Exhibit 99.2
April 12, 2021, 2021
Dear Fellow Shareholders,
Legion Partners Asset Management, LLC (together
with its affiliates, “Legion Partners” or “we”) is a top five shareholder of Genesco Inc. (NYSE: GCO) (“Genesco”
or the “Company”), with a beneficial ownership position of approximately 5.6% of the Company’s outstanding shares. It
is important to note that Legion Partners has invested in Genesco multiple times over the years, and we have a successful record of advocating
for value-enhancing actions that benefited our fellow shareholders and helped sharpen the Company’s focus. Unfortunately, Genesco
has failed to build on the foundation we helped lay in 2018 and it is now on a concerning, downward trajectory that could result in the
permanent impairment of value. This is why we have nominated seven highly-qualified, independent candidates for election to the Company’s
Board of Directors (the “Board”) at the 2021 annual meeting of shareholders (the “2021 Annual Meeting”).
Legion Partners believes Genesco’s chronic
underperformance relative to its peers and relevant indices stems from the incumbent Board’s stubborn commitment to a conglomerate
structure and years of value-destructive capital allocation decisions. Although our previous engagement with Genesco resulted in a partial
refresh of the Board and the divestment of Lids Sports Group (“Lids”) for $101 million, we did not seek to replace a majority
of directors. Unfortunately, we believe allowing a majority of the Company’s directors to remain in place has resulted in an entrenched
Board that has been either unable or unwilling to implement accretive initiatives that support enduring value creation. With an average
director tenure of more than 10 years and a history of underperformance for the decade leading up to the pandemic in 2020, we believe
that substantial change in the boardroom is long overdue and necessary at the 2021 Annual Meeting in order for Genesco to achieve its
greatest potential.
Our concerns regarding the Board’s fitness
and judgement have only mounted in recent days. We were shocked to learn on Friday, April 9th that Genesco has been recording
our recent conversations without seeking or receiving prior consent. Even if lawful in Genesco’s home state of Tennessee, we struggle
with the motivation and ethics behind engaging in this type of conduct with one of the Company’s largest stockholders. In our view,
it raises serious questions regarding the Board’s commitment to transparent governance and maintaining trust with shareholders.
This initial letter details what else has gone
wrong at Genesco and why substantial change is desperately needed. Over the upcoming weeks, our nominees intend to detail their ideas
and release a comprehensive strategic plan for transforming Genesco into a stronger and more focused company that can deliver near-term
and long-term value. We firmly believe that if our nominees are elected and their strategic plan is fully implemented, Genesco will be
able to produce $7.50 in earnings per share (“EPS”) by fiscal 2023 and see its stock double from current levels. We believe
this level of earnings is possible by achieving a 6% operating income margin, monetizing non-core assets and implementing a prudent capital
allocation framework that contemplates organic investments and share repurchases.
While we are attempting to replace a majority
of the Board, we want to be clear that we are not seeking to remove Mimi Vaughn as a director or as Chief Executive Officer. In fact,
Legion Partners intends to vote to reelect Ms. Vaughn at the 2021 Annual Meeting. Our nominees are prepared to partner with Ms. Vaughn
and draw on her institutional knowledge to implement a strategic plan for Genesco.
The Board Has Presided Over Long-Term Share
Price Underperformance
Legion Partners believes its case for meaningful change is largely
validated by Genesco’s perpetual underperformance – over several time periods – relative to its peers, the Russell 2000
Index, the S&P 1500 Footwear Index and the S&P 500 Index.
| |
Share Price Performance
(Total Shareholder Returns Include Dividends) |
| |
Pre-COVID to Present |
1 Year |
3 Year |
5 Year |
10 Year |
| Genesco Inc. |
2% |
151% |
10% |
(28%) |
21% |
| Peer Group (1) |
52% |
205% |
127% |
243% |
236% |
| ISS Peer Group (2) |
47% |
192% |
61% |
108% |
82% |
| S&P 1500 Footwear Index (3) |
34% |
62% |
100% |
136% |
499% |
| S&P 500 |
31% |
50% |
67% |
122% |
282% |
| Russell 2000 Index |
37% |
82% |
54% |
119% |
206% |
| |
|
|
| Genesco Relative Performance: |
|
|
|
|
|
| Peer Group (1) |
(50%) |
(54%) |
(117%) |
(271%) |
(214%) |
| ISS Peer Group (2) |
(46%) |
(40%) |
(51%) |
(136%) |
(61%) |
| S&P 1500 Footwear Index (3) |
(33%) |
89% |
(90%) |
(164%) |
(478%) |
| S&P 500 |
(29%) |
101% |
(57%) |
(150%) |
(260%) |
| Russell 2000 Index |
(35%) |
69% |
(44%) |
(147%) |
(185%) |
| |
|
|
|
|
|
|
Source: Company SEC Filings, Capital
IQ as of 04/09/2021 (Pre-COVID date of 12/31/2019)
(1) Peer Group includes
BOOT, DBI, FL, SCVL, CAL, DKS, HIBB, WWW, CROX, DECK, SHOO, SKX
(2) ISS Peer Group includes ANF, GES,
SCVL, BKE, CROX, HIBB, SHOO, ZUMZ, ANF, CAL, DBI, URBN, CHS, EXPR, PLCE, WWW
(3) S&P 1500 Footwear Index includes
CROX, DECK, NKE, SKX, SHOO, WWW
The Board Has Presided Over Long-Term Operating
Underperformance
As detailed below, Genesco’s operating performance
and returns on invested capital (“ROIC”) have also steadily declined over the long-term. We believe the incumbent directors
have failed to effectively guide management and hold it accountable for these poor results.
12121 Wilshire Blvd, Suite 1240, Los Angeles, CA 90025
| |
Fiscal Year |
'12-'20 |
| ($mm) |
2012 |
2013 |
2014 |
2015 |
2016 |
2017 |
2018 |
2019 |
2020 |
Change |
| Net Sales |
$2,292 |
$2,605 |
$2,625 |
$2,860 |
$3,022 |
$2,868 |
$2,907 |
$2,189 |
$2,197 |
|
| Gross Profit |
$1,148 |
$1,299 |
$1,299 |
$1,400 |
$1,443 |
$1,418 |
$1,416 |
$1,047 |
$1,063 |
|
| Gross margin % |
50.1% |
49.9% |
49.5% |
49.0% |
47.8% |
49.4% |
48.7% |
47.8% |
48.4% |
(172bps) |
| Selling and administrative expenses |
$984 |
$1,112 |
$1,134 |
$1,231 |
$1,284 |
$1,276 |
$1,321 |
$962 |
$966 |
|
| % of Net Sales |
42.9% |
42.7% |
43.2% |
43.0% |
42.5% |
44.5% |
45.5% |
44.0% |
44.0% |
105bps |
| Operating income |
$161 |
$170 |
$163 |
$167 |
$151 |
$142 |
($96) |
$82 |
$83 |
|
| Operating income margin % |
7.0% |
6.5% |
6.2% |
5.8% |
5.0% |
4.9% |
(3.3%) |
3.7% |
3.8% |
(325bps) |
| Net earnings (loss) |
$92 |
$112 |
$93 |
$98 |
$95 |
$97 |
($112) |
($52) |
$61 |
|
| Net earnings (loss) margin % |
4.0% |
4.3% |
3.5% |
3.4% |
3.1% |
3.4% |
(3.8%) |
(2.4%) |
2.8% |
(124bps) |
| ROIC (1) |
16.9% |
15.9% |
13.9% |
13.1% |
11.2% |
10.7% |
6.6% |
7.5% |
10.7% |
(617bps) |
Source: Company
SEC Filings (2012-2018 filings included Lids. 2019-2020 filings were pro forma for sale of Lids). Legion Partners’ Estimates
Note: 1. ROIC is
defined as: ROIC = NOPAT / 4Q Trailing Average Debt & Equity, where NOPAT = Reported Operating Profit – Tax Expenses and 4Q
Trailing Average Debt & Equity = 4Q Average of Net Debt + Shareholders Equity. Assuming consistent tax rate of 25%. 2018 ROIC calculation
excludes $182mm of goodwill impairments from Operating Profit
In the table below, we isolated Genesco’s
performance without the Lids segment (which was sold in 2019). As shown, the Company’s operating income margin has been deteriorating
for years. From 2015 to 2020, the operating income margin was roughly cut in half down to 3.8%. This downward trajectory further bolsters
our belief that substantial change is needed on the Board.
| |
Fiscal Year |
'15-'20 |
| ($mm) |
2015 |
2016 |
2017 |
2018 |
2019 |
2020 |
Change |
| Net Sales |
$1,957 |
$2,047 |
$2,021 |
$2,128 |
$2,189 |
$2,197 |
12% |
| Operating income |
$118 |
$143 |
$108 |
$74 |
$82 |
$83 |
($34) |
| Operating income margin % |
7.0% |
7.0% |
5.3% |
3.5% |
3.7% |
3.8% |
(320bps) |
| Net earnings (loss) |
$98 |
$95 |
$97 |
($112) |
($52) |
$61 |
($36) |
| Net earnings (loss) margin % |
5.0% |
4.6% |
4.8% |
(5.3%) |
(2.4%) |
2.8% |
(220bps) |
Source: Company SEC Filings that pro
forma 2015-2020 fiscal years for sale of Lids
We Have Serious Concerns With the Board’s
Capital Allocation Decisions
We believe a major contributor to Genesco’s
poor performance is the Company’s ill-conceived plan to operate as a retail conglomerate holding company and think of itself as
a private equity investment platform. As noted below, management has historically described this structure as such:
“We own a number of retail-oriented
businesses. The common theme here is they operate in protected niches. We use the phrase businesses that are difficult for others to
replicate and we believe that that then delivers outsized returns. We marry that with great operators. We give them a lot of independence
in terms of operating their business and we heavily pay for performance. We try to mimic a lot of private equities' best practices
in our approach and then we operate a shared services model with a very small corporate center that supports these businesses.”
| ‒ | Robert Dennis, former Genesco Chairman and CEO 1/14/2014 |
12121 Wilshire Blvd, Suite 1240, Los Angeles, CA 90025
However, we believe this approach and conglomerate
operating structure have empowered management to make a string of poor acquisition decisions that has led to an increasingly bloated cost
structure and corporate overhead. Several of the worst capital allocation decisions are detailed below, and we believe that without material
change to the Board, the Company and shareholders will experience more of the same going forward.
| · | Lids – Genesco curiously decided to enter the hat business in 2004 and spent $283 million
in various acquisitions to build up the segment. After 15 years in this unrelated business and an abysmal track record of poor performance,
Genesco exited the business in 2019 for $101 million in cash. The selling price was a 64% discount to the acquisition costs and implies
an internal rate of return of 7.1%. |
| · | Schuh – In 2011, Genesco attempted to extend its reach outside of North America by buying
a European footwear retailer. While the business has by many measures been a disaster since its acquisition, it is still owned by Genesco
today and we estimate the current value at less than 20% of the acquisition cost. We estimate the internal rate of return on this acquisition
of -1.2%. |
| · | Togast LLC – Genesco was again on the acquisition path in 2020 and spent $34 million to buy
a licensing business. Given that the existing Genesco licensing business does not generate any profitability, we are doubtful that Togast
will meaningfully change the profitability of this shrinking segment. |
Lids
Genesco acquired Lids in 2004 and subsequently
acquired several other hat retailing businesses for a total cost of $283 million. Following these acquisitions, Genesco grew the location
count for Lids by opening new stores. Interestingly, for most of the time that Genesco owned Lids, same store sales were generally positive.
However, we believe the Lids segment operationally underperformed largely due to other underperforming acquisitions, low-productivity
from opening new stores, significant gross margin erosion and weak cost controls. As noted in the table below, from fiscal 2012 to fiscal
2018, the operating profit margin fell from 11.3% to 1.5%.
Source: Company SEC Filings
12121 Wilshire Blvd, Suite 1240, Los Angeles, CA 90025
While we were pleased to see Lids sold in 2019,
our diligence revealed that the main reasons for Lids’ underperformance before its sale stemmed from massive inventory mismanagement
year after year. Genesco also appeared to lack the key relationships and expertise to effectively compete for licensing deals with major
sports leagues and the foresight to compete online as a destination for product search, instead relying on mall customers to make a hat
purchase. As you will see below, the downward spiral of profits matches the story of Schuh.
Schuh
In 2011, Genesco’s management team ventured
into Europe to buy Schuh, a European footwear retailer. Here is what Genesco management’s team touted at the time of the Schuh deal:
"Schuh provides us with an
immediate and established retail presence in the United Kingdom, a highly experienced international management team, and improved insight
into global fashion trends. The concept is similar to Journeys in customer demographics, product offering and operating philosophy, so
it is a business we know and understand.”
The Schuh results from the time of acquisition
up until the COVID-19 pandemic paint a completely different picture. Since buying Schuh, the Genesco team expanded the business from its
original base of stores in Ireland, Scotland and Northern England to move into Southern England and then into Germany. In the process,
Genesco strayed from Schuh’s original core business model of being more of a small-town neighborhood shoe retailer with local customer
allegiance. Building out a store base in Southern England with larger stores and a more urban customer base did not go well. Schuh experienced
higher rents as it expanded further south and, by 2019, management determined that the high-end rents were making the cost structure “uneconomical.”
Here are the high-level operating statistics which show how Schuh has performed under Genesco’s management:
| Schuh Key Statistics |
|
At Acquisition |
FY 2020 (Pre-COVID) |
| #
of Stores |
|
75(1) |
127 |
| Sales
($mm) |
|
$271mm |
$374mm |
| Operating
Profit ($mm) |
|
$25mm |
$5mm |
| Operating Margin
% |
|
9.1% |
1.2% |
| Source: SEC Filings, Press Releases, Legion Partners’
Estimates |
| Note: 1. Includes 59 stores and 16 concessional
locations |
| FY 2020 ended February 1, 2020 |
In our view, the story of Schuh demonstrates a
Board and management team that are not executing well and lack an awareness of the challenges of global expansion. This misallocation
of capital not only damaged shareholder value on an immediate basis, but also held the Company back from investing in core assets and
focusing on sound execution across the existing portfolio. Through studying what went wrong, we’ve noted a few key areas that seemed
to plague this acquisition:
12121 Wilshire Blvd, Suite 1240, Los Angeles, CA 90025
| · | Decision to expand into Europe – Management seemed intent on Genesco expanding abroad without
apparently recognizing that the market was very competitive and that market dynamics in Europe are different than the U.S. – the
acquired venture was more of a small-town shoe store than a viable growth engine. |
| · | Decision to expand store base into Southern England and Germany – Management entered into
prohibitively expensive leases in the UK (in and around London area) as well as an ill-fated expansion into Germany. |
| · | Insight into fashion trends – Management claimed buying Schuh would offer fashion perspectives,
yet this is one of the most irrational reasons for making an acquisition we have ever heard – if you need to monitor European fashion
trends, fly to Europe and walk around – it would be infinitely more cost-effective. |
| · | Vendor synergies – Vendor synergies were noted as another key reason for the Schuh acquisition,
but instead, product availability for Schuh has been a major issue at times as well as differing consumer tastes. |
Togast
More recently, Genesco purchased Togast in 2020,
which it described as a leading footwear licensee. When we look at Genesco’s results from its Licensed Segment, we suspect why the
existing licensed business needed to buy something – it was shrinking and made almost no money but had to support the bloated overhead
inherent in Genesco’s conglomerate structure. The Togast deal was structured as a $33.7 million cash payment at closing and a four-year
earnout with the potential of an additional $34 million in cash consideration.
“The
acquisition of Togast adds scale to our successful licensed brands platform. The combination of our licensed business with Togast's strengths
furthers our footwear focused strategy by creating an even more robust platform within Genesco that
can serve multiple tiers of distribution.”
| ‒ | Robert Dennis 12/18/2019 |
The financial results for Genesco’s licensed
brands segment are as follows:
12121 Wilshire Blvd, Suite 1240, Los Angeles, CA 90025
Source: Company SEC Filings
On a recent call we asked Ms. Vaughn to provide
some details around the revenues possible from licensed brands following the pandemic and she noted that while the guidance on the Licensed
Brands segment would likely go up due to the addition of Togast, the core Dockers business had been in decline for some period and that
it was very hard to predict what the future looked like for this segment. A year ago, just after closing the Togast acquisition, management
provided the following outlook:
“Included in our guidance
for consolidated sales is between $80 million to $90 million in revenue related to the Togast acquisition.”
| ‒ | Melvin G. Tucker 3/12/2020 |
We are skeptical that Genesco shareholders will
ever see an incremental $80 million to $90 million in revenue from Togast because the base revenues of the pre-acquisition Licensing Segment
are declining. In our view, rather than responsibly reallocate or return capital to shareholders, Genesco has made another ill-advised
acquisition overseen by a Board and management team more focused on empire building than generating shareholder value.
Johnston & Murphy
Johnston & Murphy (“J&M”)
is yet another footwear business acquired and operated by Genesco that appears to have been severely undermanaged based on the results.
This is particularly disappointing because J&M has a rich history built over 170 years and having made shoes for 33 U.S. Presidents.
J&M was acquired in 1951 by Genesco. The following table highlights the J&M segment’s recent results:
12121 Wilshire Blvd, Suite 1240, Los Angeles, CA 90025
Source: Company SEC Filings
J&M’s resilience is likely due to its
rich heritage. This said, we believe the business has been very poorly managed. We believe the key areas of concern are as follows:
| · | Wholesale business has been undermanaged – We estimate there are thousands of retail doors
to penetrate, and deeper SKU penetration is needed in existing wholesale doors. |
| · | Retail store base has substantial room for expansion – Management has been very slow to maximize
opportunity to open stores despite recently noting that there were 200+ store locations that could be added. |
| · | Footwear design issues – We believe introductions during 2020 performed poorly as management
has struggled to stay on-trend, likely leading to the hiring of a new Head of Product Development. |
| · | Women’s business – J&M aggressively introduced a women’s category, but it
sold poorly and has led to frequent inventory markdowns and liquidations. |
12121 Wilshire Blvd, Suite 1240, Los Angeles, CA 90025
Wholesale Retail Split – J&M vs.
Peers
Source: SEC Filings,
Legion Partners’ Estimates
We believe that J&M will continue to struggle
under the current leadership. The skill sets required to operate a business like J&M are not only very different than the rest of
the businesses at Genesco, but J&M was being consistently undermanaged before the recent design issues surfaced, leading to a change
on the operating team.
The Board Has Allowed Journeys, Which is
Genesco’s Core Business, to Stagnate
Genesco’s core business, Journeys, has been
the one shining spot at Genesco. However, even this store base has produced highly inconsistent profitability as the table below highlights:
Source: Company SEC Filings
12121 Wilshire Blvd, Suite 1240, Los Angeles, CA 90025
While Journeys has a strong, loyal customer base
and good sales momentum, we believe there are opportunities for growth and profitability that have been neglected by the Board and management
team.
The Board Has Signed Off on a Bloated SG&A
Structure
Genesco has maintained an excessive corporate
cost structure, which is both high in dollars and as a percentage of sales. We believe this is because the Board has been focused on
maintaining a bloated corporate structure in Nashville. During our first campaign at Genesco, management claimed to be focused on reducing
SG&A, but a comparison of Genesco and its peers does not reflect favorably on this measure.
Source: SEC Filings,
Legion Partner’s Estimates
Note: Financials
based on the latest pre-COVID fiscal year filings
The level of corporate costs that are not allocated
back to business units at Genesco is a staggering sum of nearly $40 million per year. Corporate and other expenses have grown faster than
revenue as noted in the table below. Due to the impending demolition of the current Genesco headquarters, management, in 2020, found a
new location comprising 199,000 sq. ft. and entered into a 15-year lease and plans to spend $16 million to build out this swanky new space
which will house approximately 800 employees. We find this level of spending very problematic.
| |
Fiscal Year |
'18-'20 |
| |
2012 |
2013 |
2014 |
2015 |
2016 |
2017 |
2018 |
2019 |
2020 |
Change |
| Net Sales |
$2,292 |
$2,605 |
$2,625 |
$2,860 |
$3,022 |
$2,868 |
$2,907 |
$2,189 |
$2,197 |
(24%) |
| Corporate & Other Expenses |
$46 |
$43 |
$28 |
$30 |
$30 |
$31 |
$33 |
$39 |
$40 |
21% |
| % of Net Sales |
2.0% |
1.6% |
1.1% |
1.0% |
1.0% |
1.1% |
1.1% |
1.8% |
1.8% |
68bps |
Source: Company SEC Filings. 2012 –
2018 filings included Lids. 2019 – 2020 filings were pro forma for sale of Lids.
12121 Wilshire Blvd, Suite 1240, Los Angeles, CA 90025
We Believe the Board Has Formulated a Misaligned
Compensation Plan That Pays for Underperformance
Over the past decade, Genesco has stated in every
annual proxy statement that “Genesco’s compensation programs for its senior management are designed to incorporate a significant
element of pay for performance.” However, Genesco’s executive compensation appears to serve executives instead
of employees or shareholders. The ratio of the annual total compensation of the CEO to the median employee increased to 1,441:1 in 2020,
implying an 143% increase from 593:1 just 2 years ago.
While the Company claims to recognize “the
ultimate objective of building shareholder value,” its compensation program seems to stand in contrast. We believe that the
Board has approved a compensation plan that pays for underperformance. As shown below, during the fiscal 2014 to fiscal 2020 period,
the top five Named Executive Officers’ (NEOs) compensation increased by 43% while operating profit was halved. In our view, the
Board has hidden its misalignment of pay with performance by embracing an overly complicated Economic Value Added Incentive Compensation
Plan (“EVA Plan”) that is clearly not providing appropriate alignment or incentives, and seems intentionally convoluted.
The “pay for underperformance” result
is made possible first by designing a non-symmetric EVA Plan. Despite their objective to “reward creation of shareholder value,”
the EVA Plan is ironically designed to pay out positive bonus for EVA declines. In addition, to brace for belt-tightening, it seems the
Board also consistently sets lower performance targets for higher target payout. In fiscal 2020, for example, while the target EVA improvement
for every business unit declined to around one-third of fiscal 2013 level, the CEO’s estimated target payout during this period
grew by 15%.
Source: SEC Filings,
Legion Partners’ Estimates
Note: FY 2018 Operating
Profit excluded $182mm of goodwill impairments
12121 Wilshire Blvd, Suite 1240, Los Angeles, CA 90025
We Believe the Board Lacks Sufficient Alignment
with Shareholders
We believe that the Board’s failure to create
value for Genesco’s shareholders is in part attributable to its own lack of skin in the game (as well as management’s). It
is easy to rubberstamp one failed acquisition or growth strategy after the other, sign off on large capital expenditures and approve excessive
operating expenses when you have no material exposure to the Company’s share price. Since fiscal 2012, directors have purchased
a mere $0.3 million in Company stock while collecting over $8 million in director compensation. We think having directors that invest
in total just 4% of their fees in the Company demonstrates a lack of conviction and confidence in Genesco and is woefully misaligned with
shareholders.
We Believe the Board Bears Responsibility
for Worst-in-Class Valuation
The Company’s operating underperformance
has resulted in one of the lowest market valuations in the retail sector. We believe the Company will struggle to create shareholder value
and will not be rewarded a reasonable valuation until there is a refreshed Board committed to overseeing management in developing a strategic
plan that shareholders can believe will be successful. The Board is currently comprised of 8 individuals, one new and 7 of which share
a disturbing history of chronic and prolific value destruction as noted in the table below.
| |
|
|
GCO Relative TSR over Tenure vs. |
| Director |
Tenure |
GCO Own. % |
Core Peer Group |
ISS Peer Group |
S&P 1500 Footwear |
S&P 500 |
Russell
2000
|
| Kathleen Mason |
25 Years |
0.313% |
(2980%) |
(1144%) |
(1155%) |
456% |
544% |
|
Matthew C. Diamond
(Gov. / Nom. Comm. Chair)
|
20 Years |
0.345% |
(3446%) |
(1204%) |
(1440%) |
(246%) |
(388%) |
| Marty G. Dickens |
18 Years |
0.192% |
(4170%) |
(675%) |
(1745%) |
(390%) |
(458%) |
| Thurgood Marshall, Jr. |
9 Years |
0.109% |
(258%) |
(99%) |
(398%) |
(293%) |
(243%) |
|
Joanna Barsh
(Comp. Comm. Chair)
|
7 Years |
0.183% |
(176%) |
(83%) |
(269%) |
(199%) |
(153%) |
|
Kevin P. McDermott
(Audit Comm. Chair)
|
5 Years |
0.149% |
(279%) |
(137%) |
(150%) |
(162%) |
(160%) |
| John F. Lambros |
0 Years |
0.009% |
82% |
23% |
155% |
142% |
123% |
|
Mimi E. Vaughn
(CEO / Chair)
|
1 Years |
1.344% |
(45%) |
(39%) |
(27%) |
(16%) |
(22%) |
| |
|
|
|
|
|
|
|
|
|
|
Source: SEC Filings,
Investor Group’s Estimates, Capital IQ – Data as of 04/09/2021
(1) Core Peer Group
includes BOOT, DBI, FL, SCVL, CAL, DKS, HIBB, WWW, CROX, DECK, SHOO, SKX
(2) ISS Peer Group includes ANF, GES,
SCVL, BKE, CROX, HIBB, SHOO, ZUMZ, ANF, CAL, DBI, URBN, CHS, EXPR, PLCE, WWW
(3) S&P 1500 Footwear Index includes
CROX, DECK, NKE, SKX, SHOO, WWW
Note: Total Shareholder Return (“TSR”)
figures as of respective Board appointment date through 04/09/2021. Assumes that Kathleen Mason, Matthew C. Diamond, Marty G. Dickens
and Thurgood Marshall, Jr. were appointed on January 1st in their year of appointment due to lack of detailed information
12121 Wilshire Blvd, Suite 1240, Los Angeles, CA 90025
Our Nominees Have Superior Experience in
Retail, Capital Allocation and Strategic Planning and Are Well-Positioned to Create Significant, Long-Term Shareholder Value
Legion Partners spent significant energy and time
recruiting a slate that has the backgrounds and qualifications required to ignite a turnaround from the boardroom. In order to position
our slate to maintain important corporate continuity under various change-in-control scenarios, we also recruited individuals with prior
c-level leadership experience.
Legion’s highly-qualified, independent nominees
will bring substantial and complementary skills in areas that include retail operations, footwear and apparel merchandising, marketing,
customer experience, real estate and governance.
More detailed information on Legion’s nominees
is as follows:
Marjorie L. Bowen, age 56, is an experienced
public company director with extensive knowledge of corporate governance, capital markets strategies and strategic transactions.
| · | Ms. Bowen previously served a one-year term as an independent director of Genesco from 2018-2019. During
that period, she actively monitored the successful sale process for Lids, and participated in the consideration of other strategic alternatives.
Her prior tenure as a director will allow her to immediately understand the Company, its operations, and challenges. |
| · | Ms. Bowen has served as a director on over a dozen public and privately held companies, including Genesco
and other industry participants such as Centric Brands and Talbots. |
| · | As a qualified NYSE and NASDAQ financial expert, Ms. Bowen has experience chairing Special Committees,
Audit Committees, and Restructuring/Strategic Committees. |
| · | She also has experience serving as a director in situations that call for improved governance, transparency
and accountability. |
| · | Prior to her directorships, Ms. Bowen had a nearly 20-year career in investment banking at Houlihan Lokey,
serving as Managing Director from 1997 to 2008 and heading its industry leading fairness opinion practice. During her tenure at Houlihan
Lokey, Ms. Bowen was the most senior woman at the firm. |
| · | As both an investment banker and corporate director, Ms. Bowen has experience across different types of
corporate finance and M&A transactions for both healthy and distressed companies. In addition to the retail experience above, she
has broad industry experience, including a focus in real estate intensive and related industries while at Houlihan Lokey. |
| · | Ms. Bowen holds a B.A. and graduated cum laude from Colgate University in 1987. She holds an M.B.A., with
a concentration in Finance from the University of Chicago in 1989. |
Thomas M. Kibarian, age 55, is an experienced
retail executive with a background that also includes advising and investing in companies across the industry.
| · | Thomas M. Kibarian currently serves as a freelance advisor to private equity firms that invest in mid-cap
retail and consumer wholesale businesses, since January 2013. He assists these firms in developing investment theses, in conducting due
diligence on prospective investments, and in the strategic oversight of portfolio companies. |
12121 Wilshire Blvd, Suite 1240, Los Angeles, CA 90025
| · | He is also a coach to CEOs, with a focus on entrepreneurs who are running a wide range of retail and consumer
product companies, including a home decor retailer, an apparel brand, a food brand, and a consumer health service. |
| · | Mr. Kibarian previously served as the Chief Executive Officer at Garden Ridge (n/k/a At Home Group Inc.
(NYSE: HOME)), a home décor retailer, from September 2005 to December 2012, and as a member of its board of directors, from April
2003 to December 2012. Mr. Kibarian took over as CEO shortly after Garden Ridge was purchased for $25mm out of bankruptcy as a breakeven
business and sold the business seven years later for over $700mm when it was a 25% EBITDA margin business. Mr. Kibarian and his team increased
gross margin from 40% to 50% through format renewal, category remix, and merchant function automation, reduced per store occupancy expense
by 35%, self-funded a 50% increase in store count by developing a new store model with <1 year payback, and reduced SG&A by 40%. |
| · | Prior to that, Mr. Kibarian served as Partner at Three Cities Research, Inc., a private equity firm, from
February 2003 to September 2005, and as an Associate Principal at McKinsey & Company, Inc., a global management consulting firm, from
August 1997 to January 2003. Mr. Kibarian focused primarily on the retail industry, and served a wide range of US retailers, including
mass merchants, department stores, and specialty apparel retailers. He served clients on a wide range of issues, including strategy, growth,
and marketing spend effectiveness. |
| · | Mr. Kibarian received his M.B.A. with a concentration in Finance from The Wharton School of the University
of Pennsylvania, a M.S. in Statistics from Stanford University, and a B.S. in Statistics from the University of Chicago. |
Margenett Moore-Roberts, age 50, is a seasoned
marketing strategist and an expert in diversity and inclusion initiatives.
| · | Ms. Moore-Roberts serves as Chief Inclusion & Diversity Officer for IPG DXTRA, a global collective
of 28 marketing services and agency brands as a part of Interpublic Group (NYSE: IPG), since January 2020. |
| · | Previously, Ms. Moore-Roberts held Corporate Diversity & Inclusion leadership roles at Golin and Yahoo.
She served as VP and Global Head of Inclusive Diversity at Yahoo from 2016 to 2017 and established Yahoo’s first Office of Inclusive
Diversity as a global Center of Excellence. She also established and led the growth of Yahoo’s first video advertising network. |
| · | Prior to joining Yahoo in 2011, she served as VP of Client Services & Ad Operations at Scanscout /
Tremor Video (now known as Telaria) from 2007 to 2011 and VP of Client Services at Muze from 2001 to 2007. |
| · | Ms. Moore-Roberts holds a B.A. from Otterbein University. |
Dawn H. Robertson, age 65, is a proven retail
executive with significant operational, omnichannel and marketing experience.
| · | Ms. Robertson has served as Independent Non-Executive Chairman at Splitit Payments Ltd (OTCMKTS: STTTF)
since February 2021 and previously served as a Director of the Company. |
| · | Ms. Robertson serves as the CEO of On Campus Marketing, a nationwide leader in endorsed marketing to college
students and parents since 2018. |
12121 Wilshire Blvd, Suite 1240, Los Angeles, CA 90025
| · | Ms. Robertson is a business leader of major retailers, department stores and startups with extensive turnaround
experience at Old Navy, Myer, Sak’s Avenue, OCM, May Dept Stores, and Macy’s. She has 26 years’ expertise at the executive
management level. |
| · | Ms. Robertson served as the Chief Executive Officer of Stein Mart Inc. in 2016. Ms. Robertson served as
the President of Old Navy, Inc. from November 2006 to February 2008. She served as Managing Director of Myer Grace Bros of Coles Group
Limited from 2002 to 2006. |
| · | She has extensive omnichannel experience, including the development and launch of Macys.com and Bloomingdales.com
and currently as CEO of OCM, an online retailer of college dorm essentials. |
| · | Ms. Robertson is a graduate from Auburn University with a BA in Fashion Merchandising. |
Patricia M. Ross, age 56, is a seasoned retail
executive and veteran public company director with a focus on global e-commerce, digital assets and technology.
| · | Ms. Ross, also known as Patty, currently serves as a Board Member for Nautilus Inc., and MMC Corp. |
| · | Ms. Ross previously served as an Executive Advisor to Apple, Inc., a technology company, from November
2019 to February 2020. |
| · | She served as Founder and Principal for PMR Operations and Organizational Consulting LLC, a company providing
organizational, talent and business consulting services, from March 2017 to November 2019. |
| · | She spent the majority of her career with Nike, Inc. (NYSE: NKE), where she focused on strategy, process
re-engineering, operations, and general management. From 1992 to March 2017, Ms. Ross served Nike, Inc. in a variety of roles, including
most recently Vice President, Global Operations & Technology. |
| · | Ms. Ross pioneered, developed, and implemented Nike's first global e-commerce B2B website for retailers
(www.nike.net), sharing a significant amount of alignment and partnership with Nike.com, including leveraging of infrastructure, digital
assets, and technology. |
| · | She led her team to create Nike’s Global Brand Imaging organization, which supported and focused
on creating premium product photography and videos for all Nike point-of-sale needs, including consumer websites, apps and digital sell-in-tools,
scaling in digital commerce to new levels. |
| · | Ms. Ross holds a Bachelor of Applied Science degree in Finance and Marketing from Portland State University,
a coaching certification in Executive Leadership Development from The Hudson Institute of Coaching, and an Advanced Management Certificate
of Completion in Business Administration and General Management from Harvard Business School. She is also a graduate of the Executive
Education Program at Harvard Business School, where she focused on corporate boards, governance, operations, and management. |
Georgina L. Russell, age 44, is a capital markets
expert who also possesses valuable experience in the software and information technology fields.
| · | Ms. Russell is the Portfolio Manager of Chicane Opportunities Fund, a management and consulting firm. |
| · | Previously, she oversaw a portfolio of credit and equity securities at Willett Advisors LLC, which manages
the philanthropic assets of Michael R. Bloomberg. |
12121 Wilshire Blvd, Suite 1240, Los Angeles, CA 90025
| · | Prior to Willett, Ms. Russell was a Managing Director at Smithwood Advisers, L.P., an investment advisory
firm with $2.5 billion in assets under management at the time. |
| · | Earlier in her career, Ms. Russell served as an Analyst at Lonestar Capital Management LLC, an investment
advisory firm, from January 2009 to April 2012. |
| · | From August 2007 to December 2008, Ms. Russell served as an Analyst at Smithwood in their Hong Kong office. |
| · | Before embarking on a career in investing, Ms. Russell was a software engineer. She architected and authored
cloud-based distributed systems. |
| · | Ms. Russell graduated from the University of California, Berkeley with honors in Computer Science. She
received an MBA with honors from The Wharton School at the University of Pennsylvania. |
Hobart P. Sichel, age 56, is a proven marketing
leader and veteran c-level executive in the retail space.
| · | Mr. Sichel is the President of bps Captura, an independent advisory and consulting firm to corporate senior
leaders, private equity firms, and boards across multiple consumer-facing industries, since 2019. |
| · | Mr. Sichel previously worked at Burlington Stores from 2011 to 2019, where he served as Executive Vice
President and Chief Marketing Officer. He was a key member of the leadership team that turned the business around and launched its initial
public offering. |
| · | At Burlington, Mr. Sichel was responsible for marketing, corporate strategy and the company’s push
into e-commerce. |
| · | Prior to joining Burlington and since 1998, Mr. Sichel served as a Principal at McKinsey & Company.
He was a leader in McKinsey’s Marketing and Retail practices in North America. Prior to 1998, Mr. Sichel worked in various capacities
across consumer facing industries including retail, e-commerce, packaged goods, financial services, and media. |
| · | Mr. Sichel holds an M.B.A. from Columbia University and a B.A. from Vassar College. |
Legion Partners believes that Genesco has tremendous
potential to thrive in today’s evolving retail landscape; however, we feel strongly that substantial change to the Board
is required to put the Company on a path to value creation for all shareholders and stakeholders. We look forward to communicating with
our fellow shareholders over the upcoming weeks.
Sincerely,
 |
 |
| Christopher Kiper |
Ted White |
12121 Wilshire Blvd, Suite 1240, Los Angeles, CA 90025
About Legion Partners
Legion Partners is a value-oriented investment
manager based in Los Angeles, with a satellite office in Sacramento, CA. Legion Partners seeks to invest in high-quality businesses that
are temporarily trading at a discount, utilizing deep fundamental research and long-term shareholder engagement. Legion Partners manages
a concentrated portfolio of North American small-cap equities on behalf of some of the world’s largest institutional and HNW investors.
CERTAIN INFORMATION
CONCERNING THE PARTICIPANTS
Legion Partners Holdings,
LLC, a Delaware limited liability company (“Legion Partners Holdings”), together with the other participants named herein,
intend to file a preliminary proxy statement and accompanying WHITE proxy card with the Securities and Exchange Commission (“SEC”)
to be used to solicit votes for the election of its slate of highly-qualified director nominees at the 2021 annual meeting of shareholders
of Genesco Inc., a Tennessee corporation (the “Company”).
LEGION PARTNERS HOLDINGS
STRONGLY ADVISES ALL SHAREHOLDERS OF THE COMPANY TO READ THE PROXY STATEMENT AND OTHER PROXY MATERIALS AS THEY BECOME AVAILABLE BECAUSE
THEY WILL CONTAIN IMPORTANT INFORMATION. SUCH PROXY MATERIALS WILL BE AVAILABLE AT NO CHARGE ON THE SEC'S WEB SITE AT HTTP://WWW.SEC.GOV.
IN ADDITION, THE PARTICIPANTS IN THIS PROXY SOLICITATION WILL PROVIDE COPIES OF THE PROXY STATEMENT WITHOUT CHARGE, WHEN AVAILABLE, UPON
REQUEST. REQUESTS FOR COPIES SHOULD BE DIRECTED TO THE PARTICIPANTS' PROXY SOLICITOR.
The participants in
the proxy solicitation are anticipated to be Legion Partners Holdings, Legion Partners, L.P. I, a Delaware limited partnership (“Legion
Partners I”), Legion Partners, L.P. II, a Delaware limited partnership (“Legion Partners II”), Legion Partners, LLC,
a Delaware limited liability company (“Legion Partners GP”), Legion Partners Asset Management, LLC, a Delaware limited liability
company (“Legion Partners Asset Management”), Christopher S. Kiper, Raymond T. White, Marjorie L. Bowen, Thomas M. Kibarian,
Margenett Moore-Roberts, Dawn H. Robertson, Patricia M. Ross, Georgina L. Russell and Hobart P. Sichel.
As of the date hereof, Legion Partners I directly
beneficially owns 791,552 shares of Common Stock, par value $1.00 per share, of the Company (the “Common Stock”).
As of the date hereof, Legion Partners II directly beneficially owns 44,526 shares of Common Stock. As the general partner of each of
Legion Partners I and Legion Partners II, Legion Partners GP may be deemed to beneficially own the 836,078 shares of Common Stock beneficially
owned in the aggregate by Legion Partners I and Legion Partners II. As the investment advisor of each of Legion Partners I and Legion
Partners II, Legion Partners Asset Management may be deemed to beneficially own the 836,078 shares of Common Stock beneficially owned
in the aggregate by Legion Partners I and Legion Partners II. As of the date hereof, Legion Partners Holdings directly beneficially owns
100 shares of Common Stock and, as the sole member of each of Legion Partners Asset Management and Legion Partners GP, Legion Partners
Holdings may also be deemed to beneficially own the 836,078 shares of Common Stock beneficially owned in the aggregate by Legion Partners
I and Legion Partners II. As a managing director of Legion Partners Asset Management and managing member of Legion Partners Holdings,
each of Messrs. Kiper and White may be deemed to beneficially own the 836,078 shares of Common Stock beneficially owned in the aggregate
by Legion Partners I and Legion Partners II and 100 shares of Common Stock held of record by Legion Partners Holdings. As of the date
hereof, none of Messrs. Kibarian and Sichel or Mses. Bowen, Moore-Roberts, Robertson, Ross and Russell own beneficially or of record any
securities of the Company.
12121
Wilshire Blvd, Suite 1240, Los Angeles, CA 90025
