under our Johnston & Murphy brand, the Trask
brand, the licensed Dockers brand, the licensed Levi's brand, the licensed Bass brand and other brands that we license for
footwear. At February 1, 2020, we operated 1,480 retail stores in the U.S., Puerto Rico, Canada, the United Kingdom
and the Republic of Ireland.
Effective January 1, 2020, we completed the acquisition of Togast, which specializes in the the design, sourcing and sale
of licensed footwear. We also entered into a new U.S. footwear license agreement with Levi Strauss & Co. for the
license of Levi's® footwear for men, women, and children in the U.S. The acquisition expands our portfolio to include
footwear licenses for Bass®, ADIO and FUBU, among others. Togast operates in our Licensed Brands segment. On
February 2, 2019, we completed the sale of our Lids Sports Group business. As a result, we reported the operating
results of this business in loss from discontinued operations, net in our Consolidated Statements of Operations for Fiscal
2019 and 2018. The cash flows related to discontinued operations have not been segregated, and are included in our
Consolidated Statements of Cash Flows for Fiscal 2019 and 2018. Unless otherwise noted, discussion within these notes
to our consolidated financial statements relates to continuing operations. See Note 16 for additional information related
to discontinued operations.
During Fiscal 2020, we operated four reportable business segments (not including corporate): (i) Journeys Group,
comprised of the Journeys, Journeys Kidz and Little Burgundy retail footwear chains, e-commerce and catalog
operations; (ii) Schuh Group, comprised of the Schuh retail footwear chain and e-commerce operations; (iii) Johnston &
Murphy Group, comprised of Johnston & Murphy retail operations, e-commerce operations, catalog, Trask e-commerce
operations and wholesale distribution of products under the Johnston & Murphy® and H.S. Trask® brands; and
(iv) Licensed Brands, comprised of the licensed Dockers®, Levi's®, and Bass® brands, as well as other brands we license
for footwear.
Principles of Consolidation
All subsidiaries are consolidated in our Consolidated Financial Statements. All significant intercompany transactions
and accounts have been eliminated.
Fiscal Year
Our fiscal year ends on the Saturday closest to January 31. As a result, Fiscal 2020 was a 52-week year with 364 days,
Fiscal 2019 was a 52-week year with 364 days and Fiscal 2018 was a 53-week year with 371 days. Fiscal 2020 ended on
February 1, 2020, Fiscal 2019 ended on February 2, 2019 and Fiscal 2018 ended on February 3, 2018.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP)
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from those estimates.
58
Note 1
Summary of Significant Accounting Policies, Continued
Cash and Cash Equivalents
Our foreign subsidiaries held cash of approximately $8.9 million and $20.8 million as of February 1, 2020 and February
2, 2019, respectively, which is included in cash and cash equivalents on the Consolidated Balance Sheets. Our strategic
plan does not require the repatriation of foreign cash in order to fund our operations in the U.S., and it is our current
intention to indefinitely reinvest our foreign cash and cash equivalents outside of the U.S. If we were to repatriate
foreign cash to the U.S., we would be required to accrue and pay U.S. taxes in accordance with applicable U.S. tax rules
and regulations as a result of the repatriation.
There were $59.6 million and $127.2 million of cash equivalents at February 1, 2020 and February 2, 2019, respectively.
Cash equivalents are primarily institutional money market funds. Our $59.6 million of cash equivalents was invested in
institutional money market funds which invest exclusively in highly rated, short-term securities that are issued,
guaranteed or collateralized by the U.S. government or by U.S. government agencies and instrumentalities. The majority
of payments due from banks for domestic customer credit card transactions process within 24 - 48 hours and are
accordingly classified as cash and cash equivalents in our Consolidated Balance Sheets.
At February 1, 2020 and February 2, 2019, outstanding checks drawn on zero-balance accounts at certain domestic banks
exceeded book cash balances at those banks by approximately $17.1 million and $29.6 million, respectively. These
amounts are included in accounts payable in our Consolidated Balance Sheets.
Concentration of Credit Risk and Allowances on Accounts Receivable
Our wholesale businesses sell primarily to independent retailers and department stores across the United States.
Receivables arising from these sales are not collateralized. Customer credit risk is affected by conditions or occurrences
within the economy and the retail industry as well as by customer specific factors. In the wholesale businesses, one
customer accounted for 26%, three customers each accounted for 9% and one customer accounted for 6% of our total
trade receivables balance, while no other customer accounted for more than 5% of our total trade receivables balance as
of February 1, 2020.
We establish an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers,
historical trends and other information, as well as customer specific factors. We also establish allowances for sales
returns, customer deductions and co-op advertising based on specific circumstances, historical trends and projected
probable outcomes.
Inventory Valuation
In our footwear wholesale operations and our Schuh Group segment, cost for inventory that we own is determined using
the first-in, first-out ("FIFO") method. Net realizable value is determined using a system of analysis which evaluates
inventory at the stock number level based on factors such as inventory turn, average selling price, inventory level, and
selling prices reflected in future orders for footwear wholesale. We provide a valuation allowance when the inventory has
not been marked down to net realizable value based on current selling prices or when the inventory is not turning and is
not expected to turn at satisfactory levels.
In our retail operations, other than the Schuh Group segment, we employ the retail inventory method, applying average
cost-to-retail ratios to the retail value of inventories. Under the retail inventory method, valuing inventory at the lower of
cost or market is achieved as markdowns are taken or accrued as a reduction of the retail value of inventories.
59
Note 1
Summary of Significant Accounting Policies, Continued
Inherent in the retail inventory method are subjective judgments and estimates, including merchandise mark-on,
markups, markdowns and shrinkage. These judgments and estimates, coupled with the fact that the retail inventory
method is an averaging process, could produce a range of cost figures. To reduce the risk of inaccuracy and to ensure
consistent presentation, we employ the retail inventory method in multiple subclasses of inventory with similar gross
margins, and analyze markdown requirements at the stock number level based on factors such as inventory turn, average
selling price and inventory age. In addition, we accrue markdowns as necessary. These additional markdown accruals
reflect all of the above factors as well as current agreements to return products to vendors and vendor agreements to
provide markdown support. In addition to markdown allowances, we maintain reserves for shrinkage and damaged
goods based on historical rates.
Inherent in the analysis of both wholesale and retail inventory valuation are subjective judgments about current market
conditions, fashion trends and overall economic conditions. Failure to make appropriate conclusions regarding these
factors may result in an overstatement or understatement of inventory value.
Property and Equipment
Property and equipment are recorded at cost and depreciated or amortized over the estimated useful life of related assets.
Depreciation and amortization expense are computed principally by the straight-line method over the following
estimated useful lives:
Buildings and building equipment
Computer hardware, software and equipment
Furniture and fixtures
20-45 years
3-10 years
10 years
Depreciation expense related to property and equipment was approximately $49.4 million, $52.1 million and $51.5
million for Fiscal 2020, 2019 and 2018, respectively.
Leases
We recognize lease assets and corresponding lease liabilities for all operating leases on the Consolidated Balance Sheets
as described under ASC 842. We evaluate renewal options and break options at lease inception and on an ongoing basis,
and include renewal options and break options that we are reasonably certain to exercise in our expected lease terms for
calculations of the right-of-use assets and liabilities. Approximately 2% of our leases contain renewal options. To
determine the present value of lease payments not yet paid, we estimate incremental borrowing rates corresponding to
the reasonably certain lease term. As most of our leases do not provide a determinable implicit rate, we estimate our
collateralized incremental borrowing rate based upon a synthetic credit rating and yield curve analysis at the lease
commencement or modification date in determining the present value of lease payments. For lease payments in foreign
currencies, the incremental borrowing rate is adjusted to be reflective of the risk associated with the respective currency.
Operating lease assets represent our right to use an underlying asset and are based upon the operating lease liabilities
adjusted for prepayments or accrued lease payments, initial direct costs, lease incentives, and impairment, if any, of
operating lease assets. We test right-of-use assets for impairment in the same manner as long-lived assets.
Net lease costs are included within selling and administrative expenses on the Consolidated Statements of Operations.
60
Note 1
Summary of Significant Accounting Policies, Continued
Asset Retirement Obligations
An asset retirement obligation represents a legal obligation associated with the retirement of a tangible long-lived asset
that is incurred upon the acquisition, construction, development, or normal operation of that long-lived asset. Our asset
retirement obligations are primarily associated with leasehold improvements that we are contractually obligated to
remove at the end of a lease to comply with the lease agreement. We recognize asset retirement obligations at the
inception of a lease with such conditions if a reasonable estimate of fair value can be made. Asset retirement obligations
are recorded in accrued expenses and other accrued liabilities and deferred rent and other long-term liabilities in our
Consolidated Balance Sheets and are subsequently adjusted for changes in estimated asset retirement obligations. The
associated estimated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset and
depreciated over its useful life.
Our Consolidated Balance Sheets include asset retirement obligations related to leases of $11.1 million and $10.9 million
as of February 1, 2020 and February 2, 2019, respectively.
Impairment of Long-Lived Assets
We periodically assess the realizability of our long-lived assets, other than goodwill, and evaluate such assets for
impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be
recoverable. Asset impairment is determined to exist if estimated future cash flows, undiscounted and without interest
charges, are less than the carrying amount. Inherent in the analysis of impairment are subjective judgments about future
cash flows. Failure to make appropriate conclusions regarding these judgments may result in an overstatement or
understatement of the value of long-lived assets.
We annually assess our goodwill and indefinite lived trade names for impairment and on an interim basis if indicators of
impairment are present. Our annual assessment date of goodwill and indefinite lived trade names is the first day of the
fourth quarter.
In accordance with ASC 350, we have the option first to assess qualitative factors to determine whether events and
circumstances indicate that it is more likely than not that goodwill is impaired. If, after such assessment, we conclude
that the asset is not impaired, no further action is required. However, if we conclude otherwise, we are required to
determine the fair value of the asset using a quantitative impairment test. The quantitative impairment test for goodwill
compares the fair value of each reporting unit with the carrying value of the reporting unit with which the goodwill is
associated. If the fair value of the reporting unit is less than the carrying value of the reporting unit, an impairment
charge would be recorded for the amount, if any, in which the carrying value exceeds the reporting unit's fair value. We
estimate fair value using the best information available, and compute the fair value derived by a combination of the
market and income approach. The market approach is based on observed market data of comparable companies to
determine fair value. The income approach utilizes a projection of a reporting unit’s estimated operating results and cash
flows that are discounted using a weighted-average cost of capital that reflects current market conditions. A key
assumption in our fair value estimate is the weighted average cost of capital utilized for discounting our cash flow
projections in our income approach. The projection uses our best estimates of economic and market conditions over the
projected period including growth rates in sales, costs, estimates of future expected changes in operating margins and
cash expenditures. Other significant estimates and assumptions include terminal value growth rates, future estimates of
capital expenditures and changes in future working capital requirements.
61
Note 1
Summary of Significant Accounting Policies, Continued
Fair Value
The Fair Value Measurements and Disclosures Topic of the Codification defines fair value, establishes a framework for
measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair
value measurements. This Topic defines fair value as the exchange price that would be received for an asset or paid to
transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly
transaction between market participants on the measurement date. It also establishes a fair value hierarchy which
requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring
fair value. The standard describes three levels of inputs that may be used to measure fair value:
Level 1 - Quoted prices in active markets for identical assets or liabilities.
Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices
in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for
substantially the full term of the assets or liabilities.
Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of
the assets or liabilities.
A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is
significant to the fair value measurement.
Revenue Recognition
Revenue is recognized upon satisfaction of all contractual performance obligations and transfer of control to the
customer. Revenue is measured as the amount of consideration we expect to be entitled to in exchange for corresponding
goods. The majority of our sales are single performance obligation arrangements for retail sale transactions for which
the transaction price is equivalent to the stated price of the product, net of any stated discounts applicable at a point in
time. Each sales transaction results in an implicit contract with the customer to deliver a product at the point of sale.
Revenue from retail sales is recognized at the point of sale, is net of estimated returns, and excludes sales and value
added taxes. Revenue from catalog and internet sales is recognized at estimated time of delivery to the customer, is net of
estimated returns, and excludes sales and value added taxes. Wholesale revenue is recorded net of estimated returns and
allowances for markdowns, damages and miscellaneous claims when the related goods have been shipped and legal title
has passed to the customer. Actual amounts of markdowns have not differed materially from estimates. Shipping and
handling costs charged to customers are included in net sales. We exclude sales and value added tax collected on behalf
of third parties from transaction price.
A provision for estimated returns is provided through a reduction of sales and cost of goods sold in the period that the
related sales are recorded. Estimated returns are based on historical returns and claims. Actual returns and claims in any
future period may differ from historical experience. Revenue from gift cards is deferred and recognized upon the
redemption of the cards. These cards have no expiration date. Income from unredeemed cards is recognized on the
Consolidated Statements of Operations within net sales in proportion to the pattern of rights exercised by the customer in
future periods. We perform an evaluation of historical redemption patterns from the date of original issuance to estimate
future period redemption activity.
Our Consolidated Balance Sheets include an accrued liability for gift cards of $5.0 million and $5.1 million at February
1, 2020 and February 2, 2019, respectively. Gift card breakage recognized as revenue was $1.0 million, $0.8 million and
62
Note 1
Summary of Significant Accounting Policies, Continued
$0.4 million for Fiscal 2020, 2019 and 2018, respectively. During Fiscal 2020, we recognized $3.7 million of gift card
redemptions and gift card breakage revenue that were included in the gift card liability as of February 2, 2019.
Cost of Sales
For our retail operations, the cost of sales includes actual product cost, the cost of transportation to our warehouses from
suppliers, the cost of transportation from our warehouses to the stores and the cost of transportation from our warehouses
to the customer. Additionally, the cost of our distribution facilities allocated to our retail operations is included in cost of
sales.
For our wholesale operations, the cost of sales includes the actual product cost and the cost of transportation to the
Company’s warehouses from suppliers.
Selling and Administrative Expenses
Selling and administrative expenses include all operating costs excluding (i) those related to the transportation of
products from the supplier to the warehouse, (ii) for our retail operations, those related to the transportation of products
from the warehouse to the store and from the warehouse to the customer and (iii) costs of our distribution facilities which
are allocated to our retail operations. Wholesale costs of distribution are included in selling and administrative expenses
on our Consolidated Statements of Operations in the amounts of $5.6 million, $5.6 million and $5.8 million for Fiscal
2020, 2019 and 2018, respectively.
We record buying, merchandising and occupancy costs in selling and administrative expense. Because we do not
include these costs in cost of sales, our gross margin may not be comparable to other retailers that include these costs in
the calculation of gross margin. Retail occupancy costs recorded in selling and administrative expense were $334.4
million, $334.3 million and $333.8 million for Fiscal 2020, 2019 and 2018, respectively.
Shipping and Handling Costs
Shipping and handling costs related to inventory purchased from suppliers are included in the cost of inventory and are
charged to cost of sales in the period that the inventory is sold. All other shipping and handling costs are charged to cost
of sales in the period incurred except for wholesale costs of distribution and shipping costs for product shipped from
stores, which are included in selling and administrative expenses in our Consolidated Statements of Operations.
Advertising Costs
Advertising costs are predominantly expensed as incurred. Advertising costs were $72.3 million, $68.3 million and
$68.6 million for Fiscal 2020, 2019 and 2018, respectively.
Consideration to Resellers
In our wholesale businesses, we do not have any written buy-down programs with retailers, but we have provided certain
retailers with markdown allowances for obsolete and slow moving products that are in the retailer’s inventory. We
estimate these allowances and provide for them as reductions to revenues at the time revenues are recorded. Markdowns
are negotiated with retailers and changes are made to the estimates as agreements are reached. Actual amounts for
markdowns have not differed materially from estimates.
63
Note 1
Summary of Significant Accounting Policies, Continued
Cooperative Advertising
Cooperative advertising funds are made available to most of our wholesale footwear customers. In order for retailers to
receive reimbursement under such programs, the retailer must meet specified advertising guidelines and provide
appropriate documentation of expenses to be reimbursed. Our cooperative advertising agreements require that wholesale
customers present documentation or other evidence of specific advertisements or display materials used for our products
by submitting the actual print advertisements presented in catalogs, newspaper inserts or other advertising circulars, or
by permitting physical inspection of displays. Additionally, our cooperative advertising agreements require that the
amount of reimbursement requested for such advertising or materials be supported by invoices or other evidence of the
actual costs incurred by the retailer.
Vendor Allowances
From time to time, we negotiate allowances from our vendors for markdowns taken or expected to be taken. These
markdowns are typically negotiated on specific merchandise and for specific amounts. These specific allowances are
recognized as a reduction in cost of sales in the period in which the markdowns are taken. Markdown allowances not
attached to specific inventory on hand or already sold are applied to concurrent or future purchases from each respective
vendor.
We receive support from some of our vendors in the form of reimbursements for cooperative advertising and catalog
costs for the launch and promotion of certain products. The reimbursements are agreed upon with vendors and represent
specific, incremental, identifiable costs incurred by us to sell the vendor’s specific products. Such costs and the related
reimbursements are accumulated and monitored on an individual vendor basis, pursuant to the respective cooperative
advertising agreements with vendors. Such cooperative advertising reimbursements are recorded as a reduction of
selling and administrative expenses in the same period in which the associated expense is incurred. If the amount of cash
consideration received exceeds the costs being reimbursed, such excess amount would be recorded as a reduction of cost
of sales.
Vendor reimbursements of cooperative advertising costs recognized as a reduction of selling and administrative expenses
were $8.0 million, $7.8 million and $8.7 million for Fiscal 2020, 2019 and 2018, respectively. During Fiscal 2020, 2019
and 2018, our vendor reimbursements of cooperative advertising received were not in excess of the costs incurred.
Foreign Currency Translation
The functional currency of our foreign operations is the applicable local currency. The translation of the applicable
foreign currency into U.S. dollars is performed for balance sheet accounts using current exchange rates in effect at the
balance sheet date. Income and expense accounts are translated at monthly average exchange rates. The unearned gains
and losses resulting from such translation are included as a separate component of accumulated other comprehensive loss
within shareholders' equity. Gains and losses from certain foreign currency transactions were not material for Fiscal
2020, 2019 or 2018.
64
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 2
New Accounting Pronouncements
New Accounting Pronouncements Recently Adopted
We adopted ASU 2016-02, " Leases (Topic 842)", ("ASC 842"), as of February 3, 2019, using the optional transition
method provided by ASU 2018-11, "Leases (Topic 842): Targeted Improvements". The optional transition approach
provides a method for recording existing leases at adoption by allowing a cumulative effect adjustment to the opening
balance of retained earnings in the period of adoption, as opposed to the modified or full retrospective transition methods
that require restating prior comparative periods. Additionally, we elected the “package of practical expedients”, which
permits us to not reassess under the new standard its prior conclusions about lease identification, lease classification and
initial direct costs. We also elected the practical expedient to not separate lease and non-lease components for its store
and equipment leases.
Adoption of the new standard resulted in the recording of additional net operating lease right of use assets and operating
lease liabilities of $795.6 million and $855.3 million, respectively, as of February 3, 2019. The operating lease right of
use asset is inclusive of the impairments recorded upon adoption for store operating lease right of use assets, which
totaled $4.8 million and resulted in a decrease to retained earnings of $4.2 million, net of tax. Right of use assets are
recorded based upon the present value of the remaining operating lease payments, discounted using an incremental
borrowing rate based on the initial lease term, adjusted for deferred rent, including tenant allowances from landlords.
ASC 842 did not materially impact net earnings or liquidity and did not have an impact on covenant compliance under
our current debt agreements. Financial results for reporting periods beginning after February 3, 2019 are presented in
accordance with ASC 842, while prior periods will continue to be reported in accordance with our historical accounting
for leases under ASC 840: "Leases (Topic 840)" and therefore have not been adjusted to conform to Topic 842. For
additional information regarding leases, see Note 8.
In August 2018, the FASB issued ASU 2018-15, "Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-
40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service
Contract", (ASU 2018-15"). The standard requires that issuers follow the internal-use software guidance in ASC 350-40
to determine which costs to capitalize as assets or expense as incurred. The ASC 350-40 guidance requires that certain
costs incurred during the application development stage be capitalized and other costs incurred during the preliminary
project and post-implementation stages be expensed as they are incurred. ASU 2018-15 is effective for fiscal years
beginning after December 15, 2019. We adopted this standard effective August 4, 2019 and elected to apply the
prospective transition approach with no material impact on our Consolidated Financial Statements. We did not capitalize
any material implementation costs incurred in a cloud computing arrangement service contract during Fiscal 2020.
In February 2018, the FASB issued ASU 2013-02, "Comprehensive Income (Topic 220)" ("ASC 220"), which allows a
reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting
from the Act. This guidance is effective for all entities for fiscal years, and interim periods within those years, beginning
after December 15, 2018, with early adoption permitted. The amendments in ASC 220 should be applied either in the
period of adoption or retrospectively to each period in which the effect of the change in the U.S. federal corporate
income tax rate in the Act is recognized. We adopted ASC 220 in the fourth quarter of Fiscal 2018 and reclassified $2.2
million to retained earnings for the impact of stranded tax effects resulting from the Act.
In March 2016, the FASB issued ASU 2014-12, "Compensation - Stock Compensation (Topic 718)" ("ASC 718"). The
update addresses several aspects of the accounting for share-based compensation transactions including: (a) income tax
consequences when awards vest or are settled, (b) classification of awards as either equity or liabilities, (c) a policy
65
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 2
New Accounting Pronouncements, Continued
election to account for forfeitures as they occur rather than on an estimated basis and (d) classification of excess tax
impacts on the statement of cash flows. The inclusion of excess tax benefits and deficiencies as a component of our
income tax expense will increase volatility within its provision for income taxes as the amount of excess tax benefits or
deficiencies from share-based compensation awards is dependent on our stock price at the date the awards are exercised
or settled which is primarily in the second quarter of each fiscal year. We adopted ASC 718 in the first quarter of Fiscal
2018. We recorded an excess tax deficiency of $2.2 million as an increase in income tax expense related to share-based
compensation for vested awards in Fiscal 2018. Earnings per share decreased $0.11 per share for Fiscal 2018 due to the
impact of ASC 718.
We adopted ASC 606 in the first quarter of Fiscal 2019 using the modified retrospective method by recognizing the
cumulative effect of $4.4 million as an adjustment to the opening balance of retained earnings at February 4, 2018. The
adoption of this standard did not have a material impact on our Consolidated Financial Statements and related
disclosures.
New Accounting Pronouncements Not Yet Adopted
In June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments-Credit Losses (Topic 326): Measurement of
Credit Losses on Financial Instruments", which requires entities to use a forward-looking approach based on expected
losses to estimate credit losses on certain types of financial instruments, including trade receivables. The FASB has
subsequently issued updates to the standard to provide additional clarification on specific topics. This guidance will be
effective for us in the first quarter of the year ending January 30, 2021 ("Fiscal 2021") with early adoption permitted. We
do not expect this guidance to have a material impact on our Consolidated Financial Statements. However, we are also
evaluating how COVID-19 will impact this standard.
Note 3
Goodwill and Other Intangible Assets
The fair value of the assets acquired and liabilities assumed are recorded based on their estimated fair values at
acquisition.
In connection with acquisitions, we record goodwill on our Consolidated Balance Sheets. This asset is not amortized but
is subject to an impairment test at least annually, based on current market information as well as projected future cash
flows from the acquired business discounted at a rate commensurate with the risk we consider to be inherent in our
current business model. We perform the impairment test annually at the beginning of our fourth quarter, or more
frequently if events or circumstances indicate that the value of the asset might be impaired.
Our identifiable intangible assets with finite lives are trademarks, customer lists, backlog and a vendor contract. They
are subject to amortization based upon their estimated useful lives. Finite-lived intangible assets are evaluated for
impairment using a process similar to that used to evaluate other definite-lived long-lived assets, a comparison of the fair
value of the intangible asset with its carrying amount. An impairment loss is recognized for the amount by which the
carrying value exceeds the fair value of the asset. No significant impairment charges for ongoing operations were
recognized in Fiscal 2020, 2019 or 2018. Impairment charges, if recognized, are included in asset impairments and
other, net on the Consolidated Statements of Operations.
66
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 3
Goodwill and Other Intangible Assets, Continued
Goodwill
Effective January 1, 2020, we completed the acquisition of substantially all of the assets, and assumption of certain
liabilities, of Togast for an aggregate base purchase price of $33.5 million, which was paid in full in cash at the closing,
with an additional two-part earnout provision of up to an additional $17.0 million in cash following our Fiscal 2022 and
an additional $17.0 million in cash following our Fiscal 2024, contingent upon the acquired business achieving certain
earnings targets over multi-year periods, plus a potential further payment following Fiscal 2022 of 10% of earnings in
excess of the earnings target. The two-part earnout provision is largely subject to the payees' post acquisition service
requirement and therefore will be recorded as compensation expense and not reported as a component of the purchase
price for the acquisition. Togast specializes in the design, sourcing and sale of licensed footwear. We also entered into a
new U.S. footwear license agreement with Levi Strauss & Co. for the license of Levi's® footwear for men, women, and
children in the U.S. The Togast purchase includes footwear licenses for Bass®, ADIO and FUBU, among others. Togast
operates within the Licensed Brands segment.
The changes in the carrying amount of goodwill by segment were as follows:
(In thousands)
Balance, February 2, 2019
Acquisition
Effect of foreign currency exchange rates
Schuh
Group
Journeys
Group
Licensed
Brands
Group
—
Total
Goodwill
$93,081
$9,838 $
—
28,385
28,385
(108 )
—
718
$83,243
—
826
Balance, February 1, 2020
$84,069
$9,730
$28,385
$122,184
Given the Schuh Group reporting unit has continued to perform below our projected operating results, as part of our
annual impairment assessment as of the first day of the fourth quarter, we performed a quantitative assessment to
determine if an impairment existed. We found that the result of the impairment test, which valued the business at
approximately $8.2 million in excess of our carrying value, indicated no impairment at that time. Holding all other
assumptions constant as of the measurement date, we noted that an increase in the weighted average cost of capital of
100 basis points would reduce the fair value of the Schuh Group business by $10.0 million. Furthermore, we noted that
a decrease in projected annual revenue growth by one percent would reduce the fair value of the Schuh Group business
by $6.9 million. However, if other assumptions do not remain constant, the fair value of the Schuh Group business may
decrease by a greater amount.
67
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 3
Goodwill and Other Intangible Assets, Continued
Other Intangible Assets
Other intangibles by major classes were as follows:
Leases
Customer Lists(1)
Other(2)
Total
(In thousands)
Gross other intangibles
Accumulated amortization
Net Other Intangibles
$
$
Feb. 1,
2020
— $
—
— $
Feb. 2,
2019
3,532 $
(2,916 )
616 $
Feb. 1,
2020
6,562 $
(1,509 )
5,053 $
Feb. 2,
2019
1,450 $
(1,450 )
— $
Feb. 1,
2020
767 $
(479 )
288 $
Feb. 2,
2019
641 $
(314 )
327 $
Feb. 1,
2020
7,329 $
(1,988 )
5,341 $
Feb. 2,
2019
5,623
(4,680 )
943
(1)Includes $5.1 million for the Togast acquisition.
(2)Includes backlog and vendor contract.
The amortization of intangibles was $0.2 million for Fiscal 2020 and less than $0.1 million for Fiscal 2019 and 2018.
Currently, amortization of intangibles is expected to be $0.9 million for Fiscal 2021 and $0.6 million for each of the next
four years.
Note 4
Asset Impairments and Other Charges
Asset impairment charges are reflected as a reduction of the net carrying value of property and equipment, and in asset
impairment and other, net in the accompanying Consolidated Statements of Operations.
We recorded a pretax charge to earnings of $13.4 million in Fiscal 2020, including $11.5 million pension settlement
expense and $3.1 million for retail store asset impairments, partially offset by a $(0.6) million gain on the sale of the
Lids Sports Group headquarters building, a $(0.4) million gain for lease terminations and a $(0.2) million gain related to
Hurricane Maria.
We recorded a pretax charge to earnings of $3.2 million in Fiscal 2019, including $4.2 million for retail store asset
impairments, $0.3 million for legal and other matters and $0.1 for hurricane losses, partially offset by a $(1.4) million
gain related to Hurricane Maria.
We recorded a pretax charge to earnings of $7.8 million in Fiscal 2018, including a $5.2 million licensing termination
expense, $1.7 million for retail store asset impairments and $0.9 million for hurricane losses.
Note 5
Inventories
(In thousands)
Wholesale finished goods
Retail merchandise
Total Inventories
February 1, 2020
$
$
34,271 $
330,998
365,269
$
February 2, 2019
45,679
320,988
366,667
68
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 6
Fair Value
The carrying amounts and fair values of our financial instruments at February 1, 2020 and February 2, 2019 are:
(In thousands)
February 1, 2020
February 2, 2019
U.S. Revolver Borrowings
UK Term Loans
UK Revolver Borrowings
Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Value
$
14,393 $
—
—
14,056 $
—
—
56,773 $
8,970
—
56,861
9,063
—
Debt fair values were determined using a discounted cash flow analysis based on current market interest rates for similar
types of financial instruments and would be classified in Level 2 as defined in Note 1.
Carrying amounts reported on our Consolidated Balance Sheets for cash, cash equivalents, receivables and accounts
payable approximate fair value due to the short-term maturity of these instruments.
The following table presents our assets and liabilities measured at fair value on a nonrecurring basis as of February 1,
2020 aggregated by the level in the fair value hierarchy within which those measurements fall (in thousands):
Measured as of May 4, 2019
Measured as of August 3, 2019
Measured as of November 2, 2019
Measured as of February 1, 2020
Total Asset Impairment Fiscal 2020
Long-Lived
Assets
Held and Used
$
906 $
63
263
—
Level 1
Level 2
Level 3
— $
—
—
—
— $
—
—
—
Impairment
Charges
307
731
799
1,258
3,095
906 $
63
263
—
$
We recorded $3.1 million of impairment charges as a result of the fair value measurement of its long-lived assets held
and used and tested on a nonrecurring basis during the year ended February 1, 2020. These charges are reflected in asset
impairments and other, net in our Consolidated Statements of Operations.
We used a discounted cash flow model to estimate the fair value of these long-lived assets. Discount rate and growth
rate assumptions are derived from current economic conditions, expectations of management and projected trends of
current operating results. As a result, we have determined that the majority of the inputs used to value our long-lived
assets held and used are unobservable inputs that fall within Level 3 of the fair value hierarchy.
Note 7
Long-Term Debt
Credit Facility
On February 1, 2019, we entered into a First Amendment to the Fourth Amended and Restated Credit Agreement, (the
"Amendment") amending the Fourth Amended and Restated Credit Agreement, dated as of January 31, 2018 between us and
the lenders party thereto and Bank of America, N.A., as agent (as amended, the "Credit Facility" or the "Credit Agreement").
The Amendment modified the Credit Facility to, among other things, decrease each of the Domestic Total
69
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 7
Long-Term Debt, Continued
Commitments and the Total Commitments from $400.0 million to $275.0 million and to permit the sale of Lids Sports
Group. The Credit Facility matures January 31, 2023.
Deferred financing costs incurred of $1.7 million related to the Credit Facility were capitalized and are being amortized
over five years. In connection with the Amendment to the Credit Facility, deferred financing costs of $0.6 million were
written off. These costs are included in loss on early retirement of debt on the Consolidated Statements of Operations.
The remaining balance of deferred financing costs incurred related to the Credit Facility are being amortized over the
remaining four years of the agreement. These costs are included in other non-current assets on the Consolidated Balance
Sheets.
The Credit Facility is a revolving credit facility in the aggregate principal amount of $275.0 million, including (i) for the
Company and other borrowers formed in the U.S., a $70.0 million sublimit for the issuance of letters of credit and a
domestic swingline subfacility of up to $45.0 million, (ii) for GCO Canada, Inc., a revolving credit subfacility in an
amount not to exceed $70.0 million, which includes a $5.0 million sublimit for the issuance of letters of credit and a
swingline subfacility of up to $5.0 million, and (iii) for Genesco (UK) Limited, a revolving credit subfacility in an
aggregate amount not to exceed $100.0 million, which includes a $10.0 million sublimit for the issuance of letters of
credit and a swingline subfacility of up to $10.0 million . Any swingline loans and any letters of credit and borrowings
under the Canadian and U.K. subfacilities will reduce the availability under the Credit Facility on a dollar for dollar
basis. We have the option, from time to time, to increase the availability under the Credit Facility by an aggregate
amount of up to $200.0 million subject to, among other things, the receipt of commitments for the increased amount. In
connection with this increased facility, the Canadian revolving credit subfacility may be increased by no more than $15.0
million and the UK revolving credit subfacility may be increased by no more than $100.0 million. The aggregate
amount of the loans made and letters of credit issued under the Credit Facility are limited to the lesser of the facility
amount ($275.0 million or, if increased as described above, up to $475.0 million) or the "Borrowing Base", as defined in
the Credit Agreement.
The Credit Facility is secured by certain assets of the Company and certain subsidiaries of the Company, including
accounts receivable, inventory, payment intangibles, and deposit accounts and specifically excludes intellectual property,
equity interests, equipment, real estate and leaseholds interests.
We are required to pay a commitment fee on the actual daily unused portions of the Credit Facility at a rate of 0.25% per
annum.
The Credit Facility also permits us to incur senior debt in an amount up to the greater of $500.0 million or an amount
that would not cause our ratio of consolidated total indebtedness to consolidated EBITDA to exceed 5.0:1.0 provided
that certain terms and conditions are met.
In addition, the Credit Facility contains certain covenants that, among other things, restrict additional indebtedness, liens
and encumbrances, loans and investments, acquisitions, dividends and other restricted payments, transactions with
affiliates, asset dispositions, mergers and consolidations, prepayments or material amendments to certain material
documents and other matters customarily restricted in such agreements.
The Credit Facility does not require us to comply with any financial covenants unless Excess Availability, as defined in the
Credit Agreement, is less than the greater of $17.5 million or 10.0% of the Loan Cap. If and during such time as Excess
Availability is less than the greater of $17.5 million or 10.0% of the Loan Cap, the Credit Facility requires us to
70
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 7
Long-Term Debt, Continued
meet a minimum fixed charge coverage ratio. Excess Availability was $199.9 million at February 1, 2020. See Note 18
for subsequent events related to the Credit Facility.
The Credit Facility contains customary events of default, which if any of them occurs, would permit or require the
principal of and interest on the Credit Facility to be declared due and payable as applicable.
U.K. Credit Agreements
On November 15, 2019, Schuh Limited ("Schuh") entered into an Amendment and Restatement Agreement (the “2019
Restatement Agreement”) with Lloyds Bank plc (“Lloyds”) which amended and restated the Amendment and
Restatement Agreement dated April 26, 2017. Schuh Limited replaced Schuh Group Limited as Parent under the 2019
Restatement
Agreement. The 2019 Restatement Agreement contains certain covenants at the Schuh level, including a minimum
interest coverage covenant of 4.50x and a maximum leverage covenant of 1.75x. The 2019 Restatement Agreement is
secured by a pledge of all the assets of Schuh and Schuh (ROI) Limited. Pursuant to a Guarantee in favor of Lloyds,
Genesco Inc. has guaranteed the obligations of Schuh under the 2019 Restatement Agreement on an unsecured basis.
We were in compliance with all the covenants at February 1, 2020.
The 2019 Restatement Agreement includes a Facility B of £6.25 million, a Facility C revolving credit agreement of
£19.0 million, a working capital facility of £2.5 million and a Facility D revolving credit facility of €7.2 million for its
operations in Ireland. The Facility B loan bears interest at LIBOR plus 2.5% per annum and was paid off in January
2020. The Facility C bears interest at LIBOR plus 2.2% per annum and expired January 31, 2020. The Facility D bears
interest at EURIBOR plus 2.2% per annum and expired January 31, 2020. There were no UK term loans or UK revolver
loans outstanding at February 1, 2020.
In March of 2020, Schuh entered into an Amendment and Restatement Agreement, amending the 2019 Restatement
Agreement (the "U.K. A&R Agreement") with Lloyds. The U.K. A&R Agreement includes only a Facility C revolving
credit agreement of £19.0 million,bears interest at 2.2% per annum and expires in September 2020.
(In thousands)
U.S. Revolver borrowings
UK term loans
UK revolver borrowings
Deferred note expense on term loans
Total long-term debt
Current portion
Total Noncurrent Portion of Long-Term Debt
February 1,
2020
February 2,
2019
$
$
14,393 $
—
—
—
14,393
—
14,393 $
56,773
8,992
—
(22 )
65,743
8,992
56,751
The long-term debt balance of $14.4 million bears interest at 2.13% and matures in January 2023.
The revolver borrowings outstanding under the Credit Facility at February 1, 2020 included $14.4 million (£10.9
million) related to Genesco (UK) Limited. We had outstanding letters of credit of $9.3 million under the Credit Facility
at February 1, 2020. These letters of credit support lease and insurance indemnifications.
71
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 8
Leases
We lease our office space and all of our retail store locations, transportation equipment and other equipment under
various noncancelable operating leases. The leases have varying terms and expire at various dates through 2034. The
store leases in the United States, Puerto Rico and Canada typically have initial terms of approximately 10 years. The
store leases in the United Kingdom and the Republic of Ireland typically have initial terms of between 10 and 15 years.
Our lease portfolio includes leases with fixed base rental payments, rental payments based on a percentage of retail sales
over contractual amounts and others with predetermined fixed escalations of the minimum rentals based on a defined
consumer price index or percentage. Generally, most of the leases require us to pay taxes, insurance, maintenance costs
and contingent rentals based on sales. We evaluate renewal options and break options at lease inception and on an
ongoing basis, and include renewal options and break options that we are reasonably certain to exercise in our expected
lease terms for calculations of our right-of-use assets and liabilities. Approximately 2% of our leases contain renewal
options. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.
The lease on our Nashville office expires in April 2022. On February 10, 2020, we announced plans for our new
corporate headquarters in Nashville, Tennessee. We entered into a lease agreement for approximately 199,000 square
feet of office space which will replace our current corporate headquarters office lease. The term of the lease is 15 years,
with two options to extend for an additional period of five years each.
Under ASC 842, for store, office and equipment leases beginning in Fiscal 2020 and later, we have elected to not
separate fixed lease components and non-lease components. Accordingly, we include fixed rental payments, common
area maintenance costs, promotional advertising costs and other fixed costs in our measurement of lease liabilities.
Our leases do not provide an implicit rate, so the incremental borrowing rate, based on the information available at
commencement or modification date, is used in determining the present value of lease payments. The incremental
borrowing rate represents an estimate of the interest rate we would incur at lease commencement to borrow an amount
equal to the lease payments on a collateralized basis over the term of a lease within a particular currency environment.
For operating leases that commenced prior to the date of adoption of the new lease accounting guidance, we used the
incremental borrowing rate that corresponded to the initial lease term as of the date of adoption.
Net lease costs are included within selling and administrative expenses on the Consolidated Statements of Operations.
The table below presents the components of lease cost for operating leases for the year ended February 1, 2020.
(In thousands)
Operating lease cost
Variable lease cost
Less: Sublease income
Net Lease Cost
Fiscal 2020
$184,428
12,176
(307 )
$196,297
72
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 8
Leases, Continued
The following table reconciles the maturities of undiscounted cash flows to our operating lease liabilities recorded on the
Consolidated Balance Sheets at February 1, 2020:
Fiscal Years
2021
2022
2023
2024
2025
Thereafter
Total undiscounted future minimum lease payments
Less: Amounts representing interest
Total Present Value of Operating Lease Liabilities
(In thousands)
$180,314
171,483
151,141
127,544
103,668
192,246
926,396
(135,752)
$790,644
Our weighted-average remaining lease term and weighted-average discount rate for operating leases as of February 1,
2020 are:
Weighted-average remaining lease term (years)
Weighted-average discount rate
February 1, 2020
6.2 years
5.2%
Prior Period Comparative Disclosures
Under the optional transition method, for leases that existed prior to and at the adoption of the new standard, we continue
to present comparative prior period lease amounts in accordance with ASC 840, "Leases". As of February 2, 2019 future
minimum rental commitments were:
Fiscal Years
2020
2021
2022
2023
2024
Thereafter
Total Minimum Rental Commitments
(In thousands)
$183,432
171,584
159,155
140,889
119,023
323,638
$1,097,721
Leasehold improvements are recorded at their gross costs including items reimbursed by landlords. The reimbursements
are recorded as deferred rent and amortized as a reduction of rent expense over the initial lease term. Tenant allowances
of $22.5 million and deferred rent of $48.6 million at February 2, 2019 are included in other long-term liabilities on the
Consolidated Balance Sheets.
73
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 8
Leases, Continued
Total rent expense was $202.6 million and $203.1 million for Fiscal 2019 and 2018, respectively. Total contingent rent
was not material for Fiscal 2019 and 2018.
Note 9
Equity
Non-Redeemable Preferred Stock
Class
Employees’ Subordinated
Convertible Preferred
Stated Value of Issued Shares
Employees’ Preferred Stock
Purchase Accounts
Total Non-Redeemable
Preferred Stock
Shares
Authorized
Number of Shares
Amounts in Thousands
2020
2019
2018
2020
2019
2018
5,000,000
34,440
36,147
36,671
$ 1,033
$ 1,084
$ 1,100
1,033
1,084
1,100
(24 )
(24 )
(48 )
$ 1,009
$ 1,060
$ 1,052
Subordinated Serial Preferred Stock:
Our charter permits the Board of Directors to issue Subordinated Serial Preferred Stock (3,000,000 shares, in aggregate,
are authorized) in as many series, each with as many shares and such rights and preferences as the board may designate.
We have shares authorized for $2.30 Series 1, $4.75 Series 3, $4.75 Series 4, Series 6 and $1.50 Subordinated
Cumulative Preferred stocks in amounts of 64,368 shares, 40,449 shares, 53,764 shares, 800,000 shares and 5,000,000
shares, respectively. All of these preferred stocks were mandatorily redeemed by us in Fiscal 2014. As a result, there are
no outstanding shares for any preferred issues of stock other than Employees' Subordinated Convertible Preferred stock
shown in the table above.
Employees’ Subordinated Convertible Preferred Stock:
Stated and liquidation values are 88 times the average quarterly per share dividend paid on common stock for the
previous eight quarters (if any), but in no event less than $30 per share. Each share of this issue of preferred stock is
convertible into one share of common stock and has one vote per share.
Common Stock:
Common stock-$1 par value. Authorized: 80,000,000 shares; issued: February 1, 2020 – 15,185,670 shares; February 2,
2019 –19,591,048 shares. There were 488,464 shares held in treasury at February 1, 2020 and February 2, 2019. Each
outstanding share is entitled to one vote. At February 1, 2020, common shares were reserved as follows: 34,440 shares
for conversion of preferred stock and 916,680 shares for the Second Amended and Restated 2009 Genesco Inc. Equity
Incentive Plan (the "2009 Plan").
74
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 9
Equity, Continued
For the year ended February 1, 2020, 270,173 shares of common stock were issued as restricted shares as part of the
2009 Plan; 25,368 shares were issued to directors in exchange for their services; 55,598 shares were withheld for taxes
on restricted stock vested in Fiscal 2020; 77,013 shares of restricted stock were forfeited in Fiscal 2020; and 1,707 shares
were issued in miscellaneous conversions of Employees’ Subordinated Convertible Preferred Stock. In addition, the
Company repurchased and retired 4,570,015 shares of common stock at an average weighted market price of $41.44 for
a total of $189.4 million. We have $89.7 million remaining under our current $100.0 million share repurchase
authorization.
For the year ended February 2, 2019, 353,633 shares of common stock were issued as restricted shares as part of the
2009 Plan; 36,421 shares were issued to directors in exchange for their services; 69,762 shares were withheld for taxes
on restricted stock vested in Fiscal 2019; 153,646 shares of restricted stock were forfeited in Fiscal 2019; and 524 shares
were issued in miscellaneous conversions of Employees’ Subordinated Convertible Preferred Stock. In addition, the
Company repurchased and retired 968,375 shares of common stock at an average weighted market price of $47.45 for a
total of $45.9 million.
For the year ended February 3, 2018, 356,224 shares of common stock were issued as restricted shares as part of the
2009 Plan; 30,620 shares were issued to directors in exchange for their services; 50,957 shares were withheld for taxes
on restricted stock vested in Fiscal 2018; 23,581 shares of restricted stock were forfeited in Fiscal 2018; and 975 shares
were issued in miscellaneous conversions of Employees’ Subordinated Convertible Preferred Stock. In addition, the
Company repurchased and retired 275,300 shares of common stock at an average weighted market price of $58.71 for a
total of $16.2 million.
Restrictions on Dividends and Redemptions of Capital Stock:
Our charter provides that no dividends may be paid and no shares of capital stock acquired for value if there are dividend
or redemption arrearages on any senior or equally ranked stock. Exchanges of subordinated serial preferred stock for
common stock or other stock junior to such exchanged stock are permitted.
Note 10
Income Taxes
On December 22, 2017, the Tax Cuts and Jobs Act (the “Act”) was enacted in the United States. The Act includes a
number of changes to existing U.S. tax laws that impact us including the reduction of the U.S. corporate income tax rate
from 35% to 21% for tax years beginning after December 31, 2017. The Act also provides for a one-time transition tax
on indefinitely reinvested foreign earnings and the acceleration of depreciation for certain assets placed into service after
September 27, 2017, as well as prospective changes beginning in 2018, including the elimination of certain domestic
deductions and credits and additional limitations on the deductibility of executive compensation. Our Fiscal 2020 and
2019 financial results reflected all tax effects from the Act.
The changes to existing U.S. tax laws as a result of the Act, which have the most significant impact on our provision for
income taxes as of February 1, 2020 and February 2, 2019 are as follows:
75
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 10
Income Taxes, Continued
Reduction of the U.S. Corporate Income Tax Rate
We measure deferred tax assets and liabilities using enacted tax rates that will apply in the years in which the temporary
differences are expected to be recovered or paid. Accordingly, our deferred tax assets and liabilities were adjusted to
reflect the reduction in the U.S. corporate income tax rate from 35% to 21%, resulting in a $5.3 million increase in
income tax expense for the year ended February 3, 2018 and a corresponding $5.3 million decrease in net deferred tax
assets as of February 3, 2018.
Transition Tax on Foreign Earnings
We recognized a provisional income tax expense of $4.5 million for the year ended February 3, 2018 related to the one-
time transition tax on indefinitely reinvested foreign earnings.
The adjustments to the deferred tax assets and liabilities and the liability for the transition tax on indefinitely reinvested
foreign earnings, including the analysis of our ability to fully utilize foreign tax credits associated with the transition tax,
were provisional amounts estimated based on information reviewed as of February 3, 2018. We recorded an additional
expense of $1.3 million in Fiscal 2019, as the one-time transition tax of $5.8 million was finalized.
Global Intangible Low-Taxed Income ("GILTI")
The Act established new tax rules designed to tax U.S. companies on GILTI earned by foreign subsidiaries. We elected
to treat any future GILTI tax liabilities as period costs and will expense those liabilities in the period incurred.
Therefore, we will not record deferred taxes associated with the GILTI provision for the Act. Because of tax losses in
foreign jurisdictions, there was no liability for GILTI in any period.
The components of earnings from continuing operations before income taxes is comprised of the following:
(In thousands)
United States
Foreign
$
Total Earnings from Continuing Operations before Income Taxes $
2020
2019
2018
83,871 $
(1,436 )
82,435 $
84,807 $
(6,548 )
78,259 $
58,137
10,852
68,989
Income tax expense from continuing operations is comprised of the following:
(In thousands)
Current
U.S. federal
International
State
Total Current Income Tax Expense
Deferred
U.S. federal
International
State
Total Deferred Income Tax Expense (Benefit)
Total Income Tax Expense – Continuing Operations
76
2020
2019
2018
$
$
16,313 $
322
3,383
20,018
(463 )
1,145
(22 )
660
20,678 $
13,657 $
1,649
4,029
19,335
3,632
2,594
1,474
7,700
27,035 $
25,093
5,421
3,828
34,342
1,491
(3,498 )
(54 )
(2,061 )
32,281
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 10
Income Taxes, Continued
Reconciliation of the United States federal statutory rate to our effective tax rate from continuing operations is as follows:
U. S. federal statutory rate of tax
State taxes (net of federal tax benefit)
Foreign rate differential
Change in valuation allowance
Impact of statutory rate change
Credits
Permanent items
Uncertain federal, state and foreign tax positions
Transition tax
Other
Effective Tax Rate
2020
2019
2018
21.00 %
3.62
(2.21 )
3.64
—
(0.93 )
1.72
(2.01 )
—
0.25
25.08 %
21.00 %
5.67
(2.56 )
11.51
—
(2.65 )
2.27
(1.68 )
2.23
(1.24 )
34.55 %
33.72 %
3.58
(5.66 )
1.95
7.74
(1.80 )
2.77
(1.36 )
6.47
(0.62 )
46.79 %
Deferred tax assets and liabilities are comprised of the following:
(In thousands)
Pensions
Lease obligation
Book over tax depreciation
Expense accruals
Uniform capitalization costs
Provisions for discontinued operations and restructurings
Inventory valuation
Tax net operating loss and credit carryforwards
Allowances for bad debts and notes
Deferred compensation and restricted stock
Other
Gross deferred tax assets
Deferred tax asset valuation allowance
Deferred tax asset net of valuation allowance
Identified intangibles
Prepaids
Right of use asset
Pensions
Gross deferred tax liabilities
Net Deferred Tax Assets
77
February 1,
2020
February 2,
2019
$
332 $
188,590
4,558
7,386
7,292
674
810
11,972
181
3,344
144
225,283
(23,333 )
201,950
(3,616 )
(1,929 )
(176,930 )
—
(182,475 )
$
19,475 $
—
11,081
2,739
5,061
7,938
730
908
15,766
318
3,814
39
48,394
(20,354 )
28,040
(3,265 )
(1,638 )
—
(1,802 )
(6,705 )
21,335
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 10
Income Taxes, Continued
The deferred tax balances have been classified in our Consolidated Balance Sheets as follows:
Net non-current asset
Net Deferred Tax Assets
2020
2019
19,475 $
19,475 $
21,335
21,335
$
$
As of February 1, 2020 and February 2, 2019, we had state net operating loss carryforwards of $3.4 million and $5.7
million, respectively. We provided a valuation allowance against these attributes of $3.2 million and $3.3 million,
respectively, as of February 1, 2020 and February 2, 2019. The attributes expire in fiscal years 2022 through 2039.
As of February 1, 2020 and February 2, 2019, we had state tax credits of $0.6 million and $0.4 million, respectively.
These credits expire in fiscal years 2021 through 2026.
As of February 1, 2020 and February 2, 2019, we had foreign net operating loss carryforwards of $29.5 million and
$28.4 million, respectively, which expire in 20 years.
As of February 1, 2020, we have provided a total valuation allowance of approximately $23.3 million on deferred tax
assets associated primarily with foreign and state net operating losses for which management has determined it is more
likely than not that the deferred tax assets will not be realized. The $2.9 million net increase in valuation allowance
during Fiscal 2020 from the $20.4 million provided for as of February 2, 2019 relates to increases of $0.5 million related
to state tax attributes and $2.4 million related to foreign tax attributes. Management believes that it is more likely than
not that the remaining deferred tax assets will be fully realized.
As of February 1, 2020, no deferred taxes have been provided on the accumulated undistributed earnings of our foreign
operations beyond the amounts recorded for deemed repatriation of such earnings, as required by U.S. Tax Reform. An
actual repatriation of earnings from our foreign operations could still be subject to additional foreign withholding and
U.S. state taxes. Based upon evaluation of our foreign operations, undistributed earnings are intended to remain
permanently reinvested to finance anticipated future growth and expansion, and accordingly, deferred taxes have not
been provided. If undistributed earnings of our foreign operations were not considered permanently reinvested as of
February 1, 2020, an immaterial amount of additional deferred taxes would have been provided.
The following is a tabular reconciliation of the total amounts of unrecognized tax benefits for Fiscal 2020, 2019 and
2018.
(In thousands)
Unrecognized Tax Benefit – Beginning of Period
Gross Increases (Decreases) – Tax Positions in a Prior Period
Gross Increases (Decreases) – Tax Positions in a Current Period
Settlements
Lapse of Statutes of Limitations
Unrecognized Tax Benefit – End of Period
2020
2019
2018
1,835 $
—
178
(931 )
(904 )
178 $
3,701 $
—
(638 )
—
(1,228 )
1,835 $
5,622
(15 )
(166 )
—
(1,740 )
3,701
$
$
The amount of unrecognized tax benefits as of February 1, 2020, February 2, 2019 and February 3, 2018 which would
impact the annual effective rate if recognized were $0.2 million, $0.6 million and $0.6 million, respectively. The amount
78
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 10
Income Taxes, Continued
of unrecognized tax benefits may change during the next twelve months but we do not believe the change, if any, will be
material to our consolidated financial position or results of operations.
We recognize interest expense and penalties related to the above unrecognized tax benefits within income tax expense on
the Consolidated Statements of Operations and it was not material for Fiscal 2020, 2019 or 2018.
We file income tax returns in federal and in many state and local jurisdictions as well as foreign jurisdictions. With few
exceptions, our state and local income tax returns for fiscal years ended January 31, 2017 and beyond remain subject to
examination. In addition, we have subsidiaries in various foreign jurisdictions that have statutes of limitation generally
ranging from two to six years. Our US federal income tax returns for fiscal years ended January 31, 2017 and beyond
remain subject to examination.
Note 11
Defined Benefit Pension Plans and Other Postretirement Benefit Plans
Defined Benefit Pension Plans
We previously sponsored a non-contributory, defined benefit pension plan. As of January 1, 1996, we amended the plan
to change the pension benefit formula to a cash balance formula from the then existing benefit calculation based upon
years of service and final average pay. The benefits accrued under the old formula were frozen as of December 31, 1995.
Effective January 1, 2005, we froze the defined benefit cash balance plan. In March 2019, our board of directors
authorized the termination of the defined benefit pension plan. The termination was completed in January 2020.
Other Postretirement Benefit Plans
We provide health care benefits for early retirees that meet certain age and years of service criteria and life insurance
benefits for certain retirees. Under the health care plan, early retirees are eligible for benefits until age 65. Employees
who met certain requirements are eligible for life insurance benefits. We accrue such benefits during the period in which
the employee renders service.
Obligations and Funded Status
The measurement date of the assets and liabilities for the defined benefit pension plan and postretirement medical and
life insurance plans is the month-end date that is closest to our fiscal year end.
79
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 11
Defined Benefit Pension Plans and Other Postretirement Benefit Plans, Continued
Change in Plan Assets
(In thousands)
Fair value of plan assets at beginning of year
Actual gain on plan assets
Employer contributions
Plan participants’ contributions
Benefits paid
Asset transfer
Fair Value of Plan Assets at End of Year
Change in Benefit Obligation
(In thousands)
Benefit obligation at beginning of year
Service cost - ongoing operations
Service cost - discontinued operations
Interest cost - ongoing operations
Interest cost - discontinued operations
Plan participants’ contributions
Effect of plan change
Asset transfer
Benefits paid
Actuarial (gain) loss
Benefit Obligation at End of Year
Funded Status at End of Year
Pension Benefits
Other Benefits
2020
2019
2020
2019
82,632 $
8,470
—
—
(26,363 )
(64,739 )
— $
85,730 $
892
3,500
—
(7,490 )
—
82,632
— $
—
480
111
(591 )
—
—
—
—
105
126
(231 )
—
—
Pension Benefits
Other Benefits
2020
2019
2020
2019
78,322 $
596
—
2,771
—
—
—
(64,739 )
(26,363 )
9,413
— $
— $
85,035 $
450
—
3,022
—
—
—
—
(7,490 )
(2,695 )
78,322 $
4,310 $
4,525 $
89
—
151
—
111
—
—
(591 )
2,740
7,025 $
(7,025 ) $
10,584
409
300
214
80
126
(3,658 )
—
(231 )
(3,299 )
4,525
(4,525 )
$
$
$
$
$
Amounts recognized in the Consolidated Balance Sheets consist of:
(In thousands)
Noncurrent assets
Current liabilities
Noncurrent liabilities
Net Amount Recognized
Pension Benefits
Other Benefits
2020
2019
2020
2019
$
$
— $
—
—
— $
4,310 $
—
—
4,310 $
— $
(603 )
(6,422 )
(7,025 ) $
—
(391 )
(4,134 )
(4,525 )
80
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 11
Defined Benefit Pension Plans and Other Postretirement Benefit Plans, Continued
Amounts recognized in accumulated other comprehensive income consist of:
(In thousands)
Prior service cost
Net loss (gain)
Total Recognized in Accumulated Other
Comprehensive Loss
Pension Benefits
Other Benefits
2020
2019
2020
2019
— $
—
— $
8,148
(1,244 ) $
2,384
(2,165 )
(334 )
—
$
8,148
$
1,140
$
(2,499 )
$
$
Amounts for projected and accumulated benefit obligation and fair value of plan assets are as follows:
(In thousands)
Projected benefit obligation
Accumulated benefit obligation
Fair value of plan assets
Components of Net Periodic Benefit Cost
Net Periodic Benefit Cost
(In thousands)
Service cost
Interest cost
Expected return on plan assets
Amortization:
Prior service cost
Losses
Net amortization
February 1,
2020
February 2,
2019
$
— $
—
—
78,322
78,322
82,632
Pension Benefits
2019
2020
2018
2020
Other Benefits
2019
2018
$
596 $
450 $
550 $
89 $
409 $
2,771
(2,676 )
3,022
(4,198 )
3,277
(4,505 )
—
258
258
353 $
—
776
776
—
834
834
151
—
(921 )
22
(899 )
214
—
(231 )
37
(194 )
20 $
507
251
—
—
114
114
365
872
Other components of net periodic benefit cost
$
(400 ) $
(394 ) $
(748 ) $
Net Periodic Benefit Cost - Ongoing Operations $
949
$
50
$
156
$
(659 ) $
429
$
Net Periodic Benefit Cost - Discontinued
Operations
$
—
$
—
$
—
$
—
$
(877 ) $
524
81
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 11
Defined Benefit Pension Plans and Other Postretirement Benefit Plans, Continued
Reconciliation of Accumulated Other Comprehensive Income
(In thousands)
Net (gain) loss
Amortization of prior service cost
Settlement charge
Amortization of net actuarial loss
Total Recognized in Other Comprehensive Income
Total Recognized in Net Periodic Benefit Cost and Other Comprehensive Income $
Weighted-average assumptions used to determine benefit obligations
Pension Benefits Other Benefits
2020
2020
$
$
3,620 $
—
(11,510 )
(258 )
(8,148 ) $
(7,199 ) $
2,740
921
—
(22 )
3,639
2,980
Discount rate
Rate of compensation increase
Pension Benefits
2019
2020
NA
NA
4.05 %
NA
Other Benefits
2020
2.21 %
NA
2019
3.48 %
NA
For Fiscal 2020 and 2019, the discount rate was based on a yield curve of high quality corporate bonds with cash flows
matching our planned expected benefit payments.
Weighted-average assumptions used to determine net periodic benefit costs
Discount rate
Expected long-term rate of return on plan
assets
Rate of compensation increase
Assumed health care cost trend rates
Pension Benefits
2019
2020
2018
2020
Other Benefits
2019
2018
4.05 %
3.70 %
3.95 %
3.48 %
3.67 %
3.98 %
3.85 %
5.65 %
6.05 %
NA
NA
NA
NA
NA
NA
NA
NA
NA
Health care cost trend rate assumed for next year
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)
Year that the rate reaches the ultimate trend rate
2020
2019
7.25 %
6.25 %
2024
7.25 %
6.75 %
2022
82
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 11
Defined Benefit Pension Plans and Other Postretirement Benefit Plans, Continued
The effect on disclosed information of one percentage point change in the assumed health care cost trend rate for each
future year is shown below.
(In thousands)
Aggregated service and interest cost
Accumulated postretirement benefit obligation
Cash Flows
Return of Assets
The plan did not return any assets from the plan to Genesco in Fiscal 2020.
1% Increase
in Rates
1% Decrease
in Rates
$
$
20 $
526 $
18
480
Contributions
No minimum funding was required under the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), for the plan in 2019.
Estimated Future Benefit Payments
Expected benefit payments for other postretirement benefits, paid from the employee benefit trust, are as follows:
Estimated future payments
2020
2021
2022
2023
2024
2025 – 2029
Section 401(k) Savings Plan
$
Other
Benefits
($ in millions)
0.6
0.6
0.6
0.6
0.5
2.8
We have a Section 401(k) Savings Plan available to all employees, including retail employees who have completed 500
hours of service within the first six months of employment, and are age 18 or older.
Since January 1, 2005, we have matched 100% of each employee’s contribution of up to 3% of salary and 50% of the
next 2% of salary. In addition, for those employees hired before December 31, 2004, who were eligible for our cash
balance retirement plan before it was frozen, we annually make an additional contribution of 2 1/2 % of salary to each
employee’s account. Participants are immediately vested in their contributions and our matching contribution plus actual
earnings thereon. Our contribution expense for the matching program was approximately $5.3 million for Fiscal 2020,
$5.6 million for Fiscal 2019 and $5.1 million for Fiscal 2018.
83
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 12
Earnings Per Share
Basic earnings per share excludes dilution and is computed by dividing income available to common shareholders by the
weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential
dilution that could occur if securities to issue common stock were exercised or converted to common stock.
Weighted-average number of shares used for earnings per share is as follows:
(Shares in thousands)
Weighted-average number of shares - basic
Common stock equivalents
Fiscal Year
2020
15,544
2019
19,351
2018
19,218
127
144
64
Weighted-average number of shares - diluted
15,671
19,495
19,282
Note 13
Share-Based Compensation Plans
We have share-based compensation covering certain members of management and non-employee directors. The fair
value of employee restricted stock is determined based on the closing price of our stock on the date of grant. Forfeitures
for restricted stock are recognized as they occur.
Stock Incentive Plan
Under the 2009 Plan, which was originally effective June 22, 2011, we may grant options, restricted shares, performance
awards and other stock-based awards to our employees, consultants and directors for up to 2.6 million shares of common
stock. Under the 2009 Plan, the exercise price of each option equals the market price of our stock on the date of grant,
and an option’s maximum term is 10 years. Options granted under the plan primarily vest 25% per year over four years.
Restricted share grants deplete the shares available for future grants at a ratio of 2.0 shares per restricted share grant.
For Fiscal 2020, 2019 and 2018, we did not recognize any stock option related share-based compensation for our stock
incentive plan as all such amounts were fully recognized in earlier periods. We did not capitalize any share-based
compensation cost.
As of February 1, 2020, we do not have any options outstanding under our stock incentive plan. As of February 1, 2020,
there was no unrecognized compensation costs related to stock options under the 2009 Plan. On February 5, 2020, our
new chief executive officer was issued a one-time grant of stock options under the 2009 Plan with a grant date fair value
of $500,000. Compensation costs related to these stock options will begin in the first quarter of our Fiscal 2021 since
the grant was made on the first day on Fiscal 2021.
Restricted Stock Incentive Plans
Director Restricted Stock
The 2009 Plan permits grants to non-employee directors on such terms as the Board of Directors may approve.
Restricted stock awards were made to independent directors on the date of the annual meeting of shareholders in each of
Fiscal 2020, 2019 and 2018. The shares granted in each award vested on the first anniversary of the grant date, subject to
the director's
84
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 13
Share-Based Compensation Plans, Continued
continued service through that date. In all cases, the director is restricted from selling, transferring, pledging or assigning
the shares for three years from the grant date unless he or she earlier leaves the board.
The Fiscal 2020 grant was valued at $91,375 for the year, per director, the Fiscal 2019 grant was valued at $91,375 for
the year, per director, with the exception of two new directors with a grant valued at $106,605 each, and the Fiscal 2018
grant was valued at $107,500 for the year, per director, based on the average closing price of the stock for the first five
trading days of the month in which they were granted and vested on the first anniversary of the grant date. For Fiscal
2020, 2019 and 2018, we issued 14,455 shares, 22,042 shares and 22,185 shares, respectively, of director restricted
stock.
In addition, the 2009 Plan permits an outside director to elect irrevocably to receive all or a specified portion of his
annual retainers for board membership and any committee chairmanship for the following fiscal year in a number of
shares of restricted stock (the "Retainer Stock"). Shares of the Retainer Stock are granted as of the first business day of
the fiscal year as to which the election is effective, subject to forfeiture to the extent not earned upon the outside
director's ceasing to serve as a director or committee chairman during such fiscal year. Once the shares are earned, the
director is restricted from selling, transferring, pledging or assigning the shares for an additional three years. For Fiscal
2020, 2019 and 2018, we issued 10,913 shares, 14,379 shares and 8,435 shares, respectively, of Retainer Stock.
We recognized $1.3 million of director restricted stock related share-based compensation in each of Fiscal 2020, 2019
and 2018 in selling and administrative expenses in the accompanying Consolidated Statements of Operations.
Employee Restricted Stock
Under the 2009 Plan, we issued 269,816 shares, 352,060 shares and 356,224 shares of employee restricted stock in
Fiscal 2020, 2019 and 2018, respectively. Shares of employee restricted stock issued in Fiscal 2020, 2019 and 2018
primarily vest 25% per year over four years, provided that on such date the grantee has remained continuously employed
by the Company since the date of grant. In addition, we issued 1,800, 4,388 and 4,947 restricted stock units in Fiscal
2020, 2019 and 2018, respectively, to certain employees at no cost that vest over three years. The fair value of employee
restricted stock is charged against income as compensation cost over the vesting period. Compensation cost recognized
in selling and administrative expenses in the accompanying Consolidated Statements of Operations for these shares was
$8.8 million, $12.1 million and $12.2 million for Fiscal 2020, 2019 and 2018, respectively, and is inclusive of
discontinued operations of $2.0 million and $1.7 million in Fiscal 2019 and 2018, respectively.
85
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 13
Share-Based Compensation Plans, Continued
A summary of the status of our nonvested shares of our employee restricted stock as of February 1, 2020 is presented
below:
Nonvested Restricted Shares
Nonvested at January 28, 2017
Granted
Vested
Withheld for federal taxes
Forfeited
Nonvested at February 3, 2018
Granted
Vested
Withheld for federal taxes
Forfeited
Nonvested at February 2, 2019
Granted
Vested
Withheld for federal taxes
Forfeited
Nonvested at February 1, 2020
Weighted-
Average
Grant-Date
Fair Value
$68.27
32.00
68.94
68.87
55.90
48.37
40.90
54.12
54.26
42.66
42.99
42.48
47.56
46.51
42.19
$41.46
Shares
484,002
356,224
(125,190 )
(50,957 )
(23,999 )
640,080
352,060
(177,394 )
(69,762 )
(153,646 )
591,338
269,816
(138,765 )
(55,598 )
(77,013 )
589,778
As of February 1, 2020, we had $19.0 million of total unrecognized compensation costs related to nonvested share-based
compensation arrangements for restricted stock discussed above. That cost is expected to be recognized over a weighted
average period of 1.79 years.
Note 14
Legal Proceedings and Other Matters
Environmental Matters
New York State Environmental Matters
In August 1997, the New York State Department of Environmental Conservation (“NYSDEC”) and the Company
entered into a consent order whereby we assumed responsibility for conducting a remedial investigation and feasibility
study and implementing an interim remedial measure with regard to the site of a knitting mill operated by a former
subsidiary of ours from 1965 to 1969. The United States Environmental Protection Agency (“EPA”), which assumed
primary regulatory responsibility for the site from NYSDEC, issued a Record of Decision in September 2007. The
Record of Decision specified a remedy of a combination of groundwater extraction and treatment and in-situ chemical
oxidation.
In September 2015, the EPA adopted an amendment to the Record of Decision eliminating the separate ground-water
extraction and treatment systems and the use of in-situ oxidation from the remedy adopted in the Record of Decision.
The amendment provides for the continued operation and maintenance of the existing wellhead treatment systems on
wells operated by the Village of Garden City, New York (the "Village"). It also requires us to perform certain ongoing
monitoring, operation and maintenance activities and to reimburse EPA's future oversight cost, involving future costs to
86
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 14
Legal Proceedings and Other Matters, Continued
us estimated to be between $1.7 million and $2.0 million, and to reimburse EPA for approximately $1.25 million of
interim oversight costs. On August 15, 2016, the Court entered a Consent Judgment implementing the remedy provided
for by the amendment.
The Village additionally asserted that we are liable for the costs associated with enhanced treatment required by the
impact of the groundwater plume from the site on two public water supply wells, including historical total costs ranging
from approximately $1.8 million to in excess of $2.5 million, and future operation and maintenance costs which the
Village estimated at $126,400 annually while the enhanced treatment continues. On December 14, 2007, the Village
filed a complaint (the "Village Lawsuit") against us and the owner of the property under the Resource Conservation and
Recovery Act (“RCRA”), the Safe Drinking Water Act, and the Comprehensive Environmental Response, Compensation
and Liability Act (“CERCLA”) as well as a number of state law theories in the U.S. District Court for the Eastern
District of New York, seeking an injunction requiring the defendants to remediate contamination from the site and to
establish their liability for future costs that may be incurred in connection with it.
In June 2016 we reached an agreement with the Village providing for the Village to continue to operate and maintain the
well head treatment systems in accordance with the Record of Decision and to release its claims against us asserted in
the Village Lawsuit in exchange for a lump-sum payment of $10.0 million by us. On August 25, 2016, the Village
Lawsuit was dismissed with prejudice. The cost of the settlement with the Village and the estimated costs associated
with our compliance with the Consent Judgment were covered by our existing provision for the site. The settlement with
the Village did not have, and we expect that the Consent Judgment will not have, a material effect on our financial
condition or results of operations.
In April 2015, we received from EPA a Notice of Potential Liability and Demand for Costs (the "Notice") pursuant to
CERCLA regarding the site in Gloversville, New York of a former leather tannery operated by us and by other, unrelated
parties. The Notice demanded payment of approximately $2.2 million of response costs claimed by EPA to have been
incurred to conduct assessments and removal activities at the site. In February 2017, we entered into a settlement
agreement with EPS resolving their claim for past response costs in exchange for a payment by us of $1.5 million which
was paid in May 2017. Our environmental insurance carrier has reimbursed us for 75% of the settlement amount,
subject to a $500,000 self-insured retention. We do not expect any additional cost related to the matter.
Whitehall Environmental Matters
We have performed sampling and analysis of soil, sediments, surface water, groundwater and waste management areas at
our former Volunteer Leather Company facility in Whitehall, Michigan.
In October 2010, we entered into a Consent Decree with the Michigan Department of Natural Resources and
Environment providing for implementation of a remedial Work Plan for the facility site designed to bring the site into
compliance with applicable regulatory standards. The Work Plan's implementation is substantially complete and we
expect, based on our present understanding of the condition of the site, that our future obligations with respect to the site
will be limited to periodic monitoring and that future costs related to the site should not have a material effect on our
financial condition or results of operations.
87
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 14
Legal Proceedings and Other Matters, Continued
Accrual for Environmental Contingencies
Related to all outstanding environmental contingencies, we had accrued $1.5 million as of February 1, 2020, $1.8
million as of February 2, 2019 and $3.0 million as of February 3, 2018. All such provisions reflect our estimates of the
most likely cost (undiscounted, including both current and noncurrent portions) of resolving the contingencies, based on
facts and circumstances as of the time they were made. There is no assurance that relevant facts and circumstances will
not change, necessitating future changes to the provisions. Such contingent liabilities are included in the liability arising
from provision for discontinued operations on the accompanying Consolidated Balance Sheets because it relates to
former facilities operated by us. We have made pretax accruals for certain of these contingencies, including
approximately $0.4 million in Fiscal 2020, $0.7 million in Fiscal 2019 and $0.6 million in Fiscal 2018. These charges
are included in loss from discontinued operations, net in the Consolidated Statements of Operations and represent
changes in estimates.
Other Legal Matters
On May 19, 2017, two former employees of our former Hat World subsidiary filed a putative class and collective action,
Chen and Salas v. Genesco Inc., et al., in the U.S. District Court for the Northern District of Illinois alleging violations
of the FLSA and certain Illinois and New York wages and hours laws, including, among others, failure to pay overtime
to store managers, and also seeking back pay, damages, statutory penalties, and declaratory and injunctive relief. On
March 8, 2018, the court granted us a motion to transfer venue to the U.S. District Court for the Southern District of
Indiana. On March 9, 2018, a former employee of our former Hat World subsidiary filed a putative class action in the
Superior Court of the Commonwealth of Massachusetts claiming violations of the Massachusetts Overtime Law,
M.G.L.C. 151§1A, by failing to pay overtime to employees classified as store managers, and seeking restitution, an
incentive award, treble damages, interest, attorneys fees and costs. We reached an agreement in principle to settle the
Chen and Salas and Massachusetts matters for payment of attorneys' fees and administrative costs totaling $0.4 million
plus total payments to members of the plaintiff class who opt to participate in the settlement of up to $0.8 million. The
proposed settlement has been approved by the court and the distribution of relief to class members is in process. We do
not expect that the proposed settlement will have a material adverse effect on our financial condition or results of
operations.
Other Matters
In the fourth quarter of Fiscal 2020, the IRS notified us on Letter 226-J, that we may be liable for an Employer Shared
Responsibility Payment (“ESRP”) in the amount of $4.2 million for the year ended December 31, 2017. The ESRP is
applicable to employers that had 50 or more full-time equivalent employees, did not offer minimum essential coverage
(“MEC”) to at least 95% of full-time employees (and their dependents) or did offer MEC to at least 95% of full time-
employees (and their dependents), which did not meet the affordable or minimum value criteria and had one or more
employees who claimed the Employee Premium Tax Credit (“PTC”) pursuant to the Affordable Care Act (the “ACA”).
The IRS determines which employers receive Letter 226-J and the amount of the proposed ESRP from information that
the employers complete on their information returns (IRS Forms 1094-C and 1095-C) and from the income tax returns of
their employees. Since the inception of the ACA, it has been our policy to offer MEC to all full-time employees and their
dependents. Based on our analysis, we responded to the IRS on January 15, 2020 asserting that we did offer MEC to at
least 95% of our full-time employees for each month of 2017 and noting that the discrepancy was caused by errors in the
electronic files uploaded through the ACA information return system. We are awaiting a response from the IRS and do
not believe we have a liability. As a result, we did not make an accrual for this matter for the year ended February 1,
2020.
88
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 14
Legal Proceedings and Other Matters, Continued
In addition to the matters specifically described in this Note, we are a party to other legal and regulatory proceedings and
claims arising in the ordinary course of our business. While management does not believe that our liability with respect
to any of these other matters is likely to have a material effect on our financial statements, legal proceedings are subject
to inherent uncertainties and unfavorable rulings could have a material adverse impact on our financial statement.
89
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 15
Business Segment Information
The accounting policies of the segments are the same as those described in the summary of significant accounting
policies.
Our reportable segments are based on management's organization of the segments in order to make operating decisions
and assess performance along types of products sold. Journeys Group and Schuh Group sell primarily branded products
from other companies while Johnston & Murphy Group and Licensed Brands sell primarily our owned and licensed
brands.
Corporate assets include cash, domestic prepaid rent expense, prepaid income taxes, pension asset, deferred income
taxes, deferred note expense on revolver debt and corporate fixed assets, including the former Lids Sports Group
headquarters building in Fiscal 2019 and Fiscal 2018, and miscellaneous investments. We do not allocate certain costs
to each segment in order to make decisions and assess performance. These costs include corporate overhead, bank fees,
interest expense, interest income, asset impairment charges and other, including a pension settlement charge, major
litigation and major lease terminations.
Net sales to external customers
$ 1,460,253 $ 373,930 $ 300,850 $ 61,859 $
Fiscal 2020
(In thousands)
Sales
Intercompany sales
Segment operating income (loss)
Asset impairments and other(1)
Operating income
Other components of net periodic
benefit cost
Interest expense
Interest income
Earnings from continuing
operations before income taxes
Total assets(2)
Depreciation and amortization
Capital expenditures
Journeys
Group
Schuh
Group
Johnston
&
Murphy
Group
Licensed
Brands
Corporate
& Other
$ 1,460,253 $ 373,930 $ 300,850 $ 61,859 $
—
—
—
—
$
114,945 $ 4,659 $
—
114,945
—
4,659
17,702 $
—
17,702
(698 ) $
—
(39,916 ) $
(13,374 )
(698 )
(53,290 )
—
—
—
—
—
—
—
—
—
—
—
—
395
(3,339 )
2,061
174 $
—
174 $
Consolidated
2,197,066
—
2,197,066
96,692
(13,374 )
83,318
395
(3,339 )
2,061
$
$
114,945
$ 4,659
$
17,702
$
(698 ) $
(54,173 ) $
82,435
908,312 $ 363,205 $ 197,670 $ 63,385 $ 147,906 $
2,235
6,091
29,122
989
5,540
17,920
11,466
4,890
660
428
1,680,478
49,574
29,767
(1)Asset Impairments and other includes an $11.5 million pension settlement expense and a $3.1 million charge for asset impairments,
of which $1.2 million is in the Johnston & Murphy Group, $1.2 million is in the Schuh Group and $0.7 million is in the Journeys
Group, partially offset by a $(0.6) million gain on the sale of the Lids Sports Group headquarters building, a $(0.4) million gain for
lease terminations and a $(0.2) million gain related to Hurricane Maria.
(2)Of the Company's $973.4 million of long-lived assets, $174.4 million and $46.2 million relate to long-lived assets in the United
Kingdom and Canada, respectively.
90
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 15
Business Segment Information, Continued
Fiscal 2019
(In thousands)
Sales
Intercompany sales
Net sales to external customers
Segment operating income (loss)
Asset impairments and other(1)
Operating income
Loss on early retirement of debt
Other components of net periodic
benefit cost
Interest expense
Interest income
Earnings from continuing
operations before income taxes
Total assets(2)
Depreciation and amortization(3)
Capital expenditures(4)
Johnston
&
Murphy
Group
Journeys
Group
Schuh
Group
$ 1,419,993 $ 382,591 $ 313,134 $
—
$ 1,419,993 $ 382,591 $ 313,134 $
—
—
$
100,799
$
3,765
$ 20,385
Licensed
Brands
Corporate
& Other
72,576 $
(12 )
72,564 $
Consolidated
2,188,565
(12 )
2,188,553
271 $
—
271 $
—
100,799
—
—
3,765
—
$
—
20,385
—
(488 ) $
—
(488 )
—
(39,481 ) $
(3,163 )
(42,644 )
(597 )
—
—
—
—
—
—
—
—
—
—
—
—
380
(4,115 )
774
$
$
$
$ 20,385
100,799
$
3,765
425,842 $ 211,983 $ 128,525 $
6,517
14,193
28,121
6,526
7,226
26,114
(488 ) $
(46,202 ) $
24,004 $ 390,727 $
2,693
1,752
637
162
84,980
(3,163 )
81,817
(597 )
380
(4,115 )
774
78,259
1,181,081
52,161
41,780
(1)Asset Impairments and other includes a $4.2 million charge for asset impairments, of which $2.4 million is in the Schuh Group, $1.6
million is in the Journeys Group and $0.2 million is in the Johnston & Murphy Group, a $0.3 million charge for legal and other
matters and a $0.1 million charge for hurricane losses, partially offset by a $(1.4) million gain related to Hurricane Maria.
(2) Of our $277.4 million of long-lived assets, $44.6 million and $12.8 million relate to long-lived assets in the United Kingdom and
Canada, respectively.
(3)Excludes $24.8 million of depreciation and amortization related to Lids Sports Group. This amount is included in depreciation and
amortization in our Consolidated Statements of Cash Flows as we did not segregate cash flows related to discontinued operations.
(4)Excludes $15.4 million of capital expenditures related to Lids Sports Group. This amount is included in capital expenditures in our
Consolidated Statements of Cash Flows as we did not segregate cash flows related to discontinued operations.
91
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 15
Business Segment Information, Continued
Fiscal 2018
(In thousands)
Journeys
Group
Schuh
Group
Johnston
&
Murphy
Group
Licensed
Brands
Corporate
& Other
Sales
Intercompany sales
(3 )
Net sales to external customers $ 1,329,460 $ 403,698 $ 304,160 $ 89,809 $
$ 1,329,460 $ 403,698 $ 304,160 $ 89,812 $
—
—
—
Segment operating income (loss) $
Asset impairments and other(1)
Operating income
Other components of net periodic
benefit cost
Interest expense
Interest income
Earnings from continuing
operations before income taxes $
Total assets ongoing operations
$
Assets from discontinued
operations
Total assets(2)
74,114 $ 20,104 $ 19,367 $
—
20,104
—
19,367
—
74,114
—
—
—
—
—
—
—
—
—
(299 ) $
—
(299 )
—
—
—
$ 20,104
74,114
(44,297 ) $
443,066 $ 239,479 $ 127,178 $ 32,331 $ 156,919 $
$ 19,367
(299 ) $
$
420 $
—
420 $
(31,141 ) $
(7,773 )
(38,914 )
29
(5,420 )
8
Consolidated
2,127,550
(3 )
2,127,547
82,145
(7,773 )
74,372
29
(5,420 )
8
68,989
998,973
316,380
1,315,353
51,533
98,609
Depreciation and amortization(3)
Capital expenditures(4)
26,490
79,532
13,769
10,968
6,418
6,163
688
421
4,168
1,525
(1)Asset Impairments and other includes a $5.2 million charge for a licensing termination expense related to Licensed Brands Group
and a $1.7 million charge for asset impairments, of which $1.0 million is in the Schuh Group and $0.7 million is in the Journeys
Group, and a $0.9 million charge for hurricane losses.
(2)Total assets for the Schuh Group and Journeys Group include $89.9 million and $10.4 million of goodwill, respectively. Goodwill
for Schuh Group and Journeys Group increased $10.1 million and $0.6 million, respectively, from January 28, 2017 due to foreign
currency translation adjustments. Of our $298.5 million of long-lived assets, $55.2 million and $14.8 million relate to long-lived
assets in the United Kingdom and Canada, respectively.
(3)Excludes $26.8 million of depreciation and amortization related to Lids Sports Group. This amount is included in depreciation and
amortization in our Consolidated Statements of Cash Flows as we did not segregate cash flows related to discontinued operations.
(4)Excludes $29.2 million of capital expenditures related to Lids Sports Group. This amount is included in capital expenditures in our
Consolidated Statements of Cash Flows as we did not segregate cash flows related to discontinued operations.
92
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 16
Discontinued Operations
On December 14, 2018, we entered into a definitive agreement for the sale of Lids Sports Group to FanzzLids Holdings,
LLC (the "Purchaser"), a holding company controlled and operated by affiliates of Ames Watson Capital, LLC. The sale
was completed on February 2, 2019 for $93.8 million cash which consisted of a sales price of $100.0 million and
working capital adjustments of $6.2 million. Because the effective date of closing was a Saturday and the cash proceeds
were not received by us until February 4, 2019, the purchase price is reflected in accounts receivable at February 2, 2019.
We provided various transition services to the Purchaser for a period of up to six months under a separate agreement
after the closing.
During the fourth quarter of Fiscal 2019, we recorded a loss on the sale of Lids Sports Group of $98.3 million, net of tax,
on the sale of these assets, representing the sales price less the value of the Lids Sports Group assets sold and other
miscellaneous charges, including divestiture transaction costs, offset by a tax benefit on the loss. Included in the loss on
the sale is a $48.7 million write-off of trademarks. The tax benefit associated with discontinued operations differs from
the effective rate due to the mix of earnings and loss in the various jurisdictions, the impact of permanent items and other
factors.
As a result of the sale, we met the requirements of ASC 360 to report the results of Lids Sports Group as discontinued
operations. We have presented operating results of Lids Sports Group and the loss on the sale of Lids Sports Group in
loss from discontinued operations, net in our Consolidated Statements of Operations for Fiscal 2019 and 2018. Certain
corporate overhead costs and other allocated costs previously allocated to the Lids Sports Group business for segment
reporting purposes did not qualify for classification within discontinued operations and have been reallocated to
continuing operations whereas bank fees and certain legal fees related to the Lids Sports Group business segment
previously excluded from segment earnings were reclassified to discontinued operations. The costs of the Lids Sports
Group headquarters building, which was not included in the sale, was reclassified to corporate and other in segment
earnings. In addition, the third quarter Fiscal 2018 goodwill impairment charge of $182.2 million and the third quarter
Fiscal 2019 trademark impairment charge of $5.7 million related to the Lids Sports Group business segment, that were
both previously excluded from the calculation of segment earnings, were reclassified to discontinued operations.
As part of the Lids Sports Group sales transaction, the Purchaser has agreed to indemnify and hold us harmless in
connection with continuing obligations and any guarantees of ours in place as of February 2, 2019 in respect of post-
closing or assumed liabilities or obligations of the Lids Sports Group business. The Purchaser has agreed to use
commercially reasonable efforts to have any guarantees by, or continuing obligations of, the Company released.
However, we are contingently liable in the event of a breach by the Purchaser of any such obligation to a third-party. In
addition, we are a guarantor for 36 Lids Sports Group leases with lease expirations through October of 2027 and
estimated maximum future payments totaling $20.6 million as of February 1, 2020. We do not believe the fair value of
the guarantees is material to our Consolidated Financial Statements.
93
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 16
Discontinued Operations, Continued
Components of amounts reflected in loss from discontinued operations, net of tax on the Consolidated Statements of
Operations for the years ended February 2, 2019 and February 3, 2018 are as follows (in thousands):
Net sales
Cost of sales
Selling and administrative expenses
Goodwill and trademark impairment
Asset impairments and other, net
Loss on sale of Lids Sports Group
Other components of net periodic benefit cost
Provision for discontinued operations(1)
Loss from discontinued operations before taxes
Income tax benefit
$
Fiscal Year
2019
723,125 $
348,038
370,480
5,736
2,394
(126,321 )
(23 )
(743 )
2018
779,469
374,730
391,982
182,211
1,068
—
(128 )
(552 )
(130,610 )
(171,202 )
(27,456 )
(22,655 )
Loss from discontinued operations, net of tax
$
(103,154 ) $
(148,547 )
(1) Expenses primarily for anticipated costs of environmental remedial alternatives related to former facilities operated by us (see Note 14).
The cash flows related to discontinued operations have not been segregated, and are included in our Consolidated
Statements of Cash Flows. The following table summarizes depreciation and amortization, capital expenditures and the
significant operating noncash items from discontinued operations for each period presented:
(In thousands)
Depreciation and amortization
Capital expenditures
Impairment of intangible assets
Impairment of long-lived assets
Fiscal Year
$
2019
2018
24,778 $
15,450
5,736
1,670
26,793
29,244
182,211
1,007
94
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 17
Quarterly Financial Information (Unaudited)
(In thousands,
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
Fiscal Year
except per share
amounts)
Net sales
Gross margin
Earnings from
continuing
operations before
income taxes
Earnings (loss)
from continuing
operations
Net earnings
(loss)
Diluted earnings
(loss) per
common share:
Continuing
operations
Net earnings
(loss)
2020
2019
2020
2019
$ 495,651 $ 486,219
238,006
244,908
$ 486,573 $ 487,015
231,469
236,533
2020
$ 537,263
264,202
2019
$ 539,828
261,918
2020
$ 677,579
317,472
2019
$ 675,491
315,663
2020
2019
$ 2,197,066 $ 2,188,553
1,063,115 1,047,056
9,336
(1)
2,692
(2)
2,708
(4)
1
25,433
(5)
25,580
44,958
(7)
49,986
(8)
82,435
78,259
6,470
6,346
1,856
(2,331 ) (3)
0.36
0.10
0.36
(0.12 )
793
577
0.05
0.04
(25 )
(15 )
0.00
0.00
18,979
19,694
35,515
29,699
61,757
51,224
18,899
(6)
14,387
35,562
(63,971 ) (9)
61,384
(51,930 )
1.31
1.30
1.00
0.73
2.49
2.49
1.53
3.94
2.63
(3.29 )
3.92
(2.66 )
(1)Includes a net asset impairment and other gain of $(0.7) million (see Note 4).
(2)Includes a net asset impairment and other charge of $1.1 million (see Note 4).
(3)Includes a loss of $4.2 million, net of tax, from discontinued operations (see Note 16).
(4)Includes a net asset impairment and other charge of $1.8 million (see Note 4).
(5)Includes a net asset impairment and other charge of $0.8 million (see Note 4).
(6)Includes a loss of $5.3 million, net of tax, from discontinued operations (see Note 16).
(7)Includes a net asset impairment and other charge of $11.5 million (see Note 4).
(8)Includes a net asset impairment and other charge of $2.1 million (see Note 4) and a loss on early retirement of debt of $0.6 million
(see Note 7).
(9)Includes a loss of $93.7 million, net of tax, from discontinued operations (see Note 16).
95
Note 18
Subsequent Events
On February 10, 2020, we announced plans for our new corporate headquarters in Nashville, Tennessee. We entered into
a lease agreement for approximately 199,000 square feet of office space which will replace our current corporate
headquarters office lease. The term of the lease is 15 years, with two options to extend for an additional period of five
years each.
In March 2020, the World Health Organization declared the outbreak of COVID-19 as a pandemic, which continues to
spread throughout the United States. As a result, we temporarily closed our North American retail stores on March 18,
2020, and on March 23, 2020, we closed our stores in the United Kingdom and Ireland. On March 26, 2020, our UK e-
commerce business was temporarily closed. These temporary closures will have a negative impact to our sales. While
the disruption is currently expected to be temporary, there is uncertainty around the duration. We will continue to
evaluate the timing of reopening our stores and our UK e-commerce operations until such time as the stores can be
opened safely. Therefore, while we expect this matter to negatively impact our business, results of operations, cash
flows and financial position, the related financial impact cannot be reasonably estimated at this time.
On March 19, 2020, Schuh Limited ("Schuh") entered into an Amendment and Restatement Agreement (the "U.K. A&R
Agreement") with Lloyds Bank which amended and restated the Amendment and Restatement Agreement dated April
26, 2017. The U.K. A&R Agreement includes only a Facility C revolving credit agreement of £19.0 million, bears
interest at 2.2% per annum and expires in September 2020. The U.K. A&R Agreement contains certain covenants at the
Schuh level, including a minimum interest coverage covenant of 4.50x and a maximum leverage covenant of 1.75x. The
U.K. A&R Agreement is secured by a pledge of all the assets of Schuh and Schuh (ROI) Limited. Pursuant to a
Guarantee in favor of Lloyds, Genesco Inc. has guaranteed the obligations of Schuh under the U.K. A&R Agreement on
an unsecured basis.
On March 19, 2020, we borrowed $150.0 million under our Credit Facility and we have subsequently borrowed another
$34.3 million. We did this as a precautionary measure to ensure funds are available to meet our obligations for a
substantial period of time in response to the COVID-19 outbreak that caused public health officials to recommend
precautions that would mitigate the spread of the virus, including warning against congregating in heavily populated
areas such as malls and shopping centers. As of April 1, 2020, our total remaining available liquidity under our Credit
Facility was approximately $50.0 million.
In addition, as of March 24, 2020, we have borrowed £19.0 million under the U.K. A&R Agreement as a precautionary
measure to ensure funds are available to meet our obligations in the UK for a substantial period of time in response to
the COVID-19 outbreak.
On March 27, 2020, in response to the current business environment as impacted by COVID-19, we announced that we
were taking several precautionary measures and adjusting our operational needs, including a significant reduction of
expense, capital and planned inventory receipts. As part of these measures we made the decision to temporarily reduce
compensation of certain members of senior management and the Board of Directors. In addition, we have furloughed all
of our full-time store employees in North America and our store and distribution center employees in the United
Kingdom.
As a result of the economic and business impact of COVID-19, we may be required to revise certain accounting
estimates and judgments such as, but not limited to, those related to the valuation of goodwill, long-lived assets and
deferred tax assets, which could have a material adverse effect on our financial position and results of operations.
96
ITEM 9, CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A, CONTROLS AND PROCEDURES
Evaluation of disclosure controls and procedures.
We have established disclosure controls and procedures to ensure that material information relating to us, including our
consolidated subsidiaries, is made known to the officers who certify our financial reports and to other members of senior
management and Board of Directors.
Based on their evaluation as of February 1, 2020, the principal executive officer and principal financial officer of the
Company have concluded that our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), were effective to ensure that the information
required to be disclosed by us in the reports that we file or submit under the Exchange Act is (i) recorded, processed,
summarized and reported, within the time periods specified in the SEC’s rules and forms, and (ii) accumulated and
communicated to our management, including the principal executive and principal financial officers, or persons
performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.
Management’s annual report on internal control over financial reporting.
Management of the Company is responsible for establishing and maintaining effective internal control over financial
reporting as defined in Rule 13a-15(f) under the Exchange Act. Our internal control over financial reporting is a process
designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial
statement preparation and presentation.
Management assessed the effectiveness of our internal control over financial reporting as of February 1, 2020. In
making this assessment, management used the criteria set forth in Internal Control – Integrated Framework (2013)
drafted by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this
assessment, management believes that, as of February 1, 2020, our internal control over financial reporting was effective
based on those criteria.
Ernst & Young LLP, the independent registered public accounting firm who also audited our Consolidated Financial
Statements, has issued an attestation report on the Company’s effectiveness of internal control over financial reporting
which is included herein. The report by Ernst & Young LLP is included in Item 8.
Changes in internal control over financial reporting.
There were no changes in our internal control over financial reporting that occurred during our last fiscal quarter that
have materially affected or are reasonable likely to materially affect our internal control over financial reporting.
ITEM 9B, OTHER INFORMATION
Not applicable.
97
PART III
ITEM 10, DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Certain information required by this item is incorporated herein by reference to the sections entitled “Election of
Directors,” “Corporate Governance” and “Delinquent Section 16(a) Reports” in our definitive proxy statement for our
annual meeting of shareholders to be held June 25, 2020, to be filed with the Securities and Exchange Commission.
Pursuant to General Instruction G(3), certain information concerning our executive officers appears under Part I, Item
4A, “Executive Officers of the Registrant” in this report.
We have a code of ethics (the “Code of Ethics”) that applies to all of our directors, officers (including our chief executive
officer, chief financial officer and chief accounting officer) and employees. We have made the Code of Ethics available
and intend to post any legally required amendments to, or waivers of, such Code of Ethics on our website at
http://www.genesco.com. Our website address is provided as an inactive textual reference only. The information
provided on our website is not a part of this report, and therefore is not incorporated herein by reference.
ITEM 11, EXECUTIVE COMPENSATION
The information required by this item is incorporated herein by reference to the sections entitled “Director
Compensation,” “Compensation Committee Report” and “Executive Compensation” in our definitive proxy statement
for our annual meeting of shareholders to be held June 25, 2020, to be filed with the Securities and Exchange
Commission.
ITEM 12, SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
Certain information required by this item is incorporated herein by reference to the section entitled “Security Ownership
of Officers, Directors and Principal Shareholders” in our definitive proxy statement for our annual meeting of
shareholders to be held June 25, 2020, to be filed with the Securities and Exchange Commission.
The following table provides certain information as of February 1, 2020 with respect to our equity compensation plans:
EQUITY COMPENSATION PLAN INFORMATION*
Plan Category
Equity compensation plans approved by security holders
Equity compensation plans not approved by security holders
Total
(a)
Number of
securities
to be issued
upon exercise of
outstanding options,
warrants and
rights(1)
(b)
Weighted-average
exercise price of
outstanding
options, warrants
and rights
1,800 $
—
1,800 $
—
—
—
(c)
Number of securities
remaining available for
future issuance under equity
compensation plans
(excluding securities
reflected in column (a)) (2)
951,120
—
951,120
(1) Restricted stock units issued to certain employees at no cost.
(2) Such shares may be issued as restricted shares or other forms of stock-based compensation pursuant to our stock incentive plans.
*
For additional information concerning our equity compensation plans, see the discussion in Note 13 Share-Based
Compensation Plans.
98
ITEM 13, CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this item is incorporated herein by reference to the section entitled “Election of Directors”
in our definitive proxy statement for our annual meeting of shareholders to be held June 25, 2020, to be filed with the
Securities and Exchange Commission.
ITEM 14, PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by this item is incorporated herein by reference to the section entitled “Audit Matters” in our
definitive proxy statement for our annual meeting of shareholders to be held June 25, 2020, to be filed with the
Securities and Exchange Commission.
99
PART IV
ITEM 15, EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Financial Statements
The following consolidated financial statements of Genesco Inc. and Subsidiaries are filed as part of this report under
Item 8, Financial Statements and Supplementary Data
Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets, February 1, 2020 and February 2, 2019
Consolidated Statements of Operations, each of the three fiscal years ended 2020, 2019 and 2018
Consolidated Statements of Comprehensive Income, each of the three fiscal years ended 2020, 2019 and 2018
Consolidated Statements of Cash Flows, each of the three fiscal years ended 2020, 2019 and 2018
Consolidated Statements of Equity, each of the three fiscal years ended 2020, 2019 and 2018
Notes to Consolidated Financial Statements
Financial Statement Schedules
Schedule 2 — Valuation and Qualifying Accounts, each of the three fiscal years ended 2020, 2019 and 2018
All other schedules are omitted because the required information is either not applicable or is presented in the financial
statements or related notes. These schedules begin on page 106.
Exhibits
(2)
a.
b.
a.
b.
a.
b.
a.
(3)
(4)
(10)
Purchase Agreement dated December 14, 2018, among Hat World, Inc., GCO Canada Inc.,
Flagg Bros. of Puerto Rico, Inc., Hat World Corporation, Hat World Services Co., Inc., LSG
Guam, Inc., Genesco Inc., Fanzzlids Holding, LLC, Fanatics, Inc. and Fanzz Holding, Inc.
Incorporated by reference to Exhibit 2.1 to the current report on Form 8-K file December 14,
2018 (File No. 1-3083).*
Asset Purchase Agreement dated December 18, 2019, by and among Genesco Brands NY,
LLC, Togast LLC, Togast Direct, LLC, TGB Design, LLC, Quanzhou TGB Footwear Co. Ltd
and Anthony LoConte. Incorporated by reference to Exhibit 2.1 to the current report on Form
8-K filed December 18, 2019 (File No. 1-3083).
Amended and Restated Bylaws of Genesco Inc. Incorporated by reference to Exhibit 99.2 to
the current report on Form 8-K filed November 12, 2015 (File No. 1-3083).
Restated Charter of Genesco Inc., as amended. Incorporated by reference to Exhibit 1 to the
Genesco Inc. Registration Statement on Form 8-A/A filed with the SEC on May 1, 2003 (File
No.1-3083).
Form of Certificate for the Common Stock. Incorporated by reference to Exhibit 3 to the
Genesco Inc. Registration Statement on Form 8-A/A filed with the SEC on May 1, 2003 (File
No.1-3083).
Description of Securities.
Cooperation Agreement dated April 24, 2018, among Genesco Inc., Legion Partners Asset
Management, LLC, 4010 Capital, LLC and each of the persons listed on the signature page
thereto. Incorporated by reference to Exhibit 10.1 to the current report on Form 8-K filed
April 25, 2018 (File No. 1-3083).
100
b.
c.
d.
e.
f.
g.
h.
i.
j.
k.
l.
m.
n.
o.
p.
q.
r.
s.
Fourth Amended and Restated Credit Agreement, dated as of January 31, 2018, by and among
Genesco Inc., certain subsidiaries of Genesco Inc. party thereto, as other Other Domestic
Borrowers, GCO Canada Inc., Genesco (UK) Limited, the Lenders party thereto and Bank of
America, N.A., as Agent. Incorporated by reference to Exhibit 10.1 to the current report on
Form 8-K filed February 3, 2018.
First Amendment to Fourth Amended and Restated Credit Agreement, dated as of February 1,
2019, by and among Genesco Inc., certain subsidiaries of Genesco Inc. party thereto, as other
Other Domestic Borrowers, GCO Canada Inc., Genesco (UK) Limited, the Lender party
thereto and Bank of America, N.A., as Agent. Incorporated by reference to Exhibit 10.1 to the
current report on Form 8-K filed February 5, 2019 (File No. 1-3083).
Amendment and Restatement Agreement, dated March 19, 2020, between Schuh Limited, as
Parent, and others as Borrowers and Guarantors and Lloyds Bank PLC, as Arranger, Agent
and Security Trustee. Incorporated by reference to Exhibit 10.1 to the current report on Form
8-K filed March 24, 2020 (File No. 1-3083).
Form of Split-Dollar Insurance Agreement with Executive Officers. Incorporated by reference
to Exhibit (10)a to the Company’s Annual Report on Form 10-K for the fiscal year ended
February 1, 1997 (File No.1-3083).
Genesco Inc. 2005 Equity Incentive Plan Amended and Restated as of October 24, 2007.
Incorporated by reference to Exhibit (10)d to the Company’s Annual Report on Form 10-K for
the fiscal year ended February 2, 2008 (File No.1-3083).
Genesco Inc. Second Amended and Restated 2009 Equity Incentive Plan. Incorporated by
reference to Exhibit 10.1 to the Company’s current report on Form 8-K, filed June 28, 2016
(File No. 1-3083)
Genesco Inc. Third Amended and Restated EVA Incentive Compensation Plan.
Form of Incentive Stock Option Agreement. Incorporated by reference to Exhibit (10)c to the
Company’s Quarterly Report on Form 10-Q for the quarter ended October 29, 2005 (File
No.1-3083).
Form of Non-Qualified Stock Option Agreement. Incorporated by reference to Exhibit (10)d
to the Company’s Quarterly Report on Form 10-Q for the quarter ended October 29, 2005
(File No.1-3083).
Form of Restricted Share Award Agreement for Executive Officers. Incorporated by reference
to Exhibit (10)e to the Company’s Quarterly Report on Form 10-Q for the quarter ended
October 29, 2005 (File No.1-3083).
Form of Restricted Share Award Agreement for Officers and Employees. Incorporated by
reference to Exhibit (10)f to the Company’s Quarterly Report on Form 10-Q for the quarter
ended October 29, 2005 (File No.1-3083).
Form of Restricted Share Award Agreement. Incorporated by reference to Exhibit (10)a to the
Company’s Quarterly Report on Form 10-Q for the quarter ended August 1, 2009 (File No. 1-
3083).
Form of Indemnification Agreement For Directors. Incorporated by reference to Exhibit (10)m
to the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 1993
(File No.1-3083).
Form of Non-Executive Director Indemnification Agreement. Incorporated by reference to
Exhibit (10.1) to the current report on Form 8-K filed November 3, 2008 (File No. 1-3083).
Form of Officer Indemnification Agreement. Incorporated by reference to Exhibit (10.2) to the
Company’s Quarterly Report on Form 10-Q for the quarter ended November 1, 2008 (File
No.1-3083).
Form of Employment Protection Agreement between the Company and certain executive
officers dated as of February 26, 1997. Incorporated by reference to Exhibit (10)p to the
Company’s Annual Report on Form 10-K for the fiscal year ended February 1, 1997 (File
No.1-3083).
First Amendment to Form of Employment Protection Agreement. Incorporated by reference to
Exhibit (10)s to the Company’s Annual Report on Form 10-K for the fiscal year ended
January 30, 2010 (File No.1-3083).
Form of Employment Protection Agreement between the Company and certain executive
officers dated as of October 30, 2019. Incorporated by reference to Exhibit 10.1 to the current
report on Form 8-K filed October 31, 2019 (File No. 1-3083).
101
t.
u.
v.
w.
x.
y.
z.
Genesco Inc. Deferred Income Plan dated as of July 1, 2000. Incorporated by reference to
Exhibit (10)p to the Company’s Annual Report on Form 10-K for the fiscal year ended
January 29, 2005. Amended and Restated Deferred Income Plan dated August 22, 2007.
Incorporated by reference to Exhibit (10)r to the Company’s Annual Report on Form 10-K for
the fiscal year ended February 2, 2008 (File No.1-3083).
The Schuh Group Limited 2015 Management Bonus Scheme. Incorporated by reference to
Exhibit (10)a to the Company’s Quarterly Report on Form 10-Q for the quarter ended July 30,
2011 (File No.1-3083).
Jon Caplan Consulting Agreement dated February 1, 2019. Incorporated by reference to
Exhibit (10) aa to the Company's Annual Report on Form 10-K for the fiscal year ended
February 2, 2019 (File No. 1-3083).
Basic Form of Exchange Agreement (Restricted Stock). Incorporated by reference to Exhibit
10.1 to the current report on Form 8-K filed April 29, 2009 (File No. 1-3083).
Basic Form of Exchange Agreement (Unrestricted Stock). Incorporated by reference to
Exhibit 10.2 to the current report on Form 8-K filed April 29, 2009 (File No. 1-3083).
Form of Conversion Agreement. Incorporated by reference to Exhibit 10.1 to the current
report on Form 8-K filed November 2, 2009 (File No. 1-3083).
Form of Conversion Agreement. Incorporated by reference to Exhibit 10.1 to the current
report on Form 8-K filed November 6, 2009 (File No. 1-3083).
aa. Transition Agreement, dated as of October 31, 2019, by and between the Company and Robert
J. Dennis. Incorporated by reference to Exhibit 10.1 to the current report on Form 8-K filed
November 4, 2019 (File No. 1-3083).
bb. Terms and Conditions to Trademark License Agreement dated December 17, 2019, between
Levi Strauss & Co. and Genesco Inc.*
cc. Schedule to Trademark License Agreement (Levi’s® Brand) dated December 17, 2019,
between Levi Strauss & Co. and Genesco Inc.*
dd. Schedule to Trademark License Agreement (Dockers® Brand) dated December 17, 2019,
between Levi Strauss & Co. and Genesco Inc.*
ee. Amendment No. 1 to Trademark License Agreement, dated December 17, 2019, between Levi
(21)
(23)
(24)
(31.1)
(31.2)
(32.1)
(32.2)
101.INS
101.SCH
101.CAL
101.DEF
101.LAB
101.PRE
104
Strauss & Co. and Genesco Inc.*
Subsidiaries of the Company
Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm included on
page 104.
Power of Attorney
Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.
Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Inline XBRL Instance Document (The instance document does not appear in the Interactive
Data File because its XBRL tags are embedded within the Inline XBRL document.)
Inline XBRL Taxonomy Extension Schema Document
Inline XBRL Taxonomy Extension Calculation Linkbase Document
Inline XBRL Taxonomy Extension Definition Linkbase Document
Inline XBRL Taxonomy Extension Label Linkbase Document
Inline XBRL Taxonomy Extension Presentation Linkbase Document
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
Exhibits (10)e through (10)m, (10)q through (10)v and (10)aa are Management Contracts or Compensatory Plans or
Arrangements required to be filed as Exhibits to this Form 10-K.
* Certain portions of this exhibit have been omitted pursuant to a request for confidential treatment.
102
A copy of any of the above described exhibits will be furnished to the shareholders upon written request, addressed to
Director, Corporate Relations, Genesco Inc., Genesco Park, Room 498, P.O. Box 731, Nashville, Tennessee 37202-0731,
accompanied by a check in the amount of $15.00 payable to Genesco Inc.
ITEM 16, FORM 10-K SUMMARY
None.
103
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the following Registration Statements:
(1) Registration statement (Form S-8 No. 333-08463) of Genesco Inc.,
(2) Registration statement (Form S-8 No. 333-104908) of Genesco Inc.,
(3) Registration statement (Form S-8 No. 333-40249) of Genesco Inc.,
(4) Registration statement (Form S-8 No. 333-128201) of Genesco Inc.,
(5) Registration statement (Form S-8 No. 333-160339) of Genesco Inc.,
(6) Registration statement (Form S-8 No. 333-180463) of Genesco Inc., and
(7) Registration statement (Form S-8 No. 333-218670) of Genesco Inc.
of our reports dated April 1, 2020, with respect to the consolidated financial statements and schedule of Genesco Inc. and
Subsidiaries and the effectiveness of internal control over financial reporting of Genesco Inc. and Subsidiaries included
in this Annual Report (Form 10-K) of Genesco Inc. for the year ended February 1, 2020.
/s/ Ernst & Young LLP
Nashville, Tennessee
April 1, 2020
104
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
GENESCO INC.
By:
/s/Melvin G. Tucker
Melvin G. Tucker
Senior Vice President – Finance and
Chief Financial Officer
Date: April 1, 2020
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities indicated on the 5th day of February, 2020.
/s/Mimi Eckel Vaughn
Mimi Eckel Vaughn
/s/Melvin G. Tucker
Melvin G. Tucker
/s/Brently G. Baxter
Brently G. Baxter
Directors:
Joanna Barsh*
James W. Bradford*
Robert J. Dennis*
Matthew C. Diamond*
*By
/s/Scott E. Becker
Scott E. Becker
Attorney-In-Fact
President, Chief Executive Officer
and a Director
(Principal Executive Officer)
Senior Vice President – Finance and
Chief Financial Officer
(Principal Financial Officer)
Vice President and Chief Accounting Officer
(Principal Accounting Officer)
Marty G. Dickens*
Thurgood Marshall, Jr.*
Kathleen Mason*
Kevin P. McDermott*
105
Genesco Inc.
and Subsidiaries
Financial Statement Schedule
February 1, 2020
106
Genesco Inc.
and Subsidiaries
Valuation and Qualifying Accounts
Schedule 2
Year Ended February 1, 2020
(In thousands)
Allowances deducted from assets in the balance sheet:
Accounts Receivable Allowances
Markdown Allowance (1)
Year Ended February 2, 2019
(In thousands)
Allowances deducted from assets in the balance sheet:
Accounts Receivable Allowances
Markdown Allowance (1)
Year Ended February 3, 2018
Beginning
Balance
Charged
to Profit
and Loss
Additions
(Reductions)
Ending
Balance
$
$
2,894 $
7,019 $
133 $
1,579 $
(87 ) $
(3,039 ) $
2,940
5,559
Beginning
Balance
Charged
to Profit
and Loss
Reductions
Ending
Balance
$
$
4,593 $
6,498 $
40 $
4,297 $
(1,739 ) $
(3,776 ) $
2,894
7,019
(In thousands)
Allowances deducted from assets in the balance sheet:
Accounts Receivable Allowances
Markdown Allowance (1)
Beginning
Balance
Charged
to Profit
and Loss
Reductions
Ending
Balance
$
$
3,073 $
5,416 $
618 $
3,491 $
902 $
(2,409 ) $
4,593
6,498
(1) Reflects adjustment of merchandise inventories to realizable value. Charged to Profit and Loss column represents increases
to the allowance and the Reductions column represents decreases to the allowance based on quarterly assessments of the
allowance.
107
BOARD OF DIRECTORS
Joanna Barsh
Director Emeritus, McKinsey & Company; Independent Consultant
New York, New York
Chairperson of the compensation committee, member of the nominating and governance committee
James W. Bradford
Retired Dean, Owen Graduate School of Management
Vanderbilt University
Nashville, Tennessee
Member of the compensation and nominating and governance committees
Robert J. Dennis
Executive Chairman
Genesco Inc.
Nashville, Tennessee
Matthew C. Diamond
Former Chief Executive Officer
Defy Media, LLC
New York, New York
Chairperson of the nominating and governance committee, member of the compensation committee
Marty G. Dickens
Retired President
AT&T -Tennessee
Nashville, Tennessee
Member of the audit and the nominating and governance committees
Thurgood Marshall, Jr.
Retired Partner
Morgan, Lewis & Bockius LLP
Washington, D.C.
Kathleen Mason
Former President and Chief Executive Officer
Tuesday Morning Corporation
Dallas, Texas
Member of the audit committee
Kevin P. McDermott
Former Partner, KPMG LLP and
Former Chief Audit Executive, Pinnacle Financial Partners, Inc.
Nashville, Tennessee
Chairperson of the audit committee
Mimi E. Vaughn
President and Chief Executive Officer
Genesco Inc.
Nashville, Tennessee
CORPORATE OFFICERS
Mimi E. Vaughn
President and Chief Executive Officer
16 years with Genesco
Scott E. Becker
Senior Vice President, General Counsel, Corporate Secretary
1 year with Genesco
Parag D. Desai
Senior Vice President, Strategy and Shared Services
6 years with Genesco
Daniel E. Ewoldsen
Senior Vice President, President – Johnston & Murphy Group
17 years with Genesco
Mario Gallione
Senior Vice President, President – Journeys Group
41 years with Genesco
Melvin G. Tucker
Senior Vice President, Finance and Chief Financial Officer
1 year with Genesco
Matthew N. Johnson
Vice President, Treasurer
27 years with Genesco
Brently G. Baxter
Vice President, Chief Accounting Officer
1 year with Genesco