Genesco Plans to Up Door Count Aggressively

NEW YORK — Genesco Inc. is ramping up expansion plans for its retail network after a better-than-expected first-quarter performance.

The firm’s chairman, president and CEO, Robert Dennis, said in a conference call with analysts, “We remain excited about Canadian expansion opportunities for Lids Sports, Journeys and Johnston & Murphy, with 30 new stores planned across all our concepts for this year. [We’re also looking] for further U.S. expansion in the Lids Locker Room and Clubhouse space.” Similarly, the Schuh group is slated to bow twice as many new doors, thanks to the chain outperforming expectations through May, even as the business climate in the U.K. has weakened.

“We are moving quickly to take advantage of a weak real estate market by accelerating store openings [to 16],” said Dennis, noting that the additions will be concentrated in the southern U.K.

Explaining Schuh’s success, he added, “Product is a huge chunk of it, but … we have a terrific merchant team that is executing and figuring out how to position that store prop- erly. They are getting access to all the right brands, [and] our team here in the U.S. is getting them a little extra access to brands [and to some] prod- uct that is exclusive with Journeys here and is now exclusive to Schuh in the U.K.”

Looking to the back half, Dennis noted, “Our concern [is that] the consumer started spending with borrowed money again and that can’t go on forever. We’re cautious on that basis, but we continue to have good leverage on our business, and the low-single-digit comps [help us] improve operating margins year- over-year.”


Meanwhile, analysts, calling Genesco’s full-year guidance conserva- tive, sounded upbeat on Journeys’ continued contribution to the top and bottom lines after the group comped up 12 percent in the first quarter.

Mitch Kummetz, analyst at Baird & Co., said, “Genesco is poised to deliver double-digit earnings growth over the next few years [because] there is opportunity to improve the operating margin at Journeys, driven by comp-store gains and the negotiation of better rents.”

Scott Krasik, analyst at BB&T Capital Markets, added, “Journeys would likely be the driver [of potential upside to expectations] as it continues to benefit from the popularity of boat shoes, casual footwear and skate in the fall.”

Genesco handily topped estimates in the first quarter, earning a net income of $20.6 million, or 85 cents a share, an increase from $14.8 million, or 63 cents, in the same period a year ago.

Net sales surged 24.6 percent to $600.1 million, from $481.5 million, reflecting the addition of sales from Schuh and a comps increase of 9 percent. Analysts were expecting a net income of 74 cents a share on revenue of $577.1 million. Genesco now expects full-year EPS to come in between $4.70 and $4.82, up from its previous range of $4.58 to $4.70. It ended the quarter with $54.8 million in cash and equivalents, and $25.4 million in long-term debt.

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