Slate Shares a Vision for Achieving
Operational Efficiencies, Igniting Growth and Enhancing Value for
the Company’s Shareholders, Customers and Employees
Sees a Path to Helping Genesco Ultimately
Achieve Superior Revenue and Earnings Growth in the Rapidly
Evolving Retail and Footwear Industries
Urges Shareholders to Vote on the
WHITE Proxy Card to Elect Legion
Partners’ Full Slate
Legion Partners Asset Management, LLC (together with its
affiliates, “Legion Partners” or “we”), which collectively with the
other participants in its solicitation beneficially owns
approximately 5.9% of the outstanding common shares of Genesco,
Inc. (NYSE: GCO) (“Genesco” or the “Company”), today announced that
its four highly-qualified and independent director candidates –
Marjorie L. Bowen, Margenett Moore-Roberts, Dawn H. Robertson and
Hobart P. Sichel – have issued a letter to shareholders regarding
their value-enhancing vision. Learn more about our four world-class
nominees and how to vote on the WHITE proxy card by visiting
www.GCOForward.com.
This press release features multimedia. View
the full release here:
https://www.businesswire.com/news/home/20210630005978/en/
***
June 30, 2021
Dear Shareholder,
Legion Partners Asset Management, LLC (together with its
affiliates, “Legion Partners” or “we”) is seeking to elect the four
of us to Genesco, Inc.’s (“Genesco” or the “Company”) nine-member
Board of Directors (the “Board”) at the Company’s Annual Meeting of
Shareholders (the “Annual Meeting”) on July 20, 2021. We take our
prospective roles as directors extremely seriously and are
committed to representing the interests of all shareholders.
Each of us agreed to be nominated by Legion Partners earlier
this year because we believe Genesco’s best days should still be
ahead of it. Although the Company has spent many years stagnating
and underperforming relative to its peers and relevant indices, we
believe that there are an array of issues that can be fixed by an
engaged, objective and properly refreshed Board. These issues
include:
- A Value-Destructive Conglomerate Structure
- Poor Capital Allocation and Strategic Oversight
- Excessive Interlocks Among Directors and Insiders
- Bloated Cost Structure and Sustained Margin Erosion
- A Lack of Focus on Operational Excellence at Journeys
- Misaligned Executive Compensation
We believe that a Board comprised of impartial individuals with
fresh views and the right skills and experience can quickly
identify actionable solutions. This is the type of Board that
Genesco will have if shareholders elect us. Collectively, we
possess extensive corporate governance acumen, capital markets
expertise, retail operations experience, e-commerce and digital
know-how, and strategic turnaround backgrounds. We also have a deep
and practical understanding of best practices for driving growth
while implementing environmental, social and governance (“ESG”) and
Diversity, Equity and Inclusion (“DEI”) initiatives.
In addition to being able to help fix problems, we also know how
to help businesses adapt as consumer tastes continue to change and
more shopping occurs in the extremely competitive online
environment. We cannot stress enough how pivotal it is for Genesco
to reassess its approach and strategy as the pandemic fades,
stimulus subsides and competitors fight harder to establish lasting
bonds with younger consumers and their parents across all channels,
including social media and apps. The Company’s directors need to
maintain a sense of urgency in order to spot the “big picture”
shifts and opportunities that will impact the Company today and
moving forward.
Against the backdrop of Genesco’s evolving operating landscape,
we contend that we are the right directors at the right point in
time. We are completely committed to working collaboratively with
the remaining incumbents to move the Company into the modern era
when it comes to customer engagement, operations, governance, and
merchandising and marketing. We have what it takes to achieve
near-term business efficiencies while overseeing the pursuit of
long-term growth and deeper consumer engagement.
Nominee
Skills
Sample of Relevant
Experience
Marjorie Bowen
- Capital Markets Expertise
- Corporate Governance Acumen
- Certified Financial Expert
- Turnaround Experience
- Transaction Evaluation Know-how
- When Ms. Bowen was a Genesco director in 2018, she applied her
capital markets background and transaction experience to the
Company’s strategic alternatives process – which resulted in the
sale of the non-synergistic Lids business and provided a runway for
value-enhancing share repurchases
- Her experience would be invaluable if the Board were to
impartially consider ways to refine the Company’s costly and
cumbersome conglomerate model
Margenett Moore-Roberts
- Customer Experience Acumen
- ESG Expertise
- DEI Specialization
- Digital Media Know-how
- Marketing Experience
- When Ms. Moore-Roberts served as Vice President and Global Head
of Inclusive Diversity at Yahoo!, she established the company’s
first Office of Inclusive Diversity and a global Center of
Excellence
- She oversaw the implementation of a number of policies and
procedures that filtered into business lines and operations during
a period of strong top-line growth at Yahoo!
Dawn Robertson
- Customer Experience Acumen
- Merchandising Expertise
- Marketing Background
- E-Commerce Specialization
- Retail Operations and Turnaround Know-how
- When Ms. Robertson was President of Macys.com, she led the
development, launch and growth of its e-commerce sales
- As President of Old Navy, she drove significant sales and
improved EBITDA, including strong e-commerce performance
- This is exactly the type of experience Genesco’s brands need
given the large younger customer shift to digital
Hobart P. Sichel
- Marketing Expertise
- E-Commerce Specialization
- Turnaround Experience
- Retail Operations Know-how
- Capital Markets Acumen
- Mr. Sichel previously worked at Burlington Stores from 2011 to
2019, where he served as Executive Vice President and Chief
Marketing Officer
- He was a key member of the leadership team that turned the
business around and ignited sales growth prior to an initial public
offering
- He has the ideal background for helping Genesco identify
efficiencies while still pursuing growth – especially e-commerce
growth – during a transformation period
When it comes to specific actions and ideas, we are cognizant of
the fact that our slate would only represent a minority of
Genesco’s nine-member Board. We are also aware that none of us has
access to the Company’s non-public information. This has not
stopped us, however, from analyzing the business from the outside
and setting a vision for value creation: we want to help create a simpler, modernized and
operationally-efficient Genesco that can deliver enhanced value for
shareholders, delight customers and drive lifetime value, and
provide rewarding opportunities to a diverse group of
employees.
We see a clear path to realizing this vision:
- Refocus the Company and Transform its Culture
- Conduct a strategic review and identify options for divesting
of non-core, non-synergistic businesses
- Realign executive compensation, including performance-based
equity vesting, to tangible key performance indicators and value
creation metrics
- Initiate a culture assessment in order to establish a more
innovative, vibrant and accountable work environment up and down
the organization
- Develop tangible public plans and goals for both ESG and DEI,
which will be increasingly important as Journeys competes for a
younger, more socially-engaged consumer
- Task the management team with preparing a growth-focused
strategy for the core Journeys business, with a specific emphasis
on penetrating high-growth consumer categories and upgrading
digital and e-commerce capabilities
- We believe these steps can yield annual
savings of $20 million to $30 million, with non- business
divestitures potentially producing approximately $350
million(1)
- Reshape the Company’s Cost Structure and Increase Capital
Efficiency
- Assess paths to improving inventory turns
- Implement cost reduction priorities for corporate sales and
general and administrative expenses, which appear bloated
- Analyze potential sale-leaseback transactions to unlock
material value trapped in real estate
- Evaluate sustainability and supply chain practices to remedy
financial and environmental inefficiencies, including split
shipments
- We believe these steps can help grow
Journeys’ segment EBITDA margin by 2%, resulting in an increase
from 8% to 10%(2)
- Reignite Growth by Positioning Journeys as a Strategic
Retail Partner and the Preferred Consumer Destination for
Footwear
- Identify customer and brand partner value propositions to
deepen relationships
- Increase share of wallet with improved product offerings and
basic offerings like buy online pick-up in store, curbside pickup,
and same-day delivery, etc.
- Enhance customer engagement by implementing a loyalty program,
building a mobile app, and improving the website
- Drive new customer acquisition via improved digital marketing
and social engagement
- We believe these steps could help grow
sales by 4%-6% annually(3)
Our ideas, if implemented, could lead to annual earnings of $13
per share, which is a substantial increase from the $5 per share of
earnings that Genesco achieved pre-pandemic.(4)
We recognize that in order for ideas to turn into actions, there
will need to be collegial deliberation of fresh and varying
perspectives in the boardroom. That is what we hope to facilitate
if we are fortunate enough to be elected to the Board at this
year’s Annual Meeting.
While we are independent of Legion Partners, we do share the
firm’s view that there is a roadmap to achieving superior value
creation for all of Genesco’s stakeholders. The changing dynamics
in the retail and footwear industries make this the right time to
build and execute that type of roadmap at Genesco. We encourage you
to vote on the WHITE proxy card
to elect our slate and give us the opportunity to champion your
interests in the boardroom.
Thank you for evaluating our experience and ideas.
Sincerely,
Marjorie L. Bowen
Margenett
Moore-Roberts Dawn
H.
Robertson Hobart
P. Sichel
Please visit www.GCOForward.com to view
important materials.
If you have any questions or require
assistance as you consider how to vote, please contact Legion
Partners’ proxy solicitor Kingsdale Advisors at
GCO@kingsdaleadvisors.com.
VOTE ON LEGION
PARTNERS’ WHITE PROXY CARD
***
About Legion Partners
Legion Partners is a value-oriented investment manager based in
Los Angeles, with a satellite office in Sacramento, California.
Legion Partners seeks to invest in high-quality businesses that are
temporarily trading at a discount, utilizing deep fundamental
research and long-term shareholder engagement. Legion Partners
manages a concentrated portfolio of North American small-cap
equities on behalf of some of the world’s largest institutional and
high-net-worth investors. Learn more at www.LegionPartners.com.
(1)
Annual savings projections based
on (i) $15 million in annual corporate costs reduction, which
assumes corporate spending as % of net sales returning to 1.1% from
the pre-COVID 1.8% and (ii) $8-10 million annual store rent
savings, which assumes 20% of leases renewal and 20% reduction in
renewed leases. Non-core asset sale assumes $282mm in total
proceeds from the divestiture of Schuh and J&M based on
multiples to Adj. EBITDA of 4x and 10x, respectively. $141mm of
real estate value realized through outright sales and
sale-leaseback transactions based on implied $105 per sq. ft on
average.
(2)
Journeys’ margin expansion
assumes 100bps expansion vs FY 2020 (pre-COVID level) and also
incorporates $40mm of cash free up assuming Journeys inventory
turns improvement of 0.5x.
(3)
Journeys’ sales growth assumes 5%
annual growth for 3 years vs. FY 2020 level.
(4)
$13 EPS incorporates the
following assumptions. Sale-leaseback assumes $87mm of share
buyback at share price of $65. Buyback with excess cash assumes
$164mm of share buyback at share price of $70, allowing the Company
to have $50mm of net cash on balance sheet. Non-core asset sale
assumes $282mm of share buyback at share price of $75 to $90. All
non-reported EPS calculations assume a tax rate of 25%.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210630005978/en/
For Investors: Kingsdale Advisors Michael Fein / Lydia Mulyk,
646-651-1640 mfein@kingsdaleadvisors.com /
lmulyk@kingsdaleadvisors.com
For Media: MKA Charlotte Kiaie / Bela Kirpalani, +1 646-386-0091
ckiaie@mkacomms.com / bkirpalani@mkacomms.com
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