Genesco Posts Major Profit Gains, Beats Street In Q2

Journeys
A Journeys store front.
Courtesy.

With across the board comparable sales growth and improving momentum at the once-faltering Lids Sports Group, Genesco Inc. upstaged Wall Street’s estimates for profits and revenues in its second quarter.

The Nashville, Tenn.-based firm’s share price soared following the earnings release and was up as much as 7.75 percent at press time.

“We had healthy top line growth despite a later than usual start back to school and the move of sales tax holidays in several states which shifted some sales into the third quarter versus last year,” said Robert Dennis, Genesco’s chairman, president and CEO, during the firm’s Q2 conference call. “Higher than anticipated comps allowed us to improve adjusted earnings per share to 36 cents compared to 34 cents last year despite the expected drag on gross margin from our ongoing aggressive efforts to right-size inventory in the Lids Sports Group.”

It was Journeys, Dennis said, that had to shoulder the biggest impact from the shift in the timing of the back-to-school season and Labor Day holidays. Comps, the CEO said, accelerated in May and June compared to the first quarter trends and then flattened during the end of July as a result of the shifts.

Despite headwinds, Genesco pulled off 7 percent total comparable sales growth in the second quarter with a 4 percent increase at Journeys; an 8 percent increase at Lids; an 8 percent increase in the Schuh Group; and a 10 percent increase in the Johnston & Murphy Group.

Comparable sales for the company reflected a 5 percent increase in same store sales and a 26 percent increase in e-commerce sales.

Net Income: Net earnings, for the quarter ending Aug. 1, 2015, improved 60 percent year-over-year to $7.5 million from the comparable quarter when earnings were $4.7 million.

EPS: Earnings per diluted share rose 12 cents year-over-year to 32 cents from the comparable quarter when diluted EPS were 20 cents.

Net Revenue: Revenues rose 7 percent to $656 million from the same year-ago quarter when revenues were $615 million.

Adjustments: Adjusted earnings from continuing operations were $8.5 million, or 36 cents per diluted share, compared to adjusted earnings of $8 million, or 34 cents per diluted share in the comparable quarter.

Hit, Miss or Beat: Genesco beat market watchers forecasts for revenues and EPS. Analysts polled by Yahoo Finance had predicted EPS of 24 cents and revenues of $650.7 million.

Executive Insights: “The third quarter got off to a good start. We feel good about our merchandise offerings and believe we’re well-positioned for the fall and holiday selling seasons. We also have a good line up of baseball teams that look to be headed for the playoffs. Looking ahead, however, we have somewhat less visibility on our overall sales in the third quarter than we usually do at this point in the year because of the later Labor Day. In the first three weeks of August, comp sales reaccelerated as anticipated especially at Journeys, but were impacted at the end of the month by the Labor Day weekend offset. We expect momentum to pick up again with the holiday this coming weekend.” –Dennis during the Q2 conference call.

Looking Ahead: Genesco reiterated its outlook for Fiscal 2016.