Genesco Inc (GCO) 2012 Q4 法說會逐字稿

Good day, everyone, and welcome to the Genesco fourth-quarter fiscal year 2012 conference call.

Just a reminder, today's call is being recorded.

Participants in the call expect to make forward-looking statements.

They reflect the participants' expectations as of today, but the results could differ.

Genesco refers you to this morning's earnings release and to the Company's SEC filings, including the third quarter fiscal year 2012 10-Q, for some of the factors that could cause differences from the expectations reflected in the forward-looking statements made during the call today.

At this time for opening remarks and introductions, I would like to turn the call over to Mr.

Bob Dennis, Chairman, President, and Chief Executive Officer.

Please go ahead.

Good morning and thank you for being with us for our fourth-quarter earnings call.

With me today is Jim Gulmi, our Chief Financial Officer.

As a reminder, Jim's detailed review of the quarterly financials has been posted to our website along with the press release from earlier this morning.

I will begin this call with the few short remarks about the fourth quarter and an outline of the key reorganization we are in the midst of executing, and then I will turn the call over to Jim for a review of the numbers.

Finally, I will return to provide some color on our operating segments before we open the call up for your questions.

Our fourth-quarter performance ended up being much better than we initially anticipated and represents a great way to end what was a very rewarding year for Genesco.

Fourth-quarter sales and earnings ran ahead of plan for almost all of our businesses.

What was really pleasing about the fourth-quarter, and this was also true of the third quarter, was our ability to maintain our consolidated double-digit comp trend from the first half of the year in the face of much stronger comparisons in the back half.

This speaks to the excellent job that our teams are doing to ensure our stores are merchandised well, taking advantage of several positive trends by being the dominant go-to retailer for many key brands and styles.

The sales momentum from the fourth quarter has carried over into the first quarter with comps up 13% in February.

While this is certainly an encouraging start to fiscal 2013, we aren't budgeting this level of growth for the full year.

February has been a variable month in recent years with IRS refunds, the timing of Mardis Gras, and weather all very much in play, so we are careful about reading too much into the trends.

That said, based on current merchandise patterns and the strategic positions of our core retail businesses, we feel confident that we can continue to comp positively despite the tougher comparisons that we created for ourselves over the next four quarters.

Before I turn the call over to Jim, we want to talk you through our strategic restructuring that the Journeys management team is in the midst of executing, which integrates Underground Station into the Journeys business.

As background, Underground has been a difficult business for Genesco ever since a relatively strong fiscal 2006 when it had revenues of roughly $164 million and an operating margin of 6.6%.

The recession hit Underground Station's core demographic especially hard and performance bottomed out in fiscal 2009 when it lost almost $6 million on sales of $111 million.

We addressed the downturn by shutting underperforming stores, renegotiating rents, shortening average lease life, and in select instances converting stores to Journeys.

Store count went from 223 in fiscal 2007 to 137 at our recent year-end.

119 of the locations in the current store base were EBITDA positive on a four-wall basis for the year.

The business sales for the year were about $92 million and operating income was just shy of breakeven.

Several factors have shaped our thinking on how to proceed with Underground Station.

First, Underground Station was already highly integrated with Journeys operationally.

Only the merchants and store supervision were independent functions so the restructuring is less comprehensive than would occur between two truly independent businesses.

Second, over the past several years, fashion within Underground Station's demographic has gone much more mainstream in terms of styles and brands.

Most of what used to be considered core urban looks and brands are much less relevant today.

Consequently, Journeys and Underground Station have become more similarly merchandised than once was the case.

Third, there is pretty heavy real estate overlap between Journeys and Underground Station; about 100 Underground stores are in a mall with a Journeys.

As such, we will seek to maintain a reasonable level of differentiation between the Journeys and Underground Station stores with Underground continuing to target a customer that is a little older.

We believe that there will continue to be enough of a difference in the two stores' merchandise offerings to enable them to coexist in these malls.

However, if we should see cannibalization in particular malls, we will be able to address the problem in most instances because the remaining lease life of the current Underground Station real estate portfolio averages only two years.

At the end of Q4 we began executing a plan that essentially rolls the Underground Station stores into the Journeys organization.

We will now operate the former Underground Station stores as a subset of Journeys under the brand Underground by Journeys.

This is a similar set up to the other siblings within the Journeys group -- Journeys Kidz and Shi By Journeys.

For the few stores and locations that do not overlap with an existing Journeys, we will consider a complete conversion to the core Journeys brand.

The product in the new Underground by Journeys stores will much more resemble a traditional Journeys store but with merchandising tweaks to reflect the mall and store demographics, and as I mentioned a moment ago, aiming for a somewhat older demographic.

This is not unlike our Lids headwear chain which under one retail banner operates stores in a range of demographic environments that are then assorted to reflect the local mix of customer traffic.

We will continue to close underperforming Underground by Journeys locations, of which there are still roughly 20 possibilities based on current rents and current store level performance.

So where are we now?

The store supervision and the merchandising organization have been completely integrated as of February 1.

Some Underground personnel have been rolled into the field in merchandising organizations to support the now larger Journeys revenue base.

Other former Underground Station personnel have been assigned to several new and important initiatives within Journeys, most notably an expanded effort on Journeys.com, a more dedicated focus on the merchandising of Journeys Canada, and a greater focus on merchandising our largest Journeys stores.

We will come back to those initiatives later in the call when we discuss the core Journeys business.

There is more for us to do over the coming year including rebranding the storefronts, converting selects locations to Journeys stores, and adjusting the merchandise mix in the Underground by Journeys stores.

The re-merchandising should start to show up during back-to-school and should be fully implemented by holiday.

This is not really a cost reduction play, nor are we taking a charge.

The integration of personnel is complete.

We will likely go through some targeted clearance of Underground Station inventory, but that is reflected in our guidance.

Finally, as of the current quarter, we will no longer report Underground Station as a separate line of business.

We are excited by the prospect for the combined Journeys/Underground by Journeys business.

We recognize the terrific job done by our Underground Station team over the past several years.

They helped get Underground Station back to where it almost broke even this year and left it well-positioned for this move.

It requires great skill, patience, and commitment to manage a business as challenged as Underground Station has been for the past four years, and our hats are off to the entire team for their accomplishments.

Jim will now take you to the numbers and outline the specifics of our full-year outlook.

Thank you, Bob.

Much of the detailed financial information for the quarter has been posted online so I will only be making a few comments.

The fourth quarter came in better than our updated guidance from early January.

Comp sales were 12% for the quarter and 13% for the full year.

This compared with 9% comps in the fourth quarter last year and a 7% comp for the full year.

This was led by a 14% comp increase for the Journeys group, 13% comp increase for the Lids group, and an 8% comp increase for Johnston & Murphy in the fourth quarter.

For the full year, all three of these business units achieved double-digit comp increases -- 15% for the Journeys group, 12% for the Lids group, and 10% for Johnston & Murphy.

February same-store sales increased 13% and direct sales increased 4% on a comparable basis.

Consolidated net sales for the quarter were $723 million, an increase of 29% over last year.

This includes sales of $100 million from ours Schuh UK acquisition in the second quarter of the year.

Excluding Schuh UK, sales increased 11% for the fourth quarter.

We earned $1.97 per share in the quarter, adjusted as shown on the attachment to the press release, compared to last year's adjusted earnings per share of $1.33 or an increase of 48%.

The adjusted tax rate this year came in lower than expected and represented approximately $0.13 per share of the EPS improvement.

Gross margin for the quarter was 49.4% compared with last year's gross margin of 48.7%.

This is 70 basis points -- this 70 basis point increase was better than expected.

It was due to lower retail markdowns and favorable changes in sales mix in the quarter.

Adjusting for all the items broken out in the press release, we were able to leverage expenses by 60 basis points in the quarter.

Adjusted expenses as a percent of sales improved to 39.1% this year compared to 39.7% last year.

This included increased bonus accruals driven by our stronger performance in the quarter and additional contingent Schuh UK acquisition bonus accruals related to their better-than-expected performance in the fourth quarter.

For the quarter, adjusted operating income increased to $74.5 million, or 10.3% of sales, compared with $51 million, or 9.1% of sales, last year.

For the fiscal year sales were $2.3 billion, an increase of 28% over fiscal 2011.

Adjusting for acquisitions by excluding sales of businesses not owned for the entirety of fiscal years 2011 and 2012, Genesco sales increased 13% for the year.

For the year, on an adjusted basis, we earned $4.09 per share compared with $2.48 last year, an increase of 65%, including the tax rate improvement I mentioned earlier.

For the full year, our adjusted operating margin as a percent of sales was 7% compared with 5.5% last year.

This improvement in operating margin was driven by the leveraging of operating expenses, primarily rent expense, selling salaries, and depreciation, as margin was flat with the previous year.

The strong P&L performance for the year was reflected in the balance sheet and cash flow as well.

We ended the year with $54 million in cash compared with $56 million last year and $41 million in debt.

This debt consisted of $5 million in US borrowings and $36 million of UK debt assumed in connection with the Schuh UK acquisition.

Due to our strong cash flow during the year, we were able to pay down $95 million of debt incurred from the financing of this acquisition.

We also paid about $28 million in cash for the acquisition so it was good to end the year with cash essentially flat with last year.

Free cash flow before acquisition expenditures for the year was $106 million.

Inventories were up 21% year-over-year compared with the sales increase in the fourth quarter of 28%.

We feel year-end inventory was a little lower low, particularly in Journeys, due to the strength of our holiday business, but large product receipts in February have positioned us well for the spring season.

Now I would like to spend a few minutes on our guidance for FY 2013.

On our last conference call we gave an early indication of our forecast for the year.

The preliminary EPS guidance was 12% to 15% increase over this past year.

At that time, our updated guidance for fiscal 2012 was a range from $3.64 to $3.69, which we eventually increased early January to $3.74 to $3.79.

As we reported today, our EPS was stronger than anticipated at $4.09 per share.

Even with this improved performance, we remain comfortable with the 12% to 15% increase year over year in the previous guidance and our updated FY 2013 EPS guidance is therefore $4.58 to $4.70.

Consistent with previous years, this guidance does not include about $1.4 million to $2.5 million pretax, or $0.04 to $0.06 per share after tax in expected non-cash impairments.

This amount compares with last year's non-cash impairments, other legal matters, and network intrusion expenses of $2.7 million pretax, or about $0.07 per share after tax.

In addition, we will continue to exclude the amortization of the Schuh UK acquisition deferred purchase price in our EPS guidance.

This amount in FY 2013 is expected to be approximately $12 million or $0.49 per share.

The following are assumptions we used to develop this guidance.

A comp increase of about 2% to 3%.

This is pretty consistent for all four quarters, although based on February comps the first quarter may be closer to mid-single digits.

Please remember, our comps were steady last year at 14% for each of the first two quarters and 12% for each of the back two quarters.

As Bob mentioned, we are off to a good start with February comps up 13%, though we are obviously not banking on sustaining that level for the first quarter or the full year.

We are also assuming an overall sales increase of about 11% to 12% for the year.

Adjusting for acquisitions by excluding sales of businesses not owned for the entirety of fiscal years 2012 and 2013, Genesco sales are expected to increase about 7% to 8% for the year.

Our guidance assumes a gross margin decrease of about 30 basis points and a positive expense leverage of about 60 basis points.

This results in an operating income improvement of about 30 basis points to 7.3%.

The tax rate assumption is about 37% and the share count assumption for the full year is about 24.3 million shares.

We are also expecting capital expenditures for the year of about $86 million and depreciation will be about $58 million.

We are forecasting 100 new stores and are planning to close about 41 stores.

We expect to end the new year with approximately 2,446 stores, an increase of about 2% over the year that just ended.

We are also forecasting square footage growth of about 4% in the new year.

I want to take a moment to address two particular matters from the perspective of the new annual guidance since the way we are thinking about them may not be obvious to investors.

First, the UK acquisition.

As Bob mentioned already, the performance of Schuh UK exceeded our expectations last year.

The timing of this acquisition at midyear was advantageous for us as Schuh UK earns about 85% with operating income in the last summer months of the year.

The first five months are far less profitable for Schuh UK and this is especially true in the first quarter.

In addition, in FY 2013 we will expense a full 12 months of the Schuh UK contingent acquisition bonus accrual, compared to only seven months in FY 2012.

Due to the timing of this acquisition in FY 2012, which gave us almost 85% of a full year of operating income on a half year of sales combined with a full 12 months of the increased contingent bonus accrual in FY 2013, our guidance does not reflect any pickup in year-over-year operating income for Schuh UK in FY 2013.

This contingent bonus accrual could also increase during the year if Schuh UK continues to exceed our expectations.

Bob also spoke about the integration of the Underground Station stores into the Journeys group.

While we are very excited by the prospects for the combined business, our guidance does not reflect any upside from the combination this fiscal year.

Due to the lead times involved in placing orders and receiving deliveries, we do not anticipate completing the remerchandising of the stores until the holiday selling season.

In the meantime, will be selling off current inventory to make room for the new product and this will have some impact on Underground by Journeys gross margin, especially in the first half.

For these reasons, we do not expect to see a meaningful benefit this fiscal year from the integration of Underground Station and Journeys.

Again, this analysis of both a full year of Schuh UK and the affects of the Underground consolidation is reflected in our updated guidance.

One last point on modeling our performance for FY 2013.

I have made the point in the past few years that we earned about 75% to 80% of our operating income in the back half of the year.

The opportunity for earnings improvement is normally in the back half of the year when we have meaningful sales gains.

In looking at the EPS consensus numbers for FY 2013, it appears to me that the seasonality of the Schuh UK business is not properly reflected.

As I have said before, the first quarter is normally weaker for Schuh UK than for Journeys, while in the second quarter the reverse is true.

In addition, Schuh UK will be impacted by three full months of the contingent bonus accrual in the first quarter which will further impact their performance.

Also, for reasons I mentioned, any possible upside from the Underground Station integration if we were to see it all this year will not kick in [until] the back half of the year, so the first half should not reflect any meaningful benefit from integration.

So the annual earnings will once again be heavily weighted towards the second half.

Now I will turn the call back to Bob.

Thanks, Jim.

Let's now talk about Journeys where not a lot has changed over the past few quarters in terms of what has been driving the group's results.

Current fashion trends continue to benefit the business.

With another strong merchandise selection for spring, we feel good about the group's ability to capture additional market share and, like last year, carry the momentum into back-to-school and the holidays.

Similarly, these same merchandise trends resonated with Shi By Journeys and Journeys Kidz's customers in fiscal 2012 and should continue to fuel improved results for both concepts again this year.

Let me highlight three important initiatives within Journeys for the coming year.

First, we have been very pleased with the performance of our Journeys stores in Canada which at year-end totaled 13.

To take advantage of our current momentum and fill the void we believe exists in this market, we plan to open another 12 Canadian Journeys stores this year.

In addition to unit expansion, we believe there is also an opportunity to increase Canadian store productivity which is one of the new initiatives that the Journeys team has redeployed talent to support.

While there are many similarities between the US and Canada, we have identified enough of a difference between the two markets that we believe we can capture upside by making specific adjustments to the Canadian merchandise offering.

The second initiative involves leveraging the recent strength of the Journeys e-commerce business to introduce a broader merchandise selection and continue to drive growth.

Specifically, we will explore how to expand our assortment with our core vendors for products offered only on our e-commerce site and in our very largest brick-and-mortar footprints.

Of course, given that e-commerce is integrated with all of our stores, the store associates will be able to sell off the site to their in-store traffic increasing consumer choice across the whole chain.

Along with this inventory commitment, we will invest additional funds for driving traffic to Journeys.com.

Finally, the Journeys team is also exploring ways to improve the contribution of the larger Journeys stores opened or expanded over the past few years.

These stores, which number 191, are greater than 2,400 square feet.

There are performing okay on a four-wall basis, but we have the opportunity of taking better advantage of the additional space to introduce new product offerings that should generate even higher productivity in these stores.

And as I mentioned earlier, some of the additional assortments made available on e-commerce might also be appropriate for these stores.

Turning to Schuh, we are very pleased with the acquisition.

The business continues to perform above our expectations despite a challenging retail environment in the UK and the Republic of Ireland.

We continue to find ways to help the Schuh merchants by drawing on the strength of Journeys' relationships with the major vendors.

At year-end there were 64 stand-alone Schuh stores and 14 concessions.

We continue to be bullish about future new store potential and our plans in fiscal 2013 include opening between eight and 11 locations.

Lids Sports Group delivered a very strong fourth-quarter performance.

We believe the current trends driving the hat business are sustainable for now and we remain very excited about the growth opportunities we believe exist for the locker room and clubhouse concepts.

We expect the transition of the upcoming NFL apparel and headwear licenses to Nike and New Era will create long-term opportunities for us.

However, the real big opportunity lies in leveraging the Lids Sports Group's merchandising capabilities to drive higher productivity and better efficiency in the locker room and clubhouse stores we have acquired and additional stores we might acquire or open as we consolidate the category.

As examples, many of these businesses operated without warehouses and, as a result, are often poorly assorted later in the season.

Our buying power is becoming evident as we negotiate a consolidation of the vendor base and most of the Locker Room formats that we acquired had no web presence, so our operating platform provides immediate growth opportunities, in addition to meaningful economies of scale.

Another exciting growth vehicle within the Sports Group is Lids.com.

The Lids merchandising team has made progress evolving the site beyond its original platform selling just hats.

We think we are just starting to unlock the full potential of this distribution channel for our sports business and the Lids teams sees a number of opportunities ahead, including taking advantage of their inventory position to further diversify the merchandise selection available at lids.com and to add more team-specific clubhouse sites.

In fiscal 2012, the total e-commerce business increased 17% driven by Lids.com growth and the addition of clubhouse websites.

With regard to Lids Team Sports, we are making headway integrating the three businesses we acquired over the last several years.

There are still some operational improvements to be made here, but Lids Team Sports is gaining market share and we believe we have a sound strategy in place to further build our leadership position in this large but highly fragmented marketplace.

Now to Johnston & Murphy, which had a strong year in fiscal 2012 as it continued to build its position as a compelling lifestyle brand.

The sustained improvement in the fourth quarter and full year was driven by Johnston & Murphy's growing assortment of casual footwear, women's footwear, and non-footwear collections led by apparel and personal leather goods.

We also experienced a nice pickup in dress shoes sales driven by both fashion trends and an improving economy.

That said, we view the casual and non-footwear opportunity, along with women's, as the real growth drivers going forward in the US.

Internationally, we opened our first door in Canada and are planning to open three more this year.

Our partner in Mexico opened the first Johnston & Murphy store in Mexico City with plans for a second and we recently signed distribution agreements for India and Japan while continuing to seek other opportunities globally.

Finally, Licensed Brands struggled somewhat from a top-line perspective in 2012.

However, the business continued to contribute nicely to our bottom-line thanks to healthy operating margins.

To close, we are very pleased with our overall performance in fiscal 2012 which puts us well on track to achieve our five-year plan of $3.1 billion in sales and a 9% adjusted operating margin by fiscal 2016.

Congratulations and thanks to everyone at Genesco.

The teams at each of our operating divisions has done an outstanding job of driving a very successful year and positioning us for exciting growth in the years to come.

Operator, we are now ready for questions.

(Operator Instructions) Jeff Klinefelter, Piper Jaffray.

Yes, thank you.

Congratulations, everyone at the team, on a fantastic year.

A couple questions.

One maybe just to kick off on the Q1 comp.

No doubt questions about the guidance and your anticipation for more of a mid-single digit comp in Q1.

Can you just give a little bit more context around that?

Is that purely just conservative guidance or is there something in the flow of the quarter from last year that would suggest it decelerates from double digits?

The second part of that comp question would be, if you could remind us, Jim, on kind of the leverage point at this time on occupancy given your lease restructuring you have done in last couple years.

Jeff, we are -- February, as you know, everybody reported pretty good numbers yesterday, those that come out monthly.

A lot of reasons for driving that.

The tax thing is very fuzzy.

It's kind of hard to get your arms around what the release schedule is from the IRS.

We went back and looked at a two-year comp by month.

If you do two-year comps for all of Genesco, February is tied with one other month for the easiest two-year comp we have got so that is the other thing that gives us caution.

And so when we roll forward we think the comps, just the math of it gets a little more challenging.

We are very confident about the assortment, we like the trend we are on.

We just don't think 13% is something we are going to be able to keep up.

We will see.

Jim?

And Jeff on the leverage point and the lease issue in general, we believe that our leverage point, and as you know there are many variables on this, but our leverage point is around 2%.

We last year had -- we in effect touched leases, whether it would be new leases, renewals, or whether they were kick out clauses, about 270 of our leases.

This year we have more leases that are up for renewal and it's about a 335 plus another potential 139 kick out opportunity.

So we have got a lot of opportunities in front of us to renegotiate leases, so we feel very good about our rent expense and ability to continue to leverage there.

Okay, and I believe that 2% has come down over the last couple years, correct?

Yes, it has come down considerably.

It used to be, let's say, around 4% at least.

With everything that is going on in the world -- and really that is more of a total leverage number and we really made a lot of progress in rent as a result of our ability to renew leases.

Depreciation; we have not been spending as much on capital expenditures and also we have made a lot of progress in selling expenses.

We have really done a good job in working with our stores and we are seeing a lot of leverage in selling expenses also.

Okay, that is terrific.

One other follow-up there on the comp.

The comp guidance for the year; at this point is there any change anticipated in the mix of the pricing ASPs versus transactions?

And then just on the NFL license, do you anticipate, based on historic transitions of licensing in this category, that you could see pretty significant acceleration in industry growth?

Bob, it seems to us looking back at the last time this transition, there was very meaningful acceleration in growth overall in the category.

I am just wondering if any of that is considered in the guidance.

Yes, I will do the ASP first.

Jeff, we expect ASPs to be up considerably, especially in the first half as we roll through all the price increases that we are taking.

But as you know, we don't budget on that basis.

We budget to a dollar amount and so we don't really sit back and try to figure out how much we are going to get from ASPs.

So that is something that we will see as we roll forward, but we do expect that will be part of the equation.

Therefore, we are obviously budgeting units to be less aggressive based on the ASP increase.

On the NFL, we are very excited about the transition.

Look, Reebok did a very nice job.

They were great partners, but change for the sports fan is always a pretty good thing.

In the headwear category, with New Era involved A) they do headwear very well and B) the brand means a lot.

It's the most meaningful brand in the headwear category and so that will, we think, be a big positive.

We are hopeful that we can take the NFL with our partnership with New Era to be more than just a seasonal event for the in-season product.

As you know, we do baseball business 12 months and we would love to see working with New Era if we can stretch out the NFL.

And then with Nike on jerseys, fresh and new is always good.

It gives the fan a reason to renew what they have got in their closet.

It's fairly natural when someone like Reebok is looking at the end of their contract that they are going to invest a little less.

No criticism of Reebok, it's just a natural behavior, and so we are expecting a lot of newness on a relative basis to show up in the next year or two from Nike.

So we are very excited by what that means.

Now that said, we haven't gotten crazy with the comps.

So the guidance is based on sort of morbid normalized comp and as the NFL really does make a big splash that is probably a source of upside.

Thank you.

Sam Poser, Sterne Agee.

Hi, how are you?

It's [Ben Shamsian] for Sam Poser.

Just had a question on the 53rd week.

Does your guidance include that?

Yes, we did.

Our estimate of the impact of the third week is in the range of around $0.03 to $0.04, and that is included in the numbers.

Okay and what is that from a revenue standpoint?

Excuse me?

That is an earnings standpoint.

From a revenue standpoint?

What do you mean?

We expect it from an EPS standpoint to affect it $0.03 to $0.04 and, yes, there is additional revenue, but there is also additional fixed costs in that additional week.

So the impact, we believe, as a result of all those factors is about $0.03 to $0.04.

Got it.

Thank you.

Robin Murchison, SunTrust.

Hi, good morning.

Congratulations.

Three questions here.

One, I just wanted to get a little clarity on the Lids e-com down 3%.

Anything behind that?

Secondly, wanted to get you to discuss product costs in the new year, particularly leather.

Obviously in light of Dockers commentary as well.

And then lastly, Jim, if you could just give us a little more color on where you are with the leases.

I mean you have got 335 stores up for renewal this year from 270 last year.

Are you seeing the same kind of -- what kind of allowances are you getting; directionally how that looks?

Thanks.

Well, on product costs the bigger driver right now for us is not as much leather costs as it is the labor and factory availability in China for our businesses.

Again, most of what we do, Robin, as you know, is we are a branded business.

So putting aside Johnston & Murphy and Dockers for the moment, we take the price increase from our suppliers and we pass it on with usually a target margin that is the same as it was previously.

So we don't have a lot of exposure there.

Then Johnston & Murphy and Dockers obviously they are in the situation where they are trying to time some price increases that marry to price increases all the way through the channel.

So they are actually on the other side of that process.

So we are going to be -- we will see what happens as the year goes on.

Obviously, the pressure -- upward pressure on prices is there.

On leases, we do have a good year for addressing a lot of leases.

Other than the A malls which do have -- are playing with a pretty good hand, we think we have pretty good leverage.

And so we expect continuation of the success we have had in the past of at a minimum moderating rent increases and certainly down at the very bottom end of the mall universe continuing to capture some improvement.

Okay, and Lids e-commerce?

Lids e-commerce, I would have to go back and look at it.

It's a short month, and remember we report e-commerce based on shipments not on bookings.

I would have to go back and look at one month; I wouldn't make a lot out of it.

Okay, great.

Congratulations, thank you.

(Operator Instructions) Steve Marotta, C.L.

King & Associates.

Good morning, guys.

Congrats.

You mentioned, Jim, that there is no expected benefit from Underground Station and Journeys integration in fiscal 2013.

What would you expect the aggregate benefit would be in either 2014 or just in general from an ongoing basis?

Steve, I will start on that one; we will see.

I mean there are a lot of wild card factors in how this will evolve -- how well the assortment resonates within Underground, whether we are exposed to any level of cannibalization with the Journeys stores that are in a lot of those.

So we are optimistic but we are not really going to go much further than saying it's in our guidance for this year.

Beyond that we will see what happens.

We are hoping for upside.

I don't want to quantify it.

Jim, any --?

Exactly what I would have said.

Okay.

Bob, a question for you.

We have spoken in the past regarding Lids comps not only benefiting from a strong fashion cycle but also a bit from a decreasing supply and other options for potential buyers.

Can you talk a little bit about how you see that currently playing out, as well as for the balance of the year?

Well, the fashion cycle has obviously been a big friend of ours and we all know that Snapbacks are an important piece of that.

We don't know how long Snapback plays out.

We are still doing extremely well in the category.

Just a couple of notes on that.

One, our exposure to it is not that high in the sense that as a non-fitted hat and as a very hot product it actually represents a much smaller percent of our inventory than it does of our sales.

And so in terms of having to manage inventory as a very hot trend winds down, we think that is going to be much easier than in other cycles.

The other thing about Snapbacks is as it became important we looked at what the kids weren't buying as they went into Snapbacks.

And it was heavily fitted New Era product from a variety of major league sports, mostly baseball, and then also from action sports.

And so those are categories that we are still in.

So one scenario is when that trend eventually winds down, and it will, that the kids will go back to that.

Or they go to the next big thing, which we don't know about right now, but we will be in that business as well.

So that is sort of comments about the fashion cycle.

In terms of the consolidation in retail, it's very hard to measure.

Our statements on that in the past have been based on our sales gains versus the increases that are being sort of bandied around by our vendors, and we know from those two numbers that we were gaining share.

I don't know that keeps going on, although the one thing that we are very certain that it is that in the locker room category we are going to be the aggressor in terms of trying to gain share there, both by opening stores and making further acquisitions.

So we are now a driver of the consolidation of the industry, which we think is actually a very compelling story.

So we are excited by that.

That is great, thank you.

Very last, housekeeping wise.

For the first quarter can you talk about the split in sales between February, March, and April as a percent of the total quarter?

It's about -- April is the biggest month and March is the lowest, so let's say roughly 33% in February, drops down to 30% or so in March, and then it's back up to 35% to 40% in April.

Dynamite.

Thank you very much, appreciate it.

Scott Krasik, BB&T Capital Markets.

Hey, guys thanks very much.

Just a couple questions.

Bob, to clarify your comment about the ASP trend, the 6.7% increase in the fourth quarter, was that more related to pricing then rather than mix?

There is a lot going on in the 6.7%.

There is mix, but I think it's mostly driven by the actual opening price.

That is sort of -- we have said in the past that what the vendors have been passing through to us on a year-over-year basis have been ranging from mid single digit to low double digit.

So with that as your benchmark on item pricing then you can sort of back in and you can see that most of it, therefore, is from initial price.

And then the balance would mix.

As we anniversary that now that your guys have some visibility into what they are buying for fall will mix continue to be a benefit for the back half of the year?

Don't know yet.

Okay.

And then, to the extent that you do comp a little bit better than your low single digit expectation in the guidance, is there any additional investments necessary or should that really flow in better operating leverage?

No, that would flow through leverage.

Just the point on investment, most of our buyers -- again, this is the benefit of that being our size.

If our financial budget is low singles, our buy plans will probably drift higher than knowing that if it stays singles that we have modes to exit the inventory by working with our vendors and pushing out deliveries.

So we will be funding for a better performance than that and then we will just keep watching it and react as needed.

And then in the back half of the year, if Nike does raise prices significantly on its NFL product the way it's being projected -- I am not sure what New Era is doing -- but could that actually bolster your margins during those seasons to better than they have ever been given all the other stuff?

Bolster gross margins?

Well, operating more leverage I guess I would say.

Yes, I mean if we sell the same number of units at a higher price point that all flows through because it doesn't take us any more operating expense to sell a jersey.

That is sort of a fixed expense for us.

And that is not considered in the guidance?

All of this is in the guidance.

Okay.

Okay, thanks, good luck.

Mitch Kummetz, Robert W.

Baird.

Yes, thanks.

Let's see, I have got, I think, four questions.

Let me start on the store plan for 2013.

I think you guys said you are going to open 100 and close 41.

Could you break that out by concept?

And then as far as the stores, the Underground stores that don't overlap with Journeys from a real estate standpoint, I mean how many of those are you looking to transition this year?

I will do, while Jim gets his numbers out.

On Underground, we don't have a fixed number on the plan and the reason for that is it's dependent in a lot of cases on a discussion with the landlord.

Conversion obviously takes a greater level of investment, and if we are going to do that we are going to need a lease that marries up to that better than what a lot of the leases currently have.

So we will see.

Just on that, Bob, in terms of the boxes at Underground, are those boxes about the size that you would like to see in terms of transitioning to a Journeys store?

For the malls in which the Underground stores exist the sizing is about where we would want them to be, yes.

Okay.

And, Mitch, on the new stores, in the document that we filed earlier this morning, which is a longer version of my very brief comments, we break out the new stores by individual business unit but I will give you the group right now.

For total Journeys it's 37 stores and for Johnston & Murphy it's 13 and for Schuh UK it's 8 and for Lids it's 42.

And do you have the ones that you are closing in that document that you are referring to, Jim?

Yes.

We have got -- 38 is are in Journeys, the Journeys Group, no Schuh, 3 units are in Johnston & Murphy, and right now we don't have any in the Lids Group.

Okay.

And do you have any in the Underground piece then?

Or that gets rolled into the Journeys?

That is all in the Journeys number.

Do you know how many are actually Underground within that?

We are just going to start -- we are just talking about the total group now.

Sure, okay.

There is a better number in there, but we are not going into the details about how much because it's still up in the air.

Okay, I got you.

And then in terms of the comp outlook that you provided -- 2% to 3% comp, maybe mid singles on the first quarter -- how do you see that breaking out by concept on the year?

By concept?

Yes.

It's really not that much different among the various concepts.

In that case of Lids, it's probably on the higher end of that range and the J&M Group the same thing.

Then for Journeys we are kind of in the lower end of that range.

Okay.

And it's pretty stationary for all four quarters.

Got it.

Let's see, on your -- Jim, you made some sort of cautionary comments on the first quarter.

Could you just talked about the earnings or the margin impact that you see Schuh having on the first quarter from the bonus accruals and then just the weaker profitability in the first half of the year versus the back half?

Yes, I tried to make that point in my prepared comments, but the issue is -- and when we acquired them I made this point and I am going to make it again in that the seasonality of the Schuh business, Schuh UK business and Journeys is very similar except in the first half of the year.

Journeys does better in the first quarter than Schuh does and Schuh does worse, obviously, in the first quarter and does better in the second quarter.

And so Schuh, from a seasonal standpoint, is challenged in the first quarter but that is magnified because of the contingent bonus accrual that we have got built in.

So it's not going to contribute very much at all in the first quarter.

It's a combination of higher expenses from a fixed cost standpoint and the gross margin is not as strong as it is in the back half.

Okay.

So you are basically just saying that there is no earnings contribution from Schuh in Q1 essentially.

I wouldn't count on much.

Last thing, on the Lids Team Sports business, Bob, is there any way you could give us a sense as to how big that business was last year and sort of what sort of growth expectations you are planning for that that gets baked into your guidance for 2013?

It was ballpark $100 million business last year.

We are not driving the growth on it aggressively yet.

We said before we are looking to reinvent how that business is done.

A big component of that is systems development, which takes time.

The other part of it was centralizing a lot of the capabilities that existed amongst the acquisitions, and that has taken a lot of work and time.

And so we are somewhere around halfway through what we need to get done and we are not going to be really aggressively -- we are hiring some new reps but we are not really sort of -- the way you would think about a retail chain and you have got it right and you are rolling it, we are not rolling it at this point until we get it.

And that doesn't disturb us because it's tracking exactly the way -- in terms of this reinvention of the business process it's tracking just the way we want it to go.

The reaction we are getting from the customer base is in total agreement with what we are doing and so it's giving us a lot of confidence in the longer-term outlook.

Thanks a lot, guys.

Good luck.

Jill Caruthers, Johnson Rice.

Good morning.

If you could talk about following holiday 2012 after you fully integrated all the merchandise at the Underground by Journeys stores, how much of that merchandise would overlap?

I am trying to gain how similar those stores would look.

Well, we don't know yet.

We are obviously buying for a much greater amount of overlap than we have had in the past, but there is going to be a little bit of figuring out as we go what the appropriate mix is within Underground.

And so there will be some testing and the reaction to those tests will both be how well it does in Underground and whether it is drawing away from journeys.

So the initial setup that we are targeting to get going on this will have a lot of overlap and then will start to distinguish which part of that makes a lot of sense.

So beyond that, as we always do with forward trends on merchandise, we don't want to say a whole lot for competitive reasons.

So I think I will leave it at that.

Okay.

And then just talk about -- you did say that you have to evaluate the cannibalization of operating the two concepts in the same mall.

Could you maybe talk about your options if you do; if that does occur is it a big problem?

Well, we have a bunch of options.

One is to adjust the merchandise with Underground to be more differentiated from Journeys if that were the case.

Our real goal is to create a presentation in Underground that just visually distinguishes the store from Journeys.

Journeys being very teen oriented.

If you walk our Journeys stores you will know that it is a teenage store, and so our thesis is that there is an opportunity to get people in their 20s who we know are buying the same assortment but the store may not be right for them.

And so that is what we are leaning towards.

Our last option on those is the team at Underground did a fantastic job of shortening lease life.

So in most of those instances, if we are really disappointed with what is going on by having two stores in the mall, we would have the option to go back to one.

Okay, I appreciate it.

And then just last question, kind of a bookkeeping one.

Given your strong outperformance in 2011, I know that the bonus has gone up.

Kind of what are you modeling for 2012 bonus and should we look for kind of a lower number year over year?

Should that be a benefit based on your current guidance right now?

Yes, it is built -- we are anticipating a lower bonus and as a result it helps us from a leverage standpoint.

So it is part of the leverage factor.

Thank you.

Mark Montagna, Avondale Partners.

Hi, a few questions.

First, just dealing with Lids Team Sports and Clubhouse Locker Room.

Wondering for the past fiscal year if you could just help us understand what the revenues were and what are your objectives for the new fiscal year for those two areas?

Well, we just talked about team sports so it was about $100 million and we are not aggressively growing that.

Locker Room, we are going to be -- and Clubhouse -- we are going to be more aggressive and in both of those we have some businesses that we only had for a partial year that will be a full year.

Jim, you want to give any more color on that?

It's about the same range, about $100 million in sales.

Okay.

So when you say more aggressive for Clubhouse Locker Room is that more through acquisitions or through organic growth?

Growth.

What we don't want to do on acquisitions -- we don't commit on a forward basis to acquisitions.

We always think that is a fool's game because then you feel committed to do it.

We want to add stores.

We have got new stores that we are going to open on our own on the books.

And we have -- we are seeing lots of deal flow so there is possibilities for us to make acquisitions but we will only do them when the economics really make sense for us.

In the new store growth that we talked about earlier and it's posted; of the Lids 42, about 12 of those are related to opening new Lids Locker Room stores.

Do you see those openings more off-the-mall or are you looking at those as more mall type stores?

Right now we are looking at mall but off-the-mall is a very interesting premise for these because they are more of a destination store and as such the possibility, probably more so than most of our concepts, for being off-mall is an intriguing one.

Okay.

And then in Team Sports, it sounds like you are more focused on getting organization and the operations correct before really aggressively trying to grow that.

Exactly right.

Okay.

Just next question; I only have two more.

Next question just in terms of Genesco, one of the pushbacks I get, hey, this is just a boot store and when boots die this is over.

I mean I disagree with that, but I am just curious how do you respond to a question like that?

Look, we are the go to -- first of all, half our business is -- we have a sports business, we have Johnston & Murphy which is not that boot related, so you are only talking about half our business.

Within that half of that business, we are the go-to store for the teenager.

When they are in boots, we are going to be in the boot business, and when they are not buying boots they are buying a lot of other stuff.

And so we don't feel from our perspective that exposed to what they are claiming to be an outlier situation for us.

I don't know what else to tell you.

And boots really is not a four-quarter business; it's a fourth-quarter business.

So I don't understand that at all that position by anybody.

Okay, all right.

I just wanted to hear how you guys would articulate it.

Then just the last quick question is with this whole Jeremy Lin phenomenon, wondering if that has impacted the Lids business enough to actually meaningful difference in sales that you actually notice?

Or is it still perhaps just a rounding error?

It's a rounding error.

It's an exciting rounding error, but you just can't get your hands on enough product to move -- if we had an unlimited access to product it might be able to move the needle during this thing.

But you just can't get enough product.

Is it because a lack of Knicks product or is it targeted just at this one guy?

The kid came out of nowhere.

It takes awhile to generate the amount of units that you need to move the needle.

So it's fun to watch and our New York stores have had a lot of fun with it, but, no, it doesn't really move the needle.

Lids Sports is a very big business.

Okay, great.

Thank you.

Mark, one thing on the Locker Room it really -- Locker Room and Clubhouse is 17 stores.

I said 12 so I just wanted to correct that.

Okay, that is good.

Thank you.

Robin Murchison, SunTrust.

Hi, thanks again.

Jim, is there some -- does the Dockers license expire this year?

And if so, what is going on with that?

It does expire this year, yes, FY2013.

And so we are in our discussions.

With licenses you periodically go through the discussion; we are in the discussion.

We make the point we have had that license since the early '90s so it's a pretty long-term relationship.

Right, right.

Thank you again.

At this time I would like to turn the call back over to Mr.

Dennis for any additional or closing remarks.

Thank you, everybody, for joining us.

We look forward to talking to you again, either on the road or in three months.

This concludes today's conference.

We appreciate your participation.