“We are very pleased with the comparable-sales increase we delivered in the third quarter. Our results were driven by strong full-price selling combined with higher promotional activity in line with our strategy to right-size the Lids Sports Group’s inventory levels,” said Robert Dennis, Genesco’s chairman, president and CEO, in a release. “The pressure on gross margins from our clearance actions offset some of the earnings upside from our solid top-line performance.”
Although comparable sales at Lids grew 12 percent in the quarter, the firm’s turnaround efforts for the brand — which include accelerated promotional activity — will continue to weigh on margins, Dennis added.
“Recent comparable-sales trends have been volatile, and we expect that the retail market will remain promotional through the balance of the holiday season,” Dennis said. “Given these factors, in combination with the incremental promotional activity we now plan at Lids Sports Group through the fourth quarter to conclude its inventory reduction initiative and to position it for the freshest possible start to the next fiscal year, we are revising our full-year outlook. “
Among the other factors contributing to a lower sales outlook, the CEO said, was a slow start to the fourth quarter, which eventually gained momentum over Black Friday weekend. Fourth-quarter consolidated comparable sales are up 6 percent through Dec. 1, 2015, he added.
Journeys Group continues to be a standout for Genesco. Its comparable sales climbed 6 percent in Q3.
At press time, Genesco’s share price had advanced more than 9 percent.
Net Income: Reported earnings from continuing operations for the third quarter, ended Oct. 31, 2015, totaled $32.9 million, an increase of 14.2 percent over earnings of $28.8 million during last year’s same period.
EPS: Reported diluted earnings per share were $1.43, a solid jump over the prior year’s reported diluted EPS of $1.21.
Net Revenue: Net sales rose 7 percent, to $774 million, from $723 million in the comparable quarter.
Adjustments: Adjusted earnings from continuing operations were $32.2 million, or $1.40 per diluted share, compared with earnings from continuing operations of $30.3 million, or $1.28 per diluted share, in the year-ago quarter.
Hit, Miss or Beat: Genesco beat Wall Street’s estimates for revenue and EPS. Analysts polled by Yahoo Finance had predicted revenue of $760.4 million and EPS of $1.30.
Looking Ahead: Genesco now expects adjusted diluted EPS to be in the range of $4.50 to $4.60, compared with previously issued guidance of $4.70 to $4.80. This guidance now assumes comparable-sales increases in the 5 percent to 6 percent range for the full year.