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 ~~October~~July 30, ~~2021~~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

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 ~~November~~August 26, ~~2021,~~2022, there were ~~14,607,160~~13,069,101 shares of the registrant's common stock outstanding.

~~Table of Contents~~

INDEX

~~INDEX~~



Part I. Financial Information
Item 1. Financial ~~Statements (unaudited):~~Statements:
Condensed Consolidated Balance Sheets - ~~October~~July 30, ~~2021,~~2022, January ~~30,~~29, 2022 and July 31, 2021 ~~and October 31, 2020~~	4
Condensed Consolidated Statements of Operations - Three and ~~Nine~~Six Months ended ~~October~~July 30, ~~2021~~2022 and ~~October~~July 31, ~~2020~~2021	5
Condensed Consolidated Statements of Comprehensive Income - Three and ~~Nine~~Six Months ended ~~October~~July 30, ~~2021~~2022 and ~~October~~July 31, ~~2020~~2021	6
Condensed Consolidated Statements of Cash Flows - ~~Nine~~Six Months ended ~~October~~July 30, ~~2021~~2022 and ~~October~~July 31, ~~2020~~2021	7
Condensed Consolidated Statements of Equity - Three and ~~Nine~~Six Months ended ~~October~~July 30, ~~2021~~2022 and ~~October~~July 31, ~~2020~~2021	8
Notes to Condensed Consolidated Financial Statements ~~(unaudited)~~	9
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	1816
Item 3. Quantitative and Qualitative Disclosures about Market Risk	2724
Item 4. Controls and Procedures	2724
Part II. Other Information	2825
Item 1. Legal Proceedings	2825
Item 1A. Risk Factors	2825
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	2825
Item 6. Exhibits	2926
Signature	3027

~~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 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 ~~costs~~cost of our imported products, and other factors affecting the ~~costs~~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"), impacts of the Russia-Ukraine war, 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, distribution centers and call centers,~~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, payment-related~~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, ~~changes to U.S. tax laws impacting our tax liabilities, 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; our ability to meet our sustainability, stewardship, emission and diversity, equity and inclusion related ESG projections, goals and commitments; 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	October 30, 2021			January 30, 2021			October 31, 2020			July 30, 2022			January 29, 2022			July 31, 2021
Current Assets:
Cash and cash equivalents	$	282,764		$	215,091		$	115,061
Accounts receivable, net of allowances of $4,947 at October 30, 2021,
$5,015 at January 30, 2021 and $5,142 at October 31, 2020		36,991			31,410			35,592
Cash										$	44,939		$	320,525		$	304,039
Accounts receivable, net of allowances of $5,335 at July 30, 2022,
$4,656 at January 29, 2022 and $4,440 at July 31, 2021											42,782			39,509			31,872
Inventories		339,198			290,966			370,699			507,236			278,200			326,477
Prepaids and other current assets		85,476			130,128			62,606			99,455			71,564			91,554
Total current assets		744,429			667,595			583,958			694,412			709,798			753,942
Property and equipment, net		207,489			207,842			210,834			220,742			216,308			202,711
Operating lease right of use assets		573,842			621,727			640,078			491,412			543,789			610,188
Goodwill		38,864			38,550			38,129			38,523			38,556			38,787
Other intangibles		30,592			30,929			29,664			27,506			29,855			31,063
Deferred income taxes		0			0			12,790			4,519			1,466			—
Other noncurrent assets		21,593			20,725			21,047			22,606			22,327			21,929
Total Assets		1,616,809			1,587,368			1,536,500			1,499,720			1,562,099			1,658,620
Liabilities and Equity
Current Liabilities:
Accounts payable		196,024			150,437			151,978			226,779			152,484			186,593
Current portion - operating lease liabilities		144,453			173,505			196,603			135,571			145,088			156,562
Other accrued liabilities		133,569			78,991			84,061			80,266			134,156			134,407
Total current liabilities		474,046			402,933			432,642			442,616			431,728			477,562
Long-term debt		15,610			32,986			32,850			48,872			15,679			20,022
Long-term operating lease liabilities		490,330			527,549			560,082			413,416			471,878			524,857
Other long-term liabilities		44,399			57,141			40,954			34,283			40,346			48,082
Total liabilities		1,024,385			1,020,609			1,066,528			939,187			959,631			1,070,523
Commitments and contingent liabilities
Equity
Non-redeemable preferred stock		827			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		15,071			15,438			15,479			13,557			14,256			15,597
Additional paid-in capital		288,813			282,308			280,340			298,010			291,444			286,298
Retained earnings		339,447			320,920			231,001			307,929			350,206			336,659
Accumulated other comprehensive loss		(33,877	)		(35,059	)		(40,000	)		(41,924	)		(36,408	)		(33,428	)
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		592,424			566,759			469,972			560,533			602,468			588,097
Total Liabilities and Equity	$	1,616,809		$	1,587,368		$	1,536,500		$	1,499,720		$	1,562,099		$	1,658,620

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

Nine Months Ended

October 30, 2021

October 31, 2020

October 30, 2021

October 31, 2020

Net sales

$
600,546

$
479,280

$
1,694,424

$
1,149,729

Cost of sales

305,345

253,776

869,039

637,081

Gross margin

295,201

225,504

825,385

512,648

Selling and administrative expenses

251,131

210,961

743,147

587,264

Goodwill impairment

0

0

0

79,259

Asset impairments and other, net

314

6,359

10,054

15,953

Operating income (loss)

43,756

8,184

72,184

(169,828
)
Other components of net periodic benefit cost (income)

55

(182
)

72

(488
)
Interest expense (net of interest income of $0.2 million, $0.0 million, $0.4 million and $0.3 million for the three and nine months ended Oct. 30, 2021 and Oct. 31, 2020, respectively)

585

1,404

1,931

4,178

Earnings (loss) from continuing operations before income taxes

43,116

6,962

70,181

(173,518
)
Income tax expense (benefit)

10,135

(514
)

17,432

(27,446
)
Earnings (loss) from continuing operations

32,981

7,476

52,749

(146,072
)
Loss from discontinued operations, net of tax

(86
)

(10
)

(39
)

(275
)
Net Earnings (Loss)

$
32,895

$
7,466

$
52,710

$
(146,347
)

Basic earnings (loss) per common share:

Continuing operations

$
2.30

$
0.52

$
3.69

$
(10.29
)
Discontinued operations

0.00

0.00

(0.01
)

(0.02
)
Net earnings (loss)

$
2.30

$
0.52

$
3.68

$
(10.31
)

Diluted earnings (loss) per common share:

Continuing operations

$
2.26

$
0.52

$
3.60

$
(10.29
)
Discontinued operations

(0.01
)

0.00

0.00

(0.02
)
Net earnings (loss)

$
2.25

$
0.52

$
3.60

$
(10.31
)

Weighted average shares outstanding:

Basic

14,314

14,283

14,313

14,191

Diluted

14,616

14,362

14,643

14,191


	Three Months Ended					Six Months Ended
	July 30, 2022			July 31, 2021		July 30, 2022			July 31, 2021
Net sales	$	535,332		$	555,183	$	1,056,080		$	1,093,878
Cost of sales		281,018			282,661		550,322			563,694
Gross margin		254,314			272,522		505,758			530,184
Selling and administrative expenses		245,103			252,551		488,584			492,016
Asset impairments and other, net		129			7,070		(154	)		9,740
Operating income		9,082			12,901		17,328			28,428
Other components of net periodic benefit cost		50			56		148			17
Interest expense, net		405			617		702			1,346
Earnings from continuing operations before income taxes		8,627			12,228		16,478			27,065
Income tax expense		976			1,354		3,858			7,297
Earnings from continuing operations		7,651			10,874		12,620			19,768
Gain (loss) from discontinued operations, net of tax		(8	)		63		(30	)		47
Net Earnings	$	7,643		$	10,937	$	12,590		$	19,815

Basic earnings per common share:
Continuing operations	$	0.60		$	0.76	$	0.98		$	1.38
Discontinued operations		0.00			0.00		0.00			0.00
Net earnings	$	0.60		$	0.76	$	0.98		$	1.38

Diluted earnings per common share:
Continuing operations	$	0.59		$	0.74	$	0.96		$	1.35
Discontinued operations		0.00			0.01		(0.01	)		0.00
Net earnings	$	0.59		$	0.75	$	0.95		$	1.35

Weighted average shares outstanding:
Basic		12,813			14,339		12,887			14,313
Diluted		13,009			14,611		13,189			14,657

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						Nine Months Ended
	October 30, 2021			October 31, 2020			October 30, 2021			October 31, 2020			Three Months Ended					Six Months Ended
Net earnings (loss)	$	32,895		$	7,466		$	52,710		$	(146,347	)
													July 30, 2022			July 31, 2021		July 30, 2022			July 31, 2021
Net earnings													$	7,643		$	10,937	$	12,590		$	19,815
Other comprehensive income (loss):
Postretirement liability adjustments, net of tax		21			(157	)		(2	)		(433	)		13			21		63			(23	)
Foreign currency translation adjustments		(470	)		(283	)		1,184			(7,899	)		(1,712	)		152		(5,579	)		1,654
Total other comprehensive income (loss)		(449	)		(440	)		1,182			(8,332	)		(1,699	)		173		(5,516	)		1,631
Comprehensive Income (Loss)	$	32,446		$	7,026		$	53,892		$	(154,679	)
Comprehensive Income													$	5,944		$	11,110	$	7,074		$	21,446

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)


	Nine Months Ended						Six Months Ended
	October 30, 2021			October 31, 2020			July 30, 2022			July 31, 2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss)	$	52,710		$	(146,347	)
Adjustments to reconcile net earnings (loss) to net cash provided by
Net earnings							$	12,590		$	19,815
Adjustments to reconcile net earnings to net cash provided by (used in)
operating activities:
Depreciation and amortization		32,258			35,553			21,229			21,634
Deferred income taxes		(11,101	)		6,827			(3,075	)		(9,994	)
Impairment of intangible assets		0			84,519
Impairment of long-lived assets		2,049			11,141			542			1,824
Restricted stock expense		6,476			6,532
Share-based compensation expense								6,788			3,967
Other		1,103			3,975			413			375
Changes in working capital and other assets and liabilities, net of acquisitions/dispositions:
Accounts receivable		(5,458	)		(9,130	)		(3,753	)		66
Inventories		(48,131	)		(6,902	)		(234,018	)		(34,614	)
Prepaids and other current assets		44,711			(30,626	)		(28,510	)		38,742
Accounts payable		46,314			32,428			71,258			36,681
Other accrued liabilities		53,515			613			(46,638	)		57,009
Other assets and liabilities		(22,332	)		62,719			(21,037	)		(9,730	)
Net cash provided by operating activities		152,114			51,302
Net cash provided by (used in) operating activities								(224,211	)		125,775
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		(34,507	)		(18,157	)		(29,005	)		(19,545	)
Acquisitions, net of cash acquired		0			(75	)
Proceeds from asset sales		12			100			—			9
Other		74			0			—			74
Net cash used in investing activities		(34,421	)		(18,132	)		(29,005	)		(19,462	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under revolving credit facility		25,279			218,307			62,000			23,363
Payments on revolving credit facility		(42,935	)		(201,569	)		(27,375	)		(36,854	)
Shares repurchased related to share repurchase plan		(28,474	)		0			(56,329	)		—
Restricted shares withheld for taxes		(4,076	)		(1,224	)
Shares repurchased related to taxes for share-based awards								(3,875	)		(4,076	)
Change in overdraft balances		(459	)		(15,970	)		4,841			(517	)
Other		(35	)		(1,301	)		2			(35	)
Net cash used in financing activities		(50,700	)		(1,757	)		(20,736	)		(18,119	)
Effect of foreign exchange rate fluctuations on cash		680			2,230			(1,634	)		754
Net increase in cash and cash equivalents		67,673			33,643
Cash and cash equivalents at beginning of period		215,091			81,418
Cash and cash equivalents at end of period	$	282,764		$	115,061
Net increase (decrease) in cash								(275,586	)		88,948
Cash at beginning of period								320,525			215,091
Cash at end of period							$	44,939		$	304,039
Supplemental information:
Interest paid	$	1,714		$	3,560		$	504		$	1,256
Income taxes paid (refunded)		(20,916	)		4,256			25,718			(29,485	)
Cash paid for amounts included in measurement of operating lease liabilities		152,240			78,777			101,687			96,248
Operating lease assets obtained in exchange for new operating lease liabilities		68,773			24,999			41,137			64,884

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
Net earnings		—			—			—			7,466			—			—			7,466
Employee and non-employee restricted stock		—			—			2,083			—			—			—			2,083
Restricted shares withheld for taxes		—			—			—			(1	)		—			—			(1	)
Other comprehensive loss		—			—			—			—			(440	)		—			(440	)
Other		—			(3	)		3			—			—			—			—
Balance October 31, 2020	$	1,009		$	15,479		$	280,340		$	231,001		$	(40,000	)	$	(17,857	)	$	469,972


	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
Net earnings		—			—			—			10,937			—			—			10,937			—			—			—			10,937			—			—			10,937
Other comprehensive income		—			—			—			—			173			—			173			—			—			—			—			173			—			173
Employee and non-employee restricted stock		—			—			2,055			—			—			—			2,055
Share-based compensation expense																							—			—			2,055			—			—			—			2,055
Restricted stock issuance		—			219			(219	)		—			—			—			—			—			219			(219	)		—			—			—			—
Restricted shares withheld for taxes		—			(64	)		64			(4,076	)		—			—			(4,076	)		—			(64	)		64			(4,076	)		—			—			(4,076	)
Other		—			(2	)		2			—			—			—			—			—			(2	)		2			—			—			—			—
Balance July 31, 2021		828			15,597			286,298			336,659			(33,428	)		(17,857	)		588,097		$	828		$	15,597		$	286,298		$	336,659		$	(33,428	)	$	(17,857	)	$	588,097


																						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		—			—			—			32,895			—			—			32,895			—			—			—			4,947			—			—			4,947
Other comprehensive loss		—			—			—			—			(449	)		—			(449	)		—			—			—			—			(3,817	)		—			(3,817	)
Employee and non-employee restricted stock		—			—			2,509			—			—			—			2,509
Share-based compensation expense																							—			—			3,239			—			—			—			3,239
Restricted stock issuance																							—			78			(78	)		—			—			—			—
Shares repurchased		—			(522	)		—			(30,107	)		—			—			(30,629	)		—			(104	)		—			(6,396	)		—			—			(6,500	)
Other		(1	)		(4	)		6			—			—			—			1			(9	)		(13	)		23			—			—			—			1
Balance October 30, 2021	$	827		$	15,071		$	288,813		$	339,447		$	(33,877	)	$	(17,857	)	$	592,424
Balance April 30, 2022																							818			14,217			294,628			348,757			(40,225	)		(17,857	)		600,338
Net earnings																							—			—			—			7,643			—			—			7,643
Other comprehensive loss																							—			—			—			—			(1,699	)		—			(1,699	)
Share-based compensation expense																							—			—			3,549			—			—			—			3,549
Restricted stock issuance																							—			239			(239	)		—			—			—			—
Shares repurchased																							—			(826	)		—			(44,596	)		—			—			(45,422	)
Restricted shares withheld for taxes																							—			(72	)		72			(3,875	)		—			—			(3,875	)
Other																							—			(1	)		—			—			—			—			(1	)
Balance July 30, 2022																						$	818		$	13,557		$	298,010		$	307,929		$	(41,924	)	$	(17,857	)	$	560,533

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

~~Table of Contents~~

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, nashvilleshoewarehouse.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 ~~October~~July 30, ~~2021,~~2022, we operated ~~1,434~~1,412 retail stores in the U.S., Puerto Rico, Canada, the U.K. and the ROI.

During the three and ~~nine~~six months ended ~~October~~July 30, ~~2021~~2022 and ~~October~~July 31, ~~2020,~~2021, we operated 4four 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.

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 ~~$2.7~~$3.1 million and ~~$3.1~~$3.6 million for the ~~third~~second quarters of Fiscal ~~2022~~2023 and Fiscal ~~2021,~~2022, respectively, and ~~$9.9~~$5.8 million and ~~$7.7~~$7.2 million for the first ~~nine~~six months of Fiscal ~~2022~~2023 and Fiscal ~~2021,~~2022, respectively.

Retail occupancy costs recorded in selling and administrative expense were ~~$75.0~~$75.8 million and ~~$68.6~~$75.1 million for the ~~third~~second quarters of Fiscal ~~2022~~2023 and Fiscal ~~2021,~~2022, respectively, and ~~$220.9~~$154.3 million and ~~$217.4~~$145.9 million for the first ~~nine~~six months of Fiscal ~~2022~~2023 and Fiscal ~~2021,~~2022, respectively. Fiscal 2022 included Covid-related rent credits.

Advertising Costs

Advertising costs were ~~$27.0~~$28.0 million and ~~$19.4~~$23.5 million for the ~~third~~second quarters of Fiscal ~~2022~~2023 and Fiscal ~~2021,~~2022, respectively, and ~~$71.6~~$50.1 million and ~~$48.0~~$44.6 million for the first ~~nine~~six months of Fiscal ~~2022~~2023 and Fiscal ~~2021,~~2022, respectively.

Vendor Allowances

Vendor reimbursements of cooperative advertising costs recognized as a reduction of selling and administrative expenses were ~~$2.3~~$3.5 million and ~~$0.8~~$2.4 million for the ~~third~~second quarters of Fiscal ~~2022~~2023 and Fiscal ~~2021,~~2022, respectively, and ~~$7.7~~$6.7 million and ~~$3.5~~$5.4 million for the first ~~nine~~six months of Fiscal ~~2022~~2023 and Fiscal ~~2021,~~2022, respectively. During the first ~~nine~~six months of each of Fiscal ~~2022~~2023 and Fiscal ~~2021,~~2022, our cooperative advertising reimbursements received were not in excess of the costs incurred.

~~Table of Contents~~

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~~COVID-19 Pandemic

~~COVID-19~~

~~In March 2020, the World Health Organization categorized the outbreak of~~The COVID-19 ~~as a pandemic. To help control the spread of the virus and protect the~~pandemic has created significant public 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 nine months of Fiscal 2022. As of October 30, 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. 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, July 31, 2021 and October 30, 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, July 31, 2021 or October 30, 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~~economic disruption, uncertainty, and ~~other information.~~

We also record reserves for obsolete and slow-moving inventory and for estimated shrinkage between physical inventory counts. During the initial phases of the COVID-19 pandemic, we recorded incremental inventory reserve provisions asvolatility which may negatively affect our business operations. As a result, ~~of excess inventory due to~~if the ~~impact of COVID-19 on retail traffic~~pandemic persists or worsens, our accounting estimates and ~~demand for certain products. Depending on future customer behavior, among other factors, we may incur additional inventory reserve provisions.~~assumptions could be impacted in subsequent interim reports and upon final determination at year-end, and it is reasonably possible such changes could be significant.

New Accounting Pronouncements

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, a small number of 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

~~Table of Contents~~

~~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, October 31, 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, $1.8 million, $5.0 million and $2.5 million, respectively, on our Condensed Consolidated Statements of Operations. We did 0tcurrently have any ~~material qualified payroll tax credits for the quarter ended October 30, 2021. We intend to continue to defer qualified payroll and other tax payments as permitted by the CARES Act.~~ new accounting pronouncements pending adoption.

S~~avings from the government program in the U.K. have provided property tax relief for the quarters ended May 2, 2020, August 1, 2020, October 31, 2020, May 1, 2021, July 31, 2021 and October 30, 2021~~ of approximately $1.6 million, $3.9 million, $3.9 million, $4.0 million, $3.1 million and $1.4 million, respectively. Other government relief programs in the U.K., ROI and Canada provided savings for the quarters ended May 1, 2021, July 31, 2021 and October 30, 2021 of approximately $3.2 million, $1.2 million and $0.8 million, respectively.

~~The COVID-19 pandemic continues to evolve. The emergence of variants from the original strain, its economic impact and actions taken in response thereto, including, without limitation,~~ ~~the timing and availability of effective medical treatments 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 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 economy 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.

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		314		0		314		(26	)		(7	)		(33	)
Balance, October 30, 2021	$	10,396	$	28,468	$	38,864
Balance, July 30, 2022							$	10,061		$	28,462		$	38,523

Other intangibles by major classes were as follows:


	Trademarks				Customer Lists						Other						Total
(In thousands)	Jul. 30, 2022		Jan. 29, 2022		Jul. 30, 2022			Jan. 29, 2022			Jul. 30, 2022			Jan. 29, 2022			Jul. 30, 2022			Jan. 29, 2022
Gross other intangibles	$	23,870	$	25,935	$	6,457		$	6,586		$	400		$	400		$	30,727		$	32,921
Accumulated amortization		—		—		(2,821	)		(2,666	)		(400	)		(400	)		(3,221	)		(3,066	)
Net Other Intangibles	$	23,870	$	25,935	$	3,636		$	3,920		$	—		$	—		$	27,506		$	29,855

Trademarks

Customer Lists

Other

Total

(In thousands)

Oct. 30, 2021

Jan. 30,
2021

Oct. 30, 2021

Jan. 30,
2021

Oct. 30, 2021

Jan. 30,
2021

Oct. 30, 2021

Jan. 30,
2021

Gross other intangibles

$
26,530

$
26,443

$
6,619

$
6,617

$
400

$
400

$
33,549

$
33,460

Accumulated amortization

0

0

(2,557
)

(2,131
)

(400
)

(400
)

(2,957
)

(2,531
)
Net Other Intangibles

$
26,530

$
26,443

$
4,062

$
4,486

$
0

$
0

$
30,592

$
30,929

Note 43

Asset Impairments and Other Charges

Asset impairment and other charges for the second quarter and first six months ended July 30, 2022 are not considered material.

We recorded pretax charges of ~~$0.3~~$7.1 million in the ~~third~~second quarter of Fiscal 2022, including ~~$0.1~~$6.2 million for professional fees related to actions of an activist shareholder and ~~$0.2 million~~$1.4 for retail store asset ~~impairments.~~

impairments, partially offset by a $~~Table of Contents~~0.6

~~Genesco Inc. and Subsidiaries~~

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

~~Note 4~~

~~Asset Impairments and Other Charges, Continued~~

million insurance gain. We recorded ~~pretax~~ charges of ~~$10.1~~$9.7 million in the first ~~nine~~six months of Fiscal 2022, including ~~$8.6~~$8.5 million for professional fees related to actions of an activist shareholder and ~~$2.0~~$1.8 million for retail store asset impairments, partially offset by a ~~$0.6~~$0.6 million insurance gain. ~~We recorded pretax charges~~

Genesco Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

Note 4

Inventories and Other Current Accrued Liabilities

Inventory


(In thousands)	July 30, 2022		January 29, 2022
Wholesale finished goods	$	72,809	$	28,432
Retail merchandise		434,427		249,768
Total Inventories	$	507,236	$	278,200

Other Current Accrued Liabilities


(In thousands)	July 30, 2022		January 29, 2022
Accrued employee compensation(1)	$	13,612	$	60,575
Accrued other taxes		16,411		17,631
Accrued income taxes		6		2,385
Provision for discontinued operations		475		491
Other accrued liabilities		49,762		53,074
Total Other Current Accrued Liabilities	$	80,266	$	134,156

(1) The accrual for performance-based incentive compensation of ~~$6.4~~$48.1 million as of January 29, 2022 was paid in the ~~third~~first quarter of Fiscal 2021 for retail store asset impairments. We recorded pretax charges of $16.0 million in the first nine months of Fiscal 2021, including $5.3 million for trademark impairments and $11.1 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)

October 30, 2021

January 30, 2021

Wholesale finished goods

$
13,589

$
27,851

Retail merchandise

325,609

263,115

Total Inventories

$
339,198

$
290,966

~~Note 6~~

Fair Value

Fair Value of Financial Instruments

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


Fair Values
(In thousands)	October 30, 2021				January 30, 2021				July 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	$	15,610	$	15,708	$	32,986	$	33,612	$	48,872	$	48,834	$	15,679	$	15,679
U.K. Revolver Borrowings		0		0		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 ~~October~~July 30, ~~2021,~~2022, we have ~~$0.2~~$0.2 million of long-lived assets held and used which were measured using Level 3 inputs within the fair value hierarchy. As of ~~October~~July 30, ~~2021,~~2022, we have ~~$11.7~~$10.8 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				Nine Months Ended				Three Months Ended				Six Months Ended
(Shares in thousands)	October 30, 2021		October 31, 2020		October 30, 2021		October 31, 2020		July 30, 2022		July 31, 2021		July 30, 2022		July 31, 2021
Weighted-average number of shares - basic		14,314		14,283		14,313		14,191		12,813		14,339		12,887		14,313
Common stock equivalents		302		79		330		0		196		272		302		344
Weighted-average number of shares - diluted		14,616		14,362		14,643		14,191		13,009		14,611		13,189		14,657

Due to the loss from continuing operations in the nine months ended October 31, 2020, share-based awards are excluded from the diluted earnings per share calculation for that period because they would be antidilutive.

We repurchased ~~521,693~~826,034 shares during the ~~third~~second quarter ~~and first nine months~~ of Fiscal ~~2022~~2023 at a cost of ~~$30.6~~$45.4 million, or ~~$58.71~~$54.99 per share and repurchased 928,929 shares during the first six months of Fiscal 2023 at a cost of $51.9 million, or $55.90 per share. We accrued ~~$2.1~~$4.8 million ~~for~~of share repurchases asin the fourth quarter of ~~October 30, 2021~~Fiscal 2022 due to timing of the cash settlement which is included ~~in other accrued liabilities~~ on the Condensed Consolidated ~~Balance Sheets.~~Statements of Cash Flows for the six months ended July 30, 2022, offset by a $0.4 million accrual of share repurchases in the second quarter of Fiscal 2023. We have ~~$59.0~~$54.9 million remaining as of ~~October~~July 30, ~~2021~~2022 under our ~~current $100.0 million~~expanded share repurchase ~~authorization.~~authorization announced in February 2022. We did 0tnot repurchase any shares during the ~~third~~second quarter or first ~~nine~~six months of Fiscal ~~2021.~~

~~Table~~2022. During the third quarter of ~~Contents~~Fiscal 2023, through September 7, 2022, we have repurchased 142,627 shares at a cost of $6.5 million, or $45.75 per share.

~~Genesco Inc. and Subsidiaries~~

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

Note 87

Long-Term Debt


(In thousands)	October 30, 2021		January 30, 2021		July 30, 2022		January 29, 2022
U.S. revolver borrowings	$	15,610	$	32,986	$	48,872	$	15,679
U.K. revolver borrowings		0		0
Total long-term debt		15,610		32,986		48,872		15,679
Current portion		0		0		—		—
Total Noncurrent Portion of Long-Term Debt	$	15,610	$	32,986	$	48,872	$	15,679

The revolver borrowings outstanding under the Credit Facility as of July 30, 2022 included $34.5 million U.S. revolver borrowings and $14.4 million (£11.8 million) related to Genesco (UK) Limited. We were in compliance with all the relevant terms and conditions of the Credit Facility and Facility Letter as of ~~October~~July 30, ~~2021.~~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 (“the 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 the EPA's future oversight costs, involving future costs to us estimated to be between $1.7 million and $2.0 million, and to reimburse the 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,~~Accrual for Environmental Contingencies

Related to all outstanding environmental contingencies, we ~~received~~had accrued $1.4 million as of each of July 30, 2022, January 29, 2022 and July 31, 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 ~~EPA a Notice of Potential Liability and Demand for Costs (the "Notice") pursuant~~accompanying Condensed Consolidated Balance Sheets because they relate to ~~CERCLA regarding the site in Gloversville, New York, of a~~ former ~~leather tannery~~facilities operated by usus. We have made pretax accruals for certain of these contingencies which were not material for the first six months of Fiscal 2023 or Fiscal 2022. These charges are included in loss from discontinued operations, net in the Condensed Consolidated Statements of Operations and by other, unrelated parties. The Notice demanded payment of approximately $2.2 million of response costs claimed by the EPA to have been incurred to conduct assessments and removal activities at the site. In February 2017, we entered into a settlement agreement with the EPA resolving their claim for past response costsrepresent changes 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.estimates.

~~Table of Contents~~

Genesco Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

Note 98

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 million as of October 30, 2021, $1.5 million as of January 30, 2021 and $1.4 million as of October 31, 2020. 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 to former facilities operated by us. We have made pretax accruals for certain of these contingencies which were not material for the first nine months of Fiscal 2022 and Fiscal 2021. These charges are included in 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.

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 ~~October~~July 30, ~~2021,~~2022, the inventory owned by Samsung had a historical cost of ~~$6.9~~$23.9 million. As of July 30, 2022, 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 October 30, 2021

Three Months Ended July 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	$	379,927	$	119,791	$	66,835	$	34,154		$	0		$	600,707		$	321,332	$	101,518	$	74,818	$	37,881		$	—		$	535,549
Intercompany sales		0		0		0		(161	)		—			(161	)		—		—		—		(217	)		—			(217	)
Net sales to external customers	$	379,927	$	119,791	$	66,835	$	33,993		$	—		$	600,546			321,332		101,518		74,818		37,664			—			535,332
Segment operating income (loss)	$	43,403	$	9,701	$	1,641	$	(132	)	$	(10,543	)	$	44,070			9,222		2,094		3,212		685			(6,002	)		9,211
Asset impairments and other ⁽¹⁾		0		0		0		0			(314	)		(314	)		—		—		—		—			(129	)		(129	)
Operating income (loss)		43,403		9,701		1,641		(132	)		(10,857	)		43,756			9,222		2,094		3,212		685			(6,131	)		9,082
Other components of net periodic benefit cost		0		0		0		0			(55	)		(55	)		—		—		—		—			(50	)		(50	)
Interest expense		0		0		0		0			(754	)		(754	)
Interest income		0		0		0		0			169			169
Interest expense, net																	—		—		—		—			(405	)		(405	)
Earnings (loss) from continuing operations before income taxes	$	43,403	$	9,701	$	1,641	$	(132	)	$	(11,497	)	$	43,116		$	9,222	$	2,094	$	3,212	$	685		$	(6,586	)	$	8,627
Total assets ⁽²⁾	$	760,370	$	229,347	$	131,378	$	53,310		$	442,404		$	1,616,809		$	811,860	$	201,859	$	170,713	$	74,561		$	240,727		$	1,499,720
Depreciation and amortization		7,160		1,675		1,148		266			375			10,624			6,973		1,532		1,057		217			899			10,678
Capital expenditures		4,645		718		1,104		270			8,225			14,962			4,333		1,755		1,903		384			5,233			13,608

⁽¹⁾(1) Asset impairments and other includes a ~~$0.1~~$0.1 million charge for asset impairments included in Licensed Brands.

(2) Of our $712.2 million of long-lived assets, $93.7 million and $21.5 million relate to long-lived assets in the U.K. and Canada, respectively.

Genesco Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

Note 10

Business Segment Information, Continued


Three Months Ended July 31, 2021
(In thousands)	Journeys Group		Schuh Group		Johnston & Murphy Group		Licensed Brands			Corporate & Other			Consolidated
Sales	$	346,275	$	106,079	$	61,159	$	41,966		$	—		$	555,479
Intercompany sales		—		—		—		(296	)		—			(296	)
Net sales to external customers		346,275		106,079		61,159		41,670			—			555,183
Segment operating income (loss)		30,368		3,623		3,951		991			(18,962	)		19,971
Asset impairments and other (1)		—		—		—		—			(7,070	)		(7,070	)
Operating income (loss)		30,368		3,623		3,951		991			(26,032	)		12,901
Other components of net periodic benefit cost		—		—		—		—			(56	)		(56	)
Interest expense, net		—		—		—		—			(617	)		(617	)
Earnings (loss) from continuing operations before income taxes	$	30,368	$	3,623	$	3,951	$	991		$	(26,705	)	$	12,228
Total assets (2)	$	765,100	$	247,833	$	132,639	$	50,438		$	462,610		$	1,658,620
Depreciation and amortization		7,107		1,813		1,191		270			364			10,745
Capital expenditures		4,923		529		1,003		215			773			7,443

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

⁽²⁾(2) Of our ~~$781.3~~$812.9 million of long-lived assets, ~~$120.3~~$129.4 million and ~~$29.1~~$30.3 million relate to long-lived assets in the U.K. and Canada, respectively.


Six Months Ended July 30, 2022
(In thousands)	Journeys Group		Schuh Group			Johnston & Murphy Group		Licensed Brands			Corporate & Other			Consolidated
Sales	$	635,777	$	189,677		$	145,834	$	85,781		$	—		$	1,057,069
Intercompany sales		—		—			—		(989	)		—			(989	)
Net sales to external customers		635,777		189,677			145,834		84,792			—			1,056,080
Segment operating income (loss)		24,152		(652	)		3,762		4,478			(14,566	)		17,174
Asset impairments and other(1)		—		—			—		—			154			154
Operating income (loss)		24,152		(652	)		3,762		4,478			(14,412	)		17,328
Other components of net periodic benefit cost		—		—			—		—			(148	)		(148	)
Interest expense, net		—		—			—		—			(702	)		(702	)
Earnings (loss) from continuing operations before income taxes	$	24,152	$	(652	)	$	3,762	$	4,478		$	(15,262	)	$	16,478
Depreciation and amortization	$	14,211	$	3,122		$	2,179	$	478		$	1,239		$	21,229
Capital expenditures		10,901		3,873			3,809		663			9,759			29,005

(1) Asset impairments and other includes a $0.5 million charge for asset impairments, which includes $0.2 million in Journeys Group, $0.2 million in Schuh Group and $0.1 million in Licensed Brands, partially offset by a $0.7 million gain on the termination of the pension plan.

~~Table of Contents~~

Genesco Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

Note 1110

Business Segment Information, Continued

Three Months Ended October 31, 2020
(In thousands)	Journeys Group		Schuh Group		Johnston & Murphy Group			Licensed Brands			Corporate & Other			Consolidated

Six Months Ended July 31, 2021
(In thousands)																	Journeys Group		Schuh Group			Johnston & Murphy Group		Licensed Brands			Corporate & Other			Consolidated
Sales	$	317,682		90,021	$	39,655		$	32,586		$	0		$	479,944		$	722,823	$	174,790		$	109,921	$	86,798		$	—		$	1,094,332
Intercompany sales		0		0		0			(664	)		—			(664	)		—		—			—		(454	)		—			(454	)
Net sales to external customers	$	317,682	$	90,021	$	39,655		$	31,922		$	—		$	479,280			722,823		174,790			109,921		86,344			—		$	1,093,878
Segment operating income (loss)	$	24,035	$	6,766	$	(11,137	)	$	792		$	(5,913	)	$	14,543
Segment operating loss																		63,492		(224	)		771		3,552			(29,423	)	$	38,168
Asset impairments and other ⁽¹⁾		0		0		0			0			(6,359	)		(6,359	)		—		—			—		—			(9,740	)		(9,740	)
Operating income (loss)		24,035		6,766		(11,137	)		792			(12,272	)		8,184			63,492		(224	)		771		3,552			(39,163	)		28,428
Other components of net periodic benefit income		0		0		0			0			182			182
Other components of net periodic benefit cost																		—		—			—		—			(17	)		(17	)
Interest expense		0		0		0			0			(1,415	)		(1,415	)		—		—			—		—			(1,346	)		(1,346	)
Interest income		0		0		0			0			11			11
Earnings (loss) from continuing operations before income taxes	$	24,035	$	6,766	$	(11,137	)	$	792		$	(13,494	)	$	6,962		$	63,492	$	(224	)	$	771	$	3,552		$	(40,526	)	$	27,065
Total assets ⁽²⁾	$	838,730		241,332	$	185,580		$	57,487		$	213,371		$	1,536,500
Depreciation and amortization		7,238		2,120		1,381			243			361			11,343		$	14,389	$	3,681		$	2,312	$	554		$	698		$	21,634
Capital expenditures		5,801		574		788			123			229			7,515			13,773		1,227			2,562		480			1,503			19,545

⁽¹⁾ Asset impairments and other includes a $6.4 million charge for retail store asset impairments, which includes $4.6 million in the Johnston & Murphy Group, $1.0 million in Schuh Group and $0.8 million in Journeys Group.

⁽²⁾ ~~Of our $850.9 million of long-lived assets, $139.4 million and $37.1 million relate to long-lived assets in the U.K. and Canada, respectively.~~

Nine Months Ended October 30, 2021

(In thousands)

Journeys
Group

Schuh
Group

Johnston
& Murphy
Group

Licensed
Brands

Corporate
& Other

Consolidated

Sales

$
1,102,750

$
294,581

$
176,756

$
120,952

$
0

$
1,695,039

Intercompany sales

0

0

0

(615
)

—

(615
)
Net sales to external customers

$
1,102,750

$
294,581

$
176,756

$
120,337

$
—

$
1,694,424

Segment operating income (loss)

$
106,895

$
9,477

$
2,412

$
3,420

$
(39,966
)

$
82,238

Asset impairments and other⁽¹⁾

0

0

0

0

(10,054
)

(10,054
)
Operating income (loss)

106,895

9,477

2,412

3,420

(50,020
)

72,184

Other components of net periodic benefit cost

0

0

0

0

(72
)

(72
)
Interest expense

0

0

0

0

(2,375
)

(2,375
)
Interest income

0

0

0

0

444

444

Earnings (loss) from continuing
operations before income taxes

$
106,895

$
9,477

$
2,412

$
3,420

$
(52,023
)

$
70,181

Depreciation and amortization

$
21,549

$
5,356

$
3,460

$
820

$
1,073

$
32,258

Capital expenditures

18,418

1,945

3,666

750

9,728

34,507

⁽¹⁾(1) Asset impairments and other includes an ~~$8.6~~$8.5 million charge for professional fees related to the actions of an activist shareholder and a ~~$2.0~~$1.8 million charge for retail store asset impairments, which includes ~~$0.2~~$0.8 million in ~~Johnston & Murphy~~Journeys Group, ~~$0.8~~$0.8 million in Schuh Group and ~~$1.0~~$0.2 million in ~~Journeys~~the Johnston & Murphy Group, partially offset by a ~~$0.6~~$0.6 million insurance gain.

~~Table of Contents~~

~~Genesco Inc. and Subsidiaries~~

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

~~Note 11~~

~~Business Segment Information, Continued~~

Nine Months Ended October 31, 2020

(In thousands)

Journeys
Group

Schuh
Group

Johnston
& Murphy
Group

Licensed
Brands

Corporate
& Other

Consolidated

Sales

$
763,238

$
208,918

$
102,601

$
76,381

$
0

$
1,151,138

Intercompany sales

0

0

0

(1,409
)

—

(1,409
)
Net sales to external customers

$
763,238

$
208,918

$
102,601

$
74,972

$
—

$
1,149,729

Segment operating loss

$
(2,888
)

$
(15,158
)

$
(38,964
)

$
(2,931
)

$
(14,675
)

$
(74,616
)
Goodwill impairment⁽¹⁾

0

0

0

0

(79,259
)

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

0

0

0

0

(15,953
)

(15,953
)
Operating loss

(2,888
)

(15,158
)

(38,964
)

(2,931
)

(109,887
)

(169,828
)
Other components of net periodic benefit income

0

0

0

0

488

488

Interest expense

0

0

0

0

(4,429
)

(4,429
)
Interest income

0

0

0

0

251

251

Earnings (loss) from continuing
operations before income taxes

$
(2,888
)

$
(15,158
)

$
(38,964
)

$
(2,931
)

$
(113,577
)

$
(173,518
)
Depreciation and amortization

$
21,962

$
7,077

$
4,309

$
1,066

$
1,139

$
35,553

Capital expenditures

11,653

2,412

3,356

198

538

18,157

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

⁽²⁾Asset impairments and other includes an $11.1 million charge for retail store asset impairments, which includes $5.8 million in Johnston & Murphy, $2.5 million in Schuh Group and $2.8 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 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 25.3%~~decreased 3.6% to ~~$600.5~~$535.3 million for the ~~third~~second quarter of Fiscal ~~2022~~2023 compared to ~~$479.3~~$555.2 million for the ~~third~~second quarter of Fiscal ~~2021. This~~2022. The sales ~~increase~~decrease was driven by ~~increased store~~decreased comparable sales ~~resulting~~as we continued to anniversary the significant government stimulus distributed a year ago, and by the unfavorable impact of $15.5 million in sales due primarily to foreign exchange pressure on the Schuh business from ~~strong back-to-school~~the strengthening dollar, partially offset by increased sales in the ~~U.S. and U.K., a 7% increase in digital comparable sales, increased~~ wholesale sales and the favorable impact of foreign exchange rates. Stores were open approximately 99% of possible days in the third quarter of Fiscal 2022 as compared to 95% in the third quarter of Fiscal 2021. Although we have disclosed comparable sales for the third quarter of Fiscal 2022 and Fiscal 2021, we believe that overall sales is a more meaningful metric during these periods due to the impact of the COVID-19 pandemic. See below, under the heading “Comparable Sales”, for our definition of comparable sales.

channel. Journeys Group sales ~~increased 20%~~decreased 7%, Schuh Group sales ~~increased 33%~~decreased 4% and Licensed Brands sales decreased 10%, while Johnston & Murphy Group sales increased ~~69% and Licensed Brands sales increased 6% during~~22% for the ~~third~~second quarter of Fiscal ~~2022~~2023 compared to the ~~same~~second quarter of Fiscal ~~2021.~~ 2022.

Gross margin as a percentage of net sales ~~increased~~decreased to ~~49.2%~~47.5% during the ~~third~~second quarter of Fiscal ~~2022,~~2023, compared to ~~47.1%~~49.1% for the ~~third~~second quarter of Fiscal ~~2021.~~2022. This reflects ~~increased~~decreased gross margin as a percentage of net sales in all of our operating business units except Schuh Group, primarily due to ~~fewer~~increased markdowns in our Journeys business and increased freight and logistics costs in our Johnston & Murphy business. In addition, the decrease in inventory reserves in the second quarter last year at Johnston & Murphy ~~retail, improved initial margins at Journeys Group, less promotional activity at Schuh Group and slightly lower shipping and warehouse expense in all our retail business units, partially offset by~~as the brand began to recover from the pandemic making for a ~~shift in the mix of our businesses and excess freight and logistics costs related to supply chain challenges in Licensed Brands and Johnston & Murphy Group.~~ difficult comparison this year.

Selling and administrative expenses as a percentage of net sales ~~decreased~~increased to ~~41.8%~~45.8% of net sales during the ~~third~~second quarter of Fiscal 2023 from 45.5% for the second quarter of Fiscal 2022, ~~from 44.0% for the third quarter of Fiscal 2021,~~ reflecting ~~decreased~~increased expenses as a percentage of net sales at Journeys Group, Schuh Group and ~~Johnston & Murphy Group,~~Licensed Brands, partially offset by ~~increased~~decreased expenses as a percentage of net sales at ~~Schuh Group and Licensed Brands.~~Johnston & Murphy Group. The overall ~~decrease~~increase in expenses as a percentage of net sales is due in large part to ~~greater leverage of fixed expenses as a result of revenue growth~~one-time benefits for rent credits and government relief in the ~~third~~second quarter ~~and to~~last year. Excluding these one-time benefits last year, decreased ~~occupancy expense, partially offset by increased~~ performance-based compensation expense more than offset the deleverage in selling salaries and marketing ~~expenses and less savings from the government program in the U.K. providing property tax relief. In Fiscal 2021, we did not record any performance-based compensation expense.~~ expenses.

Operating margin was ~~7.3%~~1.7% for the ~~third~~second quarter of Fiscal 2023 compared to 2.3% in the second quarter of Fiscal 2022, ~~compared to 1.7% in the third quarter of Fiscal 2021,~~ reflecting ~~increased~~decreased operating margin in all our operating business ~~units, except Licensed Brands, as a result of~~units. The decrease in operating margin for the ~~increased~~second quarter this year compared to the second quarter last year was driven by decreased gross margin as a percentage of net sales, ~~in all business units~~reflecting the increased markdowns at Journeys and ~~overall decreased~~increased freight and logistics costs at Johnston & Murphy, and increased expenses as a percentage of net ~~sales.~~

~~Significant Developments~~

~~COVID-19 Update~~

~~In March 2020,~~sales, reflecting the ~~World Health Organization categorized the outbreak of COVID-19 as a pandemic. As a result,~~one-time benefits for rent credits 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 to 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 expenses, 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 our full-time store employees in North America and our store and distribution center employees in the U.K. We also furloughed employees and

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~~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, and establish a First-in, Last-out (“FILO”) tranche of indebtedness of $17.5 million, for $350.0 million of total capacity. On June 7, 2021, we paid off the $17.5 million FILO loan.

•

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 October 30, 2021, we have no borrowings 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.~~

As of October 30, 2021, we are operating substantially all 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 optional for customers to wear masks. As a result of new government ~~mandates~~relief in the ~~U.K., all Schuh stores are once again requiring masks for employees~~prior year, partially offset by lower impairment charges and ~~customers. In Johnston & Murphy shops and factory stores, it is optional 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 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 and results of operations.

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 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, a small number of 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. During the quarters ended May 1, 2021, July 31, 2021 and October 30, 2021, we have recognized approximately $6.1 million, $2.5 million and $4.8 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 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 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, October 31, 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, $1.8 million, $5.0 million and $2.5 million, respectively, on our Condensed Consolidated Statements of Operations. We did not have any material qualified payroll tax credits for the quarter ended October 30, 2021. We intend to continue to defer qualified payroll and other tax payments as permitted by the CARES Act.

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During the third quarter this year, supply chain challenges have caused increased freight and logistics costs. These costs increased our cost of sales by approximately $4.1 million on our Condensed Consolidated Statements of Operations for the quarter ended October 30, 2021.

~~Asset Impairment and Other Charges~~

~~We recorded pretax~~ charges ~~of $0.3 million in the third quarter of Fiscal 2022, including $0.2 million for retail store asset impairments and $0.1 million~~ for professional fees related to the actions of an activist ~~shareholder.~~ shareholder in the second quarter of Fiscal 2022.

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 ~~nine~~second quarter of Fiscal 2023 but did not disclose comparable sales for the first quarter and first six months of Fiscal ~~2022, as we believe that overall sales are a more meaningful metric during this period~~2023 due to the impact of the COVID-19 pandemic and related ~~extended~~extensive store ~~closures.~~closures during the first quarter of Fiscal 2022. We believe that overall sales is a more meaningful metric during the first quarter and first six months of Fiscal 2023.

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

Our net sales in the ~~third~~second quarter of Fiscal 2023 decreased 3.6% to $535.3 million compared to $555.2 million in the second quarter of Fiscal 2022. The sales decrease was driven by a 2% decrease in comparable sales as we continued to anniversary the significant government stimulus distributed a year ago, and by the unfavorable impact of $15.5 million in sales due primarily to foreign exchange pressure on the Schuh business from the strengthening dollar, partially offset by increased sales in the wholesale channel.

Gross margin decreased 6.7% to $254.3 million in the second quarter of Fiscal 2023 from $272.5 million in the second quarter of Fiscal 2022 increased 25.3% to $600.5 million compared to $479.3 million in the third quarter of Fiscal 2021. This sales increase was driven by increased store sales resulting from strong back-to-school sales, a 7% increase in digital comparable sales, increased wholesale sales and ~~the favorable impact of foreign exchange rates. Stores were open approximately 99% of possible days in the third quarter of Fiscal 2022 as compared to 95% in the third quarter of Fiscal 2021.~~

~~Gross margin increased 30.9% to $295.2 million in the third quarter of Fiscal 2022 from $225.5 million in the third quarter of Fiscal 2021 and increased~~decreased as a percentage of net sales from ~~47.1%~~49.1% to ~~49.2%, reflecting increased~~47.5%. This reflects decreased gross margin as a percentage of net sales in all of our operating business units except Schuh Group, primarily due to ~~fewer~~increased markdowns in our Journeys business and increased freight and logistics costs in our Johnston & Murphy business. In addition, the decrease in inventory reserves in the second quarter last year at Johnston & Murphy ~~retail, improved initial margins at Journeys Group, less promotional activity at Schuh Group and slightly lower shipping and warehouse expense in all of our retail business units, partially offset by~~as the brand began to recover from the pandemic making for a ~~shift in the mix of our businesses and excess freight and logistics costs related to supply chain challenges in Licensed Brands and Johnston & Murphy Group.~~difficult comparison this year.

Selling and administrative expenses in the ~~third~~second quarter of Fiscal ~~2022~~2023 decreased 2.9% but increased ~~19.0% but decreased~~ as a percentage of net sales from ~~44.0%~~45.5% to ~~41.8%~~45.8%, reflecting ~~decreased~~increased expenses as a percentage of net sales at Journeys Group, Schuh Group and ~~Johnston & Murphy Group,~~Licensed Brands, partially offset by ~~increased~~decreased expenses as a percentage of net sales at ~~Schuh Group and Licensed Brands.~~Johnston & Murphy Group. The overall ~~decrease~~increase in expenses as a percentage of net sales is due in large part to ~~greater leverage of fixed expenses as a result of revenue growth~~one-time benefits for rent credits and government relief in the ~~third~~second quarter ~~and to~~last year. Excluding these one-time benefits last year, decreased ~~occupancy expense, partially offset by increased~~ performance-based compensation expense more than offset the deleverage in selling salaries and marketing ~~expenses and less savings from the government program in the U.K. providing property tax relief. In Fiscal 2021, we did not record any performance-based compensation expense.~~expenses. Explanations of the changes in results of operations are provided by business segment in discussions following these introductory paragraphs.

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Earnings from continuing operations before income taxes (“pretax earnings”) for the ~~third~~second quarter of Fiscal ~~2022~~2023 were ~~$43.1~~$8.6 million compared to ~~$7.0~~$12.2 million for the ~~third~~second quarter of Fiscal ~~2021.~~2022. Pretax earnings for the ~~third~~second quarter of Fiscal 2023 included asset impairment and other charges of $0.1 million for asset impairments. Pretax earnings for the second quarter of Fiscal 2022 included asset impairments and other charges of $0.3 million for retail store asset impairments and professional fees related to the actions of an activist shareholder. Pretax earnings for the third quarter of Fiscal 2021 included asset impairments and other charges of $6.4 million for retail store asset impairments.

We recorded an effective income tax rate of 23.5% and -7.4% in the third quarter of Fiscal 2022 and Fiscal 2021, respectively. The tax rate for the third quarter 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.~~

Net earnings for the third quarter of Fiscal 2022 were $32.9 million, or $2.25 diluted earnings per share compared to $7.5 million, or $0.52 diluted earnings per share, for the third quarter of Fiscal 2021.

~~Journeys Group~~

Three Months Ended

October 30, 2021

October 31, 2020

%
Change

(dollars in thousands)

Net sales

$
379,927

$
317,682

19.6
%
Operating income

$
43,403

$
24,035

80.6
%
Operating margin

11.4
%

7.6
%

Net sales from Journeys Group increased 19.6% to $379.9 million for the third quarter of Fiscal 2022, compared to $317.7 million for the third quarter of Fiscal 2021, primarily due to higher store comparable sales, reflecting strong back-to-school sales, partially offset by decreased digital comparable growth. Total comparable sales for Journeys Group increased 15% for the third quarter this year. Journeys Group operated 1,137 stores at the end of the third quarter of Fiscal 2022, including 229 Journeys Kidz stores, 47 Journeys stores in Canada and 37 Little Burgundy stores in Canada, compared to 1,168 stores at the end of the third quarter of last year, including 235 Journeys Kidz stores, 47 Journeys stores in Canada and 38 Little Burgundy stores in Canada.

Journeys Group had operating income of $43.4 million for the third quarter of Fiscal 2022 compared to $24.0 million for the third quarter of Fiscal 2021. The increase of 80.6% in operating income for Journeys Group was due to (i) increased net sales, (ii) increased gross margin as a percentage of net sales, reflecting improved initial margins and decreased markdowns and (iii) decreased selling and administrative expenses as a percentage of net sales primarily due to decreased occupancy, freight and depreciation expenses.

~~Schuh Group~~

Three Months Ended

October 30, 2021

October 31, 2020

%
Change

(dollars in thousands)

Net sales

$
119,791

$
90,021

33.1
%
Operating income

$
9,701

$
6,766

43.4
%
Operating margin

8.1
%

7.5
%

Net sales from Schuh Group increased 33.1% to $119.8 million for the third quarter of Fiscal 2022 compared to $90.0 million for the third quarter of Fiscal 2021, primarily due to increased store sales and digital comparable sales, resulting from strong back-to-school sales, and the favorable impact of $5.8 million due to changes in foreign exchange rates. Total comparable sales for Schuh Group increased 23% for the third quarter this year. Schuh Group operated 123 stores at the end of the third quarter of Fiscal 2022, compared to 127 stores at the end of the third quarter of Fiscal 2021.

Schuh Group had operating income of $9.7 million for the third quarter of Fiscal 2022 compared to $6.8 million for the third quarter of Fiscal 2021. The increase of 43.4% in operating income this year reflects (i) increased net sales and (ii) increased gross margin as a percentage of net sales, reflecting less promotional activity and decreased shipping and warehouse expense. In addition, operating income included a favorable impact of $0.4 million due to changes in foreign exchange rates compared to last year. Selling and administrative expenses increased as a percentage of net sales, reflecting increased occupancy expense and marketing expense, partially offset by decreased selling salaries, depreciation expense and compensation expense. The increase in occupancy expense for the third quarter this year primarily reflects less savings from the government program in the U.K. providing property tax relief compared to the savings in the third quarter last year as well as fewer abatements in the third quarter this year compared to last year.

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~~Johnston & Murphy Group~~

Three Months Ended

October 30, 2021

October 31, 2020

%
Change

(dollars in thousands)

Net sales

$
66,835

$
39,655

68.5
%
Operating income (loss)

$
1,641

$
(11,137
)

NM

Operating margin

2.5
%

(28.1
)%

Johnston & Murphy Group net sales increased 68.5% to $66.8 million for the third quarter of Fiscal 2022 from $39.7 million for the third quarter of Fiscal 2021, primarily due to increased store sales, increased digital comparable sales and increased wholesale sales. With an increase in social events and gatherings and more people returning to work in person, more customers have returned to in-person shopping and retail traffic has continued to improve in the third quarter this year. Total comparable sales for Johnston & Murphy retail increased 77% for the third quarter this year. Retail operations accounted for 75.4% of Johnston & Murphy Group's sales in the third quarter of Fiscal 2022, up from 69.7% in the third quarter of Fiscal 2021. The store count for Johnston & Murphy retail operations at the end of the third quarter of Fiscal 2022 was 174 stores, including eight stores in Canada, compared to 181 stores, including eight stores in Canada, at the end of the third quarter of Fiscal 2021.

Johnston & Murphy Group operating income of $1.6 million for the third quarter of Fiscal 2022 improved $12.8 million compared to an operating loss of $11.1 million in the third quarter of Fiscal 2021. The increase was primarily due to (i) increased net sales, (ii) increased gross margin as a percentage of net sales reflecting decreased retail markdowns, less closeouts at wholesale, a higher mix of retail product 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 revenue growth, and to decreased occupancy expense, partially offset by increased performance-based compensation expense and freight expense.

~~Licensed Brands~~

Three Months Ended

October 30, 2021

October 31, 2020

%
Change

(dollars in thousands)

Net sales

$
33,993

$
31,922

6.5
%
Operating income (loss)

$
(132
)

$
792

NM

Operating margin

(0.4
)%

2.5
%

Licensed Brands' net sales increased 6.5% to $34.0 million for the third quarter of Fiscal 2022, from $31.9 million for the third quarter of Fiscal 2021, reflecting primarily the growth of the Levi’s footwear business.

Licensed Brands' had an operating loss of $0.1 million for the third quarter of Fiscal 2022 compared to operating income of $0.8 million in the third quarter of Fiscal 2021. The $0.9 million decrease in operating income was primarily due to increased selling and administrative expenses as a percentage of net sales reflecting increased expenses, particularly bad debt, compensation, and marketing expenses, partially offset by lower warehouse expense for the third quarter this year. In addition, while gross margin as a percentage of net sales increased for the third quarter this year primarily due to less pre-acquisition royalty and commission cost in legacy Togast product sales, excess freight and logistics costs related to supply chain challenges negatively impacted gross margin.

~~Corporate, Interest Expenses and Other Charges~~

Corporate and other expense for the third quarter of Fiscal 2022 was $10.9 million compared to $12.3 million for the third quarter of Fiscal 2021. Corporate expense in the third quarter of Fiscal 2022 included a $0.3 million charge in asset impairment and other charges for retail store asset impairments and professional fees related to the actions of an activist shareholder. Corporate expense in the third quarter of Fiscal 2021 included a $6.4 million charge in asset impairment and other charges for retail store asset impairments. The corporate expense increase, excluding asset impairment and other charges, primarily reflected increased performance-based compensation expense and expenses related to the new headquarters building.

Net interest expense decreased to $0.6 million for the third quarter of Fiscal 2022 compared to net interest expense of $1.4 million for the third quarter of Fiscal 2021 primarily reflecting decreased average borrowings in the third quarter this year.

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

Our net sales in the first nine months of Fiscal 2022 increased 47.4% to $1.7 billion compared to $1.1 billion in the first nine months of Fiscal 2021, driven by increased store sales resulting from the reopening of stores that were closed during the first nine months of Fiscal 2021 due to the COVID-19 pandemic, increased wholesale sales, the favorable impact of foreign exchange rates and a 4% digital comparable sales growth. Stores were open approximately 95% of possible days in the first nine months of Fiscal 2022 as compared to 71% in the first nine months of Fiscal 2021.

Gross margin increased 61.0% to $825.4 million in the first nine months of Fiscal 2022 from $512.6 million in the first nine months of Fiscal 2021 and increased as a percentage of net sales from 44.6% to 48.7%, reflecting increased gross margin as a percentage of net sales in all 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 nine 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 nine months of Fiscal 2022 increased 26.5% but decreased as a percentage of net sales from 51.1% to 43.9%, reflecting decreased expenses as a percentage of net sales in all 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 and to 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 benefits from our ongoing lease initiative and was partially offset by increased percentage rent as a result of increased sales. Explanations of the changes in results of operations are provided by business segment in discussions following these introductory paragraphs.

Pretax earnings for the first nine months of Fiscal 2022 were $70.2 million compared to a pretax loss of $173.5 million for the first nine months of Fiscal 2021. Pretax earnings for the first nine months of Fiscal 2022 included asset impairments and other charges of $10.1$7.1 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 nine months of Fiscal 2021 included a goodwill impairment charge of $79.3 million and asset impairments and other charges of $16.0 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 ~~24.8%~~11.3% and ~~15.8%~~11.1% in the ~~first nine months~~second quarter of Fiscal ~~2022~~2023 and Fiscal ~~2021,~~2022, respectively. ~~The tax rate for the first nine 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 nine 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. The tax rate for the first nine months of Fiscal 2022 and Fiscal 2021 was also impacted by $1.7 million tax benefit and $1.1 million tax expense, respectively, due to the impact of ASU 2016-09 related to the vesting of restricted stock.

Net earnings for the ~~first nine months~~second quarter of Fiscal ~~2022~~2023 were ~~$52.7~~$7.6 million, or ~~$3.60~~$0.59 diluted earnings per share compared to ~~a net loss of $146.3~~$10.9 million, or ~~$10.31~~$0.75 diluted ~~loss~~earnings per share, for the ~~first nine months~~second quarter of Fiscal ~~2021.~~2022.

Journeys Group


	Nine Months Ended									Three Months Ended
	October 30, 2021			October 31, 2020			% Change			July 30, 2022			July 31, 2021			% Change
	(dollars in thousands)									(dollars in thousands)
Net sales	$	1,102,750		$	763,238			44.5	%	$	321,332		$	346,275			(7.2	)%
Operating income (loss)	$	106,895		$	(2,888	)	NM
Operating income										$	9,222		$	30,368			(69.6	)%
Operating margin		9.7	%		(0.4	)%					2.9	%		8.8	%

Net sales from Journeys Group ~~increased 44.5%~~decreased 7.2% to ~~$1.1 billion~~$321.3 million for the ~~first nine months~~second quarter of Fiscal 2023, compared to $346.3 million for the second quarter of Fiscal 2022, ~~compared to $763.2 million for the first nine months of Fiscal 2021,~~ primarily due to ~~increased store sales, resulting~~a decrease of 8% in total comparable sales. We believe the Journeys consumer benefitted most from the ~~reopening of stores that were closed during~~government stimulus in the ~~first nine months~~second quarter of Fiscal ~~2021 due~~2022 and is currently more affected by the U.S. macro-economic environment than customers of several of our other divisions. Journeys Group operated 1,131 stores at the end of the second quarter of Fiscal 2023, including 230 Journeys Kidz stores, 46 Journeys stores in Canada and 36 Little Burgundy stores in Canada, compared to 1,142 stores at the ~~COVID-19 pandemic, partially offset by decreased digital comparable sales.~~end of the second quarter of last year, including 230 Journeys Kidz stores, 47 Journeys stores in Canada and 37 Little Burgundy stores in Canada.

Journeys Group had operating income of ~~$106.9~~$9.2 million for the ~~first nine months~~second quarter of Fiscal ~~2022~~2023 compared to ~~a loss of $2.9~~$30.4 million for the ~~first nine months~~second quarter of Fiscal ~~2021.~~2022. The ~~increase~~decrease of ~~$109.8 million~~69.6% in operating income for Journeys Group was due to (i) ~~increased~~decreased net sales, (ii) ~~increased~~decreased gross margin as a percentage of net sales reflecting ~~decreased~~increased markdowns ~~and decreased shipping and warehouse expense as well as improved initial margins and (iii) decreased selling and administrative expenses as~~with a ~~percentage of net sales due~~return to ~~greater leverage of fixed expenses as~~ a ~~result of revenue growth,~~more normalized promotional environment and ~~to decreased occupancy expense, partially offset by increased performance-based compensation expense.~~

~~Table of Contents~~

~~Schuh Group~~

Nine Months Ended

October 30, 2021

October 31, 2020

%
Change

(dollars in thousands)

Net sales

$
294,581

$
208,918

41.0
%
Operating income (loss)

$
9,477

$
(15,158
)

NM

Operating margin

3.2
%

(7.3
)%

Net sales from Schuh Group increased 41.0% to $294.6 million for the first nine months of Fiscal 2022 compared to $208.9 million for the first nine months of Fiscal 2021 primarily due to increased store sales, resulting from the reopening of stores that were closed during the first nine months of Fiscal 2021 due to the COVID-19 pandemic, the favorable impact of $23.2 million due to changes in foreign exchange rates and increased digital comparable sales. Stores were open almost 73% of the possible operating days during the first nine months of Fiscal 2022 compared to 65% of possible operating days during the first nine months of Fiscal 2021.

Schuh Group had operating income of $9.5 million for the first nine months of Fiscal 2022 compared to an operating loss of $15.2 million for the first nine months of Fiscal 2021. The $24.6 million 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 ~~decreased~~the deleverage of expenses, especially selling salaries, marketing and occupancy ~~expense primarily~~ as a result of decreased revenue in the second quarter this year, partially offset by decreased performance-based compensation expense.

Schuh Group


	Three Months Ended
	July 30, 2022			July 31, 2021			% Change
	(dollars in thousands)
Net sales	$	101,518		$	106,079			(4.3	)%
Operating income	$	2,094		$	3,623			(42.2	)%
Operating margin		2.1	%		3.4	%

Net sales from Schuh Group decreased 4.3% to $101.5 million for the second quarter of Fiscal 2023 compared to $106.1 million for the second quarter of Fiscal 2022, primarily due to an unfavorable impact of $14.3 million due to changes in foreign exchange rates, partially offset by increased total comparable sales of 9% driven by increased store sales as store traffic continued to increase in the second quarter this year. Schuh stores benefitted from a better inventory position and 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 second quarter of Fiscal 2023, compared to 123 stores at the end of the second quarter of Fiscal 2022.

Schuh Group had operating income of $2.1 million for the second quarter of Fiscal 2023 compared to $3.6 million for the second quarter of Fiscal 2022. The 42.2% decrease in operating income for Schuh Group reflects increased selling and administrative expenses as a percentage of net sales for the second quarter of Fiscal 2023 compared to the second quarter of Fiscal 2022, reflecting more normalized operating expenses due to the one-time benefits for rent ~~abatement agreements with our landlords, grant~~credits and government property tax relief and other government relief related to the COVID-19 pandemic in the U.K. in the second quarter last year. Excluding these one-time benefits last year, decreased performance-based compensation, occupancy and marketing expenses more than offset deleverage in selling salaries. In addition, operating income included an unfavorable impact of $0.3 million due to changes in foreign exchange rates compared to last year. Gross margin increased as a percentage of net sales, reflecting lower e-commerce penetration in the second quarter of Fiscal 2023.

Johnston & Murphy Group


	Three Months Ended
	July 30, 2022			July 31, 2021			% Change
	(dollars in thousands)
Net sales	$	74,818		$	61,159			22.3	%
Operating income	$	3,212		$	3,951			(18.7	)%
Operating margin		4.3	%		6.5	%

Johnston & Murphy Group net sales increased 22.3% to $74.8 million for the second quarter of Fiscal 2023 from $61.2 million for the second quarter of Fiscal 2022, primarily due to a 17% increase in comparable sales and increased wholesale sales. 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 ~~U.K.~~pandemic, has fueled top line growth. Retail operations accounted for 75.4% of Johnston & Murphy Group's sales in the second quarter of Fiscal 2023, down from 81.1% in the second quarter of Fiscal 2022. The store count for Johnston & Murphy retail operations at the end of the second quarter of Fiscal 2023 was 159 stores, including six stores in Canada, compared to 174 stores, including eight stores in Canada, at the end of the second quarter of Fiscal 2022.

Johnston & Murphy Group operating income of $3.2 million for the second quarter of Fiscal 2023 decreased 18.7% compared to $4.0 million in the second quarter of Fiscal 2022. The decrease was primarily due to decreased gross margin as a percentage of net sales reflecting increased freight and ~~ROI governments, reduced~~logistics costs as well as a difficult comparison to last year with the decrease in inventory reserves last year as the brand began to recover from the pandemic. Selling and administrative expenses ~~and~~decreased as a percentage of net sales due to greater leverage of ~~fixed~~ expenses as a result of revenue growth, partially offset by increased marketing ~~and performance-based compensation~~ expense.

~~Johnston & Murphy Group~~Licensed Brands


	Nine Months Ended									Three Months Ended
	October 30, 2021			October 31, 2020			% Change			July 30, 2022			July 31, 2021			% Change
	(dollars in thousands)									(dollars in thousands)
Net sales	$	176,756		$	102,601			72.3	%	$	37,664		$	41,670			(9.6	)%
Operating income (loss)	$	2,412		$	(38,964	)	NM
Operating income										$	685		$	991			(30.9	)%
Operating margin		1.4	%		(38.0	)%					1.8	%		2.4	%

~~Johnston & Murphy Group~~Licensed Brands' net sales ~~increased 72.3%~~decreased 9.6% to ~~$176.8~~$37.7 million for the ~~first nine months~~second quarter of Fiscal 2023, from $41.7 million for the second quarter of Fiscal 2022 ~~from $102.6~~as we reposition the distribution of the mix of the Levi's brand to rely less on the value channel.

Licensed Brands' operating income was $0.7 million for the ~~first nine months~~second quarter of Fiscal ~~2021, primarily due~~2023 compared to ~~increased store sales, resulting from~~$1.0 million in the ~~reopening of stores closed during the first nine months~~second quarter of Fiscal ~~2021 due to the COVID-19 pandemic, and increased wholesale sales and digital comparable sales. Retail operations accounted for 77.1% of Johnston & Murphy Group's sales~~2022. The 30.9% decrease in ~~the first nine months of Fiscal 2022, up from 72.8% in the first nine months of last year.~~

Johnston & Murphy Group had operating income of $2.4 million for the first nine months of Fiscal 2022 compared to an operating loss of $39.0 million for the first nine months of Fiscal 2021. The increase of $41.4 million of operating income was primarily due to (i) ~~increased~~decreased net sales, (ii) ~~increased~~decreased gross margin as a percentage of net sales ~~reflecting decreased retail markdowns, decreased inventory reserves, decreased shipping~~driven by sales mix and ~~warehouse expense~~increased freight and ~~a higher mix of retail product~~logistics costs 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 revenue growth, partially offset by increased ~~performance-based compensation expense.~~

~~Licensed Brands~~

Nine Months Ended

October 30, 2021

October 31, 2020

%
Change

(dollars in thousands)

Net sales

$
120,337

$
74,972

60.5
%
Operating income (loss)

$
3,420

$
(2,931
)

NM

Operating margin

2.8
%

(3.9
)%

Licensed Brands' net sales increased 60.5% to $120.3 million for the first nine months of Fiscal 2022, from $75.0 million for the first nine months of Fiscal 2021, reflecting primarily the growth of the Levi’s footwear business as well as increased sales in our other licensed brands as customers began to recover from the COVID-19 pandemic and order volumes from our wholesale customers improved.

Licensed Brands' operating income was $3.4 million for the first nine months of Fiscal 2022 compared to an operating loss of $2.9 million in the first nine months of Fiscal 2021. The $6.4 million 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 year gross margin was impacted by pre-Togast acquisition royalty and commission cost

~~Table of Contents~~

~~and (iii) decreased~~ selling and administrative expenses as a percentage of net sales reflecting ~~decreased bad debt expense and shipping and compensation~~deleverage of expenses as a result of the change in sales mix, partially offset by ~~increased royalty and~~decreased performance-based compensation ~~expense. While gross margin increased for the first nine months this year, excess freight~~expense, shipping and ~~logistics costs related to supply chain challenges negatively impacted gross margin.~~warehouse expense and royalty expense.

Corporate, Interest Expenses and Other Charges

Corporate and other expense for the ~~first nine months~~second quarter of Fiscal ~~2022~~2023 was ~~$50.0~~$6.1 million compared to ~~$30.6~~$26.0 million for ~~first nine months~~the second quarter of Fiscal ~~2021.~~2022. Corporate expense in the ~~first nine months~~second quarter of Fiscal 2023 included a $0.1 million charge in asset impairment and other charges for asset impairments. Corporate expense in the second quarter of Fiscal 2022 included a ~~$10.1~~$7.1 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. The corporate expense decrease, excluding asset impairment and other charges, primarily reflected decreased performance-based compensation expense.

Net interest expense decreased to $0.4 million for the second quarter of Fiscal 2023 compared to net interest expense of $0.6 million for the second quarter of Fiscal 2022 primarily reflecting decreased average borrowings in the second quarter this year.

Results of Operations – Six Months of Fiscal 2023 Compared to Six Months of Fiscal 2022

Our net sales in the first six months of Fiscal 2023 decreased 3.5% to $1.056 billion compared to $1.094 billion in the first six months of Fiscal 2022. The sales decrease was driven by decreased comparable direct sales and by the unfavorable impact of $20.4 million in sales due primarily to foreign exchange pressure on the Schuh business from the strengthening dollar, partially offset by increased sales in the wholesale channel.

Gross margin decreased 4.6% to $505.8 million in the first six months of Fiscal 2023 from $530.2 million in the first six months of Fiscal 2022 and decreased as a percentage of net sales from 48.5% to 47.9%, reflecting decreased gross margin as a percentage of net sales in Journeys Group and Johnston & Murphy Group, partially offset by increased gross margin as a percentage of net sales in Schuh Group and Licensed Brands. The overall decrease in gross margin as a percentage of net sales is primarily due to increased markdowns in our Journeys business and increased freight and logistics costs as well as the decrease in inventory reserves in the Johnston & Murphy business last year making for difficult comparisons this year, partially offset by lower shipping and warehouse expense as a result of lower e-commerce penetration.

Selling and administrative expenses in the first six months of Fiscal 2023 decreased 0.7% but increased as a percentage of net sales from 45.0% to 46.3%, 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 at Johnston & Murphy Group and Licensed Brands. The overall increase in expenses as a percentage of net sales is due to 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 six months last year, as well as increased selling salaries and compensation and marketing expenses, partially offset by decreased performance-based compensation expense. 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 2023 were $16.5 million compared to $27.1 million for the first six months of Fiscal 2022. Pretax earnings for the first six months of Fiscal 2023 included an asset impairment and other gain of $0.2 million for a gain on the termination of the pension plan, partially offset by asset impairments. 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.

We recorded an effective income tax rate of 23.4% and 27.0% in the first six months of Fiscal 2023 and Fiscal 2022, respectively. The tax rate for the first six months of Fiscal 2023 is lower than Fiscal 2022, reflecting a reduction in the effective tax rate we expect for jurisdictions in which we are profitable combined with the impact of foreign activity for which we have historically been unable to recognize a tax benefit.

Net earnings for the first six months of Fiscal 2023 were $12.6 million, or $0.95 diluted earnings per share compared to $19.8 million, or $1.35 diluted earnings per share, for the first six months of Fiscal 2022.

Journeys Group


	Six Months Ended
	July 30, 2022			July 31, 2021			% Change
	(dollars in thousands)
Net sales	$	635,777		$	722,823			(12.0	)%
Operating income	$	24,152		$	63,492			(62.0	)%
Operating margin		3.8	%		8.8	%

Net sales from Journeys Group decreased 12.0% to $635.8 million for the first six months of Fiscal 2023, compared to $722.8 million for the first six months of Fiscal 2022, primarily due to decreased store sales and decreased digital comparable sales. We believe the Journeys consumer benefitted most from the government stimulus in the first six months of Fiscal 2022 and is currently more affected by the U.S. macro-economic environment than customers of several of our other divisions.

Journeys Group had operating income of $24.2 million for the first six months of Fiscal 2023 compared to $63.5 million for the first six months of Fiscal 2022. The decrease of 62.0% in operating income for Journeys Group was due to (i) decreased net sales, (ii) decreased gross margin as a percentage of net sales reflecting increased markdowns with a return to a more normalized promotional environment and lower initial mark-ons, partially offset by lower shipping and warehouse expense and (iii) increased selling and administrative expenses as a percentage of net sales reflecting the deleverage of expenses, especially selling salaries, occupancy and marketing expenses as a result of decreased revenue in the first six months this year, partially offset by decreased performance-based compensation expense.

Schuh Group


	Six Months Ended
	July 30, 2022			July 31, 2021			% Change
	(dollars in thousands)
Net sales	$	189,677		$	174,790			8.5	%
Operating loss	$	(652	)	$	(224	)		(191.1	)%
Operating margin		(0.3	)%		(0.1	)%

Net sales from Schuh Group increased 8.5% to $189.7 million for the first six months of Fiscal 2023 compared to $174.8 million for the first six months of Fiscal 2022, primarily due to increased store sales as Schuh stores were only open 59% of possible days in the first six months of Fiscal 2022 versus 100% of possible days in the first six months of Fiscal 2023, partially offset by decreased digital comparable sales and an unfavorable impact of $19.0 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 had an operating loss of $0.7 million for the first six months of Fiscal 2023 compared to an operating loss of $0.2 million for the first six months of Fiscal 2022. The increased loss this year reflects increased selling and administrative expenses as a percentage of net sales for the first six months of Fiscal 2023 compared to the first six months of Fiscal 2022, reflecting more normalized operating expenses due to the one-time benefits for rent credits and government property tax relief and other government relief related to the COVID-19 pandemic in the U.K. in the first six months last year. Excluding these one-time benefits last year, decreased occupancy, marketing and performance-based compensation

expenses more than offset the deleverage in selling salaries. In addition, operating income included an unfavorable impact of $0.2 million due to changes in foreign exchange rates compared to last year. Gross margin increased as a percentage of net sales, reflecting decreased shipping and warehouse expense driven by lower e-commerce penetration and less promotional activity in the first six months of Fiscal 2023.

Johnston & Murphy Group


	Six Months Ended
	July 30, 2022			July 31, 2021			% Change
	(dollars in thousands)
Net sales	$	145,834		$	109,921			32.7	%
Operating income	$	3,762		$	771			387.9	%
Operating margin		2.6	%		0.7	%

Johnston & Murphy Group net sales increased 32.7% to $145.8 million for the first six months of Fiscal 2023 from $109.9 million for the first six months of Fiscal 2022, primarily due to increased store sales, wholesale sales and e-commerce sales. 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 pandemic, has fueled top line growth. Retail operations accounted for 73.0% of Johnston & Murphy Group's sales in the first six months of Fiscal 2023, down from 78.2% in the first six months of Fiscal 2022.

Johnston & Murphy Group operating income of $3.8 million for the first six months of Fiscal 2023 improved $3.0 million compared to $0.8 million in the first six months of Fiscal 2022. The increase was primarily due to (i) increased net sales and (ii) decreased selling and administrative expenses as a percentage of net sales due to greater leverage of expenses as a result of revenue growth, especially occupancy expense, selling salaries and compensation, partially offset by increased marketing expense. Gross margin as a percentage of net sales decreased for the first six months of Fiscal 2023 compared to the first six months of Fiscal 2022 reflecting increased freight and logistic costs and the channel mix of more wholesale sales as well as a difficult comparison to last year with the decrease in inventory reserves last year as the brand began to recover from the pandemic, partially offset by price increases and decreased retail markdowns.

Licensed Brands


	Six Months Ended
	July 30, 2022			July 31, 2021			% Change
	(dollars in thousands)
Net sales	$	84,792		$	86,344			(1.8	)%
Operating income	$	4,478		$	3,552			26.1	%
Operating margin		5.3	%		4.1	%

Licensed Brands' net sales decreased 1.8% to $84.8 million for the first six months of Fiscal 2023, from $86.3 million for the first six months of Fiscal 2022 as we reposition the distribution of the mix of the Levi's brand to rely less on the value channel.

Licensed Brands' operating income was $4.5 million for the first six months of Fiscal 2023 compared to $3.6 million in the first six months of Fiscal 2022. The 26.1% increase in operating income was primarily due to (i) increased gross margin as a percentage of net sales as sales mix and increased freight and logistics costs were more than offset by fewer closeout sales as compared to last year and (ii) decreased selling and administrative expenses as a percentage of net sales reflecting leverage of expenses as a result of a favorable sales mix, partially offset by increased bad debt and compensation expenses.

Corporate, Interest Expenses and Other Charges

Corporate and other expense for the first six months of Fiscal 2023 was $14.4 million compared to $39.2 million for the first six months of Fiscal 2022. Corporate expense in the first ~~nine~~six months of Fiscal ~~2021~~2023 included a ~~$16.0~~gain of $0.2 million in asset impairment and other charges from a gain on the termination of the pension plan, partially offset by asset impairments. 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 ~~and intangible~~ asset impairments, partially offset by ~~the release of~~ an ~~earnout related to the Togast acquisition.~~insurance gain. The corporate expense ~~increase,~~decrease, excluding asset impairment and other charges, primarily reflected ~~increased~~decreased performance-based compensation ~~expense and expenses related to the new headquarters building.~~expense.

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

Net interest expense decreased to ~~$1.9~~$0.7 million for the first ~~nine~~six months of Fiscal ~~2022~~2023 compared to net interest expense of ~~$4.2~~$1.3 million for the first ~~nine~~six months of Fiscal ~~2021~~2022 primarily reflecting decreased average borrowings in the first ~~nine~~six months this year.

Liquidity and Capital Resources

The impacts of the COVID-19 pandemic, including the related supply chain challenges, 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~~working capital normally reaching peaks in the ~~spring~~summer and fall of each ~~year.~~year in anticipation of the back-to-school and holiday selling seasons. Historically, cash flows from operations typically have been generated principally in the fourth quarter of each fiscal year.


	Nine Months Ended									Six Months Ended
Cash flow changes:	October 30, 2021			October 31, 2020			Increase (Decrease)			July 30, 2022			July 31, 2021			Increase (Decrease)
(in millions)
Net cash provided by operating activities	$	152.1		$	51.3		$	100.8
(in thousands)
Net cash provided by (used in) operating activities										$	(224,211	)	$	125,775		$	(349,986	)
Net cash used in investing activities		(34.4	)		(18.1	)		(16.3	)		(29,005	)		(19,462	)		(9,543	)
Net cash used in financing activities		(50.7	)		(1.8	)		(48.9	)		(20,736	)		(18,119	)		(2,617	)
Effect of foreign exchange rate fluctuations on cash		0.7			2.2			(1.5	)		(1,634	)		754			(2,388	)
Increase in cash and cash equivalents	$	67.7		$	33.6		$	34.1
Net increase (decrease) in cash and cash equivalents										$	(275,586	)	$	88,948		$	(364,534	)

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 ~~$100.8~~$350.0 million higher for the first ~~nine~~six months of Fiscal 2023 compared to the first six months of Fiscal 2022, ~~compared to the first nine months of Fiscal 2021,~~ reflecting primarily the following factors:

•	~~an $114.5 million increase in cash flow from increased earnings in the first nine months of Fiscal 2022, net of intangible impairment in the first quarter of Fiscal 2021;~~

•

a $199.4 million decrease in cash flow from changes in inventory, primarily reflecting increased inventory growth in all of our business units in the first six months of Fiscal 2023 as we rebuilt inventory following the significant supply chain disruptions resulting from the pandemic;

•	~~a $75.3 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 $103.6 million decrease in cash flow from changes in other accrued liabilities, primarily reflecting the payment of Fiscal 2022 performance-based compensation accruals in the first six months of Fiscal 2023 and significantly lower performance-based compensation accruals for the first six months of Fiscal 2023 compared to Fiscal 2022; and

•

a $52.9 million increase in cash flow from changes in other accrued liabilities, primarily reflecting increased performance-based compensation accruals in the first nine months of Fiscal 2022 compared to payments of Fiscal 2020 performance-based compensation accruals in the first nine months of Fiscal 2021; and

•

a ~~$13.9~~$67.3 million decrease in cash flow from changes in prepaids and other current assets, primarily reflecting income taxes paid in the first six months of Fiscal 2023 compared to a tax refund in the first six months of Fiscal 2022; partially offset by

•

a $34.6 million increase in cash flow from changes in accounts payable, primarily reflecting changes in buying patterns in the first ~~nine~~six months of Fiscal ~~2021; partially offset by~~2023 and the increase in inventory.

~~• an $85.1 million decrease in cash flow from changes in other assets and liabilities primarily reflecting rent payments made in the first~~

~~nine months of Fiscal 2022 versus rent payments being held in the first nine months of Fiscal 2021; and~~

•	~~a $41.2 million decrease in cash flow from changes in inventory, primarily reflecting increased inventory growth in our Journeys and Schuh business segments in the first nine months of Fiscal 2022.~~

Cash used in investing activities was ~~$16.3~~$9.5 million higher for the first ~~nine~~six months of Fiscal ~~2022~~2023 as compared to the first ~~nine~~six months of Fiscal ~~2021~~2022 reflecting increased capital expenditures primarily related to the new corporate headquarters building and investments in retail stores, partially offset by decreased capital expenditures for digital and ~~omni-channel~~omnichannel initiatives.

~~Table of Contents~~

Cash used in financing activities was ~~$48.9~~$2.6 million higher for the first ~~nine~~six months of Fiscal ~~2022~~2023 as compared to the first ~~nine~~six months of Fiscal ~~2021~~2022 reflecting share repurchases this year and the payment of Fiscal 2022 share repurchase accruals in the first six months of Fiscal 2023, partially offset by increased 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 ~~October~~July 30, ~~2021,~~2022, we have borrowed ~~$15.6~~$48.9 million ~~(£11.4 million)~~ under our Credit ~~Facility.~~Facility, which includes $34.5 million in U.S. revolver borrowings and $14.4 million (£11.8 million) in Genesco (UK) Limited. We were in compliance with all the relevant terms and conditions of the Credit Facility and Facility Letter as of ~~October~~July 30, ~~2021.~~2022.

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 liquidity needs in Fiscal 2023 and the foreseeable future.

During the ~~second quarter~~remainder of Fiscal ~~2022,~~2023, we ~~paid off~~expect our primary cash requirements to be directed towards funding operating activities, including the ~~$17.5 million FILO loan~~acquisition of inventory, and other working capital obligations including those related to taxes. We expect our ~~Credit Facility.~~end of year cash balance to return to a more normalized level. 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 ~~believe will~~believed would generate approximately $55 million of net tax refunds. ~~Through the end of the third quarter of Fiscal 2022, we have~~We received approximately $26 million of such refunds ~~and~~in Fiscal 2022. We 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 Credit Facility and the Schuh Facility Letter will be sufficient to support our near-term liquidity2023.

Contractual Obligations

Our contractual obligations at ~~October~~July 30, ~~2021~~2022 decreased ~~approximately 11%~~16% compared to January ~~30, 2021,~~29, 2022, primarily due to decreased operating lease obligations, partially offset by increased long-term debt and purchase ~~obligations and long-term debt.~~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 ~~83%~~58% is for new stores and remodels and 42% is for computer hardware, software and warehouse enhancements for initiatives to drive traffic and omni-channel capabilities. Planned capital expenditures excludes approximately ~~$13~~$10 million, or $8 million net of tenant ~~allowance,~~allowances, for the new corporate headquarters building. In January of Fiscal 2022, as part of our continuing efforts to optimize our distribution center footprint, we sold a distribution warehouse for $20 million.

Common Stock Repurchases

We repurchased ~~521,693~~826,034 shares during the ~~third~~second quarter ~~and first nine months~~ of Fiscal ~~2022~~2023 at a cost of ~~$30.6~~$45.4 million, or ~~$58.71~~$54.99 per share and repurchased 928,929 shares during the first six months of Fiscal 2023 at a cost of $51.9 million, or $55.90 per share. ~~We accrued $2.1~~There were $4.8 million ~~for~~ share repurchases asaccrued in the fourth quarter of ~~October 30, 2021 which is~~Fiscal 2022 included ~~in other accrued liabilities~~ on the Condensed Consolidated ~~Balance Sheets.~~Statements of Cash Flows for the six months ended July 30, 2022, offset by a $0.4 million accrual of share repurchases in the second quarter of Fiscal 2023. We have ~~$59.0~~$54.9 million remaining as of ~~October~~July 30, ~~2021~~2022 under our ~~current $100.0 million~~expanded share repurchase ~~authorization.~~authorization announced in February 2022. We did not repurchase any shares during the ~~third~~second quarter or first ~~nine~~six months of Fiscal ~~2021.~~2022. During the third quarter of Fiscal 2023, through September 7, 2022, we have repurchased 142,627 shares at a cost of $6.5 million, or $45.75 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 ~~third~~second 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.

2623

~~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 and 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 ~~October~~July 30, ~~2021,~~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

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

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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~~July 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

August 2021

8-1-21 to 8-28-21

—

$
—

—

$
—

September 2021

8-29-21 to 9-25-21

—

$
—

—

$
—

October 2021

9-26-21 to 10-30-21⁽¹⁾

521,693

$
58.71

521,693

$
59,046

Total

521,693

$
58.71

521,693

$
59,046

⁽¹⁾ Share repurchases were made pursuant to a $100.0 million share repurchase program approved by the Board of Directors in September 2019. 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.


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 2022
5-1-22 to 5-28-22		—	$	—		—	$	100,326

June 2022
5-29-22 to 6-25-22(1)		310,000	$	56.76		310,000	$	82,730

July 2022
6-26-22 to 7-30-22 (1)		516,034	$	53.92		516,034	$	54,904
6-26-22 to 7-30-22 (2)		71,619	$	54.11		—		—
Total		897,653	$	54.92		826,034	$	54,904

(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.

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

~~Table of Contents~~

Item 6. Exhibits


Exhibit Index

~~(10.a)~~ (31.1)		~~Second Amendment to Third Amended and Restated EVA Incentive Compensation Plan of Genesco Inc.~~
~~(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)

2926

~~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 Chief Financial Officer

Date: ~~December 9, 2021~~September 8, 2022

3027

Nine Months Ended October 30, 2021
(In thousands)	Journeys Group		Schuh Group		Johnston & Murphy Group		Licensed Brands			Corporate & Other			Consolidated
Sales	$	1,102,750	$	294,581	$	176,756	$	120,952		$	0		$	1,695,039
Intercompany sales		0		0		0		(615	)		—			(615	)
Net sales to external customers	$	1,102,750	$	294,581	$	176,756	$	120,337		$	—		$	1,694,424
Segment operating income (loss)	$	106,895	$	9,477	$	2,412	$	3,420		$	(39,966	)	$	82,238
Asset impairments and other⁽¹⁾		0		0		0		0			(10,054	)		(10,054	)
Operating income (loss)		106,895		9,477		2,412		3,420			(50,020	)		72,184
Other components of net periodic benefit cost		0		0		0		0			(72	)		(72	)
Interest expense		0		0		0		0			(2,375	)		(2,375	)
Interest income		0		0		0		0			444			444
Earnings (loss) from continuing operations before income taxes	$	106,895	$	9,477	$	2,412	$	3,420		$	(52,023	)	$	70,181
Depreciation and amortization	$	21,549	$	5,356	$	3,460	$	820		$	1,073		$	32,258
Capital expenditures		18,418		1,945		3,666		750			9,728			34,507

Nine Months Ended October 31, 2020
(In thousands)	Journeys Group			Schuh Group			Johnston & Murphy Group			Licensed Brands			Corporate & Other			Consolidated
Sales	$	763,238		$	208,918		$	102,601		$	76,381		$	0		$	1,151,138
Intercompany sales		0			0			0			(1,409	)		—			(1,409	)
Net sales to external customers	$	763,238		$	208,918		$	102,601		$	74,972		$	—		$	1,149,729
Segment operating loss	$	(2,888	)	$	(15,158	)	$	(38,964	)	$	(2,931	)	$	(14,675	)	$	(74,616	)
Goodwill impairment⁽¹⁾		0			0			0			0			(79,259	)		(79,259	)
Asset impairments and other⁽²⁾		0			0			0			0			(15,953	)		(15,953	)
Operating loss		(2,888	)		(15,158	)		(38,964	)		(2,931	)		(109,887	)		(169,828	)
Other components of net periodic benefit income		0			0			0			0			488			488
Interest expense		0			0			0			0			(4,429	)		(4,429	)
Interest income		0			0			0			0			251			251
Earnings (loss) from continuing operations before income taxes	$	(2,888	)	$	(15,158	)	$	(38,964	)	$	(2,931	)	$	(113,577	)	$	(173,518	)
Depreciation and amortization	$	21,962		$	7,077		$	4,309		$	1,066		$	1,139		$	35,553
Capital expenditures		11,653			2,412			3,356			198			538			18,157