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ITEM 7, MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OFOPERATIONS

This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our Consolidated Financial Statements and related Notes and other financial information appearing elsewhere in this Annual Report on Form 10-K, and with Part II, Item 7 (“Management’s Discussion and Analysis of Financial Condition and Results of Operations”) of our Annual Report on Form 10-K for the fiscal year ended January 29, 2022, filed with the SEC on March 23, 2022, which provides a discussion of our financial condition and results of operations for Fiscal 2022 compared to our Fiscal 2021.

Summary of Results of Operations

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Net sales decreased 1.5% in Fiscal 2023 compared to Fiscal 2022.

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Journeys Group sales decreased 6% and Genesco Brands Group sales decreased 8%, partially offset by an increase of 2% at Schuh Group and 24% at Johnston & Murphy Group.

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Comparable direct sales were flat for Fiscal 2023.

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Gross margin decreased as a percentage of net sales from 48.8% in Fiscal 2022 to 47.6% in Fiscal 2023.

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Selling and administrative expenses increased as a percentage of net sales from 42.7% in Fiscal 2022 to 43.7% in Fiscal 2023.

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Operating margin decreased as a percentage of net sales from 6.4% in Fiscal 2022 to 3.9% in Fiscal 2023.

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The effective income tax rate decreased from 24.9% in Fiscal 2022 to 19.8% in Fiscal 2023.

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Diluted earnings per share from continuing operations were $5.69 per share in Fiscal 2023 compared to $7.92 per share in Fiscal 2022.

Significant Developments

Asset Impairment and Other Charges

We recorded a pretax charge to earnings of $0.9 million in Fiscal 2023, including $1.6 million for asset impairments, partially offset by a $0.7 million gain on the termination of our pension plan, which is included in asset impairments and other, net on the Consolidated Statements of Operations for Fiscal 2023.

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 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 Fiscal 2023 or Fiscal 2022, as we believe that overall sales are a more meaningful metric for these periods due to the impact of the COVID-19 pandemic and related extended store closures that occurred in Fiscal 2021 and the first quarter of Fiscal 2022.

Results of Operations—Fiscal 2023 Compared to Fiscal 2022

Our net sales for Fiscal 2023 decreased 1.5% to $2.38 billion from $2.42 billion in Fiscal 2022. The decrease in net sales was driven by the unfavorable impact of $58.5 million in sales due primarily to foreign exchange pressure on the Schuh business from the strengthening dollar, partially offset by increased sales in the store and wholesale channels, while comparable direct sales were flat for Fiscal 2023. Schuh Group sales increased 2% and Johnston & Murphy Group sales increased 24%, while Journeys Group sales decreased 6% and Genesco Brands Group sales decreased 8% for Fiscal 2023 compared to Fiscal 2022. Schuh's sales increased 15% on a local currency basis for Fiscal 2023.

Gross margin decreased 3.8% to $1.1 billion in Fiscal 2023 from $1.2 billion in Fiscal 2022 and decreased as a percentage of net sales from 48.8% in Fiscal 2022 to 47.6% in Fiscal 2023, reflecting gross margin decreases as a percentage of net sales in all of our operating business units except Schuh Group. The gross margin decrease is primarily due to a more promotional environment in the Journeys business and increased freight and logistics costs in the Johnston & Murphy and Genesco Brands Group businesses. Altogether, freight and logistics costs put approximately $16.1 million of pressure on total gross margin comparison of Fiscal 2023 to Fiscal 2022.

Selling and administrative expenses increased as a percentage of net sales from 42.7% in Fiscal 2022 to 43.7% in Fiscal 2023, reflecting increased expenses as a percentage of net sales in all of our operating business units except Johnston & Murphy Group. The overall increase in expenses as a percentage of net sales in Fiscal 2023 is due to more normalized occupancy expense as a result of the one-time benefits for rent credits and government tax relief in the U.K. related to the COVID-19 pandemic in Fiscal 2022, as well as increased selling salaries and marketing and compensation expenses, partially offset by decreased performance-based compensation expense. While our selling salaries increased for Fiscal 2023, the competitive environment and legislated increases in minimum and living wages continue to pressure our store selling salaries. Explanations of the changes in results of operations are provided by business segment in discussions following these introductory paragraphs.

Earnings from continuing operations before income taxes (“pretax earnings") for Fiscal 2023 were $90.1 million, compared to $153.0 million for Fiscal 2022. Pretax earnings for Fiscal 2023 included an asset impairment and other charge of $0.9 million which included $1.6 million for asset impairments, partially offset by a $0.7 million gain on the termination of the pension plan. Pretax earnings for Fiscal 2022 included an asset impairment and other gain of $8.1 million which included an $18.1 million gain on the sale of a distribution warehouse and a $0.6 million insurance gain, partially offset by $8.6 million for professional fees related to the actions of a shareholder activist and $2.0 million for asset impairments.

Net earnings for Fiscal 2023 were $71.9 million, or $5.66 diluted earnings per share compared to $114.9 million, or $7.92 diluted earnings per share for Fiscal 2022. The effective income tax rate was 19.8% for Fiscal 2023 compared to 24.9% for Fiscal 2022. The effective tax rate for Fiscal 2023 was lower compared to Fiscal 2022, reflecting a reduction in the effective tax rate we expect for jurisdictions in which we are profitable combined with the impact of a release of a valuation allowance related to our UK jurisdiction and the benefit from accrued interest related to our IRS refund. See Item 8, Note 11, "Income Taxes", to our Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information.

Journeys Group

Fiscal Year Ended %

(dollars in thousands)

Operating margin 6.4 % 10.5 %

Net sales from Journeys Group decreased 6.0% to $1.5 billion for Fiscal 2023 compared to $1.6 billion for Fiscal 2022, primarily due to decreased store sales, partially offset by increased digital comparable sales. We believe the Journeys consumer benefitted most from the government stimulus in Fiscal 2022 and is currently more affected by the U.S. macroeconomic environment and footwear industry promotional activity than customers of our other North American businesses. The store count for Journeys Group was 1,130 stores at the end of Fiscal 2023, including 233 Journeys Kidz stores, 45 Journeys stores in Canada and 34 Little Burgundy stores in Canada, compared to 1,135 stores at the end of Fiscal 2022, including 229 Journeys Kidz stores, 47 Journeys stores in Canada and 37 Little Burgundy stores in Canada.

Journeys Group operating income for Fiscal 2023 decreased 42.9% to $94.4 million, compared to $165.3 million for Fiscal 2022. The decrease in operating income was primarily due to (i) decreased net sales, (ii) decreased gross margin as a percentage of net sales, primarily reflecting increased markdowns with a return to a more normalized promotional environment 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 Fiscal 2023, partially offset by decreased performance-based compensation expenses.

Schuh Group

Fiscal Year Ended %

(dollars in thousands)

Operating margin 4.1 % 4.5 %

Net sales from the Schuh Group increased 2.0% to $432.0 million for Fiscal 2023 compared to $423.6 million for Fiscal 2022, primarily due to increased store sales, partially offset by an unfavorable impact of $53.8 million due to changes in foreign exchange rates and decreased digital comparable sales. Fiscal 2023 was a record year for Schuh Group sales. Stores were only open about 80% of possible operating days in Fiscal 2022 versus 100% of possible operating days in Fiscal 2023. Schuh's sales increased 15% on a local currency basis for Fiscal 2023. Schuh Group operated 122 stores at the end of Fiscal 2023 compared to 123 stores at the end of Fiscal 2022.

Schuh Group operating income for Fiscal 2023 was $17.6 million compared to $19.3 million for Fiscal 2022. The 8.6% decrease in operating income this year reflects increased selling and administrative expenses as a percentage of net sales, reflecting more normalized operating expenses due to the one-time benefits for rent credits and government property tax relief and other government relief of approximately $19.9 million in Fiscal 2022 related to the COVID-19 pandemic. Excluding these one-time benefits last year, decreased occupancy, marketing and performance-based compensation expenses more than offset the deleverage in selling salaries and compensation expense. In addition, operating income included an unfavorable impact of $2.6 million for Fiscal 2023 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.

Johnston & Murphy Group

Fiscal Year Ended %

(dollars in thousands)

Operating margin 4.6 % 2.8 %

Johnston & Murphy Group net sales increased 24.5% to $314.8 million for Fiscal 2023 from $252.9 million for 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. Fiscal 2023 was a record year for Johnston & Murphy Group sales. Retail operations accounted for 76.0% of Johnston & Murphy Group's sales in Fiscal 2023, down from 78.5% in Fiscal 2022. The store count for Johnston & Murphy retail operations at the end of Fiscal 2023 included 158 Johnston & Murphy shops and factory stores, including six stores in Canada, compared to 167 Johnston & Murphy shops and factory stores, including eight stores in Canada, at the end of Fiscal 2022.

Johnston & Murphy Group operating income for Fiscal 2023 increased 104.4% to $14.4 million compared to $7.0 million in 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 expense, partially offset by increased marketing expense. Gross margin as a percentage of net sales decreased in Fiscal 2023 compared to Fiscal 2022 reflecting increased freight and logistic costs of $8.6 million as well as a difficult comparison to decreased inventory reserves in Fiscal 2022 as the brand began to recover from the pandemic.

Genesco Brands Group

Fiscal Year Ended %

(dollars in thousands)

Operating income (loss) $ (678 ) $ 6,583 NM

Operating margin (0.4 )% 3.9 %

Net sales for Genesco Brands Group decreased 7.8% to $155.9 million for Fiscal 2023 from $169.2 million for Fiscal 2022, primarily due to repositioning the distribution of the mix of the Levi's brand to elevate distribution and rely less on the value channel, partially offset by an increase in sales of private label and Dockers footwear.

The operating loss for Genesco Brands Group was $0.7 million in Fiscal 2023 compared to operating income of $6.6 million in Fiscal 2022. The $7.3 million decrease in operating income was primarily due to (i) decreased net sales, (ii) decreased gross margin as a percentage of net sales primarily due to increased freight and logistics costs of $7.5 million and (iii) increased selling and administrative expenses as a percentage of net sales reflecting deleverage of expenses as a result of decreased revenue and changes in sales mix, partially offset by decreased performance-based compensation expense.

Corporate, Interest Expenses and Other Charges

Corporate and other expense for Fiscal 2023 was $32.5 million compared to $42.6 million for Fiscal 2022. Corporate and other expense in Fiscal 2023 included $1.6 million for asset impairments, partially offset by a $0.7 million gain on the termination of our pension plan. Corporate and other expense in Fiscal 2022 included an $18.1 million gain on the sale of a distribution warehouse and a $0.6 million insurance gain, partially offset by $8.6 million for professional fees related to the actions of a

shareholder activist and $2.0 million for asset impairments. Corporate and other expense, excluding asset impairment and other charges, decreased $19.1 million reflecting decreased performance-based compensation expense.

Net interest expense increased 19.3% to $2.9 million in Fiscal 2023 from $2.4 million in Fiscal 2022 primarily due to increased average borrowings and higher interest rates in Fiscal 2023.

Liquidity and Capital Resources

Working Capital

Our business is seasonal, with our investment in inventory and accounts receivable normally reaching peaks in the spring and fall of each year. Historically, cash flow from operations has been generated principally in the fourth quarter of each fiscal year.

Cash flow changes: Fiscal Year Ended

(in thousands) January 28, 2023 January 29, 2022 Increase(Decrease)

Effect of foreign exchange rate fluctuations on cash (2,187 ) 631 (2,818 )

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

Cash used in operating activities was $164.9 million for Fiscal 2023 compared to cash provided by operating activities of $239.9 million for Fiscal 2022, reflecting primarily the following factors:

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A $194.4 million decrease in cash flow from changes in inventory, primarily reflecting increased inventory growth in all of our business units in Fiscal 2023 as we rebuilt inventory levels following the significant supply chain disruptions resulting from the COVID-19 pandemic;

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A $100.2 million decrease in cash flow from changes in other accrued liabilities, primarily reflecting the payment of Fiscal 2022 performance-based compensation accruals in Fiscal 2023 and significantly lower performance-based compensation accruals for Fiscal 2023 compared to Fiscal 2022;

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A $74.4 million decrease in cash flow from changes in other assets and liabilities and prepaids and other current assets combined, primarily reflecting income taxes paid in Fiscal 2023 compared to a tax refund in Fiscal 2022; and

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A $42.9 million decrease in cash flow from decreased earnings in Fiscal 2023.

Cash used in investing activities was $26.0 million higher for Fiscal 2023 compared to Fiscal 2022, primarily related to increased capital expenditures related to investments in retail stores, partially offset by decreased capital expenditures for our new headquarters building and Fiscal 2022 included cash proceeds from the sale of a distribution center.

Cash used in financing activities was $55.6 million lower in Fiscal 2023 as compared to Fiscal 2022 primarily reflecting an additional payment of debt in Fiscal 2022 for the first in-last out term loan of $17.5 million and increased U.S. revolver borrowings in Fiscal 2023.

Sources of Liquidity and Future Capital Needs

We have three principal sources of liquidity: cash flow from operations, cash on hand and our credit facilities discussed in Item 8, Note 8, "Long-Term Debt", to our Consolidated Financial Statements included in this Annual Report on Form 10-K.

On January 28, 2022, we entered into a Third Amendment to our Credit Facility to, among other things, extend the maturity date to January 28, 2027 and remove the first in-last out term loan that was in an amount equal to $17.5 million. The Total Commitments (as defined in the Credit Agreement) for revolving loans is $332.5 million. As of January 28, 2023, we have $30.0 million in U.S. revolver borrowings and $14.9 million (£12.0 million) related to Genesco (UK) Limited. We had outstanding letters of credit of $9.7 million under the Credit Facility at January 28, 2023. These letters of credit support lease and insurance indemnifications.

On November 2, 2022, Schuh entered into a facility agreement (the "Facility Agreement") with Lloyds Bank PLC (“Lloyds”) for a £19.0 million revolving credit facility. The Facility Agreement expires November 2, 2025, with options to request two one-year extensions to this termination date subject to lender approval, and bears interest at 2.35% over the Bank of England Base Rate. This Facility Agreement replaced Schuh's Facility Letter that would have expired in October 2023. The Facility Agreement includes certain financial covenants specific to Schuh. Following certain customary events of default outlined in the Facility Agreement, payment of outstanding amounts due may be accelerated or the commitments may be terminated. The Facility Agreement is secured by charges over all of the assets of Schuh, and Schuh's subsidiary, Schuh (ROI) Limited. Pursuant to a Guarantee in favor of Lloyds in its capacity as security trustee, Genesco Inc. has guaranteed the obligations of Schuh under the Facility Agreement and certain existing ancillary facilities on an unsecured basis. As of January 28, 2023, we have not borrowed under the Schuh Facility Agreement.

We were in compliance with all the relevant terms and conditions of the Credit Facility and Facility Agreement as of January 28, 2023.

We believe that cash on hand, cash provided by operations and borrowings under our amended Credit Facility and the Schuh Facility Agreement will be sufficient to support our liquidity needs in Fiscal 2024 and the foreseeable future.

In the fourth quarter of Fiscal 2021, we implemented tax strategies allowed under the 5-year carryback provisions in the CARES Act which we believe will generate approximately $55 million of net tax refunds. We received approximately $26 million of such net tax refunds in Fiscal 2022 and anticipated receipt of the remaining outstanding net tax refund in Fiscal 2023. However, in the third quarter of Fiscal 2023, we were notified the IRS would conduct an audit of the periods related to the outstanding net tax refund. While we do not believe any uncertainty with the technical merits of the positions generating the net tax refunds exists, we do anticipate the timing of the net tax refund will be extended as a result of the audit process. Accordingly, we have recorded the outstanding refund as non-current prepaid income taxes on the Consolidated Balance Sheets as of January 28, 2023.

Contractual Obligations

The following table sets forth aggregate contractual obligations as of January 28, 2023.

(in thousands)

Contractual Obligations Total Current Long-Term

(1) Operating lease obligations excludes $12.1 million for leases signed but not yet commenced.

(2) As a result of the Togast acquisition, we also have a commitment to Samsung C&T America, Inc. (“Samsung”) related to the ultimate sale and valuation of related inventories owned by Samsung. If the product is sold below Samsung’s cost, we are committed to Samsung for the difference between the sales price and its cost.

We issue inventory purchase orders in the ordinary course of business, which represent authorizations to purchase that are cancelable by their terms. We do not consider purchase orders to be firm inventory commitments. If we choose to cancel a purchase order, we may be obligated to reimburse the vendor for unrecoverable outlays incurred prior to cancellation.

Capital Expenditures

Capital expenditures were $59.9 million and $53.9 million for Fiscal 2023 and 2022, respectively. The $6.0 million increase in Fiscal 2023 capital expenditures as compared to Fiscal 2022 is primarily due to increases for new stores and renovations, partially offset by decreased capital expenditures for our new corporate headquarters.

We expect total capital expenditures for Fiscal 2024 to be approximately $55-$60 million of which approximately 53% is for computer hardware, software and warehouse enhancements for initiatives to drive traffic and omni-channel initiatives and other projects and 47% is for new stores and renovations. We do not currently have any longer term capital expenditures or other cash requirements other than as set forth in the contractual obligations table. We also do not currently have any off-balance sheet arrangements.

Common Stock Repurchases

We repurchased 1,380,272 shares during Fiscal 2023 at a cost of $72.7 million or an average of $52.66 per share. The Consolidated Statements of Cash Flows include an additional $4.8 million of share repurchases in Fiscal 2023 for accruals made as of January 29, 2022 due to timing of the cash settlement. We were operating under a $100.0 million repurchase authorization from September 2019. In February 2022, we announced a $100.0 million increase to the existing $100.0 million share repurchase authorization. As of January 28, 2023, we have $34.1 million remaining under the expanded share repurchase authorization. We repurchased 1,360,909 shares during Fiscal 2022 at a cost of $82.8 million or an average of $60.88 per share. We did not repurchase any shares in Fiscal 2021. During the first quarter of Fiscal 2024, through March 22, 2023, we repurchased 135,000 shares at a cost of $5.0 million or an average of $36.67 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 8, Note 15, "Legal Proceedings", to our Consolidated Financial Statements included in this Annual Report on Form 10-K.

Financial Market Risk

The following discusses our exposure to financial market risk.

Outstanding Debt – We have $44.9 million of outstanding U.S. revolver borrowings, which includes $14.9 million (£12.0 million) related to Genesco (UK) Limited, at a weighted average interest rate of 6.74% as of January 28, 2023. A 100 basis point increase in interest rates would increase annual interest expense by $0.4 million on the $44.9 million revolver borrowings.

Cash – Our cash balances are held in our bank accounts and not invested at this time. We did not have significant exposure to changing interest rates on invested cash at January 28, 2023. As a result, we consider the interest rate risk implicit in these investments at January 28, 2023 to be low. We did not hold any cash equivalents at January 28, 2023.

Summary – Based on our overall market interest rate exposure at January 28, 2023, we believe that the effect, if any, of reasonably possible near-term changes in interest rates on our consolidated financial position, results of operations or cash flows for Fiscal 2024 would not be material.

Accounts Receivable – Our accounts receivable balance at January 28, 2023 is concentrated in our wholesale businesses, which sell primarily to department stores and independent retailers across the United States. In the wholesale businesses, one customer accounted for 25%, one customer accounted for 18% and one customer accounted for 7% of our total trade receivables balance, while no other customer accounted for more than 6% of our total trade receivables balance as of January 28, 2023. We monitor the credit quality of our customers and establish an allowance for doubtful accounts based upon factors surrounding credit risk of specific customers, historical trends and other information, as well as customer specific factors; however, credit risk is affected by conditions or occurrences within the economy and the retail industry, as well as company-specific information.

Foreign Currency Exchange Risk – We are exposed to translation risk because certain of our foreign operations utilize the local currency as their functional currency and those financial results must be translated into United States dollars. As currency exchange rates fluctuate, translation of our financial statements of foreign businesses into United States dollars affects the comparability of financial results between years. Schuh Group's net sales and operating income for Fiscal 2023 were negatively impacted by $53.8 million and $2.6 million, respectively, due to the change in foreign exchange rates.

New Accounting Principles

Descriptions of recently issued accounting pronouncements, if any, and the accounting pronouncements adopted by us during Fiscal 2023 are included in Note 2, "New Accounting Pronouncements", to the Consolidated Financial Statements included in Item 8, "Financial Statements and Supplementary Data".

Critical Accounting Estimates

Inventory Valuation

In our footwear wholesale operations and our Schuh Group segment, cost for inventory that we own is determined using the first-in, first-out ("FIFO") method. Net realizable value is determined using a system of analysis which evaluates inventory at the stock number level based on factors such as inventory turn, average selling price, inventory level, and selling prices reflected in future orders for footwear wholesale. We provide a valuation allowance when the inventory has not been marked down to net realizable value based on current selling prices or when the inventory is not turning and is not expected to turn at satisfactory levels.

In our retail operations, other than the Schuh Group segment, we employ the retail inventory method, applying average cost-to-retail ratios to the retail value of inventories. Under the retail inventory method, valuing inventory at the lower of cost or market is achieved as markdowns are taken or accrued as a reduction of the retail value of inventories.

Inherent in the retail inventory method are subjective judgments and estimates, including merchandise mark-on, markups, markdowns and shrinkage. These judgments and estimates, coupled with the fact that the retail inventory method is an averaging process, could produce a range of cost figures. To reduce the risk of inaccuracy and to ensure consistent presentation, we employ the retail inventory method in multiple subclasses of inventory with similar gross margins, and analyze markdown requirements at the stock number level based on factors such as inventory turn, average selling price and inventory age. In addition, we accrue markdowns as necessary. These additional markdown accruals reflect all of the above factors as well as current agreements to return products to vendors and vendor agreements to provide markdown support. In addition to markdown allowances, we maintain reserves for shrinkage and damaged goods based on historical rates.

Inherent in the analysis of both wholesale and retail inventory valuation are subjective judgments about current market conditions, fashion trends and overall economic conditions. Failure to make appropriate conclusions regarding these factors may result in an

overstatement or understatement of inventory value. A change of 10% from the recorded amounts for markdowns, shrinkage and damaged goods would have changed inventory by $0.7 million at January 28, 2023.

Impairment of Long-Lived Assets

We periodically assess the realizability of our long-lived assets, other than goodwill, and evaluate such assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Asset impairment is determined to exist if estimated future cash flows, undiscounted and without interest charges, are less than the carrying amount. Inherent in the analysis of impairment are subjective judgments about future cash flows. Failure to make appropriate conclusions regarding these judgments may result in an overstatement or understatement of the value of long-lived assets.

We annually assess our goodwill and indefinite lived trademarks for impairment and on an interim basis if indicators of impairment are present. Our annual assessment date of goodwill and indefinite lived trade names is the first day of the fourth quarter.

In accordance with ASC 350, "Intangibles - Goodwill and Other" ("ASC 350") we have the option first to assess qualitative factors to determine whether events and circumstances indicate that it is more likely than not that goodwill is impaired. If, after such assessment, we conclude that the asset is not impaired, no further action is required. However, if we conclude otherwise, we are required to determine the fair value of the asset using a quantitative impairment test. The quantitative impairment test for goodwill compares the fair value of each reporting unit with the carrying value of the reporting unit with which the goodwill is associated. If the fair value of the reporting unit is less than the carrying value of the reporting unit, an impairment charge would be recorded for the amount, if any, in which the carrying value exceeds the reporting unit's fair value. We estimate fair value using the best information available, and compute the fair value derived by a combination of the market and income approach. The market approach is based on observed market data of comparable companies to determine fair value. The income approach utilizes a projection of a reporting unit’s estimated operating results and cash flows that are discounted using a weighted-average cost of capital that reflects current market conditions. A key assumption in our fair value estimate is the weighted average cost of capital utilized for discounting our cash flow projections in our income approach. The projection uses our best estimates of economic and market conditions over the projected period including growth rates in sales, costs, estimates of future expected changes in operating margins and cash expenditures. Other significant estimates and assumptions include terminal value growth rates, future estimates of capital expenditures and changes in future working capital requirements. For additional information regarding impairment of long-lived assets, see Item 8, Note 3, "Goodwill and Other Intangible Assets" and Note 4,"Asset Impairments and Other Charges" to our Consolidated Financial Statements included in this Annual Report on Form 10-K.

The quantitative impairment test for indefinite lived trademarks compares the fair value of the trademark with the carrying value of the related trademark. If the fair value of the trademark is less than the carrying value of the trademark, an impairment charge would be recorded for the amount, if any, in which the carrying value exceeds the trademark’s fair value. We estimate fair value using the best information available, and compute the fair value using an income approach that estimates the savings that the trademark owner would realize from owning that asset instead of having to pay rent or a royalty for the use of it. Key assumptions in our fair value estimate are the selected royalty rate and discount rate. Other significant estimates and assumptions include terminal value growth rates and future profitability expectations.

Revenue Recognition

In accordance with ASU 2014-09, "Revenue from Contracts with Customers (Topic 606)" ("ASC 606"), revenue shall be recognized upon satisfaction of all contractual performance obligations and transfer of control to the customer. Revenue is measured as the amount of consideration we expect to be entitled to in exchange for corresponding goods. The majority of our sales are single performance obligation arrangements for retail sale transactions for which the transaction price is equivalent to the stated price of the product, net of any stated discounts applicable at a point in time. Each sales transaction results in an implicit contract with the customer to deliver a product at the point of sale. Revenue from retail sales is recognized at the point of sale, is net of estimated returns, and excludes sales and value added taxes. Revenue from catalog and internet sales is recognized at estimated time of delivery to the customer, is net of estimated returns, and excludes sales and value added taxes. Wholesale revenue is recorded net of estimated returns and allowances for markdowns, damages and miscellaneous claims when the related goods have been shipped and legal title has passed to the customer. Actual amounts of markdowns have not differed materially from estimates. Shipping and handling costs charged to customers are included in net sales. We elected the practical expedient within ASC 606 related to taxes that are assessed by a governmental authority, which allows for the exclusion of sales and value added tax from transaction price.

A provision for estimated returns is provided through a reduction of sales and cost of goods sold in the period that the related sales are recorded. Estimated returns are based on historical returns and claims. Actual returns and claims in any future period may differ from historical experience. Revenue from gift cards is deferred and recognized upon the redemption of the cards. These cards have no expiration date. Income from unredeemed cards is recognized in our Consolidated Statements of Operations within net sales in proportion to the pattern of rights exercised by the customer in future periods. We perform an evaluation of historical redemption patterns from the date of original issuance to estimate future period redemption activity.

Income Taxes

As part of the process of preparing our Consolidated Financial Statements, we are required to estimate our income taxes in each of the tax jurisdictions in which we operate. This process involves estimating actual current tax obligations together with assessing temporary differences resulting from differing treatment of certain items for tax and accounting purposes, such as depreciation of property and equipment and valuation of inventories. These temporary differences result in deferred tax assets and liabilities, which are included within our Consolidated Balance Sheets. We then assess the likelihood that our deferred tax assets will be recovered from future taxable income. Actual results could differ from this assessment if adequate taxable income is not generated in future periods. To the extent it is more likely than not that some portion or all of a deferred asset will not be realized, valuation allowances are established. To the extent valuation allowances are established or increased in a period, we include an expense within the tax provision in our Consolidated Statements of Operations. These deferred tax valuation allowances may be released in future years when we consider that it is more likely than not that some portion or all of the deferred tax assets will be realized. In making such a determination, we will need to periodically evaluate whether or not all available evidence, such as future taxable income and reversal of temporary differences, tax planning strategies, and recent results of operations, provides sufficient positive evidence to offset any other negative evidence that may exist at such time. In the event the deferred tax valuation allowance is released, we would record an income tax benefit for a portion or all of the deferred tax valuation allowance released. At January 28, 2023, we had a deferred tax valuation allowance of $36.5 million.

Income tax reserves for uncertain tax positions are determined using the methodology required by the Accounting Standards Codification (“ASC”) Income Tax Topic, ("ASC 740"). This methodology requires companies to assess each income tax position taken using a two-step process. A determination is first made as to whether it is more likely than not that the position will be sustained, based upon the technical merits, upon examination by the taxing authorities. If the tax position is expected to meet the more likely than not criteria, the benefit recorded for the tax position equals the largest amount that is greater than 50% likely to be realized upon ultimate settlement of the respective tax position. Uncertain tax positions require determinations and estimated liabilities to be made based on provisions of the tax law which may be subject to change or varying interpretation. If our determinations and estimates prove to be inaccurate, the resulting adjustments could be material to our future financial results. See Item 8, Note 11, "Income Taxes", to our Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information related to income taxes.

Leases

We recognize lease assets and corresponding lease liabilities for all operating leases on the Consolidated Balance Sheets as described under ASU No. 2016-02, “Leases (Topic 842).” We evaluate renewal options and break options at lease inception and on an ongoing basis, and include renewal options and break options that we are reasonably certain to exercise in our expected lease terms for calculations of the right-of-use assets and liabilities. Approximately 3% of our leases contain renewal options. To determine the present value of lease payments not yet paid, we estimate incremental borrowing rates corresponding to the reasonably certain lease term. As most of our leases do not provide a determinable implicit rate, we estimate our collateralized incremental borrowing rate based upon a synthetic credit rating and yield curve analysis at the lease commencement or modification date in determining the present value of lease payments. For lease payments in foreign currencies, the incremental borrowing rate is adjusted to be reflective of the risk associated with the respective currency. See Item 8, Note 9, "Leases", to our Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information related to leases.

ITEM 7A, QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We incorporate by reference the information regarding market risk appearing under the heading “Financial Market Risk” in Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations."

ITEM 8, FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO FINANCIAL STATEMENTS

Page

Report of Independent Registered Public Accounting Firm (PCAOB ID: 42) 43

Notes to Consolidated Financial Statements 50

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Genesco Inc.

Opinion on Internal Control over Financial Reporting

We have audited Genesco Inc. and Subsidiaries’ internal control over financial reporting as of January 28, 2023, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Genesco Inc. and Subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of January 28, 2023, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of Genesco Inc. and Subsidiaries as of January 28, 2023 and January 29, 2022, the related consolidated statements of operations, comprehensive income, cash flows, and equity for each of the three fiscal years in the period ended January 28, 2023, and the related notes and financial statement schedule listed in the Index at Item 15, and our report dated March 22, 2023 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

Nashville, Tennessee

March 22, 2023

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Genesco Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Genesco Inc. (the Company) as of January 28, 2023 and January 29, 2022, the related consolidated statements of operations, comprehensive income, cash flows and equity for each of the three fiscal years in the period ended January 28, 2023, and the related notes and financial statement schedule listed in the Index at Item 15 (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at January 28, 2023 and January 29, 2022, and the results of its operations and its cash flows for each of the three fiscal years in the period ended January 28, 2023, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of January 28, 2023, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 22, 2023 expressed an unqualified opinion thereon.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosures to which it relates.

Valuation of Genesco Brands Group Goodwill

/s/ Ernst & Young LLP

We have served as the Company's auditor since 2001.

Nashville, Tennessee

March 22, 2023

Genesco Inc.

and Subsidiaries

Consolidated Balance Sheets

In Thousands, except share amounts

As of Fiscal Year End

Current Assets:

Non-current prepaid income taxes 54,111 —

Liabilities and Equity

Current Liabilities:

Commitments and contingent liabilities

Equity

Non-redeemable preferred stock 815 827

Common equity:

Common stock, $1 par value:

Accumulated other comprehensive loss (41,211 ) (36,408 )

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

Genesco Inc.

and Subsidiaries

Consolidated Statements of Operations

In Thousands, except per share amounts

Fiscal Year

Goodwill impairment — — 79,259

Other components of net periodic benefit cost (income) 248 128 (670 )

Loss from discontinued operations, net of tax (327 ) (97 ) (401 )

Basic earnings (loss) per common share:

Diluted earnings (loss) per common share:

Weighted average shares outstanding:

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

Genesco Inc.

and Subsidiaries

Consolidated Statements of Comprehensive Income

In Thousands, except as noted

Fiscal Year

Other comprehensive income (loss):

Foreign currency translation adjustments (5,143 ) (613 ) (3,705 )

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

Genesco Inc.

and Subsidiaries

Consolidated Statements of Cash Flows

In Thousands

Fiscal Year

CASH FLOWS FROM OPERATING ACTIVITIES:

Impairment of intangible assets — — 84,519

Provision for discontinued operations 440 132 345

CASH FLOWS FROM INVESTING ACTIVITIES:

Other investing activities — 74 —

Acquisitions, net of cash acquired — (80 ) —

CASH FLOWS FROM FINANCING ACTIVITIES:

Shares repurchased related to share repurchase plan (77,470 ) (78,068 ) —

Additions to deferred financing costs (144 ) (1,276 ) (1,350 )

Other — — (1 )

Effect of foreign exchange rate fluctuations on cash (2,187 ) 631 3,116

Supplemental information:

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

Genesco Inc.

and Subsidiaries

Consolidated Statements of Equity

In Thousands

Other comprehensive loss — — — — (3,391 ) — (3,391 )

Share-based compensation expense — — 8,460 — — — 8,460

Restricted stock issuance — 467 (467 ) — — — —

Restricted shares withheld for taxes — (65 ) 65 (1,223 ) — — (1,223 )

Other comprehensive loss — — — — (1,348 ) — (1,348 )

Share-based compensation expense — — 9,132 — — — 9,132

Restricted stock issuance — 244 (244 ) — — — —

Restricted shares withheld for taxes — (65 ) 65 (4,076 ) — — (4,076 )

Other comprehensive loss — — — — (4,803 ) — (4,803 )

Share-based compensation expense — — 14,017 — — — 14,017

Restricted stock issuance — 316 (316 ) — — — —

Restricted shares withheld for taxes — (73 ) 73 (3,942 ) — — (3,942 )

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

Genesco Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Note 1

Summary of Significant Accounting Policies

Nature of Operations

Genesco Inc. and its subsidiaries business includes the sourcing and design, marketing and distribution of footwear, apparel 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 U.K. and the ROI; through catalogs and e-commerce websites including the following: journeys.com, journeyskidz.com, journeys.ca, schuh.co.uk, schuh.ie, schuh.eu, littleburgundyshoes.com, johnstonmurphy.com, johnstonmurphy.ca, nashvilleshoewarehouse.com and dockersshoes.com and at wholesale, primarily under our Johnston & Murphy brand, the licensed Dockers® brand, the licensed Levi's® brand, the licensed G.H. Bass® brand and other brands that we license for footwear. At January 28, 2023, we operated 1,410 retail stores in the U.S., Puerto Rico, Canada, the U.K. and the ROI.

During Fiscal 2023, we operated four 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) Genesco Brands Group, formerly Licensed Brands, comprised of the licensed Dockers, Levi's, and G.H. Bass brands, as well as other brands we license for footwear.

Principles of Consolidation

All subsidiaries are consolidated in our Consolidated Financial Statements. All significant intercompany transactions and accounts have been eliminated.

Fiscal Year

Our fiscal year ends on the Saturday closest to January 31. As a result, Fiscal 2023, 2022 and 2021 were all 52-week years with 364 days. Fiscal 2023 ended on January 28, 2023, Fiscal 2022 ended on January 29, 2022 and Fiscal 2021 ended on January 30, 2021. Fiscal 2024 will be a 53-week year ending on February 3, 2024.

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash

Our foreign subsidiaries held cash of approximately $35.9 million and $39.7 million as of January 28, 2023 and January 29, 2022, respectively, which is included in cash on the Consolidated Balance Sheets. Our strategic plan does not require the repatriation of foreign cash in order to fund our operations in the U.S., and it is our current intention to indefinitely reinvest our foreign cash outside of the U.S. If we were to repatriate foreign cash to the U.S., we would be required to accrue and pay U.S. taxes in accordance with applicable U.S. tax rules and regulations as a result of the repatriation.

Genesco Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Note 1

Summary of Significant Accounting Policies, Continued

At January 28, 2023 and January 29, 2022, outstanding checks drawn on zero-balance accounts at certain domestic banks exceeded book cash balances at those banks by approximately $6.0 million and $0.0 million, respectively. These amounts are included in accounts payable in our Consolidated Balance Sheets.

Concentration of Credit Risk and Allowances on Accounts Receivable

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 as well as by customer specific factors. In the wholesale businesses, one customer accounted for 25%, one customer accounted for 18% and one customer accounted for 7% of our total trade receivables balance, while no other customer accounted for more than 6% of our total trade receivables balance as of January 28, 2023.

We establish an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends and other information, as well as customer specific factors. We also establish allowances for sales returns, customer deductions and co-op advertising based on specific circumstances, historical trends and projected probable outcomes.

Inventory Valuation

Genesco Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Note 1

Summary of Significant Accounting Policies, Continued

Property and Equipment

Property and equipment are recorded at cost and depreciated or amortized over the estimated useful life of related assets. Depreciation and amortization expense are computed principally by the straight-line method over the following estimated useful lives:

Buildings and building equipment 20-45 years

Computer hardware, software and equipment 3-10 years

Furniture and fixtures 10 years

Depreciation expense related to property and equipment was approximately $42.3 million, $42.4 million and $45.6 million for Fiscal 2023, 2022 and 2021, respectively.

Leases

We recognize lease assets and corresponding lease liabilities for all operating leases on the Consolidated Balance Sheets as described under ASC 842. We evaluate renewal options and break options at lease inception and on an ongoing basis and include renewal options and break options that we are reasonably certain to exercise in our expected lease terms for calculations of the right-of-use assets and liabilities. Approximately 3% of our leases contain renewal options. To determine the present value of lease payments not yet paid, we estimate incremental borrowing rates corresponding to the reasonably certain lease term. As most of our leases do not provide a determinable implicit rate, we estimate our collateralized incremental borrowing rate based upon a synthetic credit rating and yield curve analysis at the lease commencement or modification date in determining the present value of lease payments. For lease payments in foreign currencies, the incremental borrowing rate is adjusted to be reflective of the risk associated with the respective currency. Operating lease assets represent our right to use an underlying asset and are based upon the operating lease liabilities adjusted for prepayments or accrued lease payments, initial direct costs, lease incentives, and impairment, if any, of operating lease assets. We test right-of-use assets for impairment in the same manner as long-lived assets.

Net lease costs are included within selling and administrative expenses on the Consolidated Statements of Operations.

Asset Retirement Obligations

An asset retirement obligation represents a legal obligation associated with the retirement of a tangible long-lived asset that is incurred upon the acquisition, construction, development, or normal operation of that long-lived asset. Our asset retirement obligations are primarily associated with leasehold improvements that we are contractually obligated to remove at the end of a lease to comply with the lease agreement. We recognize asset retirement obligations at the inception of a lease with such conditions if a reasonable estimate of fair value can be made. Asset retirement obligations are recorded in other long-term liabilities in our Consolidated Balance Sheets and are subsequently adjusted for changes in estimated asset retirement obligations. The associated estimated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset and depreciated over its useful life.

Our Consolidated Balance Sheets include asset retirement obligations related to leases of $10.8 million and $11.5 million as of January 28, 2023 and January 29, 2022, respectively.

Genesco Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Note 1

Summary of Significant Accounting Policies, Continued

Impairment of Long-Lived Assets

We annually assess our goodwill and indefinite lived trade names for impairment and on an interim basis if indicators of impairment are present. Our annual assessment date of goodwill and indefinite lived trade names is the first day of the fourth quarter.

In accordance with ASC 350, we have the option first to assess qualitative factors to determine whether events and circumstances indicate that it is more likely than not that goodwill is impaired. If, after such assessment, we conclude that the asset is not impaired, no further action is required. However, if we conclude otherwise, we are required to determine the fair value of the asset using a quantitative impairment test. The quantitative impairment test for goodwill compares the fair value of each reporting unit with the carrying value of the reporting unit with which the goodwill is associated. If the fair value of the reporting unit is less than the carrying value of the reporting unit, an impairment charge would be recorded for the amount, if any, in which the carrying value exceeds the reporting unit's fair value. We estimate fair value using the best information available, and compute the fair value derived by a combination of the market and income approach. The market approach is based on observed market data of comparable companies to determine fair value. The income approach utilizes a projection of a reporting unit’s estimated operating results and cash flows that are discounted using a weighted-average cost of capital that reflects current market conditions. A key assumption in our fair value estimate is the weighted average cost of capital utilized for discounting our cash flow projections in our income approach. The projection uses our best estimates of economic and market conditions over the projected period including growth rates in sales, costs, estimates of future expected changes in operating margins and cash expenditures. Other significant estimates and assumptions include terminal value growth rates, future estimates of capital expenditures and changes in future working capital requirements.

Fair Value

The Fair Value Measurements and Disclosures Topic of the Codification defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair value measurements. This Topic defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. It also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Genesco Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Note 1

Summary of Significant Accounting Policies, Continued

Level 1 - Quoted prices in active markets for identical assets or liabilities.

Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

Revenue Recognition

Revenue is recognized upon satisfaction of all contractual performance obligations and transfer of control to the customer. Revenue is measured as the amount of consideration we expect to be entitled to in exchange for corresponding goods. The majority of our sales are single performance obligation arrangements for retail sale transactions for which the transaction price is equivalent to the stated price of the product, net of any stated discounts applicable at a point in time. Each sales transaction results in an implicit contract with the customer to deliver a product at the point of sale. Revenue from retail sales is recognized at the point of sale, is net of estimated returns, and excludes sales and value added taxes. Revenue from catalog and internet sales is recognized at estimated time of delivery to the customer, is net of estimated returns, and excludes sales and value added taxes. Wholesale revenue is recorded net of estimated returns and allowances for markdowns, damages and miscellaneous claims when the related goods have been shipped and legal title has passed to the customer. Actual amounts of markdowns have not differed materially from estimates. Shipping and handling costs charged to customers are included in net sales. We exclude sales and value added tax collected on behalf of third parties from transaction price.

A provision for estimated returns is provided through a reduction of sales and cost of goods sold in the period that the related sales are recorded. Estimated returns are based on historical returns and claims. Actual returns and claims in any future period may differ from historical experience. Revenue from gift cards is deferred and recognized upon the redemption of the cards. These cards have no expiration date. Income from unredeemed cards is recognized on the Consolidated Statements of Operations within net sales in proportion to the pattern of rights exercised by the customer in future periods. We perform an evaluation of historical redemption patterns from the date of original issuance to estimate future period redemption activity.

Our Consolidated Balance Sheets include an accrued liability for gift cards of $6.0 million and $6.3 million as of January 28, 2023 and January 29, 2022, respectively. Gift card breakage recognized as revenue was $1.0 million, $1.0 million and $0.8 million for Fiscal 2023, 2022 and 2021, respectively. During Fiscal 2023, we recognized $4.1 million of gift card redemptions and gift card breakage revenue that were included in the gift card liability as of January 29, 2022.

Cost of Sales

For our retail operations, the cost of sales includes actual product cost, the cost of transportation to our warehouses from suppliers, the cost of transportation from our warehouses to the stores and the cost of transportation from our warehouses to the customer. Additionally, the cost of our distribution facilities allocated to our retail operations is included in cost of sales.

Genesco Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Note 1

Summary of Significant Accounting Policies, Continued

For our wholesale operations, the cost of sales includes the actual product cost and the cost of transportation to the Company’s warehouses from suppliers.

Selling and Administrative Expenses

Selling and administrative expenses include all operating costs excluding (i) those related to the transportation of products from the supplier to the warehouse, (ii) for our retail operations, those related to the transportation of products from the warehouse to the store and from the warehouse to the customer and (iii) costs of our distribution facilities which are allocated to our retail operations. Wholesale costs of distribution are included in selling and administrative expenses on our Consolidated Statements of Operations in the amounts of $12.4 million, $12.8 million and $10.1 million for Fiscal 2023, 2022 and 2021, respectively.

We record buying, merchandising and occupancy costs in selling and administrative expense. Because we do not include these costs in cost of sales, our gross margin may not be comparable to other retailers that include these costs in the calculation of gross margin. Retail occupancy costs recorded in selling and administrative expense were $307.5 million, $299.6 million and $269.8 million for Fiscal 2023, 2022 and 2021, respectively.

Shipping and Handling Costs

Shipping and handling costs related to inventory purchased from suppliers are included in the cost of inventory and are charged to cost of sales in the period that the inventory is sold. All other shipping and handling costs are charged to cost of sales in the period incurred except for wholesale costs of distribution and shipping costs for product shipped from stores, which are included in selling and administrative expenses in our Consolidated Statements of Operations.

Advertising Costs

Advertising costs are predominantly expensed as incurred. Advertising costs were $118.5 million, $106.4 million and $80.1 million for Fiscal 2023, 2022 and 2021, respectively.

Consideration to Resellers

In our wholesale businesses, we do not have any written buy-down programs with retailers, but we have provided certain retailers with markdown allowances for obsolete and slow-moving products that are in the retailer’s inventory. We estimate these allowances and provide for them as reductions to revenues at the time revenues are recorded. Markdowns are negotiated with retailers and changes are made to the estimates as agreements are reached. Actual amounts for markdowns have not differed materially from estimates.

Cooperative Advertising

Cooperative advertising funds are made available to most of our wholesale footwear customers. In order for retailers to receive reimbursement under such programs, the retailer must meet specified advertising guidelines and provide appropriate documentation of expenses to be reimbursed. Our cooperative advertising agreements require that wholesale customers present documentation or other evidence of specific advertisements or display materials used for our products by submitting the actual print advertisements presented in catalogs, newspaper inserts or other advertising circulars, or by permitting physical inspection

Genesco Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Note 1

Summary of Significant Accounting Policies, Continued

of displays. Additionally, our cooperative advertising agreements require that the amount of reimbursement requested for such advertising or materials be supported by invoices or other evidence of the actual costs incurred by the retailer.

Vendor Allowances

From time to time, we negotiate allowances from our vendors for markdowns taken or expected to be taken. These markdowns are typically negotiated on specific merchandise and for specific amounts. These specific allowances are recognized as a reduction in cost of sales in the period in which the markdowns are taken. Markdown allowances not attached to specific inventory on hand or already sold are applied to concurrent or future purchases from each respective vendor.

We receive support from some of our vendors in the form of reimbursements for cooperative advertising and catalog costs for the launch and promotion of certain products. The reimbursements are agreed upon with vendors and represent specific, incremental, identifiable costs incurred by us to sell the vendor’s specific products. Such costs and the related reimbursements are accumulated and monitored on an individual vendor basis, pursuant to the respective cooperative advertising agreements with vendors. Such cooperative advertising reimbursements are recorded as a reduction of selling and administrative expenses in the same period in which the associated expense is incurred. If the amount of cash consideration received exceeds the costs being reimbursed, such excess amount would be recorded as a reduction of cost of sales.

Vendor reimbursements of cooperative advertising costs recognized as a reduction of selling and administrative expenses were $16.3 million, $10.7 million and $6.2 million for Fiscal 2023, 2022 and 2021, respectively. During Fiscal 2023, 2022 and 2021, our vendor reimbursements of cooperative advertising received were not in excess of the costs incurred.

Foreign Currency Translation

The functional currency of our foreign operations is the applicable local currency. The translation of the applicable foreign currency into U.S. dollars is performed for balance sheet accounts using current exchange rates in effect at the balance sheet date. Income and expense accounts are translated at monthly average exchange rates. The unearned gains and losses resulting from such translation are included as a separate component of accumulated other comprehensive loss within shareholders' equity. Gains and losses from certain foreign currency transactions were not material for Fiscal 2023, 2022 and 2021.

Commitments

As a result of the Togast acquisition, we have a commitment to Samsung C&T America, Inc. (“Samsung”) related to the ultimate sale and valuation of related inventories owned by Samsung. If the product is sold below Samsung’s cost, we are committed to Samsung for the difference between the sales price and its cost. At January 28, 2023, the related inventory owned by Samsung had a historical cost of $17.5 million. As of January 28, 2023, we believe that we have appropriately accounted for any differences between the fair value of the Samsung inventory and Samsung’s historical cost.

Genesco Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Note 2

New Accounting Pronouncements

New pronouncements adopted or issued but not effective until after January 28, 2023, are not expected to have a material impact on our Consolidated Financial Statements.

Note 3

Goodwill and Other Intangible Assets

Goodwill

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

(In thousands) JourneysGroup GenescoBrandsGroup TotalGoodwill

Effect of foreign currency exchange rates (425 ) (8 ) (433 )

Goodwill Valuation (Genesco Brands Group)

As required under ASC 350, we annually assess our goodwill and indefinite lived trade names for impairment and on an interim basis if indicators of impairment are present. Our annual assessment date of goodwill and indefinite lived trade names is the first day of the fourth quarter. In accordance with ASC 350, when indicators of impairment are present on an interim basis, we must assess whether it is “more likely than not” (i.e., a greater than 50% chance) that an impairment has occurred. In our annual evaluation of goodwill, we determined that the fair value of the Togast reporting unit (related to the Genesco Brands Group operating segment) exceeded the carrying value of the reporting unit’s assets by 9%. Our analyses included preparing an income approach and a market approach model. The fair value estimates under the income approach are sensitive to significant assumptions required to develop prospective financial information related to growth rates in sales, costs, and estimates of future expected changes in operating margins. Other significant assumptions relate to estimating the weighted average cost of capital utilized for discounting cash flow estimates and terminal period growth rates. These significant assumptions are affected by expectations about future market or economic conditions. The market approach model considers valuations of comparable companies as an input in the determination of the value of the reporting unit. Based upon the results of these analyses, we concluded that an impairment had not occurred. The analyses are not sensitive to 100 basis point changes in the estimated discount rate or income assumptions. However, further downward revisions of long-term performance assumptions, decreases in our stock price or increases in the assumed long-term discount rate could represent additional indicators of impairment which could result in impairment charges in the future.

Genesco Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Note 3

Goodwill and Other Intangible Assets, Continued

Goodwill Valuation (Schuh Group)

During the first quarter of Fiscal 2021, we identified qualitative indicators of impairment, including a significant decline in our stock price and market capitalization resulting from the COVID-19 pandemic, since the last consideration of indicators of impairment in the fourth quarter of Fiscal 2020 for our Schuh Group reporting unit. When indicators of impairment are present on an interim basis, we must assess whether it is “more likely than not” (i.e., a greater than 50% chance) that an impairment has occurred. Due to the identified indicators of impairment in the first quarter of Fiscal 2021, we determined that it was “more likely than not” that an impairment had occurred and performed a full valuation of our Schuh Group reporting unit. Based upon the results of these analyses, we concluded the goodwill attributed to Schuh Group was fully impaired. As a result, we recorded an impairment charge of $79.3 million in the first quarter of Fiscal 2021.

Other intangibles by major classes were as follows:

Trademarks(1) Customer Lists(2) Other(3) Total

(1)

Includes a $20.9 million trademark at January 28, 2023 related to Schuh Group and $3.2 million related to Journeys Group.

(2)

Includes $5.1 million for the Togast acquisition.

(3)

Backlog for Togast.

The amortization of intangibles was $0.6 million, $0.6 million and $0.9 million for Fiscal 2023, Fiscal 2022 and Fiscal 2021, respectively. Currently, amortization of intangibles is expected to be $0.6 million for each of the next five years.

Genesco Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Note 4

Asset Impairments and Other Charges

Asset impairment charges are reflected as a reduction of the net carrying value of property and equipment and operating lease right of use assets, in asset impairment and other, net in the accompanying Consolidated Statements of Operations.

We recorded a pretax charge to earnings of $0.9 million in Fiscal 2023, including $1.6 million for asset impairments, partially offset by a $0.7 million gain on the termination of our pension plan.

We recorded a pretax gain to earnings of $8.1 million in Fiscal 2022, including an $18.1 million gain on the sale of a distribution warehouse and a $0.6 million insurance gain, partially offset by $8.6 million for professional fees related to the actions of a shareholder activist and $2.0 million for asset impairments.

We recorded a pretax charge to earnings of $18.7 million in Fiscal 2021, including $13.8 million for asset impairments and $5.3 million for trademark impairment, partially offset by a $0.4 million gain for the release of an earnout related to the Togast acquisition.

Note 5

Inventories

Note 6

Property and Equipment and Other Current Accrued Liabilities

Genesco Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Note 6

Property and Equipment and Other Current Accrued Liabilities, Continued

Provision for discontinued operations 536 491

Total Other Current Accrued Liabilities $ 81,327 $ 134,156

(1) Includes accrual for performance-based incentive compensation of $2.1 million and $48.1 million as of January 28, 2023 and January 29, 2022, respectively.

Note 7

Fair Value

The carrying amounts and fair values of our financial instruments at January 28, 2023 and January 29, 2022 are:

CarryingAmount FairValue CarryingAmount FairValue

Debt fair values were determined using a discount 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.

Carrying amounts reported on our Consolidated Balance Sheets for cash, receivables and accounts payable approximate fair value due to the short-term maturity of these instruments.

As of January 28, 2023, we have $4.6 million of long-lived assets held and used which were measured using Level 3 inputs within the fair value hierarchy.

As of January 28, 2023, we have $10.6 million of investments held and used which were measured using Level 1 inputs within the fair value hierarchy.

Genesco Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Note 8

Long-Term Debt

Credit Facility

On January 28, 2022, we entered into a Third Amendment (the “Third Amendment”) to our Fourth Amended and Restated Credit Agreement dated as of January 31, 2018 between us, certain of our subsidiaries, the lenders party thereto and Bank of America, N.A. as agent (as amended, the “Credit Facility” or the “Credit Agreement”), to, among other things, (i) extend the maturity date to January 28, 2027, (ii) remove the first in-last out term loan that was in an amount equal to $17.5 million and (iii) add certain in-transit inventory to the borrowing base, subject to customary eligibility requirements. In addition, the Third Amendment makes conforming changes to replace LIBOR with the Secured Overnight Financing Rate ("SOFR"), the Sterling Overnight Index Average ("SONIA") and EURIBOR. The Total Commitments (as defined in the Credit Agreement) for the revolving loans remains at $332.5 million.

The Credit Facility continues to be secured by certain assets of the Company and certain subsidiaries of the Company, including accounts receivable, inventory, payment intangibles and deposit accounts. Equity interests, certain equipment, intellectual property and most leasehold interests are specifically excluded. The Credit Facility continues to provide for the borrowing base to include real estate as those assets are added or maintained as collateral and contains customary real estate covenants. The current outstanding long-term debt balance of $44.9 million bears interest at an average rate of 6.74% and matures January 28, 2027.

Deferred financing costs incurred in Fiscal 2022 of $1.2 million related to the amended Credit Facility were capitalized and are being amortized over the term of the new agreement. The remaining balance of deferred financing costs incurred related to the previous Credit Facility are being amortized over the term of the new agreement. These costs are included in other non-current assets on the Consolidated Balance Sheets.

The Credit Facility is a revolving credit facility in the aggregate principal amount of $332.5 million, including (i) for the Company and other borrowers formed in the U.S., a $70.0 million sublimit for the issuance of letters of credit and a domestic swingline subfacility of up to $45.0 million, (ii) for GCO Canada ULC, a revolving credit subfacility in an amount not to exceed $70.0 million, which includes a $5.0 million sublimit for the issuance of letters of credit and a swingline subfacility of up to $5.0 million, and (iii) for Genesco (UK) Limited, a revolving credit subfacility in an aggregate amount not to exceed $100.0 million, which includes a $10.0 million sublimit for the issuance of letters of credit and a swingline subfacility of up to $10.0 million. Any swingline loans and any letters of credit and borrowings under the Canadian and U.K. subfacilities will reduce the availability under the Credit Facility on a dollar for dollar basis. We have the option, from time to time, to increase the availability under the Credit Facility by an aggregate amount of up to $200.0 million subject to, among other things, the receipt of commitments for the increased amount. In connection with this increased facility, the Canadian revolving credit subfacility may be increased by no more than $15.0 million and the UK revolving credit subfacility may be increased by no more than $100.0 million. The aggregate amount of the loans made and letters of credit issued under the Credit Facility are limited to the lesser of the facility amount ($332.5 million or, if increased as described above, up to $532.5 million) or the "Borrowing Base", as defined in the Credit Agreement.

We are required to pay a commitment fee on the actual daily unused portions of the Credit Facility at a rate of 0.20% per annum.

Genesco Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Note 8

Long-Term Debt, Continued

The Credit Facility also permits us to incur senior debt in an amount up to the greater of $500.0 million or an amount that would not cause our ratio of consolidated total indebtedness to consolidated EBITDA to exceed 5.0:1.0 provided that certain terms and conditions are met.

In addition, the Credit Facility contains certain covenants that, among other things, restrict additional indebtedness, liens and encumbrances, loans and investments, acquisitions, dividends and other restricted payments, transactions with affiliates, asset dispositions, mergers and consolidations, prepayments or material amendments to certain material documents and other matters customarily restricted in such agreements.

The Credit Facility does not require us to comply with any financial covenants unless Excess Availability, as defined in the Credit Agreement, is less than the greater of $22.5 million or 10% of the loan cap. If and during such time as Excess Availability is less than the greater of $22.5 million or 10% of the loan cap, the Credit Facility requires us to have a fixed charge coverage ratio of not less than 1.0:1.0. Excess Availability was $251.2 million at January 28, 2023.

The Credit Facility contains customary events of default, which if any of them occurs, would permit or require the principal of and interest on the Credit Facility to be declared due and payable as applicable.

We were in compliance with all the relevant terms and conditions of the Credit Facility as of January 28, 2023.

U.K. Facility Agreement

On November 2, 2022, Schuh entered into a facility agreement (the "Facility Agreement") with Lloyds Bank PLC (“Lloyds”) for a £19.0 million revolving credit facility. The Facility Agreement expires November 2, 2025, with options to request twoone-year extensions to this termination date subject to lender approval, and bears interest at 2.35% over the Bank of England Base Rate. This Facility Agreement replaced Schuh's Facility Letter that would have expired in October 2023. The Facility Agreement includes certain financial covenants specific to Schuh. Following certain customary events of default outlined in the Facility Agreement, payment of outstanding amounts due may be accelerated or the commitments may be terminated. The Facility Agreement is secured by charges over all of the assets of Schuh, and Schuh's subsidiary, Schuh (ROI) Limited. Pursuant to a Guarantee in favor of Lloyds in its capacity as security trustee, Genesco Inc. has guaranteed the obligations of Schuh under the Facility Agreement and certain existing ancillary facilities on an unsecured basis.

We were in compliance with all the relevant terms and conditions of the Facility Agreement as of January 28, 2023.

U.K. revolver borrowings 14,858 —

Current portion — —

Total Noncurrent Portion of Long-Term Debt $ 44,858 $ 15,679

The revolver borrowings outstanding under the Credit Facility at January 28, 2023 included $30.0 million U.S. revolver borrowings and $14.9 million (£12.0 million) related to Genesco (UK) Limited. We had outstanding letters of credit of $9.7 million under the Credit Facility at January 28, 2023. These letters of credit support lease and insurance indemnifications.

Genesco Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Note 9

Leases

We lease our office space and all of our retail store locations, transportation equipment and other equipment under various noncancelable operating leases. The leases have varying terms and expire at various dates through 2037. The store leases in the United States, Puerto Rico and Canada typically have initial terms of approximately 10 years. The store leases in the U.K. and the ROI typically have initial terms of between 10 and 15 years. Our lease portfolio includes leases with fixed base rental payments, rental payments based on a percentage of retail sales over contractual amounts and others with predetermined fixed escalations of the minimum rentals based on a defined consumer price index or percentage. Generally, most of the leases require us to pay taxes, insurance, maintenance costs and contingent rentals based on sales. We evaluate renewal options and break options at lease inception and on an ongoing basis, and include renewal options and break options that we are reasonably certain to exercise in our expected lease terms for calculations of our right-of-use assets and liabilities. Approximately 3% of our leases contain renewal options. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

On February 10, 2020, we announced plans for our new corporate headquarters in Nashville, Tennessee. We entered into a lease agreement, which was subsequently amended, for approximately 182,000 square feet of office space which replaced our previous corporate headquarters office lease. The term of the lease is 15 years, with two options to extend for an additional period of five years each. We moved to the new corporate headquarters beginning in April 2022.

Under ASC 842, for store, office and equipment leases beginning in Fiscal 2020 and later, we have elected to not separate fixed lease components and non-lease components. Accordingly, we include fixed rental payments, common area maintenance costs, promotional advertising costs and other fixed costs in our measurement of lease liabilities.

Our leases do not provide an implicit rate, so the incremental borrowing rate, based on the information available at commencement or modification date, is used in determining the present value of lease payments. The incremental borrowing rate represents an estimate of the interest rate we would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of a lease within a particular currency environment. For operating leases that commenced prior to the date of adoption of the new lease accounting guidance, we used the incremental borrowing rate that corresponded to the initial lease term as of the date of adoption.

Net lease costs are included within selling and administrative expenses on the Consolidated Statements of Operations. The table below presents the components of lease cost for operating leases for the years ended January 28, 2023, January 29, 2022 and January 30, 2021.

Genesco Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Note 9

Leases, Continued

The following table reconciles the maturities of undiscounted cash flows to our operating lease liabilities recorded on the Consolidated Balance Sheets at January 28, 2023:

Fiscal Years (In thousands)

Total undiscounted future minimum lease payments 615,183

Less: Amounts representing interest (79,611 )

Total Present Value of Operating Lease Liabilities $ 535,572

Our weighted-average remaining lease term and weighted-average discount rate for operating leases as of January 28, 2023 and January 29, 2022 are:

Weighted-average remaining lease term (years) 5.5 years 5.8 years

Weighted-average discount rate 5.1% 5.0%

As of January 28, 2023, we have additional operating leases that have not yet commenced with estimated right of use liabilities of $12.1 million. These leases will commence in Fiscal 2024 with lease terms of 1 to 10 years.

Beginning in March 2020, as a result of the onset of the COVID-19 pandemic, we suspended rent payments under the leases for our temporarily closed stores and initiated discussions with landlords to obtain lease concessions. We considered the FASB’s guidance regarding lease concessions as a result of the effects of the COVID-19 pandemic and elected to account for lease concessions related to the effects of the COVID-19 pandemic received in Fiscal 2022 and Fiscal 2021 consistent with how those concessions would be accounted for under Topic 842 and Topic 840 as though enforceable rights and obligations for those concessions existed (regardless of whether those enforceable rights and obligations for the concessions explicitly exist in the contract). Also, in accordance with the FASB’s guidance, we applied this election for concessions related to the effects of the COVID-19 pandemic that did not result in a substantial increase in our obligations or in the rights of the landlord. We continued to recognize contractual rent expense while lease concessions were under negotiation with the respective landlord. The rent concessions were recognized in the period when the amendment was executed. COVID-19 related lease concessions decreased our contractual rent expense by approximately $17 million and $34 million during Fiscal 2022 and Fiscal 2021, respectively. As of January 29, 2022, we had an accrued liability for unpaid rent related to the closed stores of $2.1 million.

Genesco Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Note 10

Equity

Non-Redeemable Preferred Stock

Number of Shares Amounts in Thousands

As of Fiscal Year End As of Fiscal Year End

Employees’ Preferred Stock Purchase Accounts (23 ) (23 ) (24 )

Total Non-Redeemable Preferred Stock $ 815 $ 827 $ 1,009

Subordinated Serial Preferred Stock:

Our charter permits the Board of Directors to issue Subordinated Serial Preferred Stock (3,000,000 shares, in aggregate, are authorized) in as many series, each with as many shares and such rights and preferences as the Board may designate. We have shares authorized for $2.30 Series 1, $4.75 Series 3, $4.75 Series 4, Series 6 and $1.50 Subordinated Cumulative Preferred stocks in amounts of 64,368 shares, 40,449 shares, 53,764 shares, 800,000 shares and 5,000,000 shares, respectively. All of these preferred stocks were mandatorily redeemed by us in Fiscal 2014. As a result, there are no outstanding shares for any preferred issues of stock other than Employees' Subordinated Convertible Preferred stock shown in the table above.

Employees’ Subordinated Convertible Preferred Stock:

Stated and liquidation values are 88 times the average quarterly per share dividend paid on common stock for the previous eight quarters (if any), but in no event less than $30 per share. Each share of this issue of preferred stock is convertible into one share of common stock and has one vote per share.

Common Stock:

Common stock-$1 par value. Authorized: 80,000,000 shares; issued: January 28, 2023 – 13,088,782 shares; January 29, 2022 –14,256,408 shares. There were 488,464 shares held in treasury at January 28, 2023 and January 29, 2022. Each outstanding share is entitled to one vote. At January 28, 2023, common shares were reserved as follows: 27,935 shares for conversion of preferred stock and 704,556 shares for the 2020 Genesco Inc. Equity Incentive Plan (the "2020 Plan").

For the year ended January 28, 2023, 299,914 shares of common stock were issued as restricted shares as part of the 2020 Plan; 16,536 shares were issued to directors in exchange for their services; 73,137 shares were withheld for taxes on restricted stock vested in Fiscal 2023; 31,057 shares of restricted stock were forfeited in Fiscal 2023; and 390 shares were issued in miscellaneous conversions of Employees’ Subordinated Convertible Preferred Stock. In addition, the Company repurchased and retired 1,380,272 shares of common stock at an average weighted market price of $52.66 for a total of $72.7 million.

Genesco Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Note 10

Equity, Continued

For the year ended January 29, 2022, 229,363 shares of common stock were issued as restricted shares as part of the 2020 Plan; 14,936 shares were issued to directors in exchange for their services; 64,535 shares were withheld for taxes on restricted stock vested in Fiscal 2022; 6,885 shares of restricted stock were forfeited in Fiscal 2022; and 6,100 shares were issued in miscellaneous conversions of Employees’ Subordinated Convertible Preferred Stock. In addition, we repurchased and retired 1,360,909 shares of common stock at an average weighted market price of $60.88 for a total of $82.8 million.

For the year ended January 30, 2021, 428,362 shares of common stock were issued as restricted shares as part of the Second Amended and Restated 2009 Genesco Inc. Equity Incentive Plan; 38,723 shares were issued to directors in exchange for their services; 64,382 shares were withheld for taxes on restricted stock vested in Fiscal 2021; 150,050 shares of restricted stock were forfeited in Fiscal 2021; and 15 shares were issued in miscellaneous conversions of Employees’ Subordinated Convertible Preferred Stock. We did not repurchase any shares of common stock in Fiscal 2021.

Restrictions on Dividends and Redemptions of Capital Stock:

Our charter provides that no dividends may be paid and no shares of capital stock acquired for value if there are dividend or redemption arrearages on any senior or equally ranked stock. Exchanges of subordinated serial preferred stock for common stock or other stock junior to such exchanged stock are permitted.

Note 11

Income Taxes

The components of earnings from continuing operations before income taxes is comprised of the following:

Fiscal Year

Genesco Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Note 11

Income Taxes, Continued

Income tax expense from continuing operations is comprised of the following:

Fiscal Year

Current

Deferred

Reconciliation of the United States federal statutory rate to our effective tax rate from continuing operations is as follows:

Fiscal Year

State taxes (net of federal tax benefit) 2.08 3.94 1.35

Foreign rate differential (0.02 ) (0.11 ) (0.25 )

Change in valuation allowance (1.12 ) 1.58 (10.70 )

Outside basis difference - IRC Section 165(g) 3 — — 10.34

Goodwill impairment — — (13.50 )

IRS interest (1.46 ) — —

Genesco Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Note 11

Income Taxes, Continued

We are subject to a tax on global intangible low-tax income (“GILTI”). GILTI taxes foreign income in excess of deemed return on tangible assets of a foreign corporation and we elected to treat this tax as a period cost. The impact from GILTI was not material for Fiscal 2023, 2022 or 2021.

We have a $54.1 million non-current prepaid income tax receivable on our Consolidated Balance Sheets as of January 28, 2023. This receivable relates to the remaining uncollected portion of our $107.2 million carryback of our Fiscal 2021 federal tax losses to prior tax periods under the CARES Act. The Internal Revenue Service ("IRS") is currently auditing the refund claim under the requirements of the Joint Committee on Taxation refund review process. We expect the examination process to extend greater than 12 months. We concluded that all positions in the refund claim met the more-likely-than-not standard based on the technical merits of the position and we recorded the benefit under the requirements of ASC 740. In addition, we recorded a $0.2 million unrecognized tax benefit related to the claim. It is possible the IRS could challenge our interpretation of the technical merits of the positions and the actual amount of the tax benefit may differ from the original refund claim.

Deferred tax assets and liabilities are comprised of the following:

Provisions for discontinued operations and restructurings 662 596

Tax net operating loss and credit carryforwards 23,146 31,646

Allowances for bad debts and notes 760 863

Deferred compensation and restricted stock 3,012 2,736

Deferred tax asset valuation allowance (36,482 ) (42,195 )

Deferred tax asset net of valuation allowance 167,269 189,626

Tax over book depreciation — (30,421 )

Net Deferred Tax Assets (Liabilities) $ 26,054 $ (517 )

The deferred tax balances have been classified in our Consolidated Balance Sheets as follows:

As of Fiscal Year Ended

Net non-current liability (2,509 ) (1,983 )

Net Deferred Tax Assets (Liabilities) $ 26,054 $ (517 )

Genesco Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Note 11

Income Taxes, Continued

As of January 28, 2023 and January 29, 2022, we had state net operating loss carryforwards of $9.0 million and $13.9 million, respectively. We provided a valuation allowance against these attributes of $3.2 million as of both January 28, 2023 and January 29, 2022. The attributes expire in fiscal years 2024 through 2039.

As of January 28, 2023 and January 29, 2022, we had state tax credits of $0.6 million and $0.5 million, respectively. These credits expire in fiscal years 2024 through 2026.

As of January 28, 2023 and January 29, 2022, we had foreign net operating loss carryforwards of $39.8 million and $50.6 million, respectively, which have a carryforward period at least 17 years.

As of January 28, 2023, we have provided a total valuation allowance of approximately $36.5 million on deferred tax assets associated primarily with foreign and state net operating losses for which management has determined it is more likely than not that the deferred tax assets will not be realized. The $5.7 million net decrease in valuation allowance during Fiscal 2023 from the $42.2 million provided for as of January 29, 2022 relates primarily to foreign tax attributes. We removed $2.4 million of German deferred tax assets and an equivalent amount of valuation allowance and our entity operating in Germany was merged out of existence in the period ended January 28, 2023. Management believes that it is more likely than not that the remaining deferred tax assets will be fully realized.

As of January 28, 2023, no deferred taxes have been provided on the accumulated undistributed earnings of our foreign operations beyond the amounts recorded for deemed repatriation of such earnings, as required in the Tax Cuts and Jobs Act (the "Act"). An actual repatriation of earnings from our foreign operations could still be subject to additional foreign withholding and U.S. state taxes. Based upon evaluation of our foreign operations, undistributed earnings are intended to remain permanently reinvested to finance anticipated future growth and expansion, and accordingly, deferred taxes have not been provided. If undistributed earnings of our foreign operations were not considered permanently reinvested as of January 28, 2023, an immaterial amount of additional deferred taxes would have been provided.

As of January 28, 2023, foreign tax credit carryforwards of approximately $4.0 million were available to reduce possible future U.S. income taxes and which expire from 2028 to 2031. As a result of the Act, we may no longer utilize certain U.S. foreign tax credit carryforwards. A valuation allowance of $3.8 million has been established against these credits.

The following is a tabular reconciliation of the total amounts of unrecognized tax benefits.

Fiscal Year

Unrecognized Tax Benefit – Beginning of Period $ 178 $ 178 $ 178

Gross Increases (Decreases) – Tax Positions in a Current Period — — —

Settlements — — —

Lapse of Statutes of Limitations — — —

Unrecognized Tax Benefit – End of Period $ 178 $ 178 $ 178

Genesco Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Note 11

Income Taxes, Continued

The amount of unrecognized tax benefits as of January 28, 2023, January 29, 2022 and January 30, 2021, which would impact the annual effective rate if recognized were $0.2 million each year. The amount of unrecognized tax benefits may change during the next twelve months but we do not believe the change, if any, will be material to our consolidated financial position or results of operations.

We recognize interest expense and penalties related to the above unrecognized tax benefits within income tax expense on the Consolidated Statements of Operations and it was not material for Fiscal 2023, 2022 or 2021. We recorded $1.7 million of interest income within income tax expense, net on the Consolidated Statements of Operations for the year ended January 28, 2023 related to our outstanding federal refund request.

We file income tax returns in federal and in many state and local jurisdictions as well as foreign jurisdictions. With few exceptions, our state and local income tax returns for fiscal years ended February 1, 2020 and beyond remain subject to examination. In addition, we have subsidiaries in various foreign jurisdictions that have statutes of limitation generally ranging from two to six years. As part of the IRS audit of our federal income tax return for the fiscal year end January 30, 2021, we have extended the statute of limitations for our fiscal years February 1, 2020, forward.

The CHIPS and Science Act of 2022 ("CHIPS") and the Inflation Reduction Act of 2022 ("IRA") were signed into law on August 9, 2022 and August 16, 2022, respectively. The legislation introduces new options for monetizing certain credits, a corporate alternative minimum tax and a stock repurchase excise tax. The stock repurchase excise tax is the principal provision that may be applicable to us and was effective for stock repurchases after December 31, 2022. We did not make any stock repurchases from January 1, 2023 to our fiscal year-end on January 28, 2023. We are still evaluating the overall impact of the CHIPS and IRA laws, but reported no impact from the new legislation for our fiscal year ended January 28, 2023.

Note 12

GCO US Equity

GCO · 10-K · period ended 2023-01-28

ITEM 7, MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OFOPERATIONS

ITEM 7A, QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 8, FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

GCO US Equity☆

GCO · 10-K · period ended 2023-01-28

ITEM 7, MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OFOPERATIONS

ITEM 7A, QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 8, FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

GCO US Equity