UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended ~~July 31, 2021~~April 30, 2022


☐	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.~~Inc.

(Exact name of registrant as specified in its charter)


Tennessee		62-0211340
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

~~Genesco Park,~~	~~1415 Murfreesboro Pike~~535 Marriott Drive	~~37217-2895~~37214
Nashville,	Tennessee	(Zip Code)
(Address of principal executive offices)

Registrant's telephone number, including area code: ~~(615)~~ (615) 367-7000

Former address: 1415 Murfreesboro Pike, Nashville, Tennessee37217-2895

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $1.00 par value	GCO	New York Stock Exchange

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 report), 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 every Interactive Data File required to be submitted 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 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	☐☒	Accelerated filer	☒☐

Non-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 Exchange Act) Yes ☐ No ☒

As of ~~August~~May 27, ~~2021,~~2022, there were ~~15,109,062~~13,728,784 shares of the registrant's common stock outstanding.

~~Table of Contents~~

INDEX

~~INDEX~~



Part I. Financial Information
Item 1. Financial Statements (unaudited):
Condensed Consolidated Balance Sheets ~~– July 31,~~- April 30, 2022, January 29, 2022 and May 1, 2021 ~~January 30, 2021 and August 1, 2020~~	4
Condensed Consolidated Statements of Operations - Three ~~and Six~~ Months ended ~~July 31,~~April 30, 2022 and May 1, 2021 ~~and August 1, 2020~~	5
Condensed Consolidated Statements of Comprehensive Income - Three ~~and Six~~ Months ended ~~July 31,~~April 30, 2022 and May 1, 2021 ~~and August 1, 2020~~	6
Condensed Consolidated Statements of Cash Flows ~~– Six~~- Three Months ended ~~July 31,~~April 30, 2022 and May 1, 2021 ~~and August 1, 2020~~	7
Condensed Consolidated Statements of Equity - Three ~~and Six~~ Months ended ~~July 31,~~April 30, 2022 and May 1, 2021 ~~and August 1, 2020~~	8
Notes to Condensed Consolidated Financial Statements (unaudited)	9
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	1815
Item 3. Quantitative and Qualitative Disclosures about Market Risk	2721
Item 4. Controls and Procedures	2721
Part II. Other Information	2822
Item 1. Legal Proceedings	2822
Item 1A. Risk Factors	2822
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	2822
Item 6. Exhibits	2923
Signature	3024

~~Table of Contents~~

cautionary notice regarding forward-looking statements

Statements in this Quarterly Report on Form 10-Q include 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 Quarterly Report on Form 10-Q 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, risks related to the ongoing novel coronavirus ("COVID-19") pandemic and emergence of variants from the original strain, as well as the timing and availability of effective medical treatments and the ongoing rollout of vaccines in response to the COVID-19 pandemic, (including the public’s acceptance of vaccines), includingpandemic; disruptions to our business, sales, supply chain and financial ~~results,~~results; the level of consumer spending on our merchandise and interest in our brands and in general, the timing of the re-opening and potential reclosing of our stores, the timing of in-person back-to-work and back-to-school and sales with respect thereto, the consumer impact of the reduction of government stimulus and tax relief programs, the level and timing of promotional activity necessary to ~~protect our reputation and~~ maintain inventories at appropriate ~~levels,~~levels; our ability to pass on price increases to our customers; the timing and amount of any share repurchases by ~~us,~~us; risks related to doing business internationally, including the ~~increasing scope~~manufacturing of a portion of our ~~non-U.S. operations,~~products in China; 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,~~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,~~distribution; unfavorable trends in fuel costs, foreign exchange rates, foreign labor and material ~~costs,~~costs; a disruption in shipping or increase in cost of our imported products, and other factors affecting the cost of ~~products,~~products; our dependence on third-party vendors and licensors for the products we ~~sell,~~sell; the effects of the ~~British decision to exit~~withdrawal of the United Kingdom ("U.K.") from the European Union ("Brexit") and other sources of market weakness in the U.K. and the Republic of Ireland (the “ROI”); the effectiveness of our omnichannel ~~initiatives, our ability to staff our stores,~~initiatives; costs associated with changes in minimum wage and overtime ~~requirements,~~requirements; wage pressure in the U.S. and the U.K.,; labor shortages; the effects of inflation, including our ability to pass increased cost on to consumers; effects resulting from wars and other ~~inflationary pressures,~~military operations; the evolving regulatory landscape related to our use of social ~~media,~~media; the establishment and protection of our intellectual ~~property,~~property; weakness in the consumer economy and retail ~~industry,~~industry; competition and fashion trends in our markets, including trends with respect to the popularity of casual and dress ~~footwear,~~footwear; weakness in shopping mall ~~traffic,~~traffic; any failure to increase sales at our existing stores, given our high fixed expense cost structure, and in our e-commerce ~~businesses,~~businesses; risks related to the potential for terrorist ~~events,~~events; changes in buying patterns by significant wholesale ~~customers,~~customers; changes in consumer ~~preferences,~~preferences; our ability to continue to complete and integrate ~~acquisitions,~~acquisitions; our ability to expand our business and diversify our product ~~base,~~base; impairment of goodwill in connection with ~~acquisitions,~~acquisitions; payment related risks that could increase our operating cost, expose us to fraud or theft, subject us to potential liability and disrupt our ~~business,~~business; retained liabilities associated with divestitures of businesses including potential liabilities under leases as the prior tenant or as a guarantor of certain ~~leases,~~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~~our ability to open additional retail stores, to renew leases in existing stores, to control or lower occupancy costs, ~~and~~ to conduct required remodeling or refurbishment on schedule and at expected expense ~~levels, our ability to~~levels; realize anticipated cost savings, including rent ~~savings, our ability to~~savings; realize any anticipated tax benefits, ~~our ability to~~and achieve expected digital gains and gain market ~~share,~~share; 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,~~consequences; unexpected changes to the market for our shares or for the retail sector in ~~general,~~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, and the impact~~us. For a full discussion of ~~actions initiated by activist shareholders.~~risk factors, see Item 1A, "Risk Factors".

Readers are cautioned not to place undue reliance on forward-looking statements as such statements speak only as of the date they were made and involve risks and uncertainties that could cause actual events or results to differ materially from the events or results described in the forward-looking statements. The most important factors which could cause our actual results to differ from our forward-looking statements are set forth in our description of risk factors in Item 1A contained in our Annual Report on Form 10-K for the fiscal year ended January ~~30, 2021, and Item 1A in Part II of this Quarterly Report on Form 10-Q,~~29, 2022, which should be read in conjunction with the forward-looking statements in this Quarterly Report on Form 10-Q. Forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update any forward-looking statement.

The events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. As a result, our actual results may differ materially from the results contemplated by these forward-looking statements.

We maintain a website at www.genesco.com where investors and other interested parties may obtain, free of charge, press releases and other information as well as gain access to our periodic filings with the Securities and Exchange Commission (“SEC”). The information contained on this website should not be considered to be a part of this or any other report filed with or furnished to the SEC.

~~Table of Contents~~

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)

Genesco Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands, except share amounts)


Assets	July 31, 2021			January 30, 2021			August 1, 2020			April 30, 2022			January 29, 2022			May 1, 2021
Current Assets:
Cash and cash equivalents	$	304,039		$	215,091		$	299,144		$	200,623		$	320,525		$	258,044
Accounts receivable, net of allowances of $4,440 at July 31, 2021,
$5,015 at January 30, 2021 and $5,485 at August 1, 2020		31,872			31,410			54,793
Accounts receivable, net of allowances of $5,074 at April 30, 2022,
$4,656 at January 29, 2022 and $4,474 at May 1, 2021											48,868			39,509			45,891
Inventories		326,477			290,966			365,267			401,479			278,200			301,017
Prepaids and other current assets		91,554			130,128			58,454			74,609			71,564			117,467
Total current assets		753,942			667,595			777,658			725,579			709,798			722,419
Property and equipment, net		202,711			207,842			220,458			219,421			216,308			208,759
Operating lease right of use assets		610,188			621,727			670,323			508,986			543,789			639,575
Goodwill		38,787			38,550			37,931			38,487			38,556			38,944
Other intangibles		31,063			30,929			30,008			28,298			29,855			31,112
Deferred income taxes		0			0			12,443			4,269			1,466			0
Other noncurrent assets		21,929			20,725			21,207			23,402			22,327			21,558
Total Assets		1,658,620			1,587,368			1,770,028			1,548,442			1,562,099			1,662,367
Liabilities and Equity
Current Liabilities:
Accounts payable		186,593			150,437			178,541			243,224			152,484			164,975
Current portion - long-term debt		—			—			24,860
Current portion - operating lease liabilities		156,562			173,505			199,392			137,770			145,088			158,295
Other accrued liabilities		134,407			78,991			88,047			83,882			134,156			112,648
Total current liabilities		477,562			402,933			490,840			464,876			431,728			435,918
Long-term debt		20,022			32,986			186,049			14,712			15,679			44,169
Long-term operating lease liabilities		524,857			527,549			593,723			430,606			471,878			555,204
Other long-term liabilities		48,082			57,141			38,552			37,910			40,346			48,068
Total liabilities		1,070,523			1,020,609			1,309,164			948,104			959,631			1,083,359
Commitments and contingent liabilities
Equity
Non-redeemable preferred stock		828			1,009			1,009			818			827			828
Common equity:
Common stock, $1 par value:
Common stock, $1 par value:
Authorized: 80,000,000 shares
Issued common stock		15,597			15,438			15,482			14,217			14,256			15,444
Additional paid-in capital		286,298			282,308			278,254			294,628			291,444			284,396
Retained earnings		336,659			320,920			223,536			348,757			350,206			329,798
Accumulated other comprehensive loss		(33,428	)		(35,059	)		(39,560	)		(40,225	)		(36,408	)		(33,601	)
Treasury shares, at cost (488,464 shares)		(17,857	)		(17,857	)		(17,857	)
Treasury shares, at cost (488,464 shares)											(17,857	)		(17,857	)		(17,857	)
Total equity		588,097			566,759			460,864			600,338			602,468			579,008
Total Liabilities and Equity	$	1,658,620		$	1,587,368		$	1,770,028		$	1,548,442		$	1,562,099		$	1,662,367

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.

~~Table of Contents~~

Genesco Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(In thousands, except per share amounts)


	Three Months Ended					Six Months Ended					Three Months Ended
	July 31, 2021		August 1, 2020			July 31, 2021		August 1, 2020			April 30, 2022			May 1, 2021
Net sales	$	555,183	$	391,217		$	1,093,878	$	670,449		$	520,748		$	538,695
Cost of sales		282,661		224,217			563,694		383,305			269,304			281,033
Gross margin		272,522		167,000			530,184		287,144			251,444			257,662
Selling and administrative expenses		252,551		187,261			492,016		376,303			243,481			239,465
Goodwill impairment		0		0			0		79,259
Asset impairments and other, net		7,070		1,733			9,740		9,594			(283	)		2,670
Operating income (loss)		12,901		(21,994	)		28,428		(178,012	)
Operating income												8,246			15,527
Other components of net periodic benefit cost (income)		56		(182	)		17		(306	)		98			(39	)
Interest expense (net of interest income of $0.1 million, $0.0 million, $0.3 million and $0.2 million for the three and six months ended July 31, 2021 and August 1, 2020, respectively)		617		1,918			1,346		2,774
Earnings (loss) from continuing operations before income taxes		12,228		(23,730	)		27,065		(180,480	)
Income tax expense (benefit)		1,354		(4,806	)		7,297		(26,932	)
Earnings (loss) from continuing operations		10,874		(18,924	)		19,768		(153,548	)
Gain (loss) from discontinued operations, net of tax		63		(112	)		47		(265	)
Net Earnings (Loss)	$	10,937	$	(19,036	)	$	19,815	$	(153,813	)
Interest expense (net of interest income of $0.1 million for each of the three months ended April 30, 2022 and May 1, 2021)												297			729
Earnings from continuing operations before income taxes												7,851			14,837
Income tax expense												2,882			5,943
Earnings from continuing operations												4,969			8,894
Loss from discontinued operations, net of tax												(22	)		(16	)
Net Earnings											$	4,947		$	8,878

Basic earnings (loss) per common share:
Basic earnings per common share:
Continuing operations	$	0.76	$	(1.33	)	$	1.38	$	(10.86	)	$	0.38		$	0.62
Discontinued operations		0.00		(0.01	)		0.00		(0.01	)		0.00			0.00
Net earnings (loss)	$	0.76	$	(1.34	)	$	1.38	$	(10.87	)
Net earnings											$	0.38		$	0.62

Diluted earnings (loss) per common share:
Diluted earnings per common share:
Continuing operations	$	0.74	$	(1.33	)	$	1.35	$	(10.86	)	$	0.37		$	0.60
Discontinued operations		0.01		(0.01	)		0.00		(0.01	)		0.00			0.00
Net earnings (loss)	$	0.75	$	(1.34	)	$	1.35	$	(10.87	)
Net earnings											$	0.37		$	0.60

Weighted average shares outstanding:
Basic		14,339		14,179			14,313		14,145			12,961			14,287
Diluted		14,611		14,179			14,657		14,145			13,369			14,702

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.

~~Table of Contents~~

Genesco Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income

(In thousands)

	Three Months Ended					Six Months Ended
	July 31, 2021		August 1, 2020			July 31, 2021			August 1, 2020			Three Months Ended
Net earnings (loss)	$	10,937	$	(19,036	)	$	19,815		$	(153,813	)
												April 30, 2022			May 1, 2021
Net earnings												$	4,947		$	8,878
Other comprehensive income (loss):
Postretirement liability adjustments, net of tax		21		(156	)		(23	)		(276	)		50			(44	)
Foreign currency translation adjustments		152		3,199			1,654			(7,616	)		(3,867	)		1,502
Total other comprehensive income (loss)		173		3,043			1,631			(7,892	)		(3,817	)		1,458
Comprehensive Income (Loss)	$	11,110	$	(15,993	)	$	21,446		$	(161,705	)
Comprehensive Income												$	1,130		$	10,336

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.

~~Table of Contents~~

Genesco Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(In thousands)


	Six Months Ended						Three Months Ended
	July 31, 2021			August 1, 2020			April 30, 2022			May 1, 2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss)	$	19,815		$	(153,813	)
Adjustments to reconcile net earnings (loss) to net cash provided by
Net earnings							$	4,947		$	8,878
Adjustments to reconcile net earnings to net cash provided by (used in)
operating activities:
Depreciation and amortization		21,634			24,210			10,551			10,889
Deferred income taxes		(9,994	)		7,129			(2,820	)		(10,054	)
Impairment of intangible assets		0			84,519
Impairment of long-lived assets		1,824			4,782			413			414
Restricted stock expense		3,967			4,449
Share-based compensation expense								3,239			1,912
Other		375			3,865			499			149
Changes in working capital and other assets and liabilities, net of acquisitions/dispositions:
Accounts receivable		66			(28,541	)		(9,977	)		(14,186	)
Inventories		(34,614	)		(1,111	)		(126,674	)		(9,031	)
Prepaids and other current assets		38,742			(26,384	)		(3,490	)		12,719
Accounts payable		36,681			55,678			92,061			14,784
Other accrued liabilities		57,009			4,516			(44,194	)		33,832
Other assets and liabilities		(9,730	)		67,304			(16,622	)		(6,120	)
Net cash provided by operating activities		125,775			46,603
Net cash provided by (used in) operating activities								(92,067	)		44,186
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		(19,545	)		(10,642	)		(15,397	)		(12,102	)
Proceeds from asset sales		9			100
Other		74			0
Net cash used in investing activities		(19,462	)		(10,542	)		(15,397	)		(12,102	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under revolving credit facility		23,363			214,821			2,609			15,736
Payments on revolving credit facility		(36,854	)		(20,239	)		(2,609	)		(4,678	)
Restricted shares withheld for taxes		(4,076	)		(1,224	)
Shares repurchased related to share repurchase plan								(11,280	)		0
Change in overdraft balances		(517	)		(13,019	)		0			(533	)
Other		(35	)		(1,087	)		(2	)		(35	)
Net cash provided by (used in) financing activities		(18,119	)		179,252			(11,282	)		10,490
Effect of foreign exchange rate fluctuations on cash		754			2,412			(1,156	)		379
Net Increase in Cash and Cash Equivalents		88,948			217,725
Net increase (decrease) in cash and cash equivalents								(119,902	)		42,953
Cash and cash equivalents at beginning of period		215,091			81,418			320,525			215,091
Cash and cash equivalents at end of period	$	304,039		$	299,143		$	200,623		$	258,044
Supplemental information:
Interest paid	$	1,256		$	2,171		$	327		$	538
Income taxes paid (refunded)		(29,485	)		3,784
Income taxes paid								225			127
Cash paid for amounts included in measurement of operating lease liabilities		96,248			25,795			57,278			45,532
Operating leased assets obtained in exchange for new operating lease liabilities		64,884			15,216
Operating lease assets obtained in exchange for new operating lease liabilities								13,935			54,247

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.

~~Table of Contents~~

Genesco Inc. and Subsidiaries

Condensed Consolidated Statements of Equity

(In thousands)

	Non- Redeemable Preferred Stock			Common Stock			Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Treasury Shares			Total Equity
Balance February 1, 2020	$	1,009		$	15,186		$	274,101		$	378,572		$	(31,668	)	$	(17,857	)	$	619,343
Net loss		—			—			—			(134,777	)		—			—			(134,777	)
Other comprehensive loss		—			—			—			—			(10,935	)		—			(10,935	)
Employee and non-employee share-based compensation		—			—			2,191			—			—			—			2,191
Other		—			(15	)		15			—			—			—			—
Balance May 2, 2020		1,009			15,171			276,307			243,795			(42,603	)		(17,857	)		475,822
Net loss		—			—			—			(19,036	)		—			—			(19,036	)
Other comprehensive income		—			—			—			—			3,043			—			3,043
Employee and non-employee restricted stock		—			—			2,258			—			—			—			2,258
Restricted stock issuance		—			461			(461	)		—			—			—			—
Restricted shares withheld for taxes		—			(64	)		64			(1,223	)		—			—			(1,223	)
Other		—			(86	)		86			—			—			—			—
Balance August 1, 2020	$	1,009		$	15,482		$	278,254		$	223,536		$	(39,560	)	$	(17,857	)	$	460,864


	Non- Redeemable Preferred Stock			Common Stock			Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Treasury Shares			Total Equity			Non- Redeemable Preferred Stock			Common Stock			Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Treasury Shares			Total Equity
Balance January 30, 2021	$	1,009		$	15,438		$	282,308		$	320,920		$	(35,059	)	$	(17,857	)	$	566,759		$	1,009		$	15,438		$	282,308		$	320,920		$	(35,059	)	$	(17,857	)	$	566,759
Net earnings		—			—			—			8,878			—			—			8,878			—			—			—			8,878			—			—			8,878
Other comprehensive income		—			—			—			—			1,458			—			1,458			—			—			—			—			1,458			—			1,458
Employee and non-employee share-based compensation		—			—			1,912			—			—			—			1,912
Share-based compensation expense																							—			—			1,912			—			—			—			1,912
Other		(181	)		6			176			—			—			—			1			(181	)		6			176			—			—			—			1
Balance May 1, 2021		828			15,444			284,396			329,798			(33,601	)		(17,857	)		579,008		$	828		$	15,444		$	284,396		$	329,798		$	(33,601	)	$	(17,857	)	$	579,008


																						Non- Redeemable Preferred Stock			Common Stock			Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Treasury Shares			Total Equity
Balance January 29, 2022																						$	827		$	14,256		$	291,444		$	350,206		$	(36,408	)	$	(17,857	)	$	602,468
Net earnings		—			—			—			10,937			—			—			10,937			—			—			—			4,947			—			—			4,947
Other comprehensive income		—			—			—			—			173			—			173
Employee and non-employee restricted stock		—			—			2,055			—			—			—			2,055
Other comprehensive loss																							—			—			—			—			(3,817	)		—			(3,817	)
Share-based compensation expense																							—			—			3,239			—			—			—			3,239
Restricted stock issuance		—			219			(219	)		—			—			—			—			—			78			(78	)		—			—			—			—
Restricted shares withheld for taxes		—			(64	)		64			(4,076	)		—			—			(4,076	)
Shares repurchased																							—			(104	)		—			(6,396	)		—			—			(6,500	)
Other		—			(2	)		2			—			—			—			—			(9	)		(13	)		23			—			—			—			1
Balance July 31, 2021	$	828		$	15,597		$	286,298		$	336,659		$	(33,428	)	$	(17,857	)	$	588,097
Balance April 30, 2022																						$	818		$	14,217		$	294,628		$	348,757		$	(40,225	)	$	(17,857	)	$	600,338

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.

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Genesco Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

Note 1

Summary of Significant Accounting Policies

Basis of Presentation

The Condensed Consolidated Financial Statements and Notes contained in this report are unaudited but reflect all adjustments, including normal recurring adjustments, necessary for a fair presentation of the results for the interim periods of the fiscal year ending January ~~29, 2022~~28, 2023 ("Fiscal ~~2022"~~2023") and of the fiscal year ended January ~~30, 2021~~29, 2022 ("Fiscal ~~2021"~~2022"). All subsidiaries are consolidated in the Condensed Consolidated Financial Statements. All significant intercompany transactions and accounts have been eliminated. The results of operations for any interim period are not necessarily indicative of results for the full year. The Condensed Consolidated Financial Statements and the related Notes have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and footnotes required by U.S. Generally Accepted Accounting Principles (“GAAP”) for complete financial statements. The Condensed Consolidated Balance Sheet as of January ~~30, 2021~~29, 2022 has been derived from the audited financial statements at that date. These Condensed Consolidated Financial Statements should be read in conjunction with our Consolidated Financial Statements and Notes for Fiscal ~~2021,~~2022, which are contained in our Annual Report on Form 10-K as filed with the SEC on March ~~31, 2021.~~23, 2022.

Nature of Operations

Genesco Inc. and its subsidiaries (collectively the "Company", "Genesco," "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 (“U.K.”) and the Republic of Ireland (“ROI”); through catalogs and e-commerce websites including the following: journeys.com, journeyskidz.com, journeys.ca, littleburgundyshoes.com, schuh.co.uk, schuh.ie, schuh.eu, johnstonmurphy.com, johnstonmurphy.ca, nashvillewarehouse.com and ~~littleburgundyshoes.com~~dockersshoes.com and at wholesale, primarily under our Johnston & Murphy brand, the licensed Levi's® brand, the licensed Dockers® brand, the licensed G.H. Bass® brand and other brands that we license for footwear. At ~~July 31, 2021,~~April 30, 2022, we operated ~~1,439~~1,414 retail stores in the U.S., Puerto Rico, Canada, the U.K. and the ROI.

During the three ~~and six~~ months ended ~~July 31,~~April 30, 2022 and May 1, 2021, ~~and August 1, 2020,~~ we operated 4 reportable business segments (not including corporate): (i) Journeys Group, comprised of the Journeys, Journeys Kidz and Little Burgundy retail footwear chains and e-commerce 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 and wholesale distribution of products under the Johnston & Murphy brand; and (iv) Licensed Brands, comprised of the licensed Dockers, Levi's, and G.H. Bass brands, as well as other brands we license for footwear.

Cash and Cash Equivalents

There were cash equivalents of $95.0 million as of April 30, 2022. There were 0 cash equivalents as of January 29, 2022 or May 1, 2021. Our $95.0 million of cash equivalents at April 30, 2022 were 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. Due to their short-term nature, the carrying amounts reported in the Condensed Consolidated Balance Sheets approximate the fair value of cash and cash equivalents.

Selling and Administrative Expenses

Wholesale costs of distribution are included in selling and administrative expenses on the Condensed Consolidated Statements of Operations in the amount of ~~$3.6~~$2.7 million and ~~$2.2 million for the second quarters of Fiscal 2022 and Fiscal 2021, respectively, and $7.2 million and $4.6~~$3.6 million for the first ~~six months~~quarters of Fiscal ~~2022~~2023 and Fiscal ~~2021,~~2022, respectively.

Retail occupancy costs recorded in selling and administrative expense were ~~$75.1~~$78.5 million and ~~$71.5 million for the second quarters of Fiscal 2022 and Fiscal 2021, respectively, and $145.9 million and $148.7~~$70.8 million for the first ~~six months~~quarters of Fiscal ~~2022~~2023 and Fiscal ~~2021,~~2022, respectively.

Advertising Costs

Advertising costs were ~~$23.5~~$22.1 million and ~~$14.1 million for the second quarters of Fiscal 2022 and Fiscal 2021, respectively, and $44.6 million and $28.6~~$21.1 million for the first ~~six months of Fiscal 2022 and Fiscal 2021, respectively.~~

~~Vendor Allowances~~

~~Vendor reimbursements of cooperative advertising costs recognized as a reduction of selling and administrative expenses were $2.4 million and $0.9 million for the second~~ quarters of Fiscal ~~2022~~2023 and Fiscal ~~2021, respectively, and $5.4 million and $2.7 million for the first six months of Fiscal~~ 2022, ~~and Fiscal 2021,~~ respectively. ~~During the first six months of each of Fiscal 2022 and Fiscal 2021, our cooperative advertising reimbursements received were not in excess of the costs incurred.~~

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Genesco Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

Note 1

Summary of Significant Accounting Policies, Continued

~~New Accounting Pronouncements~~

In December 2019, the Financial Accounting Standards Board issued ASU No. 2019-12, “Simplifying the Accounting for Income Taxes”. This guidance aims to simplify the accounting for income taxes by removing certain exceptions to the general principles within the current guidance and by clarifying and amending the current guidance. The guidance is effective for annual reporting periods, and interim periods within those years, beginning after December 15, 2020. We adopted ASU No. 2019-12 in the first quarter of Fiscal 2022. This guidance did not have a material impact on our Condensed Consolidated Financial Statements.

~~Note 2~~Vendor Allowances

~~COVID-19~~

~~In March 2020, the World Health Organization categorized the outbreak~~Vendor reimbursements of ~~COVID-19~~cooperative advertising costs recognized as a ~~pandemic. To help control the spread~~reduction of the virus and protect the health and safety of our employees and customers, we temporarily closed or modified operating models and hours of our retail stores in North America, the U.K. and the ROI beginning in March 2020 both in response to governmental requirements including “stay-at-home” orders and similar mandates and voluntarily, beyond the requirements of local government authorities. A portion of our store fleet remained closed during Fiscal 2021 and the first six months of Fiscal 2022. As of August 31, 2021, we are operating in substantially all locations.

Changes made in our operations, including temporary closures, combined with reduced customer traffic due to concerns over COVID-19, resulted in a material impact on our business since then. This prompted us to update our impairment analyses of our retail store portfolios and related lease right-of-use assets. For certain lower-performing stores, we compared the carrying value of store assets to undiscounted cash flows with updated assumptions on near-term profitability.

We evaluated our goodwill and indefinite-lived intangible assets for indicators of impairment at the end of each quarter of Fiscal 2021 and the quarters ended May 1, 2021 and July 31, 2021 of Fiscal 2022. During the first quarter of Fiscal 2021, such evaluation caused us to determine that, when considering the impact of COVID-19, indicators of impairment existed relating to the goodwill associated with Schuh Group and certain other trademarks. Therefore, we updated the goodwill impairment analysis for Schuh Group, and as a result, recorded a goodwill impairment charge of $79.3 million during the quarter ended May 2, 2020. In addition, we updated our impairment analysis for other intangible assets and, as a result, recorded a trademark impairment charge of $5.3 million during the quarter ended May 2, 2020. There were 0 impairment indicators for the quarters ended August 1, 2020, May 1, 2021 or July 31, 2021.

~~We evaluated our remaining tangible assets, particularly accounts receivable and inventory.~~ 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, such as COVID-19, as well as by customer specific factors. We establish an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends and other information.

We also record reserves for obsolete and slow-moving inventory and for estimated shrinkage between physical inventory counts. We recorded incremental inventory reserve provisions as a result of excess inventory due to the impact of COVID-19 on retail traffic and demand for certain products. Depending on future customer behavior, among other factors, we may incur additional inventory reserve provisions.

Since the first quarter of Fiscal 2021, we have withheld certain contractual rent payments generally correlating with time periods when our stores were closed and/or correlating with sales declines from Fiscal 2020. We continue to recognize rent expense in accordance with the contractual terms. We are working with landlords in various markets seeking commercially reasonable lease concessions given the current environment, and while a number of agreements have been reached, some negotiations remain ongoing. In cases where the agreements do not result in a substantial increase in the rights of the lessor or the obligation of the lessee such that the total cash flows of the modified lease are substantially the same or less than the total cash flows of the existing lease, we have not reevaluated the contract terms. For these lease agreements, we have recognized a reduction in variable rent expense in the period that the concession was granted.

On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), which among other things, provided employer payroll tax credits for wages paid to employees who were unable to work during the COVID-19 pandemic and options to defer payroll tax payments. Based on our evaluation of the CARES Act, we qualified for certain employer payroll tax credits as well

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~~Genesco Inc. and Subsidiaries~~

~~Notes to Condensed Consolidated Financial Statements (unaudited)~~

~~Note 2~~

~~COVID-19, Continued~~

as the deferral of payroll and other tax payments in the future, which were treated as government subsidies to offset related operating expenses. During the quarters ended May 2, 2020, August 1, 2020, May 1, 2021 and July 31, 2021, qualified payroll tax credits under the CARES Act and other foreign subsidy programs reduced our selling and administrative expenses ~~by approximately $7.0 million, $3.8 million, $5.0~~were $3.2 million and ~~$2.5~~$3.0 million ~~respectively, on our Condensed Consolidated Statements of Operations. We intend to continue to defer qualified payroll and other tax payments as permitted by the CARES Act.~~

S~~avings from the government program in the U.K. have provided property tax relief~~ for the first quarters ~~ended May 1, 2021~~of Fiscal 2023 and ~~July 31, 2021~~Fiscal 2022, respectively. During the first three months of each of Fiscal 2023 and Fiscal 2022, our cooperative advertising reimbursements received were not in excess of the costs incurred.

of approximately $4.7 million and $3.8 million, respectively. Other government relief programs in the U.K., ROI and Canada provided savings for the quarters ended May 1, 2021 and July 31, 2021 of approximately $3.2 million and $1.2 million, respectively.

COVID-19 Pandemic

The COVID-19 pandemic ~~continues to evolve. The emergence of variants from~~has created significant public health concerns as well as economic disruption, uncertainty, and volatility which may negatively affect our business operations. As a result, if the ~~original strain, its economic impact~~pandemic persists or worsens, our accounting estimates and ~~actions taken~~assumptions could be impacted in ~~response thereto, including, without limitation,~~ ~~the timing~~subsequent interim reports and ~~availability of effective medical treatments~~upon final determination at year-end, and ~~the ongoing rollout and acceptance of vaccines in response to the COVID-19 pandemic,~~ ~~may result in prolonged or recurring periods of store closures and modified operating schedules and may result in~~it is reasonably possible such changes in customer behaviors, including a potential reduction in consumer discretionary spending in our stores and online. These may lead to increased asset recovery and valuation risks, such as impairment of our store and other assets and an inability to realize deferred tax assets due to sustaining losses in certain jurisdictions. The uncertainties in the global economycould be significant.

New Accounting Pronouncements

We do not currently have and are likely to continue to impact the financial viability of our suppliers, and other business partners, which have interrupted and may continue to interrupt, our supply chain, limit our ability to collect receivables and require other changes to our operations. These and other factors have and may continue to adversely impact our net sales, gross margin, operating income and earnings per share financial measures.any new accounting pronouncements pending adoption.

Note 32

Goodwill and Other Intangible Assets

The changes in the carrying amount of goodwill by segment were as follows:


(In thousands)	Journeys Group		Licensed Brands Group			Total Goodwill		Journeys Group			Licensed Brands Group			Total Goodwill
Balance, January 30, 2021	$	10,082	$	28,468		$	38,550
Balance, January 29, 2022								$	10,087		$	28,469		$	38,556
Effect of foreign currency exchange rates		238		(1	)		237		(65	)		(4	)		(69	)
Balance, July 31, 2021	$	10,320	$	28,467		$	38,787
Balance, April 30, 2022								$	10,022		$	28,465		$	38,487

Other intangibles by major classes were as follows:


	Trademarks ⁽¹⁾				Customer Lists						Other						Total						Trademarks				Customer Lists						Other						Total
(In thousands)	July 31, 2021		Jan. 30, 2021		July 31, 2021			Jan. 30, 2021			July 31, 2021			Jan. 30, 2021			July 31, 2021			Jan. 30, 2021			Apr. 30, 2022		Jan. 29, 2022		Apr. 30, 2022			Jan. 29, 2022			Apr. 30, 2022			Jan. 29, 2022			Apr. 30, 2022			Jan. 29, 2022
Gross other intangibles	$	26,860	$	26,443	$	6,640		$	6,617		$	400		$	400		$	33,900		$	33,460		$	24,521	$	25,935	$	6,498		$	6,586		$	400		$	400		$	31,419		$	32,921
Accumulated amortization		0		0		(2,437	)		(2,131	)		(400	)		(400	)		(2,837	)		(2,531	)		0		0		(2,721	)		(2,666	)		(400	)		(400	)		(3,121	)		(3,066	)
Net Other Intangibles	$	26,860	$	26,443	$	4,203		$	4,486		$	0		$	0		$	31,063		$	30,929		$	24,521	$	25,935	$	3,777		$	3,920		$	0		$	0		$	28,298		$	29,855

⁽¹⁾~~Includes a $23.4 million trademark at July 31, 2021 related to Schuh Group and $3.4 million trademark related to Journeys Group.~~

Note 43

Asset Impairments and Other Charges

We recorded a pretax gain of $0.3 million in the first quarter of Fiscal 2023, including a gain of $0.7 million for the pension plan termination, partially offset by $0.4 million for retail store asset impairments.

We recorded pretax charges of ~~$7.1~~$2.7 million in the ~~second~~first quarter of Fiscal 2022, including ~~$6.2~~$2.3 million for professional fees related to actions of an activist shareholder and ~~$1.4 million~~$0.4 for retail store asset ~~impairments, partially offset by a $0.6 million insurance gain. We recorded~~impairments.

1110

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Genesco Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

Note 4

~~Asset Impairments~~Inventories and Other ~~Charges, Continued~~Current Accrued Liabilities

~~pretax charges~~

Inventory


(In thousands)	April 30, 2022		January 29, 2022
Wholesale finished goods	$	40,078	$	28,432
Retail merchandise		361,401		249,768
Total Inventories	$	401,479	$	278,200

Other Current Accrued Liabilities


(In thousands)	April 30, 2022		January 29, 2022
Accrued employee compensation(1)	$	16,887	$	60,575
Accrued other taxes		14,918		17,631
Accrued income taxes		1,640		2,385
Provision for discontinued operations		486		491
Other accrued liabilities		49,951		53,074
Total Other Current Accrued Liabilities	$	83,882	$	134,156

(1) The accrual for performance-based incentive compensation of ~~$9.7~~$48.1 million as of January 29, 2022 was paid in the first six months of Fiscal 2022, including $8.5 million for professional fees related to actions of an activist shareholder and $1.8 million for retail store asset impairments, partially offset by a $0.6 million insurance gain. We recorded pretax charges of $1.7 million in the second quarter of Fiscal 2021 for retail store asset impairments. We recorded pretax charges of $9.6 million in the first six months of Fiscal 2021, including $5.3 million for trademark impairments and $4.8 million for retail store asset impairments, partially offset by a $0.4 million gain for the release of an earnout related to the Togast acquisition.2023.

Note 5

~~Inventories~~

(In thousands)

July 31, 2021

January 30, 2021

Wholesale finished goods

$
12,515

$
27,851

Retail merchandise

313,962

263,115

Total Inventories

$
326,477

$
290,966

~~Note 6~~

Fair Value

Fair Value of Financial Instruments

The carrying amounts and fair values of our financial instruments at ~~July 31, 2021~~April 30, 2022 and January ~~30, 2021~~29, 2022 are as follows:


Fair Values
(In thousands)	July 31, 2021				January 30, 2021				April 30, 2022				January 29, 2022
	Carrying Amount		Fair Value		Carrying Amount		Fair Value		Carrying Amount		Fair Value		Carrying Amount		Fair Value
U.S. Revolver Borrowings	$	15,851	$	16,024	$	32,986	$	33,612	$	14,712	$	14,679	$	15,679	$	15,679
UK Revolver Borrowings		4,171		4,181		0		0

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 within the fair value hierarchy.

As of ~~July 31, 2021,~~April 30, 2022, we have ~~$10.8~~$3.5 million of long-lived assets held and used which were measured using Level 3 inputs within the fair value hierarchy. As of April 30, 2022, we have $11.1 million of investments held and used which were measured using Level 1 inputs within the fair value hierarchy.

Genesco Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

Note 76

Earnings Per Share

Weighted-average number of shares used to calculate earnings per share are as follows:


	Three Months Ended				Six Months Ended				Three Months Ended
(Shares in thousands)	July 31, 2021		August 1, 2020		July 31, 2021		August 1, 2020		April 30, 2022		May 1, 2021
Weighted-average number of shares - basic		14,339		14,179		14,313		14,145		12,961		14,287
Common stock equivalents		272		0		344		0		408		415
Weighted-average number of shares - diluted		14,611		14,179		14,657		14,145		13,369		14,702

~~Due~~We repurchased 102,895 shares during the first quarter of Fiscal 2023 at a cost of $6.5 million, or $63.17 per share. We accrued $4.8 million of share repurchases in the fourth quarter of Fiscal 2022 due to timing of the ~~loss from continuing operations in~~cash settlement and it is included on the Condensed Consolidated Statements of Cash Flows for the three months ~~and six months~~ ended ~~August 1, 2020, share-based awards are excluded from~~April 30, 2022. We have $100.3 million remaining as of April 30, 2022 under our expanded share repurchase authorization announced in February 2022. We did 0t repurchase any shares during the ~~diluted earnings~~first quarter of Fiscal 2022. During the second quarter of Fiscal 2023, through June 8, 2022, we have repurchased 175,000 shares at a cost of $10.1 million, or $57.94 per ~~share calculation for those periods because they would be antidilutive.~~share.

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~~Genesco Inc. and Subsidiaries~~

~~Notes to Condensed Consolidated Financial Statements (unaudited)~~

Note 87

Long-Term Debt


(In thousands)	July 31, 2021		January 30, 2021		April 30, 2022		January 29, 2022
U.S. revolver borrowings	$	15,851	$	32,986	$	14,712	$	15,679
U.K. revolver borrowings		4,171		0
Total long-term debt		20,022		32,986		14,712		15,679
Current portion		0		0		0		0
Total Noncurrent Portion of Long-Term Debt	$	20,022	$	32,986	$	14,712	$	15,679

We were in compliance with all the relevant terms and conditions of the Credit Facility and Facility Letter as of ~~July 31, 2021.~~April 30, 2022.

~~During the second quarter of Fiscal 2022, we paid off the $17.5 million First-in, Last-out tranche of our Credit Facility.~~

Note 98

Legal Proceedings

Environmental Matters

~~New York State Environmental Matters~~

~~In August 1997, the New York State Department of Environmental Conservation (“NYSDEC”)~~The Company has legacy obligations including environmental monitoring and ~~the Company~~reporting costs related to: (i) a 2016 Consent Judgment 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 United States Environmental Protection Agency involving 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~~1969 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~~York; 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(ii) a 2010 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 2 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~~Decree with the ~~Village providing for the Village~~Michigan Department of Natural Resources and Environment relating to ~~continue to operate and maintain the well head treatment systems~~our former Volunteer Leather Company facility 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 didWhitehall, Michigan. We do not ~~have, and we~~ expect that ~~the Consent Judgment~~future obligations related to either of these sites 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 EPA 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.

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~~Genesco Inc. and Subsidiaries~~

~~Notes to Condensed Consolidated Financial Statements (unaudited)~~

~~Note 9~~

~~Legal Proceedings, Continued~~

~~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 ~~$1.4~~$1.4 million as of ~~July 31, 2021, $1.5 million as~~each of April 30, 2022, January ~~30, 2021~~29, 2022 and ~~$1.5 million as of August~~May 1, ~~2020.~~2021. 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 Condensed Consolidated Balance Sheets because ~~it relates~~they relate to former facilities operated by us. We have made pretax accruals for certain of these contingencies which were not material for the first ~~six~~three months of Fiscal ~~2022 and~~2023 or Fiscal ~~2021.~~2022. These charges are included in ~~gain (loss)~~loss from discontinued operations, net in the Condensed Consolidated Statements of Operations and represent changes in estimates.

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 statements.

Genesco Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

Note 109

Commitments

As part of our ~~Togast~~Licensed Brands business, we have a commitment to Samsung C&T America, Inc. (“Samsung”) related to the ultimate sale and valuation of inventories owned by Samsung. If product is sold below Samsung’s cost, we are required to pay to Samsung the difference between the sales price and its cost. At ~~July 31, 2021,~~April 30, 2022, the inventory owned by Samsung had a historical cost of ~~$7.8~~$16.7 million. ~~As of July 31, 2021, we believe that we have appropriately accounted for any differences between the fair value of the Samsung inventory and Samsung’s historical cost.~~

~~Table of Contents~~

~~Genesco Inc. and Subsidiaries~~

~~Notes to Condensed Consolidated Financial Statements (unaudited)~~

Note 1110

Business Segment Information

Three Months Ended July 31, 2021

Three Months Ended April 30, 2022
(In thousands)	Journeys Group		Schuh Group		Johnston & Murphy Group		Licensed Brands			Corporate & Other			Consolidated			Journeys Group		Schuh Group			Johnston & Murphy Group		Licensed Brands			Corporate & Other			Consolidated
Sales	$	346,275	$	106,079	$	61,159	$	41,966		$	0		$	555,479		$	314,445	$	88,159		$	71,016	$	47,900		$	0		$	521,520
Intercompany sales		0		0		0		(296	)		—			(296	)		0		0			0		(772	)		0			(772	)
Net sales to external customers	$	346,275	$	106,079	$	61,159	$	41,670		$	—		$	555,183		$	314,445	$	88,159		$	71,016	$	47,128		$	0		$	520,748
Segment operating income (loss)	$	30,368	$	3,623	$	3,951	$	991		$	(18,962	)	$	19,971		$	14,930	$	(2,746	)	$	550	$	3,793		$	(8,564	)	$	7,963
Asset impairments and other ⁽¹⁾		0		0		0		0			(7,070	)		(7,070	)		0		0			0		0			283			283
Operating income (loss)		30,368		3,623		3,951		991			(26,032	)		12,901			14,930		(2,746	)		550		3,793			(8,281	)		8,246
Other components of net periodic benefit cost		0		0		0		0			(56	)		(56	)		0		0			0		0			(98	)		(98	)
Interest expense		0		0		0		0			(752	)		(752	)
Interest income		0		0		0		0			135			135
Interest expense, net																	0		0			0		0			(297	)		(297	)
Earnings (loss) from continuing operations before income taxes	$	30,368	$	3,623	$	3,951	$	991		$	(26,705	)	$	12,228		$	14,930	$	(2,746	)	$	550	$	3,793		$	(8,676	)	$	7,851
Total assets ⁽²⁾	$	765,100	$	247,833	$	132,639	$	50,438		$	462,610		$	1,658,620		$	766,780	$	195,591		$	146,914	$	72,114		$	367,043		$	1,548,442
Depreciation and amortization		7,107		1,813		1,191		270			364			10,745			7,238		1,590			1,122		261			340			10,551
Capital expenditures		4,923		529		1,003		215			773			7,443			6,568		2,118			1,906		279			4,526			15,397

⁽¹⁾(1) Asset impairments and other includes a ~~$6.2~~$0.3 million ~~charge for professional fees related to~~gain which includes a $0.7 million gain on the ~~actions~~termination of ~~an activist shareholder and~~the pension plan, partially offset by a ~~$1.4~~$0.4 million charge for retail store asset impairments, which includes ~~$0.6~~$0.2 million in Journeys Group ~~$0.7~~and $0.2 million infor Schuh ~~Group and $0.1 million in Johnston & Murphy Group, partially offset by a $0.6 million insurance gain.~~Group.

⁽²⁾(2) Of our ~~$812.9~~$728.4 million of long-lived assets, ~~$129.4~~$96.9 million and ~~$30.3~~$23.4 million relate to long-lived assets in the U.K. and Canada, respectively.

1513

~~Table of Contents~~

Genesco Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

Note 1110

Business Segment Information, Continued

Three Months Ended August 1, 2020

Three Months Ended May 1, 2021
(In thousands)	Journeys Group		Schuh Group			Johnston & Murphy Group			Licensed Brands			Corporate & Other			Consolidated			Journeys Group		Schuh Group			Johnston & Murphy Group			Licensed Brands			Corporate & Other			Consolidated
Sales	$	276,631		71,732		$	24,097		$	19,114		$	0		$	391,574		$	376,548	$	68,711		$	48,762		$	44,832		$	0		$	538,853
Intercompany sales		0		0			0			(357	)		—			(357	)		0		0			0			(158	)		0			(158	)
Net sales to external customers	$	276,631	$	71,732		$	24,097		$	18,757		$	—		$	391,217		$	376,548	$	68,711		$	48,762		$	44,674		$	0		$	538,695
Segment operating income (loss)	$	10,160	$	(6,838	)	$	(18,243	)	$	(1,222	)	$	(4,118	)	$	(20,261	)	$	33,124	$	(3,847	)	$	(3,180	)	$	2,561		$	(10,461	)	$	18,197
Asset impairments and other ⁽¹⁾		0		0			0			0			(1,733	)		(1,733	)		0		0			0			0			(2,670	)		(2,670	)
Operating income (loss)		10,160		(6,838	)		(18,243	)		(1,222	)		(5,851	)		(21,994	)		33,124		(3,847	)		(3,180	)		2,561			(13,131	)		15,527
Other components of net periodic benefit income		0		0			0			0			182			182			0		0			0			0			39			39
Interest expense		0		0			0			0			(1,965	)		(1,965	)
Interest income		0		0			0			0			47			47
Interest expense, net																			0		0			0			0			(729	)		(729	)
Earnings (loss) from continuing operations before income taxes	$	10,160	$	(6,838	)	$	(18,243	)	$	(1,222	)	$	(7,587	)	$	(23,730	)	$	33,124	$	(3,847	)	$	(3,180	)	$	2,561		$	(13,821	)	$	14,837
Total assets ⁽²⁾	$	855,201		249,666		$	185,375		$	84,730		$	395,056		$	1,770,028		$	765,228	$	244,918		$	146,736		$	63,505		$	441,980		$	1,662,367
Depreciation and amortization		7,271		2,318			1,452			356			390			11,787			7,282		1,868			1,121			284			334			10,889
Capital expenditures		2,660		145			891			103			101			3,900			8,850		698			1,559			265			730			12,102

⁽¹⁾(1) Asset impairments and other includes a ~~$1.7 million charge for retail store asset impairments, which includes $0.4 million in Schuh Group and $1.3 million in Journeys Group.~~

⁽²⁾ ~~Of our $890.8 million of long-lived assets, $151.3 million and $39.8 million relate to long-lived assets in the U.K. and Canada, respectively.~~

Six Months Ended July 31, 2021

(In thousands)

Journeys
Group

Schuh
Group

Johnston
& Murphy
Group

Licensed
Brands

Corporate
& Other

Consolidated

Sales

$
722,823

$
174,790

$
109,921

$
86,798

$
0

$
1,094,332

Intercompany sales

0

0

0

(454
)

—

(454
)
Net sales to external customers

$
722,823

$
174,790

$
109,921

$
86,344

$
—

$
1,093,878

Segment operating income (loss)

$
63,492

$
(224
)

$
771

$
3,552

$
(29,423
)

$
38,168

Asset impairments and other⁽¹⁾

0

0

0

0

(9,740
)

(9,740
)
Operating income (loss)

63,492

(224
)

771

3,552

(39,163
)

28,428

Other components of net periodic benefit cost

0

0

0

0

(17
)

(17
)
Interest expense

0

0

0

0

(1,621
)

(1,621
)
Interest income

0

0

0

0

275

275

Earnings (loss) from continuing
operations before income taxes

$
63,492

$
(224
)

$
771

$
3,552

$
(40,526
)

$
27,065

Depreciation and amortization

$
14,389

$
3,681

$
2,312

$
554

$
698

$
21,634

Capital expenditures

13,773

1,227

2,562

480

1,503

19,545

⁽¹⁾ ~~Asset impairments and other includes an $8.5~~$2.3 million charge for professional fees related to the actions of an activist shareholder and a ~~$1.8~~$0.4 million charge for retail store asset impairments, which includes ~~$0.2~~$0.2 million in Journeys Group, $0.1 million in the Johnston & Murphy Group ~~$0.8~~and $0.1 million in Schuh ~~Group~~Group.

(2) Of our $848.3 million of long-lived assets, $135.4 million and ~~$0.8~~$34.0 million relate to long-lived assets in ~~Journeys Group, partially offset by a $0.6 million insurance gain.~~

~~Table of Contents~~

~~Genesco Inc.~~the U.K. and ~~Subsidiaries~~Canada, respectively.

~~Notes to Condensed Consolidated Financial Statements (unaudited)~~

~~Note 11~~

~~Business Segment Information, Continued~~

Six Months Ended August 1, 2020

(In thousands)

Journeys
Group

Schuh
Group

Johnston
& Murphy
Group

Licensed
Brands

Corporate
& Other

Consolidated

Sales

$
445,556

$
118,897

$
62,946

$
43,795

$
0

$
671,194

Intercompany sales

0

0

0

(745
)

—

(745
)
Net sales to external customers

$
445,556

$
118,897

$
62,946

$
43,050

$
—

$
670,449

Segment operating loss

$
(26,923
)

$
(21,924
)

$
(27,827
)

$
(3,723
)

$
(8,762
)

$
(89,159
)
Goodwill impairment⁽¹⁾

0

0

0

0

(79,259
)

(79,259
)
Asset impairments and other⁽²⁾

0

0

0

0

(9,594
)

(9,594
)
Operating loss

(26,923
)

(21,924
)

(27,827
)

(3,723
)

(97,615
)

(178,012
)
Other components of net periodic benefit income

0

0

0

0

306

306

Interest expense

0

0

0

0

(3,014
)

(3,014
)
Interest income

0

0

0

0

240

240

Earnings (loss) from continuing
operations before income taxes

$
(26,923
)

$
(21,924
)

$
(27,827
)

$
(3,723
)

$
(100,083
)

$
(180,480
)
Depreciation and amortization

$
14,724

$
4,957

$
2,928

$
823

$
778

$
24,210

Capital expenditures

5,852

1,838

2,568

75

309

10,642

⁽¹⁾ ~~Goodwill impairment of $79.3 million is related to Schuh Group.~~

⁽²⁾Asset impairments and other includes a $4.8 million charge for retail store asset impairments, which includes $1.2 million in Johnston & Murphy, $1.6 million in Schuh Group and $2.0 million in Journeys Group, and a $5.3 million trademark impairment, which includes $4.9 million in Journeys Group and $0.4 million in Johnston & Murphy Group.

~~Table of Contents~~

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

This section discusses management’s view of the financial condition, results of operations and cash flows of the Company. This section should be read in conjunction with the information contained in our Annual Report on Form 10-K for the fiscal year ended January ~~30, 2021,~~29, 2022, including the Risk Factors section, and information contained elsewhere in this Quarterly Report on Form 10-Q, including the ~~condensed consolidated financial statements~~Condensed Consolidated Financial Statements and notes to those financial statements. The results of operations for any interim period may not necessarily be indicative of the results that may be expected for any future interim period or the entire fiscal year.

Summary of Results of Operations

Our net sales ~~increased 41.9%~~decreased 3.3% to ~~$555.2~~$520.7 million for the ~~second~~first quarter of Fiscal ~~2022~~2023 compared to ~~$391.2~~$538.7 million for the ~~second~~first quarter of Fiscal ~~2021. This~~2022. The sales ~~increase~~decrease was driven by ~~increased store~~decreased comparable direct sales, resulting from the reopening of stores that were closed during the second quarter of Fiscal 2021 due to the COVID-19 pandemic, increased wholesale sales and the favorable impact of foreign exchange rates, partially offset by increased sales in the wholesale and store channels and a ~~23% decrease in digital comparable sales. Stores~~difficult comparison due to U.S. government stimulus-fueled consumer spending last year. The store channel increase was led by our Schuh Group business as its stores were only open ~~approximately 97%~~19% of possible days in the ~~second~~first quarter of Fiscal 2022 as compared to 69% in the second quarter of Fiscal 2021. We have not disclosed comparable sales for the second quarter of Fiscal 2022 or Fiscal 2021, as we believe that overall sales is a more meaningful metric during these periods due to the impact of the COVID-19 pandemic and our policy of removing any store closed for seven consecutive days from comparable sales. See below, under the heading “Comparable Sales”, for our definition of comparable sales.

last year. Journeys Group sales ~~increased 25%,~~decreased 16% in the first quarter this year, as Journeys was the beneficiary of government stimulus-fueled consumer spending in the first quarter last year, while Schuh Group sales increased ~~48%~~28%, Johnston & Murphy Group sales increased ~~154%~~46% and Licensed Brands sales increased ~~122%~~5% during the ~~second~~first quarter of Fiscal ~~2022~~2023 compared to the same quarter of Fiscal ~~2021.~~ 2022.

Gross margin as a percentage of net sales increased to ~~49.1%~~48.3% during the ~~second~~first quarter of Fiscal ~~2022,~~2023, compared to ~~42.7%~~47.8% for the ~~second~~first quarter of Fiscal ~~2021.~~2022. This reflects increased gross margin as a percentage of net sales in all of our operating business units except Johnston & Murphy Group, primarily due to ~~fewer markdowns at Journeys Group, Schuh Group and Johnston & Murphy retail and~~ lower shipping and warehouse expense as a result of lower e-commerce penetration, increased full-price selling and price increases partially offset by ~~a shift in~~ the channel mix impact of ~~our businesses. The lower shipping~~increased wholesale sales and ~~warehouse expense in the second quarter this year is~~increased freight and logistics costs as a result of ~~reduced e-commerce penetration in Fiscal 2022 as a larger percentage of retail stores were open in Fiscal 2022 compared to Fiscal 2021.~~ supply chain challenges.

Selling and administrative expenses as a percentage of net sales ~~decreased~~increased to ~~45.5%~~46.8% of net sales during the ~~second~~first quarter of Fiscal 2023 from 44.5% for the first quarter of Fiscal 2022, ~~from 47.9% for the second quarter~~reflecting increased expenses as a percentage of ~~Fiscal 2021, reflecting~~net sales at Journeys Group and Schuh Group, partially offset by decreased expenses as a percentage of net sales at Johnston & Murphy Group and Licensed Brands. The overall increase in ~~all of our operating business units. The decrease~~expenses as a percentage of net sales ~~in expenses this year was primarily~~is due to ~~reduced~~more normalized occupancy expense partially offset by increased performance-based compensation expense. In Fiscal 2021, we did not record any performance-based compensation expense. The reduction in occupancy expense is driven in part by benefits from our ongoing lease initiative. Operating margin was 2.3% for the second quarter of Fiscal 2022 compared to (5.6)% in the second quarter of Fiscal 2021, reflecting increased operating margin in all of our operating business units as a result of the one-time benefits for rent credits and government tax relief to the COVID-19 pandemic in the U.K. in the first quarter last year, as well as increased ~~gross~~selling salaries and compensation expense, partially offset by decreased performance-based compensation expense.

Operating margin ~~as a percentage~~was 1.6% for the first quarter of ~~net sales and~~Fiscal 2023 compared to 2.9% in the first quarter of Fiscal 2022, reflecting decreased operating margin in Journeys Group, partially offset by improved operating margins in all our other operating business units. The decrease in operating margin for the first quarter this year compared to the first quarter last year was driven by more normalized expenses as a percentage of net sales.

Significant Developments

~~COVID-19 Update~~

In March 2020, the World Health Organization categorized the outbreak of COVID-19 as a pandemic. As a result, and 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 have taken several precautionary measures and adjusted our operational needs, including:~~

•

~~On March 18, 2020, we temporarily closed our North American retail stores.~~

•

~~On March 19, 2020, we borrowed $150.0 million under our Credit Facility~~ ~~as a precautionary measure to ensure funds were available to meet our obligations for a substantial period of time in response~~

COVID-19

We closely monitored, and will continue to closely monitor, the COVID-19 pandemic that caused public health officials to recommend precautions that would mitigate the spread of the virus, including “stay-at-home” orders and similar mandates and warning the public against congregating in heavily populated areas such as malls and shopping centers. We paid down the $150.0 million on September 10, 2020.

•

On March 19, 2020, 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 included only a Facility C revolving credit agreement of £19.0 million, bore interest at LIBOR plus 2.2% per annum and expired in September 2020. In March 2020, we borrowed £19.0 million ~~as a precautionary measure in response to the COVID-19 pandemic. The U.K. A&R Agreement was replaced with the Facility Letter in October 2020~~ ~~and the outstanding borrowings in the amount of £19.0 million were repaid.~~

•

~~On March 23, 2020, we temporarily closed our stores in the U.K. and the ROI.~~

•

On March 26, 2020, we temporarily closed our U.K. e-commerce business. Effective April 3, 2020, our U.K.-based Schuh business announced that it had reopened its e-commerce operations in compliance with government health and safety practices.

•

On March 27, 2020, we announced that we were 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 for the executive team and select employees and reduced the cash compensation for our Board of Directors. In addition, we furloughed all of our full-time store employees in North America and our store and distribution center employees in the U.K. We also furloughed employees

~~Table of Contents~~

~~and reduced headcount in our corporate offices, call centers and distribution centers. In the aggregate, these actions resulted in a temporary reduction of our workforce by 90%.~~

•

During a portion of the first and second quarters of Fiscal 2021, we extended payment terms with suppliers, managed inventory by reducing future receipts and reduced planned capital expenditures by over 50%. ~~For new receipts as of August 1, 2020, we have restored contractual payment terms with suppliers.~~

•

~~On June 5, 2020, we~~ entered into a Second Amendment to our Credit Facility to, among other things, increase the Total Commitments (as defined in the Credit Facility) for the revolving loans from $275.0 million to $332.5 million, establish a First-in, Last-out (“FILO”) tranche of indebtedness of $17.5 million, for $350.0 million of total capacity.

•

On June 25, 2020, our Board of Directors considered the Company’s financial results to date and that more than 90% of the Company’s stores were expected to be reopened by June 30, 2020, and decided to restore going forward a portion of the compensation of the executive team and select employees whose compensation had been reduced on March 27, 2020. In addition, the cash compensation of our Board of Directors, which had also been reduced on March 27, 2020 was partially restored.

•

In October 2020, our Board of Directors restored going forward the remaining portion of the compensation of the executive team and select employees whose compensation had been reduced on March 27, 2020 as well as the compensation of the Board of Directors.

•

On October 9, 2020, Schuh entered into the Facility Letter with Lloyds under the U.K.'s Coronavirus Large Business Interruption Loan Scheme pursuant to which Lloyds made available a revolving credit facility (“RCF”) of £19.0 million for the purpose of refinancing Schuh's existing indebtedness with Lloyds. The RCF expires in October 2023 and bears interest at 2.5% over the Bank of England Base Rate. As of July 31, 2021, we have borrowed $4.2 million or £3.0 million under the Facility Letter.

•

During the fourth quarter of Fiscal 2021, another lockdown in the U.K. and the ROI disrupted the Schuh Group business with stores closed for approximately 80% of possible days in the first quarter of Fiscal 2022. All Schuh Group stores had re-opened as of the end of the second quarter of Fiscal 2022.

•

During the fourth quarter of Fiscal 2021, a second lockdown in several provinces in Canada disrupted business in some of the Journeys, Little Burgundy and Johnston & Murphy stores. All impacted stores in Canada had re-opened as of the end of the second quarter of Fiscal 2022.

•

~~In December 2020, the Company returned the compensation to select employees other than the executive team whose compensation had been reduced on March 27, 2020.~~

•

~~On June 7, 2021 we paid off the $17.5 million FILO loan.~~

As of August 31, 2021, we are operating in substantially all of our locations. All store locations are operating under enhanced measures to ensure the health and safety of employees and customers, including providing hand sanitizer in multiple locations throughout each store for customer and employee use, enhanced cleaning and sanitation protocols, reconfigured sales floors to promote physical distancing and modified employee and customer interactions to limit contact. In Journeys stores, it is required for employees and recommended for customers to wear masks. In most of the Schuh stores, it is required for both employees and customers to wear masks. In Johnston & Murphy shops and factory stores, it is recommended for employees and customers to wear masks.

~~As a result of the economic and business~~ impact of the COVID-19 pandemic ~~we revised certain accounting estimates and judgments as discussed in~~on all facets of our business, including the ~~following paragraphs. Given the ongoing and evolving economic and business~~ impact of the COVID-19 pandemic, we may be required to further revise certain accounting estimates and judgments such as, but not limited to, those related to the valuation of inventory, goodwill, long-lived assets and deferred tax assets, which could have a material adverse effect on our ~~financial position~~employees, customers, suppliers, vendors, business partners and ~~results of operations.~~

~~Since~~supply chain networks. Although we believe our sales were affected in the first quarter of Fiscal ~~2021,~~2023 by the global and domestic supply chain challenges, primarily in the form of lower merchandise in-stock levels in our Journeys retail stores but also in our Johnston & Murphy stores, we have ~~withheld certain contractual rent payments generally correlating with time periods when~~seen some improvement in our ~~stores were closed and/or correlating with sales declines from~~in-stock levels by the end of our first quarter of Fiscal ~~2020. We~~2023. These supply chain challenges remain ongoing and there can be no assurance that we will continue to ~~recognize rent expense~~experience improvements in ~~accordance with~~our in-stock levels or that in-stock levels will reach the contractual terms. We have been working with landlords in various markets seeking commercially reasonable lease concessions given the current environment, and while a number of agreements have been reached, some negotiations remain ongoing. In cases where the agreements do not result in a substantial increase in the rights of the lessor or the obligation of the lessee such that the total cash flows of the modified leaseoptimal levels to satisfy demand.

There are substantially the same or less than the total cash flows of the existing lease, we have not reevaluated the contract terms. For these lease agreements, we have recognized a reduction in variable rent expense in the period that the concession was granted. During the quarters ended May 1, 2021 and July 31, 2021, we have recognized approximately $6.1 million and $2.5 million, respectively, in rent savings which are related to abatements and temporary rent relief.

~~On March 27, 2020, the U.S. government enacted the CARES Act, which among other things, provided employer payroll tax credits for wages paid to employees who were unable to work during~~numerous uncertainties surrounding the COVID-19 pandemic and ~~options~~its impact on the economy and our business, as further described in the Risk Factors section under Part I, Item 1A of our Fiscal 2022 Form 10-K, which make it difficult to ~~defer payroll tax payments. Based~~predict the impact on our ~~evaluation~~business, financial position, or results of operations in Fiscal 2023 and beyond. We cannot predict these uncertainties, or the CARES Act, we qualified for certain employer payroll tax credits as well as the deferral of payroll and other tax payments in the future, which were treated as government subsidies to offset related operating expenses. During the quarters ended May 2, 2020, August 1, 2020, May 1, 2021 and July 31, 2021, qualified payroll tax credits under the CARES Act and other foreign subsidy programs reduced our selling and administrative expenses by approximately $7.0 million, $3.8 million, $5.0 million and $2.5 million, respectively,corresponding impacts on our ~~Condensed Consolidated Statements of Operations. We intend to continue to defer qualified payroll and other tax payments as permitted by the CARES Act.~~ business, at this time.

~~Table of Contents~~

S~~avings from the government program in the U.K. have provided property tax relief for the quarters ended May 1, 2021 and July 31, 2021~~ of approximately $4.7 million and $3.8 million, respectively. Other government relief programs in the U.K., ROI and Canada provided savings for the quarters ended May 1, 2021 and July 31, 2021 of approximately $3.2 million and $1.2 million, respectively.

~~Asset Impairment and Other Charges~~

We recorded pretax charges of $7.1 million in the second quarter of Fiscal 2022, including $6.2 million for professional fees related to actions of an activist shareholder and $1.4 million for retail store asset impairments, partially offset by a $0.6 million insurance gain.

Critical Accounting Estimates

We discuss our critical accounting estimates in Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations", in our Annual Report on Form 10-K for the fiscal year ended January ~~30, 2021.~~29, 2022. We describe our significant accounting policies in Note 1, "Summary of Significant Accounting Policies", of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended January ~~30, 2021.~~29, 2022. There have been no other significant changes in our definition of significant accounting policies or critical accounting estimates since the end of Fiscal ~~2021.~~2022.

Key Performance Indicators

In assessing the performance of our business, we consider a variety of performance and financial measures. The key performance indicators we use to evaluate the financial condition and operating performance of our business are comparable sales, net sales, gross margin, operating income ~~(loss)~~

and operating margin. These key performance indicators should not be considered superior to, as a substitute for or as an alternative to, and should be considered in conjunction with, the U.S. GAAP financial measures presented herein. These measures may not be comparable to similarly-titled performance indicators used by other companies.

Comparable Sales

We consider comparable sales to be an important indicator of our current performance, and investors may find it useful as such. Comparable sales results are important to achieve leveraging of our costs, including occupancy, selling salaries, depreciation, etc. Comparable sales also have a direct impact on our total net revenue, cash and working capital. We define "comparable sales" as sales from stores open longer than one year, beginning with the first day a store 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 an expanded store 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. We have not disclosed comparable sales for the ~~second quarter and six~~first three months of Fiscal ~~2022,~~2023, as we believe that overall sales ~~are~~is a more meaningful metric during ~~these periods~~this period due to the impact of the COVID-19 pandemic and related ~~extended~~extensive store ~~closures.~~closures during the first quarter of Fiscal 2022.

Results of Operations – ~~Second~~First Quarter of Fiscal ~~2022~~2023 Compared to ~~Second~~First Quarter of Fiscal ~~2021~~2022

Our net sales in the ~~second~~first quarter of Fiscal ~~2022 increased 41.9%~~2023 decreased 3.3% to ~~$555.2~~$520.7 million compared to ~~$391.2~~$538.7 million in the ~~second~~first quarter of Fiscal ~~2021. This~~2022. The sales ~~increase~~decrease was driven by ~~increased store~~decreased comparable direct sales, resulting from the reopening of stores that were closed during the second quarter of Fiscal 2021 due to the COVID-19 pandemic, increased wholesale sales and the favorable impact of foreign exchange rates, partially offset by increased sales in the wholesale and store channels and a ~~23% decrease in digital comparable sales. Stores~~difficult comparison due to U.S. government stimulus-fueled consumer spending last year. The store channel increase was led by our Schuh Group business as its stores were only open ~~approximately 97%~~19% of possible days in the ~~second~~first quarter of Fiscal 2022 ~~as compared to 69%~~versus 100% of possible days in the ~~second~~first quarter of Fiscal ~~2021.~~2023.

Gross margin ~~increased 63.2%~~decreased 2.4% to ~~$272.5~~$251.4 million in the ~~second~~first quarter of Fiscal 2023 from $257.7 million in the first quarter of Fiscal 2022 ~~from $167.0 million in the second quarter of Fiscal 2021 and~~but increased as a percentage of net sales from ~~42.7%~~47.8% to ~~49.1%~~48.3%, reflecting increased gross margin as a percentage of net sales in all of our operating business units ~~primarily due to fewer markdowns at Journeys Group, Schuh Group and~~except Johnston & Murphy ~~retail and~~Group, primarily due to lower shipping and warehouse expense as a result of lower e-commerce penetration, increased full-price selling and price increases, partially offset by ~~a shift in~~ the channel mix impact of ~~our businesses. The lower shipping~~increased wholesale sales and ~~warehouse expense in the second quarter of Fiscal 2022 is~~increased freight and logistics costs as a result of ~~reduced e-commerce penetration in Fiscal 2022 as a larger percentage of retail stores were open in Fiscal 2022 compared to Fiscal 2021.~~supply chain challenges.

Selling and administrative expenses in the ~~second~~first quarter of Fiscal ~~2022~~2023 increased ~~34.9% but decreased~~1.7% and increased as a percentage of net sales from ~~47.9%~~44.5% to ~~45.5%~~46.8%, reflecting increased expenses as a percentage of net sales at Journeys Group and Schuh Group, partially offset by decreased expenses as a percentage of net sales ~~in all of our operating business units.~~at Johnston & Murphy Group and Licensed Brands. The ~~decrease~~overall increase in expenses as a percentage of net sales ~~in Fiscal 2022 was primarily~~is due to ~~reduced~~more normalized occupancy expense as a result of the one-time benefits for rent credits and government tax relief related to the COVID-19 pandemic in the U.K. in the first quarter last year, as well as increased selling salaries and compensation expense, partially offset by ~~increased~~decreased performance-based compensation expense. ~~In Fiscal 2021, we did not record any performance-based compensation expense. The reduction in occupancy expense is driven in part by benefits from our ongoing lease initiative.~~ Explanations of the changes in results of operations are provided by business segment in discussions following these introductory paragraphs.

Earnings from continuing operations before income taxes (“pretax earnings”) for the ~~second~~first quarter of Fiscal ~~2022~~2023 were ~~$12.2~~$7.9 million compared to ~~a loss from continuing operations before income taxes (“pretax loss”) of $23.7~~$14.8 million for the ~~second~~first quarter of Fiscal ~~2021.~~2022. Pretax earnings for the ~~second~~first quarter of Fiscal 2023 included an asset impairment and other gain of $0.3 million for a gain on the termination of the pension plan, partially offset by retail store asset impairments. Pretax earnings for the first quarter of Fiscal 2022 included asset impairments and other charges of ~~$7.1~~$2.7 million for professional fees related

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to the actions of an activist shareholder and retail store asset ~~impairments, partially offset by an insurance gain.~~ ~~The pretax loss for the second quarter of Fiscal 2021 included asset impairments and other charges of $1.7 million for retail store asset~~ impairments.

We recorded an effective income tax rate of ~~11.1%~~36.7% and ~~20.3%~~40.1% in the ~~second~~first quarter of Fiscal ~~2022~~2023 and Fiscal ~~2021,~~2022, respectively. The tax rate for the ~~second~~first quarter of Fiscal ~~2022~~2023 is lower than Fiscal ~~2021 primarily due to~~2022, reflecting a reduction in the ~~reduction~~amount of foreign losses ~~in the second quarter of Fiscal 2022~~ for which we are unable to recognize a tax ~~benefit and an additional tax benefit from the vesting of restricted stock.~~benefit.

Net earnings for the ~~second~~first quarter of Fiscal ~~2022~~2023 were ~~$10.9~~$4.9 million, or ~~$0.75~~$0.37 diluted earnings per share compared to ~~a net loss of $19.0~~$8.9 million, or ~~$1.34~~$0.60 diluted ~~loss~~earnings per share, for the ~~second~~first quarter of Fiscal ~~2021.~~2022.

Journeys Group


	Three Months Ended									Three Months Ended
	July 31, 2021			August 1, 2020			% Change			April 30, 2022			May 1, 2021			% Change
	(dollars in thousands)									(dollars in thousands)
Net sales	$	346,275		$	276,631			25.2	%	$	314,445		$	376,548			(16.5	)%
Operating income	$	30,368		$	10,160			198.9	%	$	14,930		$	33,124			(54.9	)%
Operating margin		8.8	%		3.7	%					4.7	%		8.8	%

Net sales from Journeys Group ~~increased 25.2%~~decreased 16.5% to ~~$346.3~~$314.4 million for the ~~second~~first quarter of Fiscal 2023, compared to $376.5 million for the first quarter of Fiscal 2022, ~~compared~~primarily due to ~~$276.6 million for~~decreased store sales and decreased digital comparable growth. Journeys was the ~~second~~beneficiary of government stimulus-fueled consumer spending in the first quarter of Fiscal ~~2021, primarily due~~2022 and experienced a lack of inventory in the first quarter this year to ~~increased store sales, resulting from the reopening of stores that were closed during the second quarter of Fiscal 2021~~fill demand due to the ~~COVID-19 pandemic, partially offset by decreased digital comparable sales.~~impact of supply chain disruptions. Journeys Group operated ~~1,142~~1,130 stores at the end of the ~~second~~first quarter of Fiscal ~~2022,~~2023, including 229 Journeys Kidz stores, 47 Journeys stores in Canada and 36 Little Burgundy stores in Canada, compared to 1,143 stores at the end of the first quarter of last year, including 230 Journeys Kidz stores, 47 Journeys stores in Canada and 37 Little Burgundy stores in ~~Canada, compared to 1,169 stores at the end of the second quarter of last year, including 232 Journeys Kidz stores, 47 Journeys stores in Canada and 38 Little Burgundy stores in~~ Canada.

Journeys Group had operating income of ~~$30.4~~$14.9 million for the ~~second~~first quarter of Fiscal ~~2022~~2023 compared to ~~$10.2~~$33.1 million for the ~~second~~first quarter of Fiscal ~~2021.~~2022. The ~~increase~~decrease of ~~$20.2 million~~54.9% in operating income for Journeys Group was due to (i) decreased net sales and (ii) increased selling and administrative expenses as a percentage of net sales reflecting the deleverage of expenses, especially occupancy and selling salaries, as a result of decreased revenue in the first quarter this year, partially offset by decreased performance-based compensation expense. Gross margin increased as a percentage of net sales in the first quarter of Fiscal 2023 compared to the first quarter of Fiscal 2022, reflecting lower shipping and warehouse expense.

Schuh Group


	Three Months Ended
	April 30, 2022			May 1, 2021			% Change
	(dollars in thousands)
Net sales	$	88,159		$	68,711			28.3	%
Operating loss	$	(2,746	)	$	(3,847	)		28.6	%
Operating margin		(3.1	)%		(5.6	)%

Net sales from Schuh Group increased 28.3% to $88.2 million for the first quarter of Fiscal 2023 compared to $68.7 million for the first quarter of Fiscal 2022, primarily due to increased store sales as Schuh stores were only open 19% of possible days in the first quarter of Fiscal 2022 versus 100% of possible days in the first quarter of Fiscal 2023, partially offset by decreased digital comparable sales and an unfavorable impact of $4.7 million due to changes in foreign exchange rates. Schuh stores benefitted from pent up demand as the U.K. economy further re-opened this year and more people resumed normal pre-pandemic activities. Schuh Group operated 122 stores at the end of the first quarter of Fiscal 2023, compared to 123 stores at the end of the first quarter of Fiscal 2022.

Schuh Group had an operating loss of $2.7 million for the first quarter of Fiscal 2023 compared to an operating loss of $3.8 million for the first quarter of Fiscal 2022. The smaller loss this year reflects (i) increased net sales and (ii) increased gross margin as a percentage of net sales, reflecting decreased ~~markdowns~~shipping and ~~(iii) decreased selling~~warehouse expense and less promotional activity in the first quarter of Fiscal 2023. Selling and administrative expenses increased as a percentage of net sales ~~due to decreased occupancy expense and freight expense, partially offset by increased selling salaries, marketing expense and performance-based compensation expense.~~

~~Schuh Group~~

Three Months Ended

July 31, 2021

August 1, 2020

%
Change

(dollars in thousands)

Net sales

$
106,079

$
71,732

47.9
%
Operating income (loss)

$
3,623

$
(6,838
)

NM

Operating margin

3.4
%

(9.5
)%

~~Net sales from Schuh Group increased 47.9% to $106.1 million~~ for the ~~second~~first quarter of Fiscal 2023 compared to the first quarter of Fiscal 2022, ~~compared to $71.7 million for the second quarter of Fiscal 2021, primarily~~reflecting more normalized occupancy expense due to ~~increased store sales, resulting from~~ the ~~reopening of stores that were closed during the second quarter of Fiscal 2021 due~~one-time benefits for rent credits and government property tax relief and other government relief related to the COVID-19 pandemic ~~and~~in the ~~favorable impact of $10.8 million due to changes~~U.K. in ~~foreign exchange rates,~~the first quarter last year, as well as increased selling salaries, partially offset by decreased digital comparable sales. Stores were open almost all of the possible operating days during the second quarter of Fiscal 2022 compared to 48% of possible operating days during the second quarter of Fiscal 2021 as government mandated lockdowns that began during the fourth quarter of Fiscal 2021, were lifted throughout May 2021. Schuh Group operated 123 stores at the end of the second quarter of Fiscal 2022, compared to 127 stores at the end of the second quarter of Fiscal 2021.marketing expense.

Schuh Group had operating income of $3.6 million for the second quarter of Fiscal 2022 compared to an operating loss of $6.8 million for the second quarter of Fiscal 2021. The increase in operating income this year reflects (i) increased net sales, (ii) increased gross margin as a percentage of net sales, reflecting less promotional activity and decreased shipping and warehouse expense and (iii) decreased selling and administrative expenses as a percentage of net sales, reflecting greater leverage of fixed expenses as a result of the increased revenue, partially offset by increased performance-based compensation expense, selling salaries and marketing expenses. In addition, operating income included a favorable impact of $0.3 million due to changes in foreign exchange rates compared to last year.

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Johnston & Murphy Group


	Three Months Ended									Three Months Ended
	July 31, 2021			August 1, 2020			% Change			April 30, 2022			May 1, 2021			% Change
	(dollars in thousands)									(dollars in thousands)
Net sales	$	61,159		$	24,097			153.8	%	$	71,016		$	48,762			45.6	%
Operating income (loss)	$	3,951		$	(18,243	)	NM			$	550		$	(3,180	)	NM
Operating margin		6.5	%		(75.7	)%					0.8	%		(6.5	)%

Johnston & Murphy Group net sales increased ~~153.8%~~45.6% to ~~$61.2~~$71.0 million for the ~~second~~first quarter of Fiscal ~~2022~~2023 from ~~$24.1~~$48.8 million for the ~~second~~first quarter of Fiscal ~~2021,~~2022, primarily due to increased store sales, ~~resulting~~wholesale sales and e-commerce sales, despite lower in-stock inventory levels this year.

Johnston & Murphy has repositioned its brand to offer more casual and comfortable footwear and apparel in this post-pandemic environment, which in addition to recovery from the ~~reopening of stores closed during the second quarter of Fiscal 2021 due to the COVID-19~~ pandemic, ~~and increased digital comparable sales and increased wholesale sales. With an increase in social events and gatherings, more customers returned to in-person shopping and retail traffic improved.~~has fueled top line growth. Retail operations accounted for ~~81.1%~~70.5% of Johnston & Murphy Group's sales in the ~~second~~first quarter of Fiscal ~~2022, up~~2023, down from ~~79.4%~~74.5% in the ~~second~~first quarter of Fiscal ~~2021.~~2022. The store count for Johnston & Murphy retail operations at the end of the ~~second~~first quarter of Fiscal ~~2022~~2023 was ~~174~~162 stores, including ~~eight~~seven stores in Canada, compared to ~~180~~178 stores, including eight stores in Canada, at the end of the ~~second~~first quarter of Fiscal ~~2021.~~2022.

Johnston & Murphy Group operating income of ~~$4.0~~$0.6 million for the ~~second~~first quarter of Fiscal ~~2022~~2023 improved ~~$22.2~~$3.7 million compared to an operating loss of ~~$18.2~~$3.2 million in the ~~second~~first quarter of Fiscal ~~2021.~~2022. The increase was primarily due to (i) increased net sales ~~(ii) increased gross margin as a percentage of net sales reflecting decreased retail markdowns, decreased inventory reserves, decreased shipping~~ and ~~warehouse expense and a higher mix of retail product and (iii)~~(ii) decreased selling and administrative expenses as a percentage of net sales due to ~~reduced expenses, especially occupancy expense, and~~ greater leverage of ~~fixed~~ expenses as a result of ~~the increased~~ revenue growth, partially offset by increased ~~selling salaries~~bad debt expense. Gross margin as a percentage of net sales decreased for the first quarter of Fiscal 2023 compared to the first quarter of Fiscal 2022 reflecting increased airfreight costs and ~~performance-based compensation~~the channel mix of more wholesale sales, partially offset by price increases, decreased retail markdowns and decreased shipping and warehouse expense.

Licensed Brands


	Three Months Ended									Three Months Ended
	July 31, 2021			August 1, 2020			% Change			April 30, 2022			May 1, 2021			% Change
	(dollars in thousands)									(dollars in thousands)
Net sales	$	41,670		$	18,757			122.2	%	$	47,128		$	44,674			5.5	%
Operating income (loss)	$	991		$	(1,222	)	NM
Operating income										$	3,793		$	2,561			48.1	%
Operating margin		2.4	%		(6.5	)%					8.0	%		5.7	%

Licensed Brands' net sales increased ~~122.2%~~5.5% to ~~$41.7~~$47.1 million for the ~~second~~first quarter of Fiscal 2023, from $44.7 million for the first quarter of Fiscal 2022, ~~from $18.8 million for the second quarter of Fiscal 2021,~~primarily reflecting ~~primarily~~ the growth in the portfolio as a result of the ~~Levi’s footwear business as well as increased sales~~selling, product and sourcing capabilities gained through an acquisition in ~~all of our other licensed brands.~~late Fiscal 2020.

Licensed Brands' operating income was ~~$1.0~~$3.8 million for the ~~second~~first quarter of Fiscal ~~2022~~2023 compared to ~~an operating loss of $1.2~~$2.6 million in the ~~second~~first quarter of Fiscal ~~2021.~~2022. The ~~$2.2 million~~48.1% increase in operating income was primarily due to (i) increased net sales, (ii) increased gross margin as a percentage of net sales as ~~the prior~~increased freight and logistics costs were more than offset by fewer closeout sales as compared to last year ~~gross margin was impacted by pre-Togast acquisition royalty and commission cost~~ and (iii) decreased selling and administrative expenses as a percentage of net sales reflecting ~~decreased compensation, shipping, bad debt, and credit card~~leverage of expenses as a result of a favorable sales mix, partially offset by increased ~~royalty and performance-based compensation~~bad debt expense.

Corporate, Interest Expenses and Other Charges

Corporate and other expense for the ~~second~~first quarter of Fiscal ~~2022~~2023 was ~~$26.0~~$8.3 million compared to ~~$5.9~~$13.1 million for the ~~second~~first quarter of Fiscal ~~2021.~~2022. Corporate expense in the ~~second~~first quarter of Fiscal 2023 included a gain of $0.3 million in asset impairment and other charges from a gain on the termination of the pension plan, partially offset by retail store asset impairments. Corporate expense in the first quarter of Fiscal 2022 included a ~~$7.1~~$2.7 million charge in asset impairment and other charges for professional fees related to the actions of an activist shareholder and retail store asset ~~impairments, partially offset by an insurance gain. Corporate expense in the second quarter of Fiscal 2021 included a $1.7 million charge in asset impairment and other charges for retail store asset~~ impairments. The corporate expense ~~increase,~~decrease, excluding asset impairment and other charges, primarily reflected ~~increased~~decreased performance-based compensation expense. In the second quarter of Fiscal 2021, corporate salaries were reduced in response to the COVID-19 pandemic. As a result, corporate salaries increased in the second quarter of Fiscal 2022 and contributed to the increased corporate expenses in the second quarter of Fiscal 2022.

Net interest expense decreased to ~~$0.6~~$0.3 million for the ~~second~~first quarter of Fiscal ~~2022~~2023 compared to net interest expense of ~~$1.9 million for the second quarter of Fiscal 2021 primarily reflecting decreased average borrowings in the second quarter this year.~~

~~Table of Contents~~

~~Results of Operations – Six Months of Fiscal 2022 Compared to Six Months of Fiscal 2021~~

Our net sales in the first six months of Fiscal 2022 increased 63.2% to $1.1 billion compared to $670.4 million in the first six months of Fiscal 2021, driven by increased store sales resulting from the reopening of stores that were closed during the first six months of Fiscal 2021 due to the COVID-19 pandemic, increased wholesale sales, the favorable impact of foreign exchange rates and a 3% digital comparable sales growth. Stores were open approximately 93% of possible days in the first six months of Fiscal 2022 as compared to 59% in the first six months of Fiscal 2021.

Gross margin increased 84.6% to $530.2 million in the first six months of Fiscal 2022 from $287.1 million in the first six months of Fiscal 2021 and increased as a percentage of net sales from 42.8% to 48.5%, reflecting increased gross margin as a percentage of net sales in all of our operating business units primarily due to fewer markdowns at Journeys Group, Schuh Group and Johnston & Murphy retail and lower shipping and warehouse expense. The lower shipping and warehouse expense in the first six months this year is a result of reduced e-commerce penetration in Fiscal 2022 as a larger percentage of retail stores were open in Fiscal 2022 compared to Fiscal 2021.

Selling and administrative expenses in the first six months of Fiscal 2022 increased 30.7% but decreased as a percentage of net sales from 56.1% to 45.0%, reflecting decreased expenses as a percentage of net sales in all of our operating business units. The decrease as a percentage of net sales in expenses in Fiscal 2022 was primarily due to greater leverage of fixed expenses as a result of the significant increase in revenue as well as reduced occupancy expense, partially offset by increased performance-based compensation expense. In Fiscal 2021, we did not record any performance-based compensation expense. The reduction in occupancy expense is driven in part by U.K. government property tax relief and benefits from our ongoing lease initiative. Explanations of the changes in results of operations are provided by business segment in discussions following these introductory paragraphs.

~~Pretax earnings for the first six months of Fiscal 2022 were $27.1 million compared to a pretax loss of $180.5~~$0.7 million for the first ~~six months~~quarter of Fiscal ~~2021. Pretax earnings for the first six months of Fiscal~~ 2022 included asset impairments and other charges of $9.7 million for professional fees related to the actions of an activist shareholder and retail store asset impairments, partially offset by an insurance gain. The pretax loss for the first six months of Fiscal 2021 included a goodwill impairment charge of $79.3 million and asset impairments and other charges of $9.6 million for retail store and intangible asset impairments, partially offset by the release of an earn-out related to the Togast acquisition.

We recorded an effective income tax rate of 27.0% and 14.9% in the first six months of Fiscal 2022 and Fiscal 2021, respectively. The tax rate for the first six months of Fiscal 2022 is higher than Fiscal 2021 primarily due to the inability to recognize a tax benefit for certain foreign losses and a higher mix of earnings in jurisdictions where we generate taxable income. Additionally, the tax rate for the first six months of Fiscal 2021 was unusually low due primarily to the non-deductibility of the Schuh Group goodwill impairment charge as well as the inability to recognize a tax benefit for certain foreign losses.

Net earnings for the first six months of Fiscal 2022 were $19.8 million, or $1.35 diluted earnings per share, compared to a net loss of $153.8 million, or $10.87 diluted loss per share for the first six months of Fiscal 2021.

~~Journeys Group~~

Six Months Ended

July 31, 2021

August 1, 2020

%
Change

(dollars in thousands)

Net sales

$
722,823

$
445,556

62.2
%
Operating income (loss)

$
63,492

$
(26,923
)

NM

Operating margin

8.8
%

(6.0
)%

Net sales from Journeys Group increased 62.2% to $722.8 million for the first six months of Fiscal 2022, compared to $445.6 million for the first six months of Fiscal 2021, primarily due to increased store sales, resulting from the reopening of stores that were closed during the first six months of Fiscal 2021 due to the COVID-19 pandemic, partially offset by decreased digital comparable sales.

Journeys Group had operating income of $63.5 million for the first six months of Fiscal 2022 compared to a loss of $26.9 million for the first six months of Fiscal 2021. The increase of $90.4 million in operating income for Journeys Group was due to (i) increased net sales, (ii) increased gross margin as a percentage of net sales, reflecting decreased markdowns and decreased shipping and warehouse expense and (iii) decreased selling and administrative expenses as a percentage of net sales due to greater leverage of fixed expenses as a result of the increased revenue, with the main driver being decreased occupancy expense, partially offset by increased performance-based compensation expense.

~~Table of Contents~~

~~Schuh Group~~

Six Months Ended

July 31, 2021

August 1, 2020

%
Change

(dollars in thousands)

Net sales

$
174,790

$
118,897

47.0
%
Operating loss

$
(224
)

$
(21,924
)

99.0
%
Operating margin

(0.1
)%

(18.4
)%

Net sales from Schuh Group increased 47.0% to $174.8 million for the first six months of Fiscal 2022 compared to $118.9 million for the first six months of Fiscal 2021 primarily due to increased store sales, resulting from the reopening of stores that were closed during the first six months of Fiscal 2021 due to the COVID-19 pandemic, the favorable impact of $17.4 million due to changes in foreign exchange rates and increased digital comparable sales. Stores were open almost 60% of the possible operating days during the first six months of Fiscal 2022 compared to 49% of possible operating days during the first six months of Fiscal 2021.

Schuh Group had an operating loss of $0.2 million for the first six months of Fiscal 2022 compared to an operating loss of $21.9 million for the first six months of Fiscal 2021. The decrease in operating loss this year reflects (i) increased net sales, (ii) increased gross margin as a percentage of net sales, reflecting less promotional activity and decreased shipping and warehouse expense and (iii) decreased selling and administrative expenses as a percentage of net sales, reflecting decreased occupancy expense primarily as a result of rent abatement agreements with our landlords and savings from the government program in the U.K. providing property tax relief, grant income from the U.K. and ROI governments, reduced expenses and greater leverage of fixed expenses as a result of the increased net sales, partially offset by increased marketing and performance-based compensation expense.

~~Johnston & Murphy Group~~

Six Months Ended

July 31, 2021

August 1, 2020

%
Change

(dollars in thousands)

Net sales

$
109,921

$
62,946

74.6
%
Operating income (loss)

$
771

$
(27,827
)

NM

Operating margin

0.7
%

(44.2
)%

Johnston & Murphy Group net sales increased 74.6% to $109.9 million for the first six months of Fiscal 2022 from $62.9 million for the first six months of Fiscal 2021, primarily due to increased store sales, resulting from the reopening of stores closed during the first six months of Fiscal 2021 due to the COVID-19 pandemic, and increased wholesale sales and digital comparable sales. Retail operations accounted for 78.2% of Johnston & Murphy Group's sales in the first six months of Fiscal 2022, up from 74.8% in the first six months of last year.

Johnston & Murphy Group had operating income of $0.8 million for the first six months of Fiscal 2022 compared to an operating loss of $27.8 million for the first six months of Fiscal 2021. The increase of $28.6 million of operating income was primarily due to (i) increased net sales, (ii) increased gross margin as a percentage of net sales reflecting decreased retail markdowns, decreased inventory reserves, decreased shipping and warehouse expense and a higher mix of retail product and (iii) decreased selling and administrative expenses as a percentage of net sales due to reduced expenses, especially occupancy expense, and greater leverage of fixed expenses as a result of the increased net sales, partially offset by increased performance-based compensation expense.

~~Licensed Brands~~

Six Months Ended

July 31, 2021

August 1, 2020

%
Change

(dollars in thousands)

Net sales

$
86,344

$
43,050

100.6
%
Operating income (loss)

$
3,552

$
(3,723
)

NM

Operating margin

4.1
%

(8.6
)%

Licensed Brands' net sales increased 100.6% to $86.3 million for the first six months of Fiscal 2022, from $43.1 million for the first six months of Fiscal 2021, reflecting primarily the growth of the Levi’s footwear business as well as increased sales in all of our other licensed brands as customers began to recover from the COVID-19 pandemic and we were able to drive more orders.

Licensed Brands' operating income was $3.6 million for the first six months of Fiscal 2022 compared to an operating loss of $3.7 million in the first six months of Fiscal 2021. The $7.3 million increase in operating income was primarily due to (i) increased net sales, (ii) increased gross

~~Table of Contents~~

margin as a percentage of net sales as the prior year gross margin was impacted by pre-Togast acquisition royalty and commission cost and (iii) decreased selling and administrative expenses as a percentage of net sales reflecting decreased bad debt, compensation and shipping expenses, partially offset by increased royalty and performance-based compensation expense.

~~Corporate, Interest Expenses and Other Charges~~

Corporate and other expense for the first six months of Fiscal 2022 was $39.2 million compared to $18.4 million for first six months of Fiscal 2021. Corporate expense in the first six months of Fiscal 2022 included a $9.7 million charge in asset impairment and other charges for professional fees related to the actions of an activist shareholder and retail store asset impairments, partially offset by an insurance gain. Corporate expense in the first six months of Fiscal 2021 included a $9.6 million charge in asset impairment and other charges for retail store and intangible asset impairments, partially offset by the release of an earnout related to the Togast acquisition. The corporate expense increase, excluding asset impairment and other charges, reflected increased performance-based compensation expense.

~~Additionally, the first six months of Fiscal 2021 included a goodwill impairment charge of $79.3 million.~~

~~Net interest expense decreased to $1.3 million for the first six months of Fiscal 2022 compared to net interest expense of $2.8 million for the first six months of Fiscal 2021~~ primarily reflecting decreased average borrowings in the first ~~six months~~quarter this year.

Liquidity and Capital Resources

The impacts of the COVID-19 pandemic have adversely affected our results of operations. In response to the business disruption caused by the COVID-19 pandemic, we have taken actions described above in the “COVID-19 Update” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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 flows from operations typically have been generated principally in the fourth quarter of each fiscal year.


	Six Months Ended									Three Months Ended
Cash flow changes:	July 31, 2021			August 1, 2020			Increase (Decrease)			April 30, 2022			May 1, 2021			Increase (Decrease)
(in millions)
Net cash provided by operating activities	$	125.8		$	46.6		$	79.2
Net cash provided by (used in) operating activities										$	(92.1	)	$	44.2		$	(136.3	)
Net cash used in investing activities		(19.5	)		(10.5	)		(9.0	)		(15.4	)		(12.1	)		(3.3	)
Net cash provided by (used in) financing activities		(18.1	)		179.2			(197.3	)		(11.3	)		10.5			(21.8	)
Effect of foreign exchange rate fluctuations on cash		0.7			2.4			(1.7	)		(1.1	)		0.4			(1.5	)
Increase in cash and cash equivalents	$	88.9		$	217.7		$	(128.8	)
Net increase (decrease) in cash and cash equivalents										$	(119.9	)	$	43.0		$	(162.9	)

Reasons for the major variances in cash ~~provided by (used in)~~used in the table above are as follows:

Cash ~~provided by~~used in operating activities was ~~$79.2~~$136.3 million higher for the first ~~six~~three months of Fiscal 2023 compared to the first three months of Fiscal 2022, ~~compared to the first six months of Fiscal 2021,~~ reflecting primarily the following factors:

•	~~an $89.1 million increase in cash flow from increased earnings in the first six months of Fiscal 2022, net of intangible impairment in the first quarter of Fiscal 2021;~~

•

a $117.6 million decrease in cash flow from changes in inventory, primarily reflecting increased inventory growth in all of business units in the first three months of Fiscal 2023 as we continue to rebuild inventory following the significant supply chain disruptions resulting from the pandemic;

•	~~a $65.1 million increase in cash flow from changes in prepaids and other current assets primarily reflecting decreased prepaid income taxes, in part due to the receipt of an income tax refund;~~

•

a $52.5 million increase in cash flow from changes in other accrued liabilities primarily reflecting increased performance-based compensation accruals in the first six months of Fiscal 2022 compared to payments of Fiscal 2020 performance-based compensation accruals in the first six months of Fiscal 2021; partially offset by

• a ~~$77.0~~$78.0 million decrease in cash flow from changes in other ~~assets and~~accrued liabilities, primarily reflecting ~~rent payments made~~the payment of Fiscal 2022 performance-based compensation accruals in the first

~~six~~ three months of Fiscal ~~2022 versus~~2023 and much lower performance-based compensation accruals for the first three months of Fiscal 2023 compared to Fiscal 2022; and

•

a $16.2 million decrease in cash flow from changes in prepaids and other current assets, primarily reflecting increased prepaid rent ~~payments being held~~ in the first ~~six~~three months of Fiscal ~~2021;~~

2023 and the decrease in prepaid income taxes was much lower in the first three months of Fiscal 2023 compared to the decrease in prepaid income taxes in the first three months of Fiscal 2022; partially offset by

•	~~a $33.5 million decrease in cash flow from changes in inventory primarily reflecting increased inventory growth in all of our business segments in the first half of Fiscal 2022; and~~

•

a ~~$19.0~~$77.3 million ~~decrease~~increase in cash flow from changes in accounts payable, primarily reflecting changes in buying patterns ~~and longer payment terms~~ in the first ~~six~~three months of Fiscal ~~2021.~~2023.

Cash used in investing activities was ~~$9.0~~$3.3 million higher for the first ~~six~~three months of Fiscal ~~2022~~2023 as compared to the first ~~six~~three months of Fiscal ~~2021~~2022 reflecting increased capital expenditures primarily related to ~~digital and omnichannel initiatives.~~the new headquarters building.

~~Table of Contents~~

Cash ~~provided by~~used in financing activities was ~~$197.3~~$21.8 million ~~lower~~higher for the first ~~six~~three months of Fiscal ~~2022~~2023 as compared to the first ~~six~~three months of Fiscal ~~2021~~2022 reflecting ~~lower revolver~~share repurchases this year and the payment of Fiscal 2022 share repurchase accruals in the first three months of Fiscal 2023 along with decreased borrowings this year compared to the same period last year.

Sources of Liquidity and Future Capital Needs

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 9, "Long-Term Debt", to our Consolidated Financial Statements included in our Annual Report on Form 10-K for Fiscal ~~2021.~~2022.

As of ~~July 31, 2021,~~April 30, 2022, we have borrowed ~~$15.8~~$14.7 million (£~~11.4~~11.7 million) under our Credit ~~Facility and~~ ~~$4.2 million (£3.0 million) under the Schuh Facility Letter.~~ Facility. We were in compliance with all the relevant terms and conditions of the Credit Facility and Facility Letter as of ~~July 31, 2021.~~April 30, 2022.

~~During the second quarter of Fiscal 2022, we paid off the $17.5 million FILO loan of our Credit Facility.~~

In the fourth quarter of Fiscal 2021, we implemented tax strategies allowed under the 5-year carryback provisions in the CARES Act which we believe will generate approximately $55 million of net tax refunds. Through the end of the second quarter of Fiscal 2022, we have received approximately $32 million of such refunds and expect to receive the balance over the remainder of Fiscal 2022 which may extend into Fiscal 2023.

Our performance-based compensation plans are designed to be self-funded by our improved operating results on a year-over-year basis. If the improvement in our operating results continues for the remainder of Fiscal 2022, we may be required to pay larger than normal performance-based compensation in the first quarter of Fiscal 2023.

~~As we manage through the impacts of the COVID-19 pandemic in Fiscal 2022, 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 amended Credit Facility and the Schuh Facility Letter will be sufficient to support our ~~near-term~~ liquidity needs in Fiscal 2023 and the foreseeable future.

During the remainder of Fiscal 2023, we expect our primary cash requirements to be directed towards funding operating activities, including the acquisition of inventory, and other working capital obligations including those related to taxes. Given the continued uncertainty and the potential impact on consumer spending from the COVID-19 pandemic and recent geopolitical events, we believe it is prudent to maintain higher than usual cash balances to support potential disruptions in cash flow. While the timing and amount of any common stock repurchases will depend on a variety of factors including price, corporate and regulatory requirements, capital availability and other market conditions, we will also consider returning cash to our shareholders through opportunistic share repurchases pursuant to our repurchase authorization described in more detail below.

In the fourth quarter of Fiscal 2021, we implemented tax strategies allowed under the 5-year carryback provisions in the CARES Act which we believed would generate approximately $55 million of net tax refunds. We received approximately $26 million of such refunds in Fiscal 2022. We expect to receive the balance in Fiscal 2023.

Contractual Obligations

Our contractual obligations at ~~July 31, 2021~~April 30, 2022 decreased ~~approximately 4%~~7% compared to January ~~30, 2021~~29, 2022, primarily due to decreased ~~purchase~~operating lease obligations and long-term ~~debt.~~debt, partially offset by increased purchase obligations.

We do not currently have any longer-term capital expenditures or other cash requirements other than as set forth above and in the contractual obligations table as disclosed in Item 7 of our Fiscal ~~2021~~2022 Form 10-K. We also do not currently have any off-balance sheet arrangements.

Capital Expenditures

Total capital expenditures in Fiscal ~~2022~~2023 are expected to be approximately ~~$35~~$50 million to ~~$40~~$55 million of which approximately ~~71%~~56% is for new stores and remodels and 44% is for computer hardware, software and warehouse enhancements for initiatives to drive traffic and omni-channel capabilities. Planned capital expenditures excludes approximately $11 million, or $9 million net of tenant ~~allowance,~~allowances, for the new ~~Corporate Headquarters~~corporate headquarters building.

Common Stock Repurchases

We repurchased 102,895 shares during the first quarter of Fiscal 2023 at a cost of $6.5 million, or $63.17 per share. There were $4.8 million share repurchases accrued in the fourth quarter of Fiscal 2022 included on the Condensed Consolidated Statements of Cash Flows for the three months ended April 30, 2022. We have $100.3 million remaining as of April 30, 2022 under our expanded share repurchase authorization announced in February 2022. We did not repurchase any shares during the first quarter of Fiscal 2022. During the second quarter of Fiscal 2023, through June 8, 2022, we have repurchased 175,000 shares at a cost of $10.1 million, or ~~Fiscal 2021. We have $89.7 million remaining as of July 31, 2021 under our current $100.0 million share repurchase authorization.~~ $57.94 per share.

Environmental and Other Contingencies

We are subject to certain loss contingencies related to environmental proceedings and other legal matters, including those disclosed in Item 1, Note 9,8, "Legal Proceedings", to our Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.

New Accounting Pronouncements

Descriptions of ~~the~~ recently issued accounting pronouncements, if any, and the accounting pronouncements adopted by us during the ~~second~~first quarter of Fiscal ~~2022~~2023 are included in Note 1 to our Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.

2620

~~Table of Contents~~

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We incorporate by reference the information regarding market risk appearing in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the heading “Financial Market Risk” in our Annual Report on Form 10-K for the fiscal year ended January ~~30, 2021.~~29, 2022. There have been no material changes to our exposure to market risks from those disclosed in the Form 10-K.

Item 4. Controls and Procedures

Evaluation of ~~disclosure controls~~Disclosure Controls and ~~procedures.~~Procedures

We have established disclosure controls and procedures designed to ensure that information required to be disclosed by us, including our consolidated subsidiaries, in the reports we file or submit under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), is made known to the officers who certify our financial reports and to other members of senior management. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving desired objectives.

Based on their evaluation as of ~~July 31, 2021,~~April 30, 2022, 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) promulgated under 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 time periods specified in SEC rules and forms and (ii) accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial ~~Reporting.~~Reporting

There were no changes in our internal control over financial reporting that occurred during our ~~second~~first quarter of Fiscal ~~2022~~2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

2721

~~Table of Contents~~

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

We incorporate by reference the information regarding legal proceedings in Item 1, Note 9,8, “Legal Proceedings”, to our Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.

Item 1A. Risk Factors

You should carefully consider the risk factors discussed in Part I, “Item 1A. Risk Factors” in the Annual Report on Form 10-K for the fiscal year ended January ~~30, 2021,~~29, 2022, and in the Quarterly Report on Form 10-Q for the quarter ended ~~May 1, 2021~~April 30, 2022 (the “Quarterly Report”), which could materially affect our business, financial condition or future results. The risks described in this report, in our Annual Report and the Quarterly Report are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Repurchases (shown in thousands except share and per share amounts):

ISSUER PURCHASES OF EQUITY SECURITIES

Period

(a) Total
Number of
Shares
Purchased

(b) Average
Price
Paid
per Share

(c) Total
Number of
Shares
Purchased
as Part
of Publicly
Announced
Plans or
Programs

(d) Maximum
Number
(or Approximate
Dollar Value)
of Shares that
May Yet Be
Purchased
Under the
Plans or
Programs

May 2021

5-2-21 to 5-29-21

—

$
—

—

$
—

June 2021

5-30-21 to 6-26-21

—

$
—

—

$
—

July 2021

6-27-21 to 7-31-21 ⁽¹⁾

64,535

$
63.16

—

$
—

⁽¹⁾ These shares represent shares withheld from vested restricted stock to satisfy the minimum withholding requirement for federal and state taxes.


ISSUER PURCHASES OF EQUITY SECURITIES

Period	(a) Total Number of Shares Purchased		(b) Average Price Paid per Share		(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		(d) Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs
February 2022
1-30-22 to 2-26-22(1)		102,895	$	63.17		102,895	$	100,326

March 2022
2-27-22 to 3-26-22		—	$	—		—	$	—

April 2022
3-27-22 to 4-30-22		—	$	—		—	$	—

Total		102,895	$	63.17		102,895	$	100,326

(1) Share repurchases were made pursuant to a $100.0 million share repurchase program approved by the Board of Directors in September 2019. In February 2022, the Board of Directors approved an additional $100.0 million be added to the prior authorization. We expect to implement the balance of the repurchase program through purchases made from time to time either in the open market or through private transactions, in accordance with the regulations of the SEC and other applicable legal requirements.

~~Table of Contents~~

Item 6. Exhibits


Exhibit Index

(31.1)		Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

(31.2)		Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

(32.1)		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.

(32.2)		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.

101.INS		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.)

101.SCH		Inline XBRL Taxonomy Extension Schema Document

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

2923

~~Table of Contents~~

SIGNATURE

~~SIGNATURE~~

Pursuant to the requirements 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.




	Genesco Inc.

	By:
	~~By:~~			/s/ Thomas A. George
				Thomas A. George
				Senior Vice President - Finance and ~~Interim~~ Chief Financial Officer

Date: ~~September~~June 9, ~~2021~~2022

3024

Six Months Ended July 31, 2021
(In thousands)	Journeys Group		Schuh Group			Johnston & Murphy Group		Licensed Brands			Corporate & Other			Consolidated
Sales	$	722,823	$	174,790		$	109,921	$	86,798		$	0		$	1,094,332
Intercompany sales		0		0			0		(454	)		—			(454	)
Net sales to external customers	$	722,823	$	174,790		$	109,921	$	86,344		$	—		$	1,093,878
Segment operating income (loss)	$	63,492	$	(224	)	$	771	$	3,552		$	(29,423	)	$	38,168
Asset impairments and other⁽¹⁾		0		0			0		0			(9,740	)		(9,740	)
Operating income (loss)		63,492		(224	)		771		3,552			(39,163	)		28,428
Other components of net periodic benefit cost		0		0			0		0			(17	)		(17	)
Interest expense		0		0			0		0			(1,621	)		(1,621	)
Interest income		0		0			0		0			275			275
Earnings (loss) from continuing operations before income taxes	$	63,492	$	(224	)	$	771	$	3,552		$	(40,526	)	$	27,065
Depreciation and amortization	$	14,389	$	3,681		$	2,312	$	554		$	698		$	21,634
Capital expenditures		13,773		1,227			2,562		480			1,503			19,545

Six Months Ended August 1, 2020
(In thousands)	Journeys Group			Schuh Group			Johnston & Murphy Group			Licensed Brands			Corporate & Other			Consolidated
Sales	$	445,556		$	118,897		$	62,946		$	43,795		$	0		$	671,194
Intercompany sales		0			0			0			(745	)		—			(745	)
Net sales to external customers	$	445,556		$	118,897		$	62,946		$	43,050		$	—		$	670,449
Segment operating loss	$	(26,923	)	$	(21,924	)	$	(27,827	)	$	(3,723	)	$	(8,762	)	$	(89,159	)
Goodwill impairment⁽¹⁾		0			0			0			0			(79,259	)		(79,259	)
Asset impairments and other⁽²⁾		0			0			0			0			(9,594	)		(9,594	)
Operating loss		(26,923	)		(21,924	)		(27,827	)		(3,723	)		(97,615	)		(178,012	)
Other components of net periodic benefit income		0			0			0			0			306			306
Interest expense		0			0			0			0			(3,014	)		(3,014	)
Interest income		0			0			0			0			240			240
Earnings (loss) from continuing operations before income taxes	$	(26,923	)	$	(21,924	)	$	(27,827	)	$	(3,723	)	$	(100,083	)	$	(180,480	)
Depreciation and amortization	$	14,724		$	4,957		$	2,928		$	823		$	778		$	24,210
Capital expenditures		5,852			1,838			2,568			75			309			10,642