Genesco Inc. is the latest shoe-store holding company to fall victim to a sluggish consumer and tepid retail market.
The Nashville, Tenn.-based company, which owns labels such as Journeys, Schuh and Lids, said it was cutting forecasts after sales dropped in the quarter. The firm’s share priced dipped as much as 21 percent in premarket trading and 28 percent when the markets opened Thursday morning.
Genesco reported that for the quarter ending July 30, net income was $14.6 million, or 72 cents per diluted share, compared to the year-ago quarter when the firm made $7.6 million, or 32 cents per diluted share. Analysts expected 27 cents per diluted share.
Those numbers didn’t disguise a very tough quarter for Genesco’s sales, though. Revenue hit $625.6 million, a 4.6 percent decline compared to second quarter last year, when sales were $655.5 million. Wall Street expected the firm to report sales of at least $642.5 million.
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In a call Thursday, executives said the firm struggled to find the right mix of product at some of its stores and that shoppers arrived for back-to-school much later than expected. Youth and teen store Journeys, one of the powerhouse labels for the company, saw comps dip 4 percent. The contraction, said executives, was in part to a sudden shift away from the trends that had fueled the store. The Genesco team didn’t expand on the trends that hit them in particular.
“We have seen the Journeys‘ consumer shift away from several of the fashion trends that have helped fuel strong performance in recent years,” Robert Dennis, president and CEO of Genesco, said Thursday. “We are also seeing strong consumer interest in rapid growth and brands that are not yet at a size in our assortment to fully offset the declines in the weaker style. We can see clearly that this is due to a fashion shift in Journeys‘ new styles, something Journeys has experienced many times before, but the speed and the intensity of the shift in this instance are more pronounced than we have ever seen in the past.”
Similarly, sister store Schuh, based in the U.K. also struggled in Q2. After a solid start, the store was under pressure after shoppers stayed home because of Brexit jitters and currency fluctuations. Executives said comps at Journeys slid in the second quarter starting in May, and they carried into back-to-school. The firm now expects Journeys and Schuh to both have negative comps for the fiscal year 2017.
Oddly enough, Lids Group, Genesco’s hat chain — which has struggled recently — gained momentum. While comps were flat, margins were up as the store relied less heavily on promotions. Johnston & Murphy continued to do well for the company.
Genesco adjusted earnings per share for fiscal 2017 to range of $3.80 to $4, down from a previously projected $4.80 to $4.90 per share.