Genesco Inc. · NYSE:GCO
Genesco — Proxy Contest (June 2021)
182 slides from Genesco's proxy contest presentation, Jun 22, 2021
Slide 1: GCOForward
June 2021 GCOForward www.GCOForward.com
Slide 2: Table of Contents
Table of Contents 1 Executive Summary 2 2 Case for Change 35 3 Governance and Compensation Issues 92 4 Legion’s Highly Qualified Nominees 119 5 Value Creation Ideas 131 6 Appendix 170 FY refers to fiscal year (FY 20 is the year ended February 1st, 2020) 2 CONFIDENTIAL & PROPRIETARY
Slide 3: Legion Partners
Section Legion Partners 1 Strategic Stock Selection $581 • High-quality businesses trading at a significant discount relative to their intrinsic value million1 Assets under • Small-cap companies which offer the greatest upside potential management • Concentrated, high-conviction portfolio based on r
Slide 4: Legion's Track Record of Success in Consumer and Retail Space
Section Legion’s Track Record of Success in Consumer and Retail Space 1 Legion Partners has successful track records investing in the consumer and retail space and has helped generate significant shareholder value Approximately $4.9 billion of value for stockholders has been generated since Legion’s
Slide 5: Legion's Nominees Have the Right Mix of Skills and Experience
Section Legion’s Nominees Have the Right Mix of Skills and Experience 1 Marjorie L. Bowen Margenett Moore-Roberts Corporate governance and qualified NYSE and Recognized leader in inclusion and diversity with NASDAQ financial expert with 20-year career in experience across data & technology, digital
Slide 6: Business Overview
Section Business Overview 1 Genesco is a retailer and wholesaler of footwear, apparel and accessories in a holding company structure ▪ Leading children's and teens’ footwear retailer headquartered in Nashville, TN ▪ Owns brands well-recognized by consumers ▪ Key company statistics (pre-COVID)1 o Rev
Slide 7: This campaign is about breaking up an insular, interconnected Board
This campaign is about breaking up an insular, interconnected Board that has kept Genesco from achieving full value by maintaining a costly conglomerate structure lacking in synergies
Slide 8: Legion's First Campaign to Unlock Value at Genesco
Section Legion’s First Campaign to Unlock Value at Genesco 1 Legion launched its first campaign at Genesco in late 2017 ▪ Legion owned ~5% of GCO shares in the first campaign ▪ GCO agreed to increase the size of the Board by two directors and appointed two Legion candidates, Marjorie L. Bowen and Jo
Slide 9: Why Are We in This Proxy Contest?
Section Why Are We in This Proxy Contest? 1 Poor Track Record & Board Is Broken & Needs Refreshment Our Nominees Can Create Value Conglomerate Structure ▪ Chronic underperformance vs. ▪ Board has consistently been comprised ▪ Our nominees have spent peers and relevant indices over an of directors wi
Slide 10: The Current Board has Failed Shareholders
Section The Current Board has Failed Shareholders 1 Genesco Key Elements Why the Genesco Board Falls Short Grade ▪ TSR is poor over any meaningful measurement period ▪ Individual segments have been operated very poorly Effective Strategy ▪ Operating margins have been in decline ▪ Capital spending ha
Slide 11: Genesco Shares Have Materially Underperformed
Section Genesco Shares Have Materially Underperformed 1 GCO stock has underperformed several pertinent peer groups and broader market indices, including the Company’s self-selected indices, over multiple time periods through the Unaffected Date (04/09/2021) GCO Relative Total Shareholder Returns vs.
Slide 12: The Right Genesco Peer Sets and Indices
Section The Right Genesco Peer Sets and Indices 1 Legion primarily utilizes a peer set that includes both footwear retailers and footwear brands for operational and valuation benchmarking, and uses ISS peers as well as GCO’s self-selected indices for TSR comparison Peers ISS Peers Company Selected I
Slide 13: Genesco's Own TSR Scorecard Appears to be an "F"
Section Genesco’s Own TSR Scorecard Appears to be an “F” 1 The Company’s TSR analysis from 2021 Annual Report GCO Genesco stock has severely underperformed the Company’s own hand-selected indices 13 Source: Company Annual Report CONFIDENTIAL & PROPRIETARY
Slide 14: GCO Valuation Lags Peers by a Substantial Margin
Section GCO Valuation Lags Peers by a Substantial Margin 1 Genesco continues to trade below peers EV / CY 2021 EBITDA 16.6x Footwear Retailers Median: 6.8x Footwear Brands Median: 13.6x 15.8x 15.8x 15.1x 12.0x 10.8x 10.0x 7.3x 6.3x 6.1x 6.4x 4.9x 4.0x BOOT DBI SCVL HIBB DKS FL GCO SHOO DECK CROX WWW
Slide 15: We Believe Numerous Issues Weigh on GCO's Valuation
Section We Believe Numerous Issues Weigh on GCO’s Valuation 1 We believe the Board has failed for years to add directors with the right experience and skill sets relevant to the Company's business ▪ Conglomerate Structure Destroying Value: Genesco is a conglomerate of very different footwear busines
Slide 16: Executive Compensation Paying for Underperformance
Section Executive Compensation Paying for Underperformance 1 Genesco’s executive compensation appears to serve executives instead of shareholders – our nominees will seek to redesign executive compensation to better align with performance NEOs’ Compensation vs. Operating Profit $200 20% $170 $167 16
Slide 17: Genesco Has No Discernible ESG Program
Section Genesco Has No Discernible ESG Program 1 Genesco announced an ESG subcommittee only in June 2021, led by two lackluster incumbent directors, Marshall Jr. and Barsh, with no announced goals, targets or framework Non-Existent Most Comprehensive ESG/Impact Report? ✓ ✓ ✓ ✓ ✓ ✓ ESG/Impact
Slide 18: Ill-Conceived and Inefficient Footwear Conglomerate Structure
Section Ill-Conceived and Inefficient Footwear Conglomerate Structure 1 Genesco is a conglomerate of two very different footwear businesses supporting an expensive and poor performing corporate center Sales: $2,197mm EBITDA: $146mm Corporate center that sees itself as a private equity firm, making a
Slide 19: GCO's Disparate Segments Have Almost Nothing in Common
Section GCO’s Disparate Segments Have Almost Nothing in Common 1 The underlying value chains of GCO’s two businesses are completely unrelated Buy footwear inventory Distribute inventory to Sell inventory to Footwear at wholesale from third- owned stores and consumers through Retailers party vendors
Slide 20: Conglomerates in Footwear are Rare and Destroy Value
Section Conglomerates in Footwear are Rare and Destroy Value 1 Most of the players in the US footwear industry do not straddle the two business models and the few that do, like GCO, underperform Footwear Retailers Footwear Brands $4.5 $8.5 $6.1 $1.2 $6.5 $1.0 $1.5 $2.9 $2.0 $5.4 $0.5 $0.8 $3.6 Value
Slide 21: Genesco Lacks Typical Synergies
Section Genesco Lacks Typical Synergies 1 Of the three US footwear companies straddling the two business models, Genesco has the least synergies Synergies Between Footwear Retailers Footwear Brands The Two Businesses ▪ Owned brands sold in Famous Footwear stores account for ~8% of sales ▪ Owned bran
Slide 22: Segments Lack Meaningful Demographic Overlap
Section Segments Lack Meaningful Demographic Overlap 1 There are no synergies between Genesco’s two businesses because they target very different customer demographics Age of Shoe 0-12 13-24 25-34 35-54 55+ Wearer Retailer of Third-Party Footwear Brands Portfolio of Footwear Brands 22 Source: SEC Fi
Slide 23: GCO Structure Explained By Former CEO and Chairman
Section GCO Structure Explained By Former CEO and Chairman 1 Robert J. Dennis promoted and closely mentored fellow McKinsey alumni Mimi E. Vaughn to ultimately lead Genesco – the structure they have implemented is more akin to a private equity firm than a footwear operating company – the Company con
Slide 24: GCO Justifies Its Conglomerate Structure with Illusory Synergies
Section GCO Justifies Its Conglomerate Structure with Illusory Synergies 1 Synergy Cited By Management Quotes Reality Management “Since Journeys and Schuh enjoy significant ▪ Despite claiming substantial vendor synergies, Product / Vendor overlap in their vendor base, their combined scale Schuh has
Slide 25: GCO's Six Strategic Pillars Lack Tangible Goals
Section GCO’s Six Strategic Pillars Lack Tangible Goals 1 GCO’s Six Strategic Pillars 1 2 3 Build Deeper 4 5 6 Maximize the Consumer Insights Intensify Product Accelerate Digital to Reshape the Cost Pursue Synergistic Relationship to Strengthen Innovation and Grow Direct-to- Base to Reinvest Acquisi
Slide 26: To Fix the Company, We Must Fix the Board
Section To Fix the Company, We Must Fix the Board 1 We are seeking to replace FOUR incumbent directors, the majority of whom have led the Board over long periods of underperformance and appear to lack experience that a modern footwear retailer would require Matthew C. Diamond (52) Thurgood Marshall,
Slide 27: Recent Refresh Is Too Little Too Late
Section Recent Refresh Is Too Little Too Late 1 Matthew C. Diamond Thurgood Marshall, Jr. Joanna Barsh Kevin P. McDermott Tenure: 20 years Tenure: 9 years Tenure: 7 years Tenure: 5 years Relative TSR: (3,446%) Relative TSR: (258%) Relative TSR: (176%) Relative TSR: (279%) Chair of the Nominating and
Slide 28: Incumbents and Insiders Maintain Concerning Interlocks
Section Incumbents and Insiders Maintain Concerning Interlocks 1 1 2 3 4 5 Matthew C. Thurgood Joanna Kevin P. John F. Diamond Marshall, Jr. Barsh McDermott Lambros Director Director Director Director Director Historic Related Party Transactions Robert J. Dennis Mimi E. Vaughn Thomas A. Brently G. 0
Slide 29: Why is Genesco Spending $8.5 Million to Protect Matthew Diamond?
Section Why is Genesco Spending $8.5 Million to Protect Matthew Diamond? 1 The Genesco Board is spending $8.5 million or 1.2% of its market cap to preserve the status quo, the highest percentage among all proxy costs for 57 small-cap companies from 2015 to present Company Market Cap ($mm)1 Proxy Fig
Slide 30: Genesco Stakeholders Deserve New Board Leadership
Section Genesco Stakeholders Deserve New Board Leadership 1 We believe Genesco’s management, employees, customers and stockholders all deserve new Board leadership that is highly experienced in leading and overseeing retailers ▪ C-Level Retail Operations / Merchandising Experience: to evaluate Genes
Slide 31: Legion's Nominees Bring the Right Skills and Experience to Genesco
Section Legion’s Nominees Bring the Right Skills and Experience to Genesco 1 GCO’s incumbent directors are far outmatched by Legion’s Nominees whose backgrounds and experiences are directly relevant to the Company’s future and integral to its success Genesco’s Incumbent Directors: Marketing / Other
Slide 32: The Value Creation Opportunity
Section The Value Creation Opportunity 1 Eliminating the inefficient conglomerate structure, coupled with monetizing non-core assets, share buybacks and operational improvement could lead to significant value creation Status Quo Non-Core Asset Sale & Buyback Operational Improvement Future Net Income
Slide 33: Sell-Side Recognizes the Need for Strategic Review
Section Sell-Side Recognizes the Need for Strategic Review 1 “I don’t think Genesco is getting lift for owning a brand, Johnston & Murphy…[Genesco] is trading at a retail multiple even though they own a brand. If you were to divest J&M once it rebounds, you could probably get more for that business
Slide 34: GCO Needs to #GoForward
Section GCO Needs to #GoForward 1 We urge fellow stockholders to vote the WHITE proxy card to elect strong and proven industry leaders to the Board ▪ Legion’s nominees will seek to: ✓ Restore profit and revive growth of Journeys through various tactical initiatives such as reducing corporate expense
Slide 35: Table of Contents
Table of Contents 1 Executive Summary 2 2 Case for Change 35 3 Governance and Compensation Issues 92 4 Legion’s Highly Qualified Nominees 119 5 Value Creation Ideas 131 6 Appendix 170 FY refers to fiscal year (FY 20 is the year ended February 1st, 2020) 35 CONFIDENTIAL & PROPRIETARY
Slide 36: Case for Change
Section Case for Change 2 1▪ Genesco Has a Poor Financial Track Record 2▪ Genesco Has Been a Poor Allocator of Capital 3▪ Operational Issues ▪ 3a Schuh Mismanagement ▪ 3b J&M Opportunities Squandered ▪ 3c Journeys Undermanaged and Stagnant 36 CONFIDENTIAL & PROPRIETARY
Slide 37: Genesco Has a Poor Financial Track Record
Section Case for Change 2 1 Genesco Has a Poor Financial Track Record Poor Long-Term TSR Poor Short-Term TSR Declining ROIC 5-Year TSR Pre-COVID to Present TSR ROIC 243% 52% 16.8% 10.7% 2% (28%) GCO Peers GCO Peers FY 2012 FY 2020 Degrading Margins Elevated SG&A Worst-in-Class Valuation Operating Ma
Slide 38: Genesco Shares Have Materially Underperformed
Section Genesco Shares Have Materially Underperformed 2 Genesco shares have underperformed retail peers and market indices over the last 10 years (share price adjusted for dividends) ▪ Significant destruction of shareholder value over the last ten years ▪ TSR for pre-COVID to Present, three, five an
Slide 39: If You Invested $100 in Genesco at Year End FY 2012
Section If You Invested $100 in Genesco at Year End FY 2012… 2 …It would be worth $79 or down by 21%, while an investment in S&P 500 would be worth $379 and an investment in S&P 1500 Footwear index would be worth $492 Footwear has been a better investment than the S&P 500 $600 $500 $492 $400 $379 $3
Slide 40: GCO Focus on Short-Term Outperformance is Misleading
Section GCO Focus on Short-Term Outperformance is Misleading 2 The attempt by Genesco to dismiss its chronic poor stock performance by focusing on the past one year is disingenuous – the highlighted short- term performance reflects how poorly it did during initial phases of the COVID pandemic instea
Slide 41: Short-term Performance Not Impressive vs. Peers
Section Short-term Performance Not Impressive vs. Peers 2 Genesco’s “footwear-focused strategy and strategic growth plans” have led to a significantly muted rebound compared to Designer Brands (+218%) and Caleres (+ 290%) $400 +290% $350 DESIGNER +218% BRANDS $300 $250 +151% GCO $200 $150 $100 $100
Slide 42: Genesco's Own TSR Scorecard Appears to be an "F"
Section Genesco’s Own TSR Scorecard Appears to be an “F” 2 The Company’s TSR analysis from 2021 Annual Report GCO Genesco stock has severely underperformed the Company’s own hand-selected indices 42 Source: Company Annual Report CONFIDENTIAL & PROPRIETARY
Slide 43: Share Price Erosion Impacted by Declining Returns
Section Share Price Erosion Impacted by Declining Returns 2 $90.00 9-year high: Legion 1st Campaign $89.25 $80.00 $70.00 $60.00 $50.00 $40.00 Estimated 9-year low: $30.00 WACC2 = 10% $21.15 $20.00 $10.00 $0.00 ROIC has declined since 2012, reaching the level at which it no longer covers the Company’
Slide 44: ROIC Below Median
Section ROIC Below Median 2 ROIC is at low end of range ROIC 42.8% 42.2% Footwear Retailers ROIC Median: 12.8% Footwear Brands ROIC Median: 22.1% 31.6% 22.9% 21.3% 15.7% 13.4% 12.1% 12.4% 12.4% 10.5% 10.3% 8.2% FL SCVL DKS BOOT DBI HIBB GCO DECK CROX SKX SHOO WWW CAL Source: SEC Filings, Legion Part
Slide 45: Margin Degradation has been the Primary Drag on ROIC
Section Margin Degradation has been the Primary Drag on ROIC 2 Genesco Operating Margin (FY 2012 - FY 2020) Journeys Operating Margin 9.9% 9.0% 9.7% 10.1% 8.7% 6.8% 7.1% 7.9% 5.6% 7.0% 6.5% FY FY FY FY FY FY FY FY FY 2012 2013 2014 2015 2016 2017 2018 2019 2020 6.2% 5.8% Schuh Operating Margin 5.0%
Slide 46: SG&A % of Revenue Appears High Compared to Peers
Section SG&A % of Revenue Appears High Compared to Peers 2 Benchmarking vs. peers shows SG&A as a % of revenue above every footwear retailer Adjusted SG&A as % of Total Revenue 37.7% 38.1% Footwear Retailers Median: 31.8% Footwear Brands Median: 30.0% 33.9% 33.4% 34.1% 33.0% 30.6% 30.3% 29.5% 29.6%
Slide 47: Occupancy Costs Are The Highest Among Peers
Section Occupancy Costs Are The Highest Among Peers 2 The highest occupancy costs % of total revenue among peers Adjusted Occupancy Costs as % of Total Revenue 15.2% Footwear Retailers Median: 7.6% Footwear Brands Median: 5.0% 12.8% 8.1% 7.9% 8.0% 7.4% 7.0% 6.6% 5.9% 5.4% 4.1% 3.4% 1.9% FL DKS DBI S
Slide 48: EBITDA Margins Have Declined in the Past Decade
Section EBITDA Margins Have Declined in the Past Decade 2 Profitability has declined despite generally positive same-store growth, indicating sub-optimal gross margin management and weak cost controls Adj. EBITDA (FY 2012 - FY 2020) 9.6% 9.5% 8.8% 8.5% 7.9% 7.6% 7.4% 6.7% 6.0% FY 2012 FY 2013 FY 201
Slide 49: EBITDA Margins Are Among the Lowest in the Industry
Section EBITDA Margins Are Among the Lowest in the Industry 2 EBITDA margins lag peers Adjusted EBITDA as % of Total Revenue 17.7% Footwear Retailers Median: 7.1% Footwear Brands Median: 12.2% 12.6% 12.4% 12.0% 11.2% 11.2% 11.3% 7.4% 6.9% 6.7% 6.6% 6.1% 5.5% BOOT FL DKS SCVL DBI HIBB GCO DECK WWW CR
Slide 50: The Result Is a Highly Unattractive Valuation Multiple
Section The Result Is a Highly Unattractive Valuation Multiple 2 GCO’s valuation is one of the worst among its peers which we believe is due to GCO’s conglomerate structure, a lack of confidence in management and poor governance EV / CY 2021 EBITDA 16.6x Footwear Retailers Median: 6.8x Footwear Bran
Slide 51: Case for Change: Genesco Has Been A Poor Allocator of Capital
Section Case for Change 2 2 Genesco Has Been A Poor Allocator of Capital 51 CONFIDENTIAL & PROPRIETARY
Slide 52: Board Approved Value-Destructive Capital Allocation
Section Board Approved Value-Destructive Capital Allocation 2 The Board has historically provided little or poor disclosures regarding M&A performance, implying a lack of accountability ▪ The Company has a history of not disclosing (e.g. Togast) or not taking account of (e.g. Lids / Schuh) a target’
Slide 53: Acquisitions Have Not Helped Improve ROIC
Section Acquisitions Have Not Helped Improve ROIC 2 Sold at 64% discount to acquisition Estimated value at 80% discount to No meaningful cash generation or cost after 15 years of ownership acquisition cost with negative IRR value creation since acquisition $283 7.1% $68 $196 $34 Acquisition: 2004 Ac
Slide 54: The Board Has Indulged in Undisciplined CapEx Spending
Section The Board Has Indulged in Undisciplined CapEx Spending 2 The Board has historically allowed CapEx that outpaced depreciation and amortization by large margins, and while CapEx accumulated to $732 million over fiscal year 2012-2020, GCO’s operating income almost halved from $161 million to $8
Slide 55: Case for Change: Schuh Mismanagement
Section Case for Change 2 3a Schuh Mismanagement 55 CONFIDENTIAL & PROPRIETARY
Slide 56: Schuh – A Case of Serious Mismanagement
Section Schuh – A Case of Serious Mismanagement 2 Genesco announced the Schuh acquisition in June 2011 – after nearly a decade, the business is performing terribly At Acquisition FY 2020 "Schuh provides us with an immediate and # of Stores 751 127 established retail presence in the United Kingdom, a
Slide 57: Schuh – What Went Wrong? Poor Board Oversight
Section Schuh – What Went Wrong? Poor Board Oversight 2 Key Area Issues ▪ Management dreamed of Genesco expanding abroad without properly Approved the Decision to Expand recognizing that European market was very competitive and that the to Europe acquired venture was more of a small-town shoe store
Slide 58: Schuh's Expansion Failure
Section Schuh’s Expansion Failure 2 Locations before GCO acquisition Despite being aware of the challenging UK retail Expansions under GCO leadership environment especially on High Street as early as 2014, management continued to open stores in the most expensive area in London Scotland “…this is a
Slide 59: Schuh Is Neither A Margin Story Nor A Growth Story
Section Schuh Is Neither A Margin Story Nor A Growth Story 2 While Schuh’s FY 2020 sales of $374 million barely grew from $370 million in FY 2013, average sales per square foot plummeted by more than a half from $1,163 to $579 under GCO leadership $450m $1,400 $407m $406m $404m $400m $383m $374m $37
Slide 60: Schuh Failed to Replicate Journeys' Story in UK
Section Schuh Failed to Replicate Journeys’ Story in UK 2 Management suggests that part of the reason to own Schuh was to keep up with fashion trends in Europe – however, Schuh seems to be the one that leverages Journeys’ assortment instead, which did not line up with management’s initial expectatio
Slide 61: Case for Change: J&M Opportunities Squandered
Section Case for Change 2 3b J&M Opportunities Squandered 61 CONFIDENTIAL & PROPRIETARY
Slide 62: Johnston & Murphy Has Been Poorly Managed
Section Johnston & Murphy Has Been Poorly Managed 2 J&M is a historic brand that has been built over 170 years and worn by 33 US Presidents ▪ Wholesale business has many retail doors to penetrate, Wholesale Business Has Been Undermanaged and deeper SKU penetration is needed in existing wholesale doo
Slide 63: J&M Wholesale Business Poorly Managed Under GCO
Section J&M Wholesale Business Poorly Managed Under GCO 2 J&M has greatly under-penetrated wholesale channels relative to its peers 13% 15% 18% 19% 29% Peers 35% Median: 47% 81% 75% 87% 85% 82% 81% 71% 65% ~53% 25% WWW DBI (Brand SHOO CAL (Brand SKX DECK CROX J&M Portfolio) Portfolio) Wholesale Reta
Slide 64: J&M Wholesale Opportunity Has Been Undermanaged
Section J&M Wholesale Opportunity Has Been Undermanaged 2 We believe there is a significant untapped opportunity to expand J&M’s business through new and existing wholesale accounts with 5+ stores – which have not been successfully executed Top 10 Wholesale Accounts… Instead, J&M Chases Lots of Litt
Slide 65: J&M Has Multiple Wholesale Growth Opportunities
Section J&M Has Multiple Wholesale Growth Opportunities 2 Current top customers underpenetrated Top 10 Existing Customer Total Chain # Name Penetration Rate Available Doors Wholesale Doors Doors 1 Dillard's 268 285 94% 17 2 Macy's 192 551 35% 359 3 Brown's Shoe Fit 43 80 54% 37 4 Von Maur 32 33 97%
Slide 66: J&M Compares Poorly With Cole Haan
Section J&M Compares Poorly With Cole Haan 2 J&M lags one of its closest peer brands, Cole Haan, across every key financial metric Score Card1 Why is Cole Haan outperforming J&M? ▪ Cole Haan has developed 4 sub-brands, each positioned to appeal to different customer Founding Year 1850 1928 segments
Slide 67: Comparison of J&M to Cole Haan
Section Comparison of J&M to Cole Haan 2 The key difference between J&M and Cole Haan is its leadership and ownership ▪ Apax Partners, a PE firm with extensive experience in fashion apparel, footwear and accessories ▪ Genesco, a conglomerate of two different business ▪ Investments include: Who o Tom
Slide 68: Case for Change: Journeys Undermanaged And Stagnant
Section Case for Change 2 3c Journeys Undermanaged And Stagnant 68 CONFIDENTIAL & PROPRIETARY
Slide 69: Journeys' Business Has Stagnated
Section Journeys’ Business Has Stagnated 2 Genesco’s core business, Journeys, has been the one bright spot at Genesco – However, even this store base has produced highly inconsistent profitability Journeys’ Net Sales and Operating Margin Performance $1,600 12.0% $1,420 $1,460 $1,400 $1,329 11.0% $1,
Slide 70: Consumer Feedback on What's Missing Or Broken
Section Consumer Feedback on What’s Missing Or Broken 2 Legion Partners conducted a proprietary survey of 252 active Journeys’ customers “Offer a loyalty program and provide rewards” “Offer military discounts” “Add brands such as Nike, Under Armour, Skechers, Asics, and Brooks” “Make the website eas
Slide 71: Journeys' E-Commerce Business Poorly Managed
Section Journeys’ E-Commerce Business Poorly Managed 2 Journeys has greatly under-managed digital channels relative to its teen retailer peers or other national brand retailers Journeys is way behind as peers embrace omnichannel Source: SEC Filings, Legion Partners’ Estimates 71 CONFIDENTIAL & PROPR
Slide 72: Journeys' E-Commerce Business Poorly Managed (Cont.)
Section Journeys’ E-Commerce Business Poorly Managed (Cont.) 2 While COVID caused e-commerce sales to surge in 2020, Journeys still lagged peers significantly Journeys’ Digital Penetration vs. Other Retailers (COVID) 64% Teens’ Retailers Median: 48% Other National Brand Retailers Median: 42% 54% 52%
Slide 73: Journeys' E-commerce Capability Lags Industry
Section Journeys’ E-commerce Capability Lags Industry 2 E-Commerce Capabilities Does Journeys Have It? ▪ Buy Online, Pickup in Store Announced initial rollout in 2021 after 8 years of promises ▪ Curbside Pickup ▪ Same-Day Delivery ▪ Mobile App ▪ Well-Designed E-Commerce Site ▪ Store Inventory Visibi
Slide 74: Investor Concern on Lack of Urgency over Digital
Section Investor Concern on Lack of Urgency over Digital 2 Journeys does not appear to be prioritizing a clear strategy for the new digital world Samuel M. Poser, Susquehanna Financial Group, Research Samuel M. Poser, Susquehanna Financial Group, Research Division, 09/06/2019 – “I've asked this ques
Slide 75: What's Missing Or Broken
Section What’s Missing Or Broken 2 33 44 Loyalty Program 4 Marketing / Advertising While peers have long engaged customers with ❖ Social engagement loyalty programs that reward customers with ❖ Search execution 21 points, exclusive offerings 5 5 and better shipping Digital Strategy options, Journeys
Slide 76: What's Missing? Mobile App
Section What’s Missing? Mobile App 2 While peers have launched mobile apps and witnessed success… GCO still has no app despite admitting growing mobile app trend “We continue to think that websites perform well. There -- the average app on someone's phone is very short list. We tested apps in other
Slide 77: What's Broken? Digital Strategy and Execution
Section What’s Broken? Digital Strategy and Execution 2 Despite providing favorable product shipping and returning terms to customers, Journeys achieved the lowest digital penetration among many of its footwear peers, implying poor strategy and execution Least Favorable to Customers Most Favorable t
Slide 78: What's Broken? Digital Strategy (cont.)
Section What’s Broken? Digital Strategy (cont.) 2 Despite having a highly favorable shipping and return policy for customers, Journeys hasn’t communicated these benefits effectively to customers Did you know Journeys offers a 365-day return policy for online orders? 71% Highest Risk of Mall Closure
Slide 79: What's Missing? Loyalty Program
Section What’s Missing? Loyalty Program 2 While peers have long engaged customers with loyalty programs that reward customers with points, exclusive offerings and better shipping options, GCO has no loyalty program for any of its businesses Loyalty Program Members (in Millions) 1 31 27 22 20 20 5 DS
Slide 80: What's Missing? Loyalty Program (cont.)
Section What’s Missing? Loyalty Program (cont.) 2 Famous Zappos DSW Dick’s Foot Locker Shoe Carnival Finish Line Shoes.com Footwear Famously You Shoe Perks ShoeFan Program Zappos VIP DSW VIP Score Rewards FLX Rewards Rewards Rewards Status Rewards Free standard Free standard Free expedited Free stan
Slide 81: What's Broken? Marketing And Advertising
Section What’s Broken? Marketing And Advertising 2 Less than 20% of customers first saw or heard about Journeys via advertising – this also ties directly into why online penetration lags Where did you first see or hear about Journeys? If I saw more ads from Journeys, I 58% would probably shop more 2
Slide 82: What's Broken? Marketing And Advertising – Social Engagement
Section What’s Broken? Marketing And Advertising – Social Engagement 2 Journeys reacted slow to social engagement trends compared to peers and has undermanaged its social media accounts Followers behind peers Followers behind peers Check-ins behind peers Content efficiency behind peers Account opene
Slide 83: What's Broken? Marketing And Advertising – Search Execution
Section What’s Broken? Marketing And Advertising – Search Execution 2 Journeys’ website isn’t anywhere on first six pages when searching “shoes for teens” Page 5 & 6: Famous Footwear, Zappos, Shoe Carnival, Toms, Teva, Walmart, Foot Locker Similarly, Journeys’ website isn’t anywhere on the first few
Slide 84: What's Broken? Marketing And Advertising – Email Advertisement
Section What’s Broken? Marketing And Advertising – Email Advertisement 2 45% of customers surveyed never subscribed to Journeys’ email distribution How often do you receive email alerts from Journeys? 45% 17% 12% 11% 10% 5% Once a day or more A few times a week Once a week Once a month Never (Becaus
Slide 85: What's Broken? Web Experience Not Competitive
Section What’s Broken? Web Experience Not Competitive 2 38% of consumers surveyed didn’t shop online because they were not sure about their size or fit, which could have been improved by better fit and width guide, as well as better communications on Journeys’ favorable returning policy Why don't yo
Slide 86: What's Broken? Web Experience Not Competitive (Cont.)
Section What’s Broken? Web Experience Not Competitive (Cont.) 2 Competitors’ online businesses offer a higher quality, more seamless web experience that likely results in far higher online sales 1 Requires Dragging to Zoom (vs. Nordstrom Shows Bigger Size and Better-Quality Product Image on Mouseove
Slide 87: What's Broken? Web Experience Not Competitive (Cont.)
Section What’s Broken? Web Experience Not Competitive (Cont.) 2 Journeys’ website features poor content that is unappealing Large empty space on page might not be the best use of space Customers deserve to see shoes staged at a place that’s at least clean Source: Company Website 87 CONFIDENTIAL & PR
Slide 88: What's Broken? SKU Offerings
Section What’s Broken? SKU Offerings 2 Journeys lags peers in SKU offerings in top teens’ favorite footwear brands compared to peers Teens’ Favorite Footwear Brands (% of Teens Surveyed) 56% Most notably, Journeys carries ZERO Nike, the #1 teens’ footwear brand that has been gaining share from Vans
Slide 89: What's Broken? SKU Offerings (Cont.)
Section What’s Broken? SKU Offerings (Cont.) 2 Journeys’ “exclusives” are not really exclusives – customers can get them elsewhere Journeys’ Vans “exclusive” found on Zappos Journeys’ Tommy Hilfiger “exclusive” found on Zappos Journeys’ Vans “exclusive” found on Amazon 89 Source: Company Websites CO
Slide 90: What's Broken? Split Shipments
Section What’s Broken? Split Shipments 2 A split shipment is just what it sounds like – when a single order arrives in two or more deliveries – although the customer submits one order, they receive multiple packages, often on different days SKUs Shipments Efficiency and ESG Issues Journeys 1. Inflat
Slide 91: What's Broken? Employee Satisfaction
Section What’s Broken? Employee Satisfaction 2 While Genesco suggests its internally conducted survey shows a favorable employee response, Glassdoor data benchmarking suggests that Journeys lags peers in various criteria, which we believe provides a better picture of how employees perceive Journeys
Slide 92: Table of Contents
Table of Contents 1 Executive Summary 2 2 Case for Change 35 3 Governance and Compensation Issues 92 4 Legion’s Highly Qualified Nominees 119 5 Value Creation Ideas 131 6 Appendix 170 FY refers to fiscal year (FY 20 is the year ended February 1st, 2020) 92 CONFIDENTIAL & PROPRIETARY
Slide 93: Genesco's Board Lacks Shareholder Alignment
Section Genesco’s Board Lacks Shareholder Alignment 3 For years, Genesco’s Board has allowed management to perpetuate a conglomerate structure that has failed to generate shareholder value Prior reviews of strategic The governance structure is alternatives seemed disingenuous suboptimal, particu
Slide 94: Recent Refresh Is Too Little Too Late
Section Recent Refresh Is Too Little Too Late 3 Matthew C. Diamond Thurgood Marshall, Jr. Joanna Barsh Kevin P. McDermott Tenure: 20 years Tenure: 9 years Tenure: 7 years Tenure: 5 years Relative TSR: (3,446%) Relative TSR: (258%) Relative TSR: (176%) Relative TSR: (279%) Chair of the Nominating and
Slide 95: GCO Board's TSR Has Been More than Disappointing
Section GCO’s Board’s TSR Has Been More than Disappointing 3 Relative TSR performance demonstrates the inability of the Board to drive better outcomes for shareholders GCO Relative TSR over Tenure vs. GCO Core Peer ISS Peer S&P 1500 Director Tenure Own. % S&P 500 R2K Group Group Footwear Kathleen Ma
Slide 96: GCO's Incumbent Board Still Lacks Necessary Skills
Section GCO’s Incumbent Board Still Lacks Necessary Skills 3 After the recent refresh, GCO’s incumbent directors still lack backgrounds and experiences that are integral to the Company’s future success Genesco Incumbent Directors: Marketing / Other Tenure / Merchan- Retail Tech / Turnaround Capital
Slide 97: Genesco's Governance Structure Concerns
Section Genesco’s Governance Structure Concerns 3 Targeted Directors lack relevant backgrounds and have long tenures Genesco Incumbent Directors: Marketing / Other Tenure / Merchan- Retail Tech / Turnaround Capital Name Age Customer ESG Public Relative TSR dising Operations Digital Experience Market
Slide 98: Genesco's Board Has Mischaracterized Its Track Record
Section Genesco’s Board Has Mischaracterized Its Track Record 3 Between data manipulation and cherry-picking dates, we believe the Board has misleadingly claimed “momentum” Misleading Claim Reality “Over the past year, Genesco's share price has increased over 150%, reflecting strong ▪ We believe t
Slide 99: Genesco Has No Discernible ESG Program
Section Genesco Has No Discernible ESG Program 3 Genesco announced an ESG subcommittee only in June 2021, led by two lackluster incumbent directors, Marshall Jr. and Barsh, with no announced goal or framework Non-Existent Most Comprehensive ESG/Impact Report? ✓ ✓ ✓ ✓ ✓ ✓ ESG/Impact Website L
Slide 100: Compensation Doesn't Reflect Performance Declines
Section Compensation Doesn’t Reflect Performance Declines 3 Top 5 executive compensation has increased by 43% from FY 2014 to FY 2020 while operating profit declined by 49% NEOs’ Compensation vs. Operating Profit 18% $190 16% 16% $170 14% $167 $170 $161 $163 14% $151 $150 12% 11% $142 10% 10% $130 8
Slide 101: EVA Bonus Rewards EVA Declines
Section EVA Bonus Rewards EVA Declines 3 GCO’s EVA plan calculates bonus multiple as: (C-A)/B+1, where C represents the actual EVA change, A represents target EVA improvement, and B represents the incremental improvement interval Non-Symmetric EVA Bonus Multiple Design Positive bonus for EVA decline
Slide 102: Declining Target EVA Improvement vs. Rising Pay
Section Declining Target EVA Improvement vs. Rising Pay 3 While the target EVA improvement for every business unit has declined to around 1/3 of FY 2013 level in FY 2020, CEO’s estimated target payout during this period has grown by 15% Target EVA Improvement vs. Former CEO Robert Dennis’ Estimated
Slide 103: Incumbents and Insiders Maintain Concerning Interlocks
Section Incumbents and Insiders Maintain Concerning Interlocks 3 1 2 3 4 5 Matthew C. Thurgood Joanna Kevin P. John F. Diamond Marshall, Jr. Barsh McDermott Lambros Director Director Director Director Director Historic Related Party Transactions Robert J. Dennis Mimi E. Vaughn Thomas A. Brently G. 0
Slide 104: High Geographical Concentration Amongst Board Members
Section High Geographical Concentration Amongst Board Members 3 Board members are concentrated in Nashville area, where Genesco is headquartered, and surrounding states Connecticut Matthew C. Diamond1 John F. Lambros2 California Kentucky New York Angel R. Martinez Mary E. Meixelsperger Joanna Barsh
Slide 105: Legion's Settlement Talks with Genesco
Section Legion’s Settlement Talks with Genesco 3 GCO Board clearly demonstrates its dysfunction during settlement talks – chooses to spend $8.5 million to protect Matthew C. Diamond ▪ For nearly 3 weeks in May 2021, Legion tried to avoid a proxy contest with Genesco ▪ Direct discussions between Legi
Slide 106: Genesco Refused to Use a Universal Proxy Card
Section Genesco Refused to Use a Universal Proxy Card 3 We suggested the use of a universal proxy card for the upcoming election to allow shareholders the best opportunity to select the best nine directors to represent shareholders ▪ Legion requested that the Board agree to the use of a universal pr
Slide 107: To Fix the Company, We Must Fix the Board
Section To Fix the Company, We Must Fix the Board 3 We are seeking to replace FOUR incumbent directors, the majority of whom have led the Board over long periods of underperformance and appear to lack experience that a modern footwear retailer would require Matthew C. Diamond (52) Thurgood Marshall,
Slide 108: An Ineffective Long-Tenured Lead Director with Problematic Career
Section An Ineffective Long-Tenured Lead Director with Problematic Career 3 20-year tenured Board member and current Lead Director Matthew C. Diamond has controlled key leadership positions for decades – we believe he is responsible for the consistent underperformance, inflated compensation and misa
Slide 109: Diamond Brings with Him a Poor Track Record Instead of "Experience"
Section Diamond Brings with Him a Poor Track Record Instead of “Experience” 3 Mr. Diamond was the CEO of Defy Media LLC from 2013 to November 2018, when the company suddenly went out of business after apparently running out of funding – and prior to Defy, Mr. Diamond co-founded Alloy Media in 1996,
Slide 110: Marshall Jr.'s Professional Connections to Genesco Seem Problematic
Section Marshall Jr.’s Professional Connections to Genesco Seem Problematic 3 Director Thurgood Marshall Jr. is a career lawyer and lobbyist, retired from a law firm used repeatedly in the past by Genesco – we believe his “expertise in corporate governance and oversight” has not been reflected in Ge
Slide 111: Marshall Jr. Led a Series of Controversial Lobbying
Section Marshall Jr. Led a Series of Controversial Lobbying 3 Does a paid lobbyist for a casino, asbestos defense, paid militia really bring unique and valuable perspective to Genesco? Key Elements Marshall Jr.’s Involvement ▪ Marshall Jr. lobbied for Securus, which had a $19 million contract with C
Slide 112: Connected to NEOs, Barsh Also Leads Questionable Compensation Program
Section Connected to NEOs, Barsh Also Leads Questionable Compensation Program 3 Joanna Barsh has served on Genesco’s Board for nearly eight years, has no modern retail operations experience and previously worked as a consultant at McKinsey & Company ▪ McKinsey & Company is the same firm where a numb
Slide 113: Barsh's Retail Experience Pre-Dated Digital Era
Section Barsh’s Retail Experience Pre-Dated Digital Era 3 Despite her being a Director Emerita at McKinsey – we believe Barsh’s retail consulting experience before her retirement in 2013 is no longer relevant to the current digital world ▪ Ms. Barsh consulted consumer-facing clients for over 30 year
Slide 114: McDermott Has Multiple Ties to GCO Board and Lacks Relevant Qualifications
Section McDermott Has Multiple Ties to GCO Board and Lacks Relevant Qualifications 3 Director Kevin P. McDermott is a retired accounting executive from KPMG – we believe the poor TSR track record at Daktronics under his chairmanship reveals his level of ineffectiveness and accountability ▪ As a KPMG
Slide 115: GCO's Recent Partial Refreshment Invites Scrutiny
Section GCO’s Recent Partial Refreshment Invites Scrutiny 3 We believe Genesco’s partial refreshment following our nomination was inadequate to break the culture of entrenchment, self-interest and underperformance in the boardroom Lack of necessary independence Track record of operational effici
Slide 116: Martinez Worked Closely Together with GCO's Interim CFO for 7 Years
Section Martinez Worked Closely Together with GCO’s Interim CFO for 7 Years 3 Angel Martinez and Genesco’s interim Chief Financial Officer Thomas A. George previously worked together in the c-suite at Deckers Outdoor Corporation (“Deckers”), leading us to question how authentic the Company’s search
Slide 117: Meixelsperger Brings Irrelevant and Lackluster Background
Section Meixelsperger Brings Irrelevant and Lackluster Background 3 Mary Meixelsperger has very little successful retailing experience in her background ▪ Ms. Meixelsperger spent the bulk of her career at Shopko before that store chain ultimately filed for bankruptcy ▪ While GCO highlighted her expe
Slide 118: Sandfort is Another Nashville Executive with Questionable Credentials
Section Sandfort is Another Nashville Executive with Questionable Credentials 3 Greg Sandfort is a prominent member of the greater Nashville area, where the Company’s headquarters are located and where the Board’s selections have historically been biased ▪ Sandfort was among the most highly compensa
Slide 119: Table of Contents
Table of Contents 1 Executive Summary 2 2 Case for Change 35 3 Governance and Compensation Issues 92 4 Legion’s Highly Qualified Nominees 119 5 Value Creation Ideas 131 6 Appendix 170 FY refers to fiscal year (FY 20 is the year ended February 1st, 2020) 119 CONFIDENTIAL & PROPRIETARY
Slide 120: Genesco's Board Requires A Further Refresh
Section Genesco’s Board Requires A Further Refresh 4 ▪ Legion's nominees have key skillsets that remain lacking following recent Board refresh: capital allocation, ESG, turnaround, and marketing ▪ Legion’s nominees have spent substantial time strategizing on how to materially improve shareholder ret
Slide 121: Legion's Nominees Have the Right Mix of Skills and Experience
Section Legion’s Nominees Have the Right Mix of Skills and Experience 4 Marjorie L. Bowen Margenett Moore-Roberts Corporate governance and qualified NYSE and Recognized leader in inclusion and diversity with NASDAQ financial expert with 20-year career in experience across data & technology, digital
Slide 122: Our Nominees Bring a Relevant Track Record of Success
Section Our Nominees Bring a Relevant Track Record of Success 4 “My career has always been focused on driving shareholder value. I have nearly two decades of experience as an investment banker who specialized on advising boards of directors on how to first understand what drives, and then how to max
Slide 123: Legion Partners' Nominee: Marjorie L. Bowen
Section Legion Partners’ Nominee: Marjorie L. Bowen 4 We believe that Ms. Bowen’s extensive board experience across 10 companies, including significant capital allocation and corporate governance experience, coupled with her investment banking and financial expertise would make her a valuable asset
Slide 124: Marjorie L. Bowen – Refocused GCO via Sale of Lids
Section 4 Marjorie L. Bowen – Refocused GCO via Sale of Lids Ms. Bowen previously served a one-year term as an independent director of Genesco from 2018 to 2019, when she actively monitored the successful sale process for the struggling Lids business, driving the Company to refocus on its core footw
Slide 125: Legion Partners' Nominee: Margenett Moore-Roberts
Section Legion Partners’ Nominee: Margenett Moore-Roberts 4 We believe that Ms. Moore-Roberts’ broad functional experience in operations, account management, customer service, product management, human resources and business strategy across a variety of industries, including digital media, technolog
Slide 126: Legion Partners' Nominee: Dawn H. Robertson
Section Legion Partners’ Nominee: Dawn H. Robertson 4 We believe that Ms. Robertson’s extensive experience in the retail industry and executive roles coupled with her service on corporate boards would make her a valuable asset to the Board ▪ Dawn H. Robertson is a proven retail executive with signif
Slide 127: Dawn Robertson – Successful Myer Turnaround
Section Dawn Robertson – Successful Myer Turnaround 4 As the former Managing Director of Myer Department Stores, the largest store in Australia, Ms. Robertson developed and executed a new strategy for the department store, achieved strong EBIT turnaround, spearheaded board-initiated sale process of
Slide 128: Legion Partners' Nominee: Hobart P. Sichel
Section Legion Partners’ Nominee: Hobart P. Sichel 4 We believe Mr. Sichel’s 25-year record of success in the retail, media, and financial service sectors, as well as his deep expertise in marketing, digital transformation, and corporate strategy, make him highly qualified to serve on the Board ▪ Ho
Slide 129: Hobart Sichel – Burlington Stores' Value Creation
Section Hobart Sichel – Burlington Stores’ Value Creation 4 As the former Chief Marketing Officer (CMO) at Burlington Stores, Bart was an integral member of the dedicated executive management team that turned the business around and took the company public – BURL stock price increased by ~6x over hi
Slide 130: Hobart Sichel – Burlington Stores Value Creation (Cont.)
Section Hobart Sichel – Burlington Stores Value Creation (Cont.) 4 During Bart’s tenure as CMO, advertising cost as a percentage of total revenue declined from 2.0% to 1.0% while fueling 30% compounding comparable store sales growth Burlington’s Compounding Comparable Store Sales Growth vs. Advertis
Slide 131: Table of Contents
Table of Contents 1 Executive Summary 2 2 Case for Change 35 3 Governance and Compensation Issues 92 4 Legion’s Highly Qualified Nominees 119 5 Value Creation Ideas 131 6 Appendix 170 FY refers to fiscal year (FY 20 is the year ended February 1st, 2020) 131 CONFIDENTIAL & PROPRIETARY
Slide 132: The Value Creation Opportunity
Section The Value Creation Opportunity 5 Simplify and improve Genesco to be the preferred teen destination for footwear and a strategic retail partner for brands Revive Growth Restore Profitability Reset Strategy and Transform Culture 1a 1b 2 3 Brand Partner Consumer Value Proposition: Proposition:
Slide 133: The Value Creation Opportunity (Cont.)
Section The Value Creation Opportunity (Cont.) 5 Reset Strategy and Restore Profitability Revive Growth Key Steps Transform Culture Journeys as a Strategic Reshape Cost Structure Refocus Company and Retail Partner and the 1 2 and Increase Capital 3 Transform Culture Preferred Consumer Efficiency Des
Slide 134: Reset Strategy: Strategic Reviews
Section The Value Creation Opportunity 5 1a Reset Strategy: Strategic Reviews Source: Legion Partners’ Estimates. Note: Status quo EPS of $4.58 reflects FY 2020 adjusted EPS as reported by the Company. Status quo (adjusted) EPS reflects FY 2020 Adj. Net Income divided by shares outstanding as of fis
Slide 135: Opportunity to Refocus via Non-Core Business Sales
Reset Strategy and Transform Culture Restore Profitability Revive Growth Section Opportunity to Refocus via Non-Core Business Sales 5 Rationalize Footwear Conglomerate Structure – we believe Genesco should conduct a full strategic review over the next 18-24 months, and immediately reduce corporate c
Slide 136: Opportunity to Refocus via Non-Core Business Sales (Cont.)
Reset Strategy and Transform Culture Restore Profitability Revive Growth Section Opportunity to Refocus via Non-Core Business Sales (Cont.) 5 Genesco is expected to generate ~$280 million from the divestitures of Schuh and J&M Schuh J&M Adj. EBITDA $10 $24 Multiple 4x 10x Gross Proceeds from Busines
Slide 137: Transform Culture: Modern and Performance Driven
Section The Value Creation Opportunity 5 1b Transform Culture: Modern and Performance Driven 137 CONFIDENTIAL & PROPRIETARY
Slide 138: Improve Corporate Structure And Governance
Reset Strategy and Transform Culture Restore Profitability Revive Growth Section Improve Corporate Structure And Governance 5 Evaluate all strategic alternatives selling non-core businesses Eliminate management layers and reduce SG&A Implement new executive compensation structure that properly
Slide 139: Develop An Action Plan to Support Diversity and Inclusion
Reset Strategy and Transform Culture Restore Profitability Revive Growth Section Develop An Action Plan to Support Diversity and Inclusion 5 Increase diversity in product offerings and workforce, more inclusive marketing programming, and greater accountability through the institution of updated empl
Slide 140: Implement ESG Framework And Annual Reporting
Reset Strategy and Transform Culture Restore Profitability Revive Growth Section Implement ESG Framework And Annual Reporting 5 Genesco should implement ESG framework and annual reporting practices that incorporate the below to keep up with the standard in footwear industry Environment Social Govern
Slide 141: Lead in Customer Facing Sustainability
Reset Strategy and Transform Culture Restore Profitability Revive Growth Section Lead in Customer Facing Sustainability 5 We believe caring about the environment matters to Gen Z. – Journeys 2.0 will thread sustainability into each of the 3 phases of the product lifecycle, making visible to customer
Slide 142: Rectify Corporate Governance Shortcoming
Reset Strategy and Transform Culture Restore Profitability Revive Growth Section Rectify Corporate Governance Shortcoming 5 ▪ Implementation of majority vote standard – 53% of Russell 3000 companies have a majority vote standard ▪ Separation of Chairman and CEO roles – 63% of Russell 3000 compan
Slide 143: Improve Investor Relations
Reset Strategy and Transform Culture Restore Profitability Revive Growth Section Improve Investor Relations 5 ▪ Genesco needs a comprehensive investor presentation ▪ Host annual Investor/Analyst Day ▪ Set 3-year goals – revenue growth, profitability and ROIC ▪ Improve segment financial discl
Slide 144: Tie NEOs' Compensation Structure to KPIs
Reset Strategy and Transform Culture Restore Profitability Revive Growth Section Tie NEOs’ Compensation Structure to KPIs 5 Current Plan A Better Plan ▪ Base Salary ▪ Base Salary ▪ Annual Incentive Bonus o Sales ▪ Annual Incentive Bonus o EBITDA margin o Overly complicated EVA structure o Free cash
Slide 145: Restore Profitability: Reshape Cost Structure and Increase Capital Efficiency
Section The Value Creation Opportunity 5 2 Restore Profitability: Reshape Cost Structure and Increase Capital Efficiency Source: Legion Partners’ Estimates. Note: Status quo EPS of $4.58 reflects FY 2020 adjusted EPS as reported by the Company. Status quo (adjusted) EPS reflects FY 2020 Adj. Net Inc
Slide 146: Improve Inventory Turns
Reset Strategy and Transform Culture Restore Profitability Revive Growth Section Improve Inventory Turns 5 Journeys should implement better practices to improve inventory turns by 0.5x to match Foot Locker (FL) and Designer Brands (DBI) Inventory turns (COGS / inventory) 8.5x Footwear Retailers Medi
Slide 147: Increase Vendor Direct Fulfillment
Reset Strategy and Transform Culture Restore Profitability Revive Growth Section Increase Vendor Direct Fulfillment 5 Journeys should test to increase vendor direct fulfillment, which will not only help expand assortment, but also help the bottom line by reducing working capital requirements Top-Lin
Slide 148: Reduce Excessive Corporate Spending
Reset Strategy and Transform Culture Restore Profitability Revive Growth Section Reduce Excessive Corporate Spending 5 ▪ Genesco has a bloated corporate structure o The level of corporate costs that are not allocated back to business units at Genesco is a staggering sum of nearly $40 million per yea
Slide 149: Reduce Store Rent
Reset Strategy and Transform Culture Restore Profitability Revive Growth Section Reduce Store Rent 5 Review every store lease for opportunities to reduce rent and accelerate the move to a variable structure o Benefits of a variable lease include adopting a variable cost structure, providing comfort
Slide 150: Unlock Value Trapped in Real Estate
Reset Strategy and Transform Culture Restore Profitability Revive Growth Section Unlock Value Trapped in Real Estate 5 Genesco has substantial real estate value on the balance sheet that is being underutilized ▪ GCO could unlock the $141mm of frozen real estate value on its balance sheet through bus
Slide 151: Unlock Value Trapped in Real Estate (Cont.)
Reset Strategy and Transform Culture Restore Profitability Revive Growth Section Unlock Value Trapped in Real Estate (Cont.) 5 Real Estate Owned Value Per Value Location Sq. Ft. Segment Type Realize Value Through Sq. Ft. ($mm) Bathgate, Scotland 244,644 Schuh Distribution warehouse $86 $21 Sale with
Slide 152: Revive Growth: Journeys Will Be Preferred Teen Destination
Section The Value Creation Opportunity 5 3 Revive Growth: Journeys Will Be – For Customers: Preferred Teen Destination for Footwear For Brands: Strategic Retail Partner Source: Legion Partners’ Estimates. Note: Status quo EPS of $4.58 reflects FY 2020 adjusted EPS as reported by the Company. Status
Slide 153: Improve Journeys' Value Proposition
Reset Strategy and Transform Culture Restore Profitability Revive Growth Section Improve Journeys’ Value Proposition 5 Leverage Journeys’ differentiation from existing retail landscape with its otherwise hard-to-reach teens and kids shoe buying audience and bring the most popular footwear brands to
Slide 154: Re-Engineer Journeys' Ecosystem
Reset Strategy and Transform Culture Restore Profitability Revive Growth Section Re-Engineer Journeys’ Ecosystem 5 Build a high engagement model and elevate customers’ experience whenever, wherever, and however they shop, with tactical growth initiatives outlined in the following pages Store Digital
Slide 155: Optimize Journeys' Store Base in US
Reset Strategy and Transform Culture Restore Profitability Revive Growth Section Optimize Journeys’ Store Base in US 5 Current top customers underpenetrated – disciplined growth and rotation opportunities available supervised by the Board Location Types Of The 1,167 Malls in US, Journeys is in 677 M
Slide 156: Improve Sales By Leveraging Store Base – BOPUS
Reset Strategy and Transform Culture Restore Profitability Revive Growth Section Improve Sales By Leveraging Store Base – BOPUS 5 Journeys should have BOPUS which will not only help top-line by increasing both foot traffic and customer satisfaction, but also reduce shipping costs and offset the digi
Slide 157: Improve Sales By Leveraging Store Base – Same-Day Delivery
Reset Strategy and Transform Culture Restore Profitability Revive Growth Section Improve Sales By Leveraging Store Base – Same-Day Delivery 5 Journeys should give customers the option to get same-day delivery through partnerships, as GenZ’s shopping decisions increasingly depend on shipping time and
Slide 158: Expand Product Assortment
Reset Strategy and Transform Culture Restore Profitability Revive Growth Section Expand Product Assortment 5 There is a strong customer preference for many brands not currently carried at Journeys “I wish Journeys had Nike” Current Journeys assortment: Athletic Fashion Comfort / Casual Iconic Limite
Slide 159: Deepen Brand Relationships & Promote Partnerships
Reset Strategy and Transform Culture Restore Profitability Revive Growth Section Deepen Brand Relationships & Promote Partnerships 5 Journeys will work with brands to ensure supply of popular products and provide exclusive SKUs to customers, as well as embrace brand and marketing partnerships that c
Slide 160: Embrace Personalization
Reset Strategy and Transform Culture Restore Profitability Revive Growth Section Embrace Personalization 5 Journeys should tailor its communications with customers and offer personalized recommendations of what they should buy Learn from Peers Personalized Homepage –A Thousand People, A Thousand Fac
Slide 161: Improve Web Experience
Reset Strategy and Transform Culture Restore Profitability Revive Growth Section Improve Web Experience 5 Journeys.com needs to offer features including product videos, gift options and BOPUS that cater to the growing trend of customers buying online Learn from Peers Recomm- endations on The Same Sc
Slide 162: Introduce Mobile App
Reset Strategy and Transform Culture Restore Profitability Revive Growth Section Introduce Mobile App 5 Journeys needs to offer a mobile app that allows teenagers to shop anywhere and anytime they want, and provides a thorough omnichannel experience that incorporates BOPUS, same day delivery and the
Slide 163: Design and Implement A Loyalty Program
Reset Strategy and Transform Culture Restore Profitability Revive Growth Section Design and Implement A Loyalty Program 5 I wish Journeys offered a loyalty program Program Kick Coin Free Shipping a Free standard shipping 73% of customers surveyed would join a loyalty program if Journeys offered one
Slide 164: Develop Stronger Marketing Initiatives
Reset Strategy and Transform Culture Restore Profitability Revive Growth Section Develop Stronger Marketing Initiatives 5 ▪ Journeys should focus on improving key word search results to achieve better placement ▪ Social engagement should be improved as Journeys was late to key platforms like YouTube
Slide 165: Penetrate GenZ's Favorite Social Media Platforms
Reset Strategy and Transform Culture Restore Profitability Revive Growth Section Penetrate GenZ’s Favorite Social Media Platforms 5 Journeys needs to upgrade its social media presence – Journeys should build and establish a presence on GenZ’s favorite social media platform Snapchat and adopt authent
Slide 166: Increase Payment Options That Are Teen-Friendly
Reset Strategy and Transform Culture Restore Profitability Revive Growth Section Increase Payment Options That Are Teen-Friendly 5 Journeys should offer teens’ favorite payment options in-store like Venmo, and roll out mobile POS to keep up with other teen retailers who adopted the trend more than 3
Slide 167: GCO Needs to #GoForward
Section GCO Needs to #GoForward 5 We urge fellow stockholders to vote the WHITE proxy card to elect strong and proven industry leaders to the Board ▪ Legion’s nominees will seek to: ✓ Restore profit and revive growth of Journeys through various tactical initiatives such as reducing corporate expense
Slide 168: Disclaimer – Important Information
Disclaimer – Important Information The materials contained herein (the “Materials”) represent the opinions of Legion Partners Holdings, LLC and its affiliates (collectively, “Legion Partners”, “Legion” or “we”) and are based on publicly available information with respect to Genesco Inc. (the “Compan
Slide 169: Legion Partners
U; LEGION PARTNERS
Slide 170: Table of Contents
Table of Contents 1 Executive Summary 2 2 Case for Change 35 3 Governance and Compensation Issues 92 4 Legion’s Highly Qualified Nominees 119 5 Value Creation Ideas 131 6 Appendix 170 FY refers to fiscal year (FY 20 is the year ended February 1st, 2020) 170 CONFIDENTIAL & PROPRIETARY
Slide 171: GCO's Misleading Attacks on Our Nominees Don't Hold Up
Section GCO’s Misleading Attacks on Our Nominees Don’t Hold Up 6 In the Company’s June 18th letter, we believe the Board impugns its own credibility by misrepresenting our nominees’ exceptional credentials and omitting important information pertaining to their successful track records Genesco’s Misr
Slide 172: GCO's Board Power Has Been Concentrated
Section GCO’s Board Power Has Been Concentrated 6 The concentration of power has reached an unparalleled level with Diamond holding board leadership positions for more than 15 years Lead Director and Chair of Nominating Chair of Compensation Committee and Governance Committee Audit Committee 2021 Jo
Slide 173: What's Broken? Social Engagement
Section What’s Broken? Social Engagement 6 Genesco reacted slowly to social engagement trends compared to most peers H2 2005 H1 2006 H2 2006 H1 2007 H2 2007 H1 2008 H2 2008 H1 2009 H2 2009 H1 2010 Post 2010 Late to Twitter H2 2005 H1 2006 H2 2006 H1 2007 H2 2007 H1 2008 H2 2008 H1 2009 H2 2009 H1 20
Slide 174: What's Broken? Social Engagement (cont.)
Section What’s Broken? Social Engagement (cont.) 6 Facebook followers (000’s) on the lower end among peers Facebook Followers (000’s) 35,598 32,936 29,088 22,945 6,257 5,481 4,992 2,827 2,348 2,196 1,734 1,718 1,573 601 498 307 105 103 Nike Walmart Amazon Target Foot Dick's Nordstrom DSW Zappos Fini
Slide 175: What's Broken? Search Execution
Section What’s Broken? Search Execution 6 GCO websites aren’t anywhere on first three screens when searching “Dress Shoes” Screen 1: DSW, Macy’s, Nordstrom, Screen 2: Cole Haan, Rack Room, Screen 3: JCPenney, Express, JoS. A. Allen Edmonds, Nordstrom Rack TOMS, Clarks, Vionic, Thursday Boots Bank, B
Slide 176: What's Broken? Search Execution (cont.)
Section What’s Broken? Search Execution (cont.) 6 Journeys’ website isn’t anywhere on first two screens when searching “Men’s Athletic Shoes” Screen 1: Amazon, Zappos, Dick’s, DSW, Kohl’s, Finish Line, Academy, Shoe Carnival, Nordstrom, Rack Room Shoes Screen 2: JCPenney, Nordstrom, Overstock, 6pm,
Slide 177: What's Broken? Web Experience Not Competitive (FL)
Section What’s Broken? Web Experience Not Competitive (FL) 6 Footlocker.com offers a broad selection of products and customer-friendly features including fit tips and width information 5.6k Reviews Broad Color Selection Width Information Promotes Klarna at Only One Place Fit Tips 5 Pictures Shot at
Slide 178: What's Broken? Split Shipments – Order #1
Section What’s Broken? Split Shipments – Order #1 6 An order of 5 SKUs led to 4 store-fulfilled shipments Destination 4 Portland, OR Shipping Facility Hanford, CA 1 3 2 Montebello, CA Los Angeles, CA 178 Source: Company Websites, Order Date 01/13/2021 CONFIDENTIAL & PROPRIETARY Note: Product picture
Slide 179: What's Broken? Split Shipments – Order #2
Section What’s Broken? Split Shipments – Order #2 6 An order of 7 SKUs led to 4 shipments, including 3 store-fulfilled shipments and 1 warehouse- fulfilled shipment Destination Shipping Facility 1 Pacoima, CA Los Angeles, CA Nashville, TN 2 3 4 Carson, CA Memphis, TN 179 Source: Company Websites, Or
Slide 180: What's Broken? Split Shipments – Order #3
Section What’s Broken? Split Shipments – Order #3 6 An order of 7 SKUs led to 5 shipments, including a long sleeve tee in an unnecessarily large box Destination Excessive Shipping Facility packaging! Grove city, OH 5 Nashville, TN 3 1 Tracy, CA 4 Fresno, CA 2 Shafter, CA Los Angeles, CA Excessive pa
Slide 181: Store Fleets Utilize Different Property Types
Section Store Fleets Utilize Different Property Types 6 The real estate strategies and geographies of Genesco’s retail stores are very different between the two business models Store Counts: 1,168 127 180 10% 1% 38% Outlet 65% Airport 13% 1% (Street) 89% Street Malls 48% 35% Journeys Schuh J&M Store
Slide 182: Journeys' US Mall Quality
Section Journeys’ US Mall Quality 6 Mall Quality Dead Anchor Tenants 300 289 266 256 Highest Risk of Mall Closure Highest Risk of Mall Closure 114 62 49 18 Tier A Tier B Tier C Tier D Zero Dead One Dead Anchor Two Dead Three+ Dead Anchor Anchors Anchors Highest Lowest Quality Quality Journeys has ab