After two-plus years of uneven performance in its Lids Sports Group, Genesco Inc. is looking to offload the division.
The company said today that it is initiating a formal process to explore the sale of Lids following a strategic review process, which yielded evidence that it is in the best interests of the company to focus on its footwear businesses. That, it believes, “is the optimal platform to deliver enhanced shareholder value over the long term.”
For several consecutive quarters, Genesco has grappled with the tug-of-war dynamics between Lids and its teen mall staple, Journeys — with Lids’ losses typically offsetting gains at the latter’s stores. In the most recent quarter, reported in December, Journeys saw a 4 percent comparable sales gain, while comps at Lids fell 6 percent. The firm’s Schuh Group also enjoyed a 4 percent comp gain in the quarter, while its Johnston & Murphy business dipped 1 percent.
Genesco said today that its board has established a special committee, consisting of four independent directors, to oversee the Lids Sports Group sale process and has retained PJ Solomon to advise the team.
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“The steps announced today reflect the results of an examination by Genesco’s board and management of strategic alternatives with the intent to enhance shareholder value,” said James Bradford, Genesco’s lead independent director and chairman of the special committee. “The Lids Sports Group has been an important part of Genesco, and we still see significant potential for the business. We believe, however, that it is in the best long-term interests of the company and its shareholders to focus on building upon our core footwear platform, in which the businesses share common strategic characteristics and where we believe we can generate greater operating efficiencies and synergies.”
He added, “We believe Lids Sports Group is undervalued as part of Genesco and that its sale would generate capital that the company can deploy productively to further enhance shareholder value.”
In January, Genesco joined a growing list of publicly traded firms attracting activist shareholder interest in the current retail climate. In a filing with the U.S. Securities and Exchange Commission, investment firms Legion Partners Asset Management LLC and 4010 Capital LLC disclosed their intent to drive change at the company. The activist investors hold roughly a combined 5.3 percent stake in Genesco and noted that they purchased the shares based on the belief that they were “undervalued and represented an attractive investment opportunity.”
