Analysts Cheer Genesco

Market watchers are upbeat on Genesco Inc.’s back half.

Although first-quarter revenue slipped at the Nashville, Tenn.-based firm, analysts noted that sales should continue to improve as the weather becomes more seasonal, and as comparisons get easier toward the latter part of the year.

Scott Krasik, analyst at BB&T Capital Markets, said, “Casual footwear should remain strong through back-to-school, which should help Journeys and Schuh. Schuh’s weakness in the quarter was primarily a traffic issue due to the cold spring in the U.K., [but] conversion was up and we expect [comparable-store sales] to further improve.”

Christopher Svezia, analyst at Susquehanna Financial, noted that Journeys returned to growth in May and appears well positioned moving forward after a challenging first quarter that was driven by later tax rebates and cool spring weather.

“The chain is on trend with its product offerings of casual and lifestyle footwear, and as a result should see sustained momentum moving into back-to-school. Comps are expected to remain positive in the second quarter and accelerate over the balance of the year,” he said.

In a conference call with analysts, Robert Dennis, Genesco’s chairman, president and CEO, said the Lids Group registered a negative comp of 6 percent in the first quarter.

“About half of our comp loss in the quarter was driven [by lower asking prices] with the balance being fewer units [sold]. Over the past several months, freshness in the category seems to have driven some demand back toward fashion fitted hats, [while we had to] become somewhat more price competitive in [snapback hats],” he said.

The Journeys Group saw comp sales fall 2 percent in the first quarter, but Dennis said, “Sales trends have been steadily improving since with positive comp sales for the combined March-April period and an increase of 4 percent in May through last Saturday. We expect the improvement to hold as we approach the very important back-to-school selling season.”

Schuh fell 11 percent, against a tough comparison of more than 20 percent growth in the first quarter of last year. The chain confronted unseasonably cold weather in the U.K. and ongoing economic challenges there.

Johnston & Murphy was a bright spot for the firm, growing 7 percent in the quarter, driven by higher-priced dress and dress-casual shoes.

For the first quarter ended May 4, Genesco earned $18.4 million, or 77 cents a share, compared with $20.6 million, or 85 cents, in the same period a year ago. Adjusted for deferred purchase price payments in connection with the acquisition of Schuh, earnings per share came in at 94 cents.

Total revenue slipped 1.5 percent to $591.4 million, from $600.1 million. Total comp sales fell 4 percent.

The firm expects full-year 2014 EPS to come in between $5.57 and $5.67, representing as much as a 12 percent increase over 2013 levels. This assumes a comp increase in the low single digits for the full year.

Genesco ended the quarter with $39.7 million in cash, compared with $54.8 million a year ago, and $53.3 million in debt, compared with $35.7 million a year ago.

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