Genesco’s Q4 Comps Climb, Guidance Lowered On Pressure At Lids & Schuh

While total comp sales have climbed an impressive 5 percent in Q4 to-date, efforts to reduce inventory at Lids Sports Group and “challenges” in the Schuh Group business have led Genesco Inc. to lower its guidance for the fiscal year, the company said Monday.

Genesco Chairman, President and CEO Robert Dennis said the firm is making “a final, aggressive push” to liquidate excess inventory by yearend at its once-struggling hatmaker, Lids Sports Group.

Genesco now expects adjusted earnings per diluted share for the fiscal year ending Jan. 30, 2016, to be in the range of $4.30 to $4.40 per share, from the previous range of $4.50 to $4.60.

Total comps at the firm’s family-footwear chain, Journeys, grew 7 percent quarter-to-date, while comps at Schuh Group declined 2 percent and Lids advanced 5 percent.

We are pleased with the top-line performance of all our North American businesses during a generally difficult holiday selling season. We are especially pleased with the strong performance of Journeys, which delivered another exceptional holiday season,” Dennis said.

Analysts have been increasingly upbeat on Genesco — highlighting, in particular, the strength of Journeys against a generally tougher economic backdrop in the latter part of 2015.

[Comps] at Journeys increased 7 percent in 4Q16, on top of a 16 percent increase in 4Q15, despite the warmer winter, dismal mall traffic and industrywide promotional environment. Journeys’ business will continue to be on fire because it is trend-right,” wrote Sterne Agee CRT analyst Sam Poser. “… We believe the strength in the quarter was due to fashion-athletic and casual/retro footwear.”

Poser added that brands such as Vans, Converse, Dr. Marten’s, Timberland and Ugg were likely strong sales drivers in the quarter.

CL King & Associates analyst Steve Marotta said that while markdowns at Lids negatively impact Q4 earnings expectations, Genesco’s efforts to right-size inventory should set the firm up well for the next fiscal year.

Under normal circumstances, another reduction in earnings guidance would be viewed poorly; however, we are more concerned with how Lids ends the current year from an inventory perspective, as opposed to the consolidated earnings pressure related to that purge,” Marotta wrote. “We believe this action keeps the division on track to end the year cleanly.”

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