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Genesco Inc.

F3Q08 Earnings Call

November 29, 2007 8:30 am ET


Hal Pennington – Chairman of the Board, Chief Executive Officer

Robert Dennings – President, Chief Operating Officer, Director

James Gulmi – Chief Financial Officer, Senior Vice President – Finance


Jeff Klinefelter – Piper Jaffray

Scott Krasik – CL King

John Shanley - Susquehanna


Good day everyone and welcome to the Genesco third quarter fiscal year 2008 earnings release conference call. (Operator Instructions) Just a reminder today’s call is being recorded.

At this time, for opening remarks and introductions, I would like to turn the call over to Mr. Hal Pennington, Chairman and Chief Executive Officer of Genesco. Please, go ahead sir.

Hal Pennington

Well, good morning and thank you for joining us for our third quarter fiscal 2008 conference call. Participating with me on the call today are Bob Dennings, our President and Chief Operating Officer, and Jim Gulmi, our Chief Financial Officer. As always we will make some forward-looking statements in this call. They reflect our expectations as of today, but actual results could be materially different. We refer you to our earnings release and to our recent SEC filings including the 10K for the fiscal year 2007 and the second quarter 10Q for some of the factors that could cause differences from our expectations. And, for those listening to the replay of this call on the Internet, some of these factors can be read on the opening screen.

I want to remind you that my remarks today will focus on the business. They will not address our pending merger or the litigation connected with it.

For the third quarter we reported a net sales increase of 2.3% to $372 million dollars. Earnings before interest, taxes, merger related costs and store closing costs were $20 million dollars compared with $30.5 million dollars last year or a decrease of 34%.

Earnings per share were $0.23, which includes an estimated $0.16 in costs primarily related to the merger. And, Jim will have more to say about the numbers in his portion of the call.

Journeys as well as Hat World and Underground Station showed the affects of a difficult retail climate in the quarter by contrast both Johnston & Murphy and Dockers Footwear produced another set of strong quarterly results.

And, now lets talk about each business in more detail.

Comps for the Journeys Group were negative 3% for the quarter and comps in the Journeys’ stores were down 3.4% compared to a 9% increase last year. This was an improvement over our second quarter performance but below our earlier expectation of low single positive comps in the quarter.

While we saw a shift in back-to-school and sales tax holiday sales out of the second quarter and into the early part of the third quarter as we thought we would, this was more than off-set by general weakness of retail. In particular, in the footwear market and by problems with one particular brand namely Heelys.

We believe that there were several factors that affected Journeys Group’s business. First, tough economic conditions have had a negative impact on demand on the mall. As you know, factors including disruptions in the housing market and high fuel prices are having an impact on consumer confidence according to recently reported numbers.

Second, additional weakness specific to footwear magnified the affects of general economic conditions. Throughout the Spring and Summer season, the industry suffered from the absence of a fresh compelling product trend in the market. There were simply no new, must have products to draw customers to the stores.

In addition, an unusually warm Fall in much of the country kept focus on sandals and other opened-up footwear and delayed the consumers’ appetite for higher priced Fall products.

Finally, Heelys, which performed strongly for us last year were a significant problem in third quarter this year, due largely to over distribution relevant to demand. First, they hurt comp sales, which we believe would have been slightly positive without them. In fact, our sales of Heelys were off $4.7 million dollars for the quarter year-over-year despite a higher inventory position.

Second, they hurt gross margins as we took permanent markdowns on most Heelys’ SKUs offsetting gross margin gains in non-Heelys inventory. Heelys hurt initial margin by $2.4 million dollars and added $2.7 million dollars of markdowns in the quarter this year.

To provide some sense of the magnitude of this change, our average sales price for Heelys dropped from about $72 in Q2 to about $62 in Q3. The affect of Heelys on this quarter was as dramatic as it was because of the strong positive contribution of the brand for our results last year. While we will continue to comp against this strong performance in the first half of next year, our merchants reacted quickly and adjusted the Heelys’ order flow in the back half of this year.

As a result, we expect Heelys inventories to be inline by the end of this year. Even in a quarter with weaker top line performance than we expected, there were signs of a long term strength of the Journeys business. For example, even though our gross margin percentage was hurt by Heelys underperformance, the Journeys Group’s gross margins were still up from last year. Further illustrating the power of the Journeys concept even in a tough environment.

Furthermore, the trend and average selling price improved. For the Journeys’ stores, footwear comp ASPs were down only 1.2% compared with a 5.3% drop in the second quarter. This improving trends in ASPs has continued into the fourth quarter so far. Unit comps were down 4.6% in the quarter compared to 3.6% decline in the previous quarter.

Now return to the unit comp increases we’re used to having, coupled with continuation of this improvement in ASPs would obviously be very positive for operating results.

Women’s casual shoes performed well in the quarter. On the men’s side, we continued to do well with the skate brands. Sandals performed well for Journeys and sandal ASPs were up. Our mix of business changed of business somewhat with accessories rising to 12% of sales this year from 9% last year. Men’s footwear made up about 42% of the sales for the quarter and women’s was about 41%.

During the first nine-months of the year, we have opened a total of 36 new Journeys’ stores and ended the quarter with 802 stores. Looking ahead, there’s still a lack of visibility about how the consumer is going to respond to general economic conditions in the current quarter.

We have heard, as you have, a range of feedback on the beginning of the holiday selling season and we frankly started slower than we’d hoped over the weekend. But, we like Journeys’ product selection for the holiday season, which we’d remind you for Journeys includes significant gift card redemption in January. And, we feel sure that we’ll get our share of the dollars the consumer decides to spend on footwear.

Turning briefly to Shi by Journeys, while we continue to adjust to the seasonality, the category mix and the pricing requirements of this business. We are pleased with the strong customer response and attractive gross margins in these stores. Early reads on holiday product are good and we are confident about the prospects for this business. During the first nine-months of the year, we have opened 28 Shi stores and ended the quarter with 40 Shi stores.

Our Journeys’ Kidz’s business had a strong comp increase of 7% in the quarter compared to a 9% increase last year and increased gross margin. Several important brands contributed to these good results enabling us to more than overcome the affects of the Heelys decline in the Kidz’s stores. For the first nine-months of the year, we have opened 30 stores compared with 18 last year and ended the quarter with 103 Journeys Kidz’s stores.

Turning now to Hat World. We had a 2% increase in comps for the quarter compared to a 1% decline last year. This reflected improvement both in Urban and regular doors. While comps in our Urban stores were still negative, this was their second consecutive quarterly improvement after a stretch of very difficult quarters in that market.

From a product standpoint, Major League Baseball remains our largest category. Core MLB product continues to be strong. On the fashion MLB side, we believe we have been successful in an effort to better match our inventory levels to the rate of sales, although we gave-up some gross margin to achieve this during the quarter.

The branded category was also strong, once again, driven by branded action product. The NCAA category was challenging in the third quarter. Some of our historically strongest college teams have had a difficult football season, especially teams like Notre Dame, Texas and Michigan. And, as you know that impacts our business.

The NFL category was a little soft in the third quarter despite the fact that teams with strong fan basis such as the Steelers, Packers and Cowboys have started the year strong. And the warm weather throughout the quarter review sales of knit caps across all product categories.

During the first nine-months of the year, we opened a total of 82 new stores and ended the quarter with 856 stores in the Hat World Group.

Turning to the Underground Station Group, comps declined 19% during the third quarter for the group, which was below our earlier expectations compared to an 11% decline last year. We expected that this business was still affected by the difficult Nike comparison early in the quarter and by the fact that the new merchandising strategy was phasing in during the quarter.

Last year, Nike contributed approximately 16% of sales in the second quarter. Approximately 17% of sales in the third quarter and only 4% of sales in the fourth quarter. Gross margin improved for the quarter in a nice reversal from the second quarter. ASPs continue to be under pressure as a result of the loss of Nike price points and of general product mix.

Women’s footwear made-up about 30% Underground Station’s footwear sales in the third quarter this year compared with 24% last year. On average, the women’s footwear price points are lower, which impacts ASP. We ended the quarter with 215 stores in the Underground Station Group and our previously announced program to close under performing stores is preceding well.

We’re encouraged by some of the early reads we’re seeing from holiday products in our stores, but the Urban segment is still difficult. We need to work our way through the quarter to get a better sense of how well the new product selection is performing. The fourth quarter is the first quarterly comparison this year that will not be significantly scud by Nike sales.

Additionally, overall fourth quarter comparisons become easier as fourth quarter costs were down 15% last year.

Now for Johnston & Murphy. Johnston & Murphy had another strong quarter showing improvements in sales, gross margin and operating income. The new initiatives launched to extend the new Johnston & Murphy brand into other non-footwear categories are continuing to pay off. Operating earnings were up 37% on a 4% increase in sales. Year-to-date sales are up 6% and operating earnings are up 47%.

Same-store sales increased approximately 3% in the Johnston & Murphy shops in the third quarter. On top of an increase of approximately 7% last year. Footwear comp ASPs for the Johnston & Murphy shops were up 5.2% with pairs down 4.2%. On all three footwear categories; dress, casual and dress casual, experienced increase in total ASPs along with fewer markdowns, which helped drive the improved gross margins.

Accessory sales continue to increase and accounted for 33% of sales compared to 31% last year. For the first nine-months of the year we have opened 10 stores; seven Johnston & Murphy Shops and three Johnston & Murphy Factory Stores and we ended the quarter with 156 stores. And, we continue to be very excited with the opportunity to grow the Johnston & Murphy brand.

Now turning to licensed brands where sales increased 26% and operating income increased 73% in the quarter. The increase reflected another great quarter for the Dockers’ footwear business, which grew sales 9%. They also reflected incremental sales from the initial roll-out of a new line of Chaps footwear that we’re sourcing exclusively for Kohl’s under a license agreement with Polo/Ralph Lauren.

The moderate men’s market that Dockers’ targets, has some of the same challenges as other segments of the footwear market. Even in a very challenging retail environment, our target consumers are continuing to respond very positively to the product’s styling, comfort and value found in Dockers’ footwear. And, our retail customers are very happy with the performance. And we believe we are poised for continued success.

And, now I’ll ask Jim to take you through the financials for the quarter.

Jim Gulmi

Thank you Hal. I will now run through the P&L for the quarter starting at the top. Third quarter sales increased 2% to$372 million dollars compared to $364 million dollars last year. Comp store sales decreased –3% in total.

Journeys Group sales increased 1% to $183 million dollars and comps were down 3%.

Hat World Group sales rose 13% to $88 million dollars and comps increased 2%.

The Underground Station Group sales were down 23% to $27 million dollars with comps down 19%.

Johnston & Murphy Group sales increased 4% to $46 million dollars. The Johnston & Murphy retail shops had a 3% comp increase. And, Johnston & Murphy wholesale sales are roughly equal to last year at higher levels of regular priced shipments this year offset higher closeout sales last year.

Licensed brand sales increased 26% to $29 million dollars on top of a 31% increase last year.

Dockers’ increase was 9% while the remaining increase was due to the introduction of the new Chaps product line we are sourcing for Kohls as Hal mentioned.

Now, turning to gross margin. Total gross margin for Genesco increased to 50.5% from 49l8% last year. This improvement was good to see especially after gross margin was down 50 basis points in quarter two compared to last year. Gross margin rates increased across all the footwear businesses during the quarter.

Journeys Group gross margin increased 30 basis points despite the previously discussed weakness with Heelys.

Underground Station Group gross margin increased150 basis points in the quarter.

Hat World’s gross margin declined 130 basis points due to shifts in the sales mix as well as more targeted markdowns and promotional activity to clear slow moving inventory.

Johnston & Murphy Group’s gross margin was, again up strongly. Increasing by 390 basis points. This was driven by continued sourcing improvement and lower markdowns across all segments of this business.

License brands also posted a strong improvement in gross margin of 250 basis points. Partially, due to the new product line Hal mentioned earlier.

Now, turning to SG&A. Total SG&A as a percentage of sales increased to 46.8% during the quarter compared to 41.4% last year. Included in this expense percent is about $6.1 million dollars or 165 basis points of costs associated with the Finish Line merger. Expense dollars excluding merger costs were lower than our earlier internal forecast.

Much of the remaining increase in SG&A as a percentage of sales reflects a lower than expected sales. The relatively fixed nature of SG&A expenses in our retail businesses and new and expanded growth.

Journeys overall dollar expenses were up slightly from our earlier expectations. Compared to last year, we were unable to leverage expenses due in-part to the negative comps and new and expanded store growth.

Expenses in the Hat World and Underground Station were down compared to our earlier expectations. But, we were not able to leverage in either business due in-part to the comps and the case of Hat World, the new store openings.

The Johnston & Murphy Group SG&A as a percent of sales was up primarily due to additional advertising expenses.

Licensed brands was able to leverage SG&A through the strong sales growth and the introduction of the new product line with little and added expenses.

Operating income was 3.7% compared to 8.1% last year. Included here are $6.2 million dollars of merger related charges and impairment charges that negatively impacted operating margin by 166 basis points. Last year’s impairment charges of $1.1 million dollars impacted margin by 30 basis points.

Overall operating margin declined due to lower operating margins in Journeys, Hat World, and Underground Station. Partially, offset by higher operating margins in Johnston & Murphy and license brands.

In addition, corporate expenses, excluding litigation and merger related expenses were down as a percentage of sales.

Journeys’ operating margin was 8.4%. Hat World’s operating margin was 5.3%. Underground Station’s operating margin was –11%, which was an improvement over the second quarter’s operating margin. Johnston & Murphy’s operating margin was up nicely once again to 9.4% from 7.2% due to increase sales and better gross margin. License brand’s operating margin also increased once again to a strong 14% from 10.2% due to gross margin expansion and solid expense leverage influenced by the introduction of the new product line.

Net interest expense during the quarter was $3.5 million dollars compared with $2.9 million dollars last year. This increase was due in-part to increased borrowings for the acquisition of Hat Shack late last year. And, borrowings necessary to support seasonal working capital requirements.

Earnings report discontinued operations of $5.6 million dollars or $0.23 per diluted share compared with $0.62 last year. Included in this year’s earnings are merger and impairment charges of $6.2 million dollars pre-taxed at a higher tax rate due primarily to the non-tax deductibility of merger related fees.

As Hal noted, we estimate that those items negatively impact EPS by about $0.16. Last year EPS for the quarter included impairment charges of about $0.02 per share.

As you know, we have announced a program to closing up to 57 un-performing stores, which consist of 49 Underground Station, 10 Journeys stores and 8 Hat World stores. For the past two quarters we have closed or converted two Hat World stores and six Underground Station and Journeys store from this group. We now expect to close or convert 31 of these stores this fiscal year and the remaining stores in the following year.

Now turning to the balance sheet. We ended the quarter with $129 million dollars in bank debt compared to $72 million dollars last year. This increase in bank debt is due to the Hat Shack acquisition, the impact of some accounts payable timing differences due to the one week later account cutoff this year, lower earnings and our normal seasonal working capital cycle. Our inventory levels increased 15% from the same period last year, which was in line with our 15% square footage increase.

Inventory per store is up slightly from last year. Also, in transit inventory is up this year, which we believe is due in-part to the later quarter end closing. For all these reasons, we are comfortable with our current inventory levels.

For the quarter, capital expenditures were $26 million dollars and depreciation was $11 million dollars. We ended the quarter with 2,172 stores compared with 1,925 stores last year. This represented a net new store increase of 247 or 13% year-over-year. For our total square footage increased 15% to 3 million square feet. In the third quarter we opened 72 stores and closed 11. In the third quarter last year, we opened 66 stores and closed 11.

At current expectations for capital expenditures for the full year is in the $86 million dollar range. Depreciation for the full year is now expected to be about $45 million dollars.

To update you on how we are tracking against our plan with regard to the current forecast for new stores and FY08, we now plan to open about 42 Journeys’ stores and close two. We believe we’ll open about 42 Journeys’ Kidz’s stores and about 35 Chi by Journeys’ stores.

Hat World expects to open about 98 stores and close all together 21 stores for the year. We expect to open two Underground Station stores and close about 24 and we expect to close 12 Journeys’ stores and convert two to Underground Station. We expect to open eight Johnston & Murphy Shops and close three and open three Johnston & Murphy Factory stores and close one. All together we expect to open about 230 stores and we estimate we will close 63 stores this fiscal year.

Included in these store closings for the full year are two Hat Worlds, 23 Underground Stations and six Journeys stores, which are part of the 57 store closing initiative we discussed earlier.

Now, I will return the call back to Hal for some closing comments.

Hal Pennington

Thank you Jim. Having spent many years in a [audio distortion] business influenced by external factors and product trends, I can say that it never gets any easier to live through a down cycle. While short-term external factors do affect us, what is most important for the long term strengths of our individual businesses, some of which we tried to highlight on the call today. And, the strategic power within our portfolio of businesses. We also believe that we’ve taken appropriate action to be sure that we deal with current market conditions and to maintain our prospects for long term growth.

Now, before we open the lines for Q&A, I need to remind you again, that we will focus on the business and that we will not be able to address any questions about our pending merger or the litigation connected with it. And, after that, let’s open it up for questions.

Question-and-Answer Session


(Operator Instructions) And, our first question will come from Mr. Jeff Klinefelter with Piper Jaffray. Please go ahead.

Jeff Klinefelter – Piper Jaffray

Yes. My questions, guys will focus on brand trend. You did discuss at length and it was helpful on the Heelys’ performance and challenges, but could you talk about any other brand trends that kind of stands out from the positive or negative side? Some of your key contributors last year, Crocks, Ugg in the boot area, DC Rocket Dog that you can share with us on the trend there? And, then in terms of your comps, you said that Black Friday weekend or the start of the season was a little bit less than expected, if you’d give us a more specific guidance or thoughts as to where you would expect your comp trends for the third quarter in Journeys and Hat World?

Hal Pennington

I’ll address the product question first. With regard to Journeys, the women’s fashion is performing well. The women’s boot category, now that we have some cooler weather is showing promise. Casuals in the suede or that with any fleece with it seems to be performing well. Wedges; I think the overall women’s casual product is showing some nice improvement.

In the men’s area, the casual category is not as strong. The skate brands continue to perform well for us. The overall athletic category in itself continues to perform well, which skate being a big part of that.

Over in the Underground Station Group, there are some things such as you might expect, Echo, some of the Apple Bottom product, Polo is performing well there. Those are the few that come to mind.

The children’s category, there were several brands – some of those brands have just expanded their offering into more available product for the younger kid, if you will. Some of the ones that you might expect, of course Puma, the Nike and Converse area, those were the ones.

During the third quarter there was still because of the extended warm weather pattern in most of the country, during the third quarter canvas continued to be a big item and Crocks continue to be a part of our mix.


Anything else, Mr. Klinefelter?

Jeff Klinefelter – Piper Jaffray

Yes. My second question was on the sales trends, Black Friday and then what do you expect going into the fourth quarter for comps?

Jim Gulmi

Well, we’re really – in terms of going into the fourth quarter on comps we’re really not going to give any guidance going forward. We’re just giving guidance in relation to what Hal had said earlier. I think over Black Friday…

Robert Dennings

This is Bob, Jeff. Black Friday was a little disappointing to us as Hal said, and we’re still trying to figure out what the rest of the industry seems to have seen. We think the stores are all set pretty well for holiday, and so, as you probably know, there’s a lot of questions about exactly how well the consumer will shop. I think Hal said it well when he said, “we think we’re well set to get our fair share of what the consumer spends.” So we think the stores are all properly set, it’s just a little hard to say just how robust the Christmas season will be.

Jeff Klinefelter – Piper Jaffray

Okay. In terms of that Black Friday weekend, how did you approach it promotionally this year versus last year? And, sounds like seasonal product did improve, I guess Hal referenced the boot category, that sounds like that was the trend either was a door buster, some kind of a promotion that really converted most of that traffic. So, how did you think you compared to other retailers in the mall with respect to your seasonal sell throughs or your promotions?

Robert Dennings

Well, in terms of promotions, Jeff, as you probably know, we’re not – we don’t use price as a traffic builder. We’ll use price really only to clear merchandise that we’re having trouble selling. In this instance that would have been Heelys. But, even with Heelys, we stayed at the high end at the of the pricing for that weekend. So, I thing year-over-year we were pretty consistent with maintaining some pretty good price integrity and not getting overly aggressive in terms of trying to meet what everybody else is doing in the marketplace.

Jeff Klinefelter – Piper Jaffray

Okay. Thank you.


Moving on, our next question will come from Mr. Scott Krasik from CL King. Your line is open, please go ahead.

Scott Krasik – CL King

Hi guys, thanks. Continuing to Journeys, I know you said that there’s no trends emerging, but what are you hearing from your product guys on a go forward basis? It seems like there might be some new interesting things in technical athletic under cross-training or running side next year. Do you still see yourselves as primarily a skate outlet going into 2008?

Hal Pennington

We still take the position that our athletic is fashion with a large part of that being skate. We don’t consider ourselves a destination shop for the performance footwear. We will leave that to some others. But, ours is focused on that teen who is looking for fashion and we believe we are the destination shop for that.

Scott Krasik – CL King

So for next Spring, is it same brand? Are you trying anything new or different?

Hal Pennington

There would be some new initiatives there I think as far as some styling and perhaps as testing of some other brands but that I won’t go into.

Scott Krasik – CL King

Do you think any of the weakness on the casual side, you went too far in the direction of your own house brand as opposed to keeping the branded product?

Hal Pennington

We did not go too far on our house brands, the casual product in that we have a low profile aspect of the casual product is not as strong as it has been and I think that’s pretty wildly know, but no we do not believe that we have gone too far with our private brand, our in-house brands or the smaller brands, if you will. We still consider ourselves a destination shop for brands and we realize brands are important for our customer in Journeys.

Scott Krasik – CL King

Yes. Okay, and lastly Bob, I know you don’t want to give guidance, but just looking at Hat World next year, you obviously having the Urban issues, the Major League Baseball issues in the first half of the year. Is it better to use 2005 as a model in terms of profitability than 2006 for the first half of next year?

Robert Dennings

You’re absolutely correct that we’re not giving guidance. There were a lot of things that went on with Hat World this year –a lot of things that went on the year before, so this year one of the big things that did go on was a rotation out of that more hip-hop inspired fashion baseball and that gave us some pressure on margins. We’ve got that inventory now right sized assuming that all of our inventories stay reasonably balanced, that we don’t make another big adjustment you can anticipate some recover on the margin line year-over-year.

Scott Krasik – CL King

And given the assortment of the mix you have now, return to historical margins is not out of the question assuming you get some sales follow-through.

Robert Dennings

Well, there’s a bunch of mixed things going on as well. When our college business came down we gave up margin because the college business is the most profitable of the large categories that we compete in, so in order to get all the way back to historical levels, I’d argue that we’d need the college business to become more important in the business again.

Scott Krasik – CL King

Okay, thanks guys.


Moving on, we will now hear from Susquehanna’s John Shanley for our next question. Please go ahead.

John Shanley - Susquehanna

Thank you. Good morning folks. Jim or Hal, I wonder if you could just clarify for us a little bit the operating margins on Journeys. Obviously, you went from 13.7 last year to 8.4 in the third quarter of this year. But, the gross margin as you pointed out was up 40 bips. Can you give up a sense, was this due to a de-leverage because of the 1% sales decline or the 3% comp decline or did the under-performance of the Heelys brand play an intricate part of that overall operating margin decline for the Journeys’ business?

Robert Dennings

Well, John, of course Heelys played a part in it. We talked some about the effect on gross margin. We also talked about the affect on sales. And, so the de-leveraging, and it is de-leveraging obviously, gross margins was slightly better. It was a combination of things, I think. One is the negative comp certainly hurt and we talked all along that we need a positive comp in order to begin to leverage. And, with that negative comp it’s obvious, we’re just not able to.

And the second issue here is that we’re opening stores and so we have additional store growth and the productivity of the newer stores. And, we’ve talked many times about how in the Journeys’ stores themselves in the first year they do about 75% of may be what the average does. So, I think it’s primarily a combination of the negative comps, plus the new store growth.

If you look at the absolute dollars of expenses, there not far off what we thought they would be, so it’s more of a question of top line growth as being the issue and then also the new store growth is affecting the leveraging.

John Shanley - Susquehanna

Was Heelys really wasn’t really an intricate part or was just a kind of corollary part?

Robert Dennings

No, no. It did have an impact because gross margin would have been better without them. It would have had some affect, but also sales were off, which we talked about, which had an impact. Obviously the top line had an impact on the leveraging factor.

John Shanley - Susquehanna

Okay, I understand. The next question I have is really for you as well. Litigation expenses are clearly becoming a very significant costs factor for the company. Is there anyway that you can give us some sense in terms of how much litigation expenses with all the law firms that you’ve hired basically battling all the UBS and Finish Line law firms. What could the nut be going forward on this thing, particularly in the fourth quarter? You must have a sense as to how much all these law firms are going to be charging you?

Robert Dennings

John, we not giving any forward-looking comments here and plus, who knows? I mean, I really don’t know at this point. We’re in the middle of all this and we just don’t know what’s going to be.

John Shanley - Susquehanna

Do you think it could be as much as it was in the third quarter?

Robert Dennings

John, I don’t know.

John Shanley - Susquehanna

Okay. Alright, it would be helpful, if you could try to give us some guidance on that whenever you’re in a position to be able to do so.

All right. Thank you very much.

Hall Pennington

Thanks John.


And, at this time Mr. Pennington, I would like to turn the call back to you for any additional or closing remarks.

Hal Pennington

Very good. Well, thank you for joining us for our call today, and have a good rest of the day.


Thank everyone for your participation and that does conclude today’s conference. Thank you for your participation and have a great day.

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