GCO · Read the filing

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 February 1, 2020, filed with the SEC on April 1, 2020, which provides a discussion of our financial condition and results of operations for Fiscal 2020 compared to our Fiscal 2019.

Summary of Results of Operations

Our net sales decreased 18.7% during Fiscal 2021 compared to Fiscal 2020. The sales decrease was driven by the impact from the COVID-19 pandemic, including as a result of store closures during the year, lower store comparable sales and sales pressure at Johnston & Murphy, partially offset by digital comparable growth of 74%. Stores were open about 76% of possible days. We have not disclosed comparable sales for Fiscal 2021 as we believe that overall sales are a more meaningful metric during this period due to the impact of the COVID-19 pandemic.

Journeys Group sales decreased 16%, Schuh Group sales decreased 18%, Johnston & Murphy Group sales decreased 49%, while Licensed Brands sales increased 61% due to the acquisition of Togast, during Fiscal 2021 compared to Fiscal 2020. Gross margin decreased as a percentage of net sales from 48.4% in Fiscal 2020 to 45.0% in Fiscal 2021, reflecting gross margin decreases as a percentage of net sales in all of our business units, except Journeys Group. The gross margin decrease is primarily due to higher shipping and warehouse expense in all of our retail divisions, increased inventory reserves at Johnston & Murphy Group, increased markdowns at Johnston & Murphy retail and closeouts at Johnston & Murphy wholesale and increased promotional activity at Schuh Group, partially offset by decreased markdowns at Journeys Group. The higher shipping and warehouse expense is a result of the increased penetration of e-commerce sales. In addition, changes in sales mix among our business units had an unfavorable impact on gross margin.

Selling and administrative expenses increased as a percentage of net sales from 44.0% in Fiscal 2020 to 45.6% in Fiscal 2021, reflecting increased expenses as a percentage of net sales in Journeys Group and Johnston & Murphy Group, partially offset by decreased expenses as a percentage of net sales in Schuh Group, Licensed Brands and Corporate. However, on a dollar basis, expenses decreased 15.8% in Fiscal 2021 compared to Fiscal 2020 due primarily to reduced occupancy expense, driven by rent abatements with landlords and government relief programs, as well as reduced selling salaries and bonus and travel expenses, partially offset by increased marketing expenses.

Operating margin decreased as a percentage of net sales from 3.8% in Fiscal 2020 to (6.0)% in Fiscal 2021, reflecting operating losses in all of our business units except Journeys Group due to disruptions related to the COVID-19 pandemic including recognition of non-cash impairment charges of $79.3 million for goodwill, $13.8 million for retail store assets and $5.3 million for trademarks.

Significant Developments

COVID-19

In March 2020, the World Health Organization categorized the outbreak of COVID-19 as a pandemic. As a result, and in consideration of the health and well-being of our employees, customers and communities, and in support of efforts to contain the spread of the virus, we have taken several precautionary measures throughout the year and adjusted our operational needs, including:

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

Table of Contents

•On March 19, 2020, we initially borrowed $150.0 million under our Credit Facility as a precautionary measure to ensure funds were available to meet our obligations for a substantial period of time in response to the COVID-19 pandemic that caused public health officials to recommend precautions that would mitigate the spread of the virus, including “stay-at-home” orders and similar mandates and warning the public against congregating in heavily populated areas such as malls and shopping centers. We paid down the $150.0 million on September 10, 2020.

•On March 19, 2020, Schuh entered into an Amendment and Restatement Agreement (the “U.K. A&R Agreement”) with Lloyds Bank which amended and restated the Amendment and Restatement Agreement dated April 26, 2017. The U.K. A&R Agreement included only a Facility C revolving credit agreement of £19.0 million, bore interest at LIBOR plus 2.2% per annum and expired in September 2020. In March 2020, we borrowed £19.0 million as a precautionary measure in response to the COVID-19 pandemic. The U.K. A&R Agreement was replaced with the Facility Letter in October 2020 and the outstanding borrowings in the amount of £19.0 million were repaid.

•On March 23, 2020, we temporarily closed our stores in the United Kingdom and the ROI.

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

•On March 27, 2020, we announced that we were adjusting our operational needs, including a significant reduction of expense, capital and planned inventory receipts. As part of these measures, we made the decision to temporarily reduce compensation for the executive team and select employees and reduced the cash compensation for our Board of Directors. In addition, we furloughed all of our full-time store employees in North America and our store and distribution center employees in the United Kingdom. We also furloughed employees and reduced headcount in our corporate offices, call centers and distribution centers. Across all these actions, this represented a reduction of our workforce by 90%.

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

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

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

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

•On October 9, 2020, Schuh entered into the Facility Letter with Lloyds under the U.K.'s Coronavirus Large Business Interruption Loan Scheme pursuant to which Lloyds made available a RCF of £19.0 million for the purpose of refinancing Schuh's existing indebtedness with Lloyds. The RCF expires in October 2023 and bears interest at 2.5% over the Bank of England Base Rate. As of January 30, 2021, we have not borrowed under the Facility Letter.

•During the fourth quarter of Fiscal 2021, another lockdown in the U.K. and the ROI disrupted the Schuh Group business with stores closed for 36% of possible days in the fourth quarter. As of January 30, 2021, all but two Schuh stores remained closed. These stores are expected to remain closed until shortly after Easter, April 4, 2021.

Table of Contents

•In December 2020, the Company returned the compensation to select employees whose compensation had been reduced on March 27, 2020.

As of March 11, 2021, we were operating in 90% of our locations, including approximately 1,145 Journeys, 160 Johnston & Murphy and two Schuh locations. All store locations are operating under enhanced measures to ensure the health and safety of employees and customers, including requiring employees to wear masks, requiring customers in our stores to wear masks, providing hand sanitizer in multiple locations throughout each store for customer and employee use, enhanced cleaning and sanitation protocols, reconfigured sales floors to promote physical distancing and modified employee and customer interactions to limit contact.

As a result of the economic and business impact of the COVID-19 pandemic, we revised certain accounting estimates and judgments as discussed in Item 8, Note 3, “COVID-19”, to our Consolidated Financial Statements included in this Annual Report on Form 10-K. Given the ongoing and evolving economic and business impact of the COVID-19 pandemic, we may be required to further revise certain accounting estimates and judgments such as, but not limited to, those related to the valuation of inventory, goodwill, long-lived assets and deferred tax assets, which could have a material adverse effect on our financial position and results of operations.

Since the first quarter of Fiscal 2021, we have withheld certain contractual rent payments generally correlating with time periods when our stores were closed and/or correlating with sales declines from Fiscal 2020. We continue to recognize rent expense in accordance with the contractual terms. We have been working with landlords in various markets seeking commercially reasonable lease concessions given the current environment, and while some agreements have been reached, a number of negotiations remain ongoing. During Fiscal 2021, we have recognized approximately $34 million in rent savings which included approximately $28 million of abatements pursuant to rent abatement agreements we have entered into with certain landlords.

On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which among other things, provides employer payroll tax credits for wages paid to employees who are unable to work during the COVID-19 pandemic and options to defer payroll tax payments. Based on our evaluation of the CARES Act, we qualify for certain employer payroll tax credits as well as the deferral of payroll and other tax payments in the future, which will be treated as government subsidies to offset related operating expenses. During Fiscal 2021, qualified payroll tax credits reduced our selling and administrative expenses by approximately $13.8 million on our Consolidated Statements of Operations. We also deferred $9.5 million of qualified payroll taxes in the U.S. that will be repaid in equal installments by December 31, 2021 and December 31, 2022. Savings from the government program in the U.K. has also provided property tax relief of approximately $13.3 million for Fiscal 2021. Additionally, we recorded a tax receivable of $107.2 million in our U.S. federal jurisdiction as a result of a carryback of our Fiscal 2021 federal tax losses to prior tax periods under the CARES Act. Due to a higher tax rate in prior tax periods than the current U.S. federal statutory tax rate of 21%, the carryback claim creates a permanent tax benefit of $46.4 million.

We recorded our income tax expense, deferred tax assets and related liabilities based on our best estimates. As part of this process, we assessed the likelihood of realizing the benefits of our deferred tax assets. During Fiscal 2021, based on available evidence, we recorded an additional valuation allowance against previously recorded deferred tax assets in our U.K. jurisdiction of $2.6 million and our Irish jurisdiction of $0.2 million. We will continue to monitor the realizability of our deferred tax assets, particularly in certain foreign jurisdictions where the COVID-19 pandemic has started to create significant net operating losses. Our ability to recover these deferred tax assets depends on several factors, including our results of operations and our ability to project future taxable income in those jurisdictions.

The Acquisition of Togast

Effective January 1, 2020, we completed the acquisition of substantially all the assets and the assumption of certain liabilities of Togast. Togast specializes in the design, sourcing and sale of licensed footwear. We also entered into a new U.S. footwear license agreement with Levi Strauss & Co. for the license of Levi's® footwear for men, women and children in U.S. concurrently

Table of Contents

with the Togast acquisition. The acquisition expands our portfolio to include footwear licenses for Bass® and FUBU, among others. Togast operates in our Licensed Brands segment.

Asset Impairment and Other Charges

We recorded a pretax charge to earnings of $18.7 million in Fiscal 2021, including $13.8 million for retail store 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 which is included in asset impairments and other, net on the Consolidated Statements of Operations for Fiscal 2021.

Postretirement Benefit Liability

In March 2019, our board of directors authorized the termination of the defined benefit pension plan. The termination was completed in January 2020 with a pension settlement charge of $11.5 million which is included in asset impairments and other, net on the Consolidated Statements of Operations for Fiscal 2020.

Key Performance Indicators

In assessing the performance of our business, we consider a variety of performance and financial measures. The key performance indicators we use to evaluate the financial condition and operating performance of our business are comparable sales, net sales, gross margin, operating income (loss) and operating margin. These key performance indicators should not be considered superior to, as a substitute for or as an alternative to, and should be considered in conjunction with, the U.S. GAAP financial measures presented herein. These measures may not be comparable to similarly-titled performance indicators used by other companies.

Comparable Sales

We consider comparable sales to be an important indicator of our current performance, and investors may find it useful as such. Comparable sales results are important to achieve leveraging of our costs, including occupancy, selling salaries, depreciation, etc. Comparable sales also have a direct impact on our total net revenue, cash and working capital. We define "comparable sales" as sales from stores open longer than one year, beginning with the first day a store has comparable sales (which we refer to in this report as "same store sales"), and sales from websites operated longer than one year and direct mail catalog sales (which we refer to in this report as "comparable direct sales"). Temporarily closed stores are excluded from the comparable sales calculation if closed for more than seven days. Expanded stores are excluded from the comparable sales calculation until the first day an expanded store has comparable prior year sales. Current year foreign exchange rates are applied to both current year and prior year comparable sales to achieve a consistent basis for comparison. We have not disclosed comparable sales for Fiscal 2021 because we believe that overall sales are a more meaningful metric during this period due to the impact of COVID-19.

Results of Operations—Fiscal 2021 Compared to Fiscal 2020

Our net sales for Fiscal 2021 decreased 18.7% to $1.79 billion from $2.20 billion in Fiscal 2020. The decrease in net sales was driven by the impact from store closures during the year due to the COVID-19 pandemic, lower store comparable sales and sales pressure at Johnston & Murphy, partially offset by digital comparable growth of 74%. Stores were open about 76% of possible days during Fiscal 2021.

Gross margin decreased 24.3% to $804.5 million in Fiscal 2021 from $1.06 billion in Fiscal 2020, and decreased as a percentage of net sales from 48.4% in Fiscal 2020 to 45.0% in Fiscal 2021, reflecting gross margin decreases as a percentage of net sales in all of our business units, except Journeys Group. The gross margin decrease is primarily due to higher shipping and warehouse expense in all of our retail divisions, increased inventory reserves at Johnston & Murphy Group, increased markdowns at Johnston & Murphy retail and closeouts at Johnston & Murphy wholesale and increased promotional activity at Schuh Group, partially offset by decreased markdowns at Journeys Group. The higher shipping and warehouse expense is a result of the increased

Table of Contents

penetration of e-commerce sales. In addition, changes in sales mix among our business units had an unfavorable impact on gross margin.

Selling and administrative expenses increased as a percentage of net sales from 44.0% in Fiscal 2020 to 45.6% in Fiscal 2021, but decreased 15.8% in total dollars due primarily to reduced occupancy expense, driven by rent abatements with landlords and government relief programs, as well as reduced selling salaries and bonus and travel expenses, partially offset by increased marketing expenses. Explanations of the changes in results of operations are provided by business segment in discussions following these introductory paragraphs.

Earnings (loss) from continuing operations before income taxes (“pretax earnings (loss)”) for Fiscal 2021 was a pretax loss of $(111.7) million, compared to pretax earnings of $82.4 million for Fiscal 2020. The pretax loss for Fiscal 2021 included a goodwill impairment charge of $79.3 million and an asset impairment and other charge of $18.7 million for retail store asset impairments and a trademark impairment, partially offset by a gain for the release of an earnout related to the Togast acquisition. Pretax earnings for Fiscal 2020 included an asset impairment and other charge of $13.4 million for pension settlement expense and retail store asset impairments, partially offset by a gain on the sale of the Lids Sports Group headquarters building, a gain on lease terminations and a gain related to Hurricane Maria.

The net loss for Fiscal 2021 was $(56.4) million, or $(3.97) diluted loss per share compared to net earnings of $61.4 million, or $3.92 diluted earnings per share for Fiscal 2020. The effective income tax rate was 49.8% for Fiscal 2021 compared to 25.1% for Fiscal 2020. The effective tax rate for Fiscal 2021 was higher compared to Fiscal 2020 due to initiatives under the CARES Act and taxes accrued for the U.S. jurisdiction, partially offset by the non-deductibility of the goodwill impairment charge and our performance in foreign jurisdictions for which no income tax benefit or expense is recorded for Fiscal 2021. See Item 8, Note 12, "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 6.3 % 7.9 %

Net sales from Journeys Group decreased 15.9% to $1.23 billion for Fiscal 2021 compared to $1.46 billion for Fiscal 2020, primarily due to store closures in response to the COVID-19 pandemic and lower store comparable sales, reflecting decreased store traffic, partially offset by increased digital comparable growth. The store count for Journeys Group was 1,159 stores at the end of Fiscal 2021, including 233 Journeys Kidz stores, 47 Journeys stores in Canada and 38 Little Burgundy stores in Canada, compared to 1,171 stores at the end of Fiscal 2020, including 233 Journeys Kidz stores, 46 Journeys stores in Canada and 39 Little Burgundy stores in Canada.

Journeys Group operating income for Fiscal 2021 decreased 33.1% to $76.9 million, compared to $114.9 million for Fiscal 2020. The decrease in operating income was primarily due to decreased net sales and increased expenses as a percentage of net sales, reflecting increased occupancy, marketing, depreciation, freight and compensation expenses, partially offset by decreased bonus expenses and selling salaries. Gross margin for Fiscal 2021 increased slightly as a percentage of net sales, primarily reflecting decreased markdowns, partially offset by higher shipping and warehouse expense from higher e-commerce sales.

Table of Contents

Schuh Group

Fiscal Year Ended %

(dollars in thousands)

Operating income (loss) $ (11,602 ) $ 4,659 NM

Operating margin -3.8 % 1.2 %

Net sales from the Schuh Group decreased 18.2% to $305.9 million for Fiscal 2021, compared to $373.9 million for Fiscal 2020, primarily due to store closures in response to the COVID-19 pandemic and lower store comparable sales, partially offset by increased digital comparable growth and the favorable impact of $4.9 million due to changes in foreign exchange rates. Schuh Group operated 123 stores at the end of Fiscal 2021 compared to 129 stores at the end of Fiscal 2020.

Schuh Group had an operating loss of $(11.6) million in Fiscal 2021 compared to operating income of $4.7 million for Fiscal 2020. The decrease in earnings this year reflects decreased net sales and decreased gross margin as a percentage of net sales, reflecting higher shipping and warehouse expense from higher e-commerce sales and increased promotional activity. Schuh Group’s selling and administrative expenses decreased as a percentage of net sales this year, reflecting decreased occupancy expense, as a result of savings from the government program in the U.K. providing property tax relief and rent abatement agreements with our landlords, and decreased selling salaries, partially offset by increased marketing, compensation and credit card expenses and professional fees. In addition, Schuh Group's operating loss included a favorable impact of $1.1 million for Fiscal 2021 due to changes in foreign exchange rates.

Johnston & Murphy Group

Fiscal Year Ended %

(dollars in thousands)

Operating margin -31.1 % 5.9 %

Johnston & Murphy Group net sales decreased 49.2% to $152.9 million for Fiscal 2021 from $300.9 million for Fiscal 2020 primarily due to lower store comparable sales, store closures in response to the COVID-19 pandemic and lower wholesale sales, partially offset by increased digital comparable growth. Retail operations accounted for 77.6% of Johnston & Murphy Group's sales in Fiscal 2021, up from 75.8% in Fiscal 2020. The store count for Johnston & Murphy retail operations at the end of Fiscal 2021 included 178 Johnston & Murphy shops and factory stores, including eight stores in Canada, compared to 180 Johnston & Murphy shops and factory stores, including eight stores in Canada, at the end of Fiscal 2020.

The operating loss for Johnston & Murphy Group for Fiscal 2021 was $(47.6) million compared to operating income of $17.7 million in Fiscal 2020. The decrease was primarily due to (i) decreased net sales (ii) decreased gross margin as a percentage of net sales, reflecting incremental inventory reserves, higher markdowns at retail, closeouts at wholesale and increased shipping and warehouse expense from higher e-commerce sales and (iii) increased selling and administrative expenses as a percentage of net sales, reflecting the inability to leverage expenses on lower sales due to the COVID-19 pandemic.

Table of Contents

Licensed Brands

Fiscal Year Ended %

(dollars in thousands)

Operating loss $ (5,430 ) $ (698 ) NM

Operating margin -5.4 % -1.1 %

Licensed Brands’ net sales increased 61.2% to $99.7 million for Fiscal 2021 from $61.9 million for Fiscal 2020, reflecting increased sales related to the Togast acquisition, partially offset by decreased sales of Dockers footwear.

Licensed Brands’ operating loss increased from $(0.7) million for Fiscal 2020 to $(5.4) million for Fiscal 2021, primarily due to decreased gross margin as a percentage of net sales as the recently acquired Togast business carried lower margins than the historic business due to the impact of pre-acquisition royalty and commission cost on legacy Togast product sales and the COVID-19 pandemic impact. As the legacy Togast products comprise less of the overall sales mix of Licensed Brands, we expect the gross margin to improve. Licensed Brands’ selling and administrative expenses decreased as a percentage of net sales, reflecting multiple expense category fluctuations as a result of both acquiring the Togast business, which carries lower expenses as a percentage of net sales than the historic business, and the impact of the COVID-19 pandemic, including higher bad debt expense for Fiscal 2021. In addition, we benefitted from actions we took to restructure the Togast business and integrate post acquisition such as the elimination of a potential $34 million earnout in future years.

Corporate, Interest Expenses and Other Charges

Corporate and other expense for Fiscal 2021 was $119.5 million compared to $53.3 million for Fiscal 2020. Corporate expense in Fiscal 2021 included non-cash impairment charges of $79.3 million related to goodwill, $13.8 million related to retail store assets and $5.3 million for trademarks, partially offset by a $(0.4) million gain for the release of an earnout related to the Togast acquisition. Fiscal 2020 included a $13.4 million charge in asset impairment and other charges, primarily for pension settlement expense and retail store asset impairments, partially offset by a gain on the sale of the Lids Sports Group headquarters building, a gain on lease terminations and a gain related to Hurricane Maria. Corporate and other expense, excluding asset impairment and other charges, decreased 46% reflecting decreased bonus and compensation expenses and decreased professional fees.

Net interest expense increased to $5.1 million in Fiscal 2021 from $1.3 million in Fiscal 2020 primarily due to increased average borrowings and lower interest rates on short-term investments.

Liquidity and Capital Resources

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

Table of Contents

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

(dollars in millions) January 30, 2021 February 1, 2020 Increase (Decrease)

Net cash provided by operating activities $ 157.8 $ 117.2 $ 40.6

Net cash provided by (used in) investing activities (24.0 ) 53.3 (77.3 )

Net cash used in financing activities (3.2 ) (256.5 ) 253.3

Effect of foreign exchange rate fluctuations on cash 3.1 0.1 3.0

Increase (decrease) in cash and cash equivalents $ 133.7 $ (85.9 ) $ 219.6

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

Cash provided by operating activities was $40.6 million higher for Fiscal 2021 compared to Fiscal 2020, reflecting primarily the following factors:

Cash provided by investing activities was $77.3 million lower for Fiscal 2021 reflecting the receipt of proceeds from the sale of Lids Sports Group in the prior year, partially offset by the acquisition of Togast in the fourth quarter of Fiscal Year 2020.

Cash used in financing activities was $253.3 million higher in Fiscal 2021 primarily reflecting share repurchases in Fiscal Year 2020.

Sources of Liquidity and Future Capital Needs

We have three principal sources of liquidity: cash flow from operations, cash and cash equivalents on hand and our credit facilities discussed in Item 8, Note 9, "Long-Term Debt", to our Consolidated Financial Statements included in this Annual Report on Form 10-K.

On June 5, 2020, we entered into a Second Amendment to our Credit Facility to, among other things, increase the Total Commitments for the revolving loans from $275.0 million to $332.5 million, establish a FILO tranche of indebtedness of $17.5 million, for $350.0 million total capacity, increase pricing on the revolving loans, modify certain covenant and reporting terms and pledge additional collateral. As of January 30, 2021, we have borrowed $33.0 million under our Credit Facility.

On October 9, 2020, Schuh entered into a Facility Letter with Lloyds under the U.K.'s Coronavirus Large Business Interruption Loan Scheme pursuant to which Lloyds made available a RCF of £19.0 million for the purpose of refinancing Schuh's existing indebtedness with Lloyds. The RCF expires in October 2023. As of January 30, 2021, we have not borrowed under the Schuh Facility Letter.

Table of Contents

As we manage through the impacts of the COVID-19 pandemic in Fiscal 2022, we have access to our existing cash, as well as our available credit facilities to meet short-term liquidity needs. We believe that cash on hand, cash provided by operations and borrowings under our amended Credit Facility and the Schuh Facility Letter will be sufficient to support our near-term liquidity. Our year end cash benefitted from both lower inventory levels as well as rent payables that will be paid once remaining COVID-related rent negotiations are fully completed and executed in Fiscal 2022. Additionally, in the fourth quarter of Fiscal 2021, we implemented tax mechanisms allowed under the 5-year carryback provisions in the CARES Act which we expect will generate significant cash inflows in Fiscal 2022. In Fiscal 2022, we will need to rebuild our inventories, especially at Journeys Group, in response to COVID-19.

We were in compliance with all the relevant terms and conditions of the Credit Facility and Facility Letter as of January 30, 2021.

Contractual Obligations

The following table sets forth aggregate contractual obligations as of January 30, 2021.

(in thousands)

Contractual Obligations Total Current Long-Term

(1) Operating lease obligations excludes $68.8 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 $24.1 million and $29.8 million for Fiscal 2021 and 2020, respectively. The $5.7 million decrease in Fiscal 2021 capital expenditures as compared to Fiscal 2020 is primarily due to decreased store renovations in Fiscal 2021 as well as decreased capital expenditures as a result of the COVID-19 pandemic.

We expect total capital expenditures for Fiscal 2022 to be approximately $35 million to $40 million of which approximately 74% is for computer hardware, software and warehouse enhancements for initiatives to drive traffic and omni-channel capabilities. Planned capital expenditures excludes approximately $16 million, net of tenant allowance, for the new Corporate Headquarters building which is still in the planning stage. 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 did not repurchase any shares during Fiscal 2021. We have $89.7 million remaining as of January 30, 2021 under our current $100.0 million share repurchase authorization. We repurchased 4,570,015 shares at a cost of $189.4 million during Fiscal 2020.

Table of Contents

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 16, "Legal Proceedings and Other Matters", 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 $33.0 million of outstanding U.S. revolver borrowings at a weighted average interest rate of 4.05% as of January 30, 2021. A 100 basis point increase in interest rates would increase annual interest expense by $0.3 million on the $33.0 million revolver borrowings.

Cash and Cash Equivalents – Our cash and cash equivalent 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 30, 2021. As a result, we consider the interest rate market risk implicit in these investments at January 30, 2021 to be low.

Summary – Based on our overall market interest rate exposure at January 30, 2021, 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 2022 would not be material.

Accounts Receivable – Our accounts receivable balance at January 30, 2021 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 16%, one customer accounted for 13% and two customers each accounted for 10% of our total trade receivables balance, while no other customer accounted for more than 7% of our total trade receivables balance as of January 30, 2021. 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 loss for Fiscal 2021 were positively impacted by $4.9 million and positively impacted by $1.1 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 2021 are included in Note 2 to the Consolidated Financial Statements included in Item 8, "Financial Statements and Supplementary Data".

Critical Accounting Estimates

As a result of the economic and business impact of COVID-19, we may be required to revise certain accounting estimates and judgments such as, but not limited to, those related to the valuation of inventory, goodwill, long-lived assets and deferred tax assets, which could have a material adverse effect on our financial position and results of operations.

Inventory Valuation

Table of Contents

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 $1.6 million at January 30, 2021.

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, 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

Table of Contents

expenditures and changes in future working capital requirements. For additional information regarding impairment of long-lived assets, see Item 8, Note 4, "Goodwill and Other Intangible Assets" and Note 5,"Asset Impairments and Other Charges" to our Consolidated Financial Statements included in this Annual Report on Form 10-K.

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 we believe that recovery of an asset is at risk, 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 potential 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 30, 2021, we had a deferred tax valuation allowance of $36.6 million.

Table of Contents

Income tax reserves for uncertain tax positions are determined using the methodology required by the Income Tax Topic of the Accounting Standards Codification (“Codification”). 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 12, "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 2% 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 10, "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."

Table of Contents

ITEM 8, FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO FINANCIAL STATEMENTS

Page

Report of Independent Registered Public Accounting Firm 43

Consolidated Balance Sheets, January 30, 2021 and February 1, 2020 45

Notes to Consolidated Financial Statements 50

Table of Contents

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 30, 2021, 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 30, 2021, 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 30, 2021 and February 1, 2020, the related consolidated statements of operations, comprehensive income, cash flows, and equity for each of the three fiscal years in the period ended January 30, 2021, and the related notes and financial statement schedule listed in the Index at Item 15, and our report dated March 31, 2021 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 31, 2021

Table of Contents

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 30, 2021 and February 1, 2020, the related consolidated statements of operations, comprehensive income, cash flows and equity for each of the three fiscal years in the period ended January 30, 2021, 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 30, 2021 and February 1, 2020, and the results of its operations and its cash flows for each of the three fiscal years in the period ended January 30, 2021, 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 30, 2021, 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 31, 2021 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) relate 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 a 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 separate opinions on the critical audit matter or on the account or disclosures to which they relate.

Table of Contents

Valuation of Schuh Group Indefinite Lived Trademark

/s/ Ernst & Young LLP

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

Nashville, Tennessee

March 31, 2021

Table of Contents

Genesco Inc.

and Subsidiaries

Consolidated Balance Sheets

In Thousands, except share amounts

As of Fiscal Year End

Current Assets:

Deferred income taxes — 19,475

Liabilities and Equity

Current Liabilities:

Commitments and contingent liabilities

Equity

Non-redeemable preferred stock 1,009 1,009

Common equity:

Common stock, $1 par value:

Accumulated other comprehensive loss (35,059 ) (31,668 )

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

Table of Contents

Genesco Inc.

and Subsidiaries

Consolidated Statements of Operations

In Thousands, except per share amounts

Fiscal Year

Goodwill impairment 79,259 — —

Loss on early retirement of debt — — 597

Other components of net periodic benefit income (670 ) (395 ) (380 )

Basic earnings (loss) per common share:

Discontinued operations (0.03 ) (0.02 ) (5.33 )

Net earnings (loss) $ (3.97 ) $ 3.95 $ (2.68 )

Diluted earnings (loss) per common share:

Discontinued operations (0.03 ) (0.02 ) (5.29 )

Net earnings (loss) $ (3.97 ) $ 3.92 $ (2.66 )

Weighted average shares outstanding:

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

Table of Contents

Genesco Inc.

and Subsidiaries

Consolidated Statements of Comprehensive Income

In Thousands, except as noted

Fiscal Year

Other comprehensive income (loss):

Total other comprehensive income (loss) (3,391 ) 6,268 (8,744 )

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

Table of Contents

Genesco Inc.

and Subsidiaries

Consolidated Statements of Cash Flows

In Thousands

Fiscal Year

CASH FLOWS FROM OPERATING ACTIVITIES:

Provision for discontinued operations 345 425 743

Loss on pension plan termination — 11,510 —

CASH FLOWS FROM INVESTING ACTIVITIES:

Other investing activities — 171 1,505

Acquisitions, net of cash acquired — (33,524 ) —

Proceeds from (payments for) sale of businesses — 98,677 (1,088 )

Net cash provided by (used in) investing activities (24,020 ) 53,308 (56,503 )

CASH FLOWS FROM FINANCING ACTIVITIES:

Payments of long-term debt — (9,133 ) (1,650 )

Shares repurchased related to share repurchase plan — (190,384 ) (44,935 )

Restricted shares withheld for taxes (1,223 ) (2,355 ) (2,853 )

Additions to deferred financing costs (1,350 ) (7 ) (359 )

Effect of foreign exchange rate fluctuations on cash 3,116 96 (464 )

Supplemental information:

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

Table of Contents

Genesco Inc.

and Subsidiaries

Consolidated Statements of Equity

In Thousands

Cumulative adjustment from ASC 606, net of tax — — — 4,413 — — — 4,413

Other comprehensive loss — — — — (8,744 ) — — (8,744 )

Employee and non-employee restricted stock — — 13,437 — — — — 13,437

Restricted stock issuance — 390 (390 ) — — — — —

Restricted shares withheld for taxes — (70 ) 70 (2,853 ) — — — (2,853 )

Noncontrolling interest – loss — — — — — — (1,530 ) (1,530 )

Cumulative adjustment from ASC 842, net of tax — — — (4,208 ) — — — (4,208 )

Other comprehensive income — — — — 6,268 — — 6,268

Employee and non-employee restricted stock — — 10,077 — — — — 10,077

Restricted stock issuance — 285 (285 ) — — — — —

Restricted shares withheld for taxes — (56 ) 56 (2,355 ) — — — (2,355 )

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

Employee and non-employee restricted stock — — 8,460 — — — — 8,460

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

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

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

Table of Contents

Genesco Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Note 1

Summary of Significant Accounting Policies

Nature of Operations

Genesco Inc. and its subsidiaries (collectively the "Company", "we", "our", or "us") business includes the sourcing and design, marketing and distribution of footwear and accessories through retail stores in the U.S., Puerto Rico and Canada primarily under the Journeys®, Journeys Kidz®, Little Burgundy® and Johnston & Murphy® banners and under the Schuh banner in the United Kingdom 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, johnstonmurphy.com and littleburgundyshoes.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 30, 2021, we operated 1,460 retail stores in the U.S., Puerto Rico, Canada, the United Kingdom and the ROI.

Effective January 1, 2020, we completed the acquisition of Togast, which specializes in the design, sourcing and sale of licensed footwear. We also entered into a new U.S. footwear license agreement with Levi Strauss & Co. for the license of Levi's® footwear for men, women, and children in the U.S. The acquisition expands our portfolio to include footwear licenses for G.H. Bass® and FUBU, among others. Togast operates in our Licensed Brands segment. On February 2, 2019, we completed the sale of our Lids Sports Group business. As a result, we reported the operating results of this business in loss from discontinued operations, net in our Consolidated Statements of Operations for Fiscal 2019. The cash flows related to discontinued operations have not been segregated and are included in our Consolidated Statements of Cash Flows for Fiscal 2019. Unless otherwise noted, discussion within these notes to our consolidated financial statements relates to continuing operations. See Note 18 for additional information related to discontinued operations.

During Fiscal 2021, 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) Licensed Brands, comprised of the licensed Dockers, Levi's, and 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 2021, 2020 and 2019 were all 52-week years with 364 days. Fiscal 2021 ended on January 30, 2021, Fiscal 2020 ended on February 1, 2020 and Fiscal 2019 ended on February 2, 2019.

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.

Table of Contents

Genesco Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Note 1

Summary of Significant Accounting Policies, Continued

Cash and Cash Equivalents

Our foreign subsidiaries held cash of approximately $21.8 million and $8.9 million as of January 30, 2021 and February 1, 2020, respectively, which is included in cash and cash equivalents 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 and cash equivalents 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.

There were no cash equivalents at January 30, 2021 and there were $59.6 million of cash equivalents at February 1, 2020. Our $59.6 million of cash equivalents at the previous year end was invested in institutional money market funds which invest exclusively in highly rated, short-term securities that are issued, guaranteed or collateralized by the U.S. government or by U.S. government agencies and instrumentalities. The majority of payments due from banks for domestic customer credit card transactions process within 24 - 48 hours and are accordingly classified as cash and cash equivalents in our Consolidated Balance Sheets.

At January 30, 2021 and February 1, 2020, outstanding checks drawn on zero-balance accounts at certain domestic banks exceeded book cash balances at those banks by approximately $0.5 million and $17.1 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 16%, one customer accounted for 13% and two customers each accounted for 10% of our total trade receivables balance, while no other customer accounted for more than 7% of our total trade receivables balance as of January 30, 2021.

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

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.

Table of Contents

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 $45.6 million, $49.4 million and $52.1 million for Fiscal 2021, 2020 and 2019, 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 2% 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.

Table of Contents

Genesco Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Note 1

Summary of Significant Accounting Policies, Continued

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 $11.5 million and $11.1 million as of January 30, 2021 and February 1, 2020, respectively.

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.

Table of Contents

Genesco Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Note 1

Summary of Significant Accounting Policies, Continued

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:

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.

Table of Contents

Genesco Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Note 1

Summary of Significant Accounting Policies, Continued

Our Consolidated Balance Sheets include an accrued liability for gift cards of $5.0 million in each of the years ended January 30, 2021 and February 1, 2020. Gift card breakage recognized as revenue was $0.8 million, $1.0 million and $0.8 million for Fiscal 2021, 2020 and 2019, respectively. During Fiscal 2021, we recognized $3.0 million of gift card redemptions and gift card breakage revenue that were included in the gift card liability as of February 1, 2020.

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.

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 $10.1 million, $5.6 million and $5.6 million for Fiscal 2021, 2020 and 2019, 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 $269.8 million, $334.4 million and $334.3 million for Fiscal 2021, 2020 and 2019, 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 $80.1 million, $72.3 million and $68.3 million for Fiscal 2021, 2020 and 2019, 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.

Table of Contents

Genesco Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Note 1

Summary of Significant Accounting Policies, Continued

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 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 $5.7 million, $8.0 million and $7.8 million for Fiscal 2021, 2020 and 2019, respectively. During Fiscal 2021, 2020 and 2019, 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 2021, 2020 or 2019.

Commitments

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. At January 30, 2021, the related inventory owned by Samsung had a historical cost of $22.8 million. As of January 30, 2021, we believe that we have appropriately accounted for any differences between the fair value of the Samsung inventory and Samsung’s historical cost.

Table of Contents

Genesco Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Note 2

New Accounting Pronouncements

New Accounting Pronouncements Recently Adopted

We adopted ASU 2016-02, " Leases (Topic 842)", ("ASC 842"), as of February 3, 2019, using the optional transition method provided by ASU 2018-11, "Leases (Topic 842): Targeted Improvements". The optional transition approach provides a method for recording existing leases at adoption by allowing a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption, as opposed to the modified or full retrospective transition methods that require restating prior comparative periods. Additionally, we elected the “package of practical expedients”, which permits us to not reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct costs. We also elected the practical expedient to not separate lease and non-lease components for our store and equipment leases.

Adoption of the new standard resulted in the recording of additional net operating lease right of use assets and operating lease liabilities of $795.6 million and $855.3 million, respectively, as of February 3, 2019. The operating lease right of use asset is inclusive of the impairments recorded upon adoption for store operating lease right of use assets, which totaled $4.8 million and resulted in a decrease to retained earnings of $4.2 million, net of tax. Right of use assets are recorded based upon the present value of the remaining operating lease payments, discounted using an incremental borrowing rate based on the initial lease term, adjusted for deferred rent, including tenant allowances from landlords. ASC 842 did not materially impact net earnings or liquidity and did not have an impact on covenant compliance under our current debt agreements. Financial results for reporting periods beginning after February 3, 2019 are presented in accordance with ASC 842, while prior periods will continue to be reported in accordance with our historical accounting for leases under ASC 840: "Leases (Topic 840)" and therefore have not been adjusted to conform to Topic 842. For additional information regarding leases, see Note 10.

In August 2018, the FASB issued ASU 2018-15, "Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract", (ASU 2018-15"). The standard requires that issuers follow the internal-use software guidance in ASC 350-40 to determine which costs to capitalize as assets or expense as incurred. The ASC 350-40 guidance requires that certain costs incurred during the application development stage be capitalized and other costs incurred during the preliminary project and post-implementation stages be expensed as they are incurred. ASU 2018-15 is effective for fiscal years beginning after December 15, 2019. We adopted this standard effective August 4, 2019 and elected to apply the prospective transition approach with no material impact on our Consolidated Financial Statements. We did not capitalize any material implementation costs incurred in a cloud computing arrangement service contract during Fiscal 2021 or Fiscal 2020.

We adopted ASC 606 in the first quarter of Fiscal 2019 using the modified retrospective method by recognizing the cumulative effect of $4.4 million as an adjustment to the opening balance of retained earnings at February 4, 2018. The adoption of this standard did not have a material impact on our Consolidated Financial Statements and related disclosures.

In June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments", which requires entities to use a forward-looking approach based on expected losses to estimate credit losses on certain types of financial instruments, including trade receivables. The FASB has subsequently issued updates to the standard to provide additional clarification on specific topics. We adopted ASU No. 2016-13 in the first quarter of Fiscal 2021. This guidance did not have a material impact on our Consolidated Financial Statements.

Table of Contents

Genesco Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Note 2

New Accounting Pronouncements, Continued

New Accounting Pronouncements Not Yet Adopted

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

Note 3

COVID-19

In March 2020, the World Health Organization categorized the outbreak of COVID-19 as a pandemic. To help control the spread of the virus and protect the health and safety of our employees and customers, we began temporarily closing or modifying operating models and hours of our retail stores in North America, the United Kingdom and the ROI both in response to governmental requirements including “stay-at-home” orders and similar mandates and voluntarily, beyond the requirements of local government authorities, during Fiscal 2021.

Changes made in our operations, including temporary closures, combined with reduced customer traffic due to concerns over COVID-19, resulted in material reductions in revenues and operating income during Fiscal 2021. This prompted us to update our impairment analyses of our retail store portfolios and related lease right-of-use assets. For certain lower-performing stores, we compared the carrying value of store assets to undiscounted cash flows with updated assumptions on near-term profitability. As a result, we recorded an incremental $11.0 million asset impairment charge within asset impairments and other, net on our Consolidated Statements of Operations during Fiscal 2021.

We evaluated our goodwill and indefinite-lived intangible assets for indicators of impairment at the end of the first three quarters of this year and our annual assessment of impairment on the first day of our fourth quarter for Fiscal 2021. During the first quarter, such evaluation caused us to determine that, when considering the impact of the COVID-19 pandemic, indicators of impairment existed relating to the goodwill associated with Schuh Group and certain other trademarks. Therefore, we updated the goodwill impairment analysis for Schuh Group, and as a result, recorded a goodwill impairment charge of $79.3 million during the quarter ended May 2, 2020. In addition, we updated our impairment analysis for other intangible assets and, as a result, recorded a trademark impairment charge of $5.3 million during the quarter ended May 2, 2020.

We evaluated our remaining assets, particularly accounts receivable and inventory. Our wholesale businesses sell primarily to independent retailers and department stores across the United States. Receivables arising from these sales are not collateralized. Customer credit risk is affected by conditions or occurrences within the economy and the retail industry, such as the COVID-19 pandemic, as well as by customer specific factors. We establish an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends and other information.

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

Table of Contents

Genesco Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Note 3

COVID-19, Continued

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

On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), which among other things, provides employer payroll tax credits for wages paid to employees who are unable to work during the COVID-19 pandemic and options to defer payroll tax payments. Based on our evaluation of the CARES Act, we qualify for certain employer payroll tax credits as well as the deferral of payroll and other tax payments in the future, which will be treated as government subsidies to offset related operating expenses. During Fiscal 2021, qualified payroll tax credits reduced our selling and administrative expenses by approximately $13.8 million on our Consolidated Statements of Operations. We also deferred $9.5 million of qualified payroll taxes in the U.S. that will be repaid in equal installments by December 31, 2021 and December 31, 2022. Savings from the government program in the U.K. has also provided property tax relief of approximately $13.3 million in Fiscal 2021. Additionally, we recorded a tax receivable of $107.2 million in our U.S. federal jurisdiction as a result of a carryback of our Fiscal 2021 federal tax losses to prior tax periods under the CARES Act. Due to a higher tax rate in prior tax periods than the current U.S. federal statutory tax rate of 21%, the carryback claim creates a permanent tax benefit of $46.4 million.

The COVID-19 pandemic remains a rapidly evolving situation. The continuation of the COVID-19 pandemic, its economic impact and actions taken in response thereto may result in prolonged or recurring periods of store closures and modified operating schedules and may result in changes in customer behaviors, including a potential reduction in consumer discretionary spending in our stores. These may lead to increased asset recovery and valuation risks, such as impairment of our store and other assets and an inability to realize deferred tax assets due to sustaining losses in certain jurisdictions. The uncertainties in the global economy have and are likely to continue to impact the financial viability of our suppliers, and other business partners, which may interrupt our supply chain, limit our ability to collect receivables and require other changes to our operations. These and other factors have and will continue to adversely impact our net revenues, gross margins, operating income and earnings per share financial measures.

Table of Contents

Genesco Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Note 4

Goodwill and Other Intangible Assets

Goodwill

Effective January 1, 2020, we completed the acquisition of substantially all of the assets, and assumption of certain liabilities, of Togast for an aggregate base purchase price of $33.5 million, which was paid in full in cash at the closing. Togast specializes in the design, sourcing and sale of licensed footwear. We also entered into a new U.S. footwear license agreement with Levi Strauss & Co. for the license of Levi's® footwear for men, women, and children in the U.S. The Togast purchase includes footwear licenses for Bass® and FUBU, among others. Togast operates within the Licensed Brands segment.

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

(In thousands) Schuh Group Journeys Group Licensed Brands Group Total Goodwill

Change in opening balance sheet — — 83 83

Effect of foreign currency exchange rates (4,810 ) 352 — (4,458 )

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. In our Fiscal 2020 annual evaluation of goodwill, we determined the Schuh Group reporting unit was valued at approximately $8.2 million in excess of its carrying value. 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. 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.

Goodwill Valuation (Schuh Group)

We estimated the fair value of our Schuh reporting unit in the first quarter of Fiscal 2021 using a discounted cash flow method (income approach) weighted 50% and a guideline public company method (market approach) weighted 50%. The key assumptions used under the income approach include the following:

Table of Contents

Genesco Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Note 4

Goodwill and Other Intangible Assets, Continued

The guideline company method involves analyzing transaction and financial data of publicly traded companies to develop multiples, which are adjusted to account for differences in growth prospects and risk profiles of the reporting unit and comparable companies.

Other Intangible Assets

Trademark Valuation

In addition, as a result of the factors noted above, we evaluated the fair value of our trademarks during the first quarter of Fiscal 2021. The fair value of trademarks was determined based on the royalty savings approach. This analysis indicated trademark

impairment in our JourneysGroup and Johnston & Murphy Group. As a result, we recorded a trademark impairment of $5.3 million in the first quarter of Fiscal 2021. This charge is included in asset impairment and other, net in the accompanying Consolidated Statements of Operations.

Key assumptions included in the estimation of the fair value for trademarks include the following:

Other intangibles by major classes were as follows:

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

(1) Includes a $23.1 million trademark at January 30, 2021 related to Schuh Group and $3.4 million related to Journeys Group.

(2)Includes $5.1 million for the Togast acquisition.

(3) Backlog for Togast.

The amortization of intangibles was $0.9 million and $0.2 million for Fiscal 2021 and Fiscal 2020, respectively, and less than $0.1 million for Fiscal 2019. Currently, amortization of intangibles is expected to be $0.6 million for each of the next five years.

Table of Contents

Genesco Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Note 5

Asset Impairments and Other Charges

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

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

We recorded a pretax charge to earnings of $13.4 million in Fiscal 2020, including $11.5 million pension settlement expense and $3.1 million for retail store asset impairments, partially offset by a $(0.6) million gain on the sale of the Lids Sports Group headquarters building, a $(0.4) million gain for lease terminations and a $(0.2) million gain related to Hurricane Maria.

We recorded a pretax charge to earnings of $3.2 million in Fiscal 2019, including $4.2 million for retail store asset impairments, $0.3 million for legal and other matters and $0.1 for hurricane losses, partially offset by a $(1.4) million gain related to Hurricane Maria.

Note 6

Inventories

Note 7

Property and Equipment and Other Current Accrued Liabilities

Provision for discontinued operations 527 495

Total Other Current Accrued Liabilities $ 78,991 $ 83,456

Table of Contents

Genesco Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Note 8

Fair Value

The carrying amounts and fair values of our financial instruments at January 30, 2021 and February 1, 2020 are:

Carrying Amount Fair Value Carrying Amount Fair Value

Debt fair values were determined using a discounted cash flow analysis based on current market interest rates for similar types of financial instruments and would be classified in Level 2 as defined in Note 1.

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

As of January 30, 2021, we have $13.2 million of long-lived assets held and used which were measured using Level 3 inputs within the fair value hierarchy. We used a discounted cash flow model to estimate the fair value of these long-lived assets. Discount rate and growth rate assumptions are derived from current economic conditions, expectations of management and projected trends of current operating results. As a result, we have determined that the majority of the inputs used to value our long-lived assets held and used are unobservable inputs that fall within Level 3 of the fair value hierarchy.

Note 9

Long-Term Debt

Credit Facility

On June 5, 2020, we entered into a Second Amendment (the “Second Amendment”) to our Fourth Amended and Restated Credit Agreement dated as of January 31, 2018 between us and 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, increase the Total Commitments (as defined in the Credit Facility) for the revolving loans from $275.0 million to $332.5 million, establish a first-in, last-out (“FILO”) tranche of indebtedness of $17.5 million, for $350.0 million of total capacity, increase pricing on the revolving loans and modify certain covenant and reporting terms. 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 and specifically excludes equity interests, equipment, and most leasehold interests. The Second Amendment to our Credit Facility added a security interest in certain intellectual property. The Second Amendment also provides for the borrowing base expansion to include real estate as those assets are added as collateral. In addition, the Second Amendment adds customary real estate covenants to the Credit Facility. The current outstanding long-term debt balance of $33.0 million bears interest at an average rate of 4.05% and matures January 31, 2023.

Deferred financing costs incurred of $1.1 million related to the amended Credit Facility were capitalized and are being amortized over the remaining term of the agreement. The remaining balance of deferred financing costs incurred related to the Credit Facility are being amortized over the remaining term of the agreement. These costs are included in other non-current assets on the Consolidated Balance Sheets. In connection with an amendment to the Credit Facility in Fiscal 2019, deferred financing costs of $0.6 million were written off. Those costs are included in loss on early retirement of debt on the Consolidated Statements of Operations in Fiscal 2019.

Table of Contents

Genesco Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Note 9

Long-Term Debt, Continued

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 0.25% per annum.

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 meet a minimum fixed charge coverage ratio. Excess Availability was $147.1 million at January 30, 2021.

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 30, 2021.

Table of Contents

Genesco Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Note 9

Long-Term Debt, Continued

U.K. Credit Agreement

On October 9, 2020, Schuh entered into a facility letter (the "Facility Letter") with Lloyds Bank (“Lloyds”) under the U.K.'s Coronavirus Large Business Interruption Loan Scheme pursuant to which Lloyds made available a revolving capital facility (the "RCF") of £19.0 million for the purpose of refinancing Schuh's existing indebtedness with Lloyds. The RCF expires in October 2023 and bears interest at 2.5% over the Bank of England Base Rate. The Facility Letter includes certain financial covenants tested against Schuh, which take effect in the second quarter of Fiscal 2022. Following certain customary events of default outlined in the Facility Letter, payment of outstanding amounts due under the RCF may be accelerated or the commitments may be terminated. The RCF 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 Letter and certain existing ancillary facilities on an unsecured basis.

We were in compliance with all the relevant terms and conditions of the Facility Letter as of January 30, 2021.

U.K. revolver borrowings — —

Current portion — —

Total Noncurrent Portion of Long-Term Debt $ 32,986 $ 14,393

The revolver borrowings outstanding under the Credit Facility at January 30, 2021 included $17.5 million U.S. revolver borrowings and $15.5 million (£11.3 million) related to Genesco (UK) Limited. We had outstanding letters of credit of $9.8 million under the Credit Facility at January 30, 2021. These letters of credit support lease and insurance indemnifications.

Note 10

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 2034. The store leases in the United States, Puerto Rico and Canada typically have initial terms of approximately 10 years. The store leases in the United Kingdom 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 2% of our leases contain renewal options. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The lease on our Nashville office expires in April 2022. 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 will replace our current 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.

Table of Contents

Genesco Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Note 10

Leases, Continued

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 30, 2021 and February 1, 2020.

Less: Sublease income (165 ) (307 )

Prior to the adoption of ASC 842 as of February 3, 2019 (our Fiscal 2020), rent expense was calculated in accordance with ASC 840, “Leases”. Total rent expense was $202.6 million for Fiscal 2019. Total contingent rent was not material for Fiscal 2019.

The following table reconciles the maturities of undiscounted cash flows to our operating lease liabilities recorded on the Consolidated Balance Sheets at January 30, 2021:

Fiscal Years (In thousands)

Total undiscounted future minimum lease payments 800,962

Less: Amounts representing interest (99,908 )

Total Present Value of Operating Lease Liabilities $ 701,054

Our weighted-average remaining lease term and weighted-average discount rate for operating leases as of January 30, 2021 and February 1, 2020 are:

Weighted-average remaining lease term (years) 5.5 years 6.2 years

Weighted-average discount rate 5.1% 5.2%

Table of Contents

Genesco Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Note 10

Leases, Continued

As of January 30, 2021, we have additional operating leases that have not yet commenced with estimated right of use liabilities of $68.8 million, primarily related to the new headquarters building lease. These leases will commence between 2021 and 2022 with lease terms of 8 to 15 years, with the 15 year lease being for the new headquarters building.

Beginning in March 2020, we suspended rent payments under the leases for our temporarily closed stores and initiated discussions with landlords to obtain lease concessions. We have considered the FASB’s recent guidance regarding lease concessions as a result of the effects of the COVID-19 pandemic and have elected to account for lease concessions related to the effects of the COVID-19 pandemic 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 apply this election for concessions related to the effects of the COVID-19 pandemic that do 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 are under negotiation with the respective landlord. The rent concessions are recognized in the period when the amendment is executed. COVID-19 related lease concessions decreased our contractual rent expense by approximately $34 million during Fiscal 2021. As of January 30, 2021, we had an accrued liability for unpaid rent related to the closed stores of $26.9 million. We continue to negotiate lease concessions with our landlords.

Note 11

Equity

Non-Redeemable Preferred Stock

Number of Shares Amounts in Thousands

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

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.

GCO US Equity

GCO · 10-K · period ended 2021-01-30

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 2021-01-30

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