Journeys Powers Genesco to Solid Q4 Finish

As Genesco Inc. moves closer to offloading its struggling Lids Sports Group business, its hero business Journeys continues to power the firm forward.

Reporting results for the fourth quarter, ended Feb. 3, Genesco posted a sales gain of 5 percent year over year to $930 million, besting Wall Street’s forecast for sales of $903 million. Overall comparable sales for the company — which announced in February its plans to divest Lids Sports after several periods of losses and deceleration at the division — rose 1 percent, boosted by an 11 percent gain at Journeys and hurt by a 14 percent tumble at Lids. Meanwhile, comps at Schuh Group increased 1 percent, and Johnston & Murphy rose 4 percent. (Overall, comparable sales for the company included a 1 percent decrease in same-store sales and a 15 percent increase in e-commerce sales.)

Genesco’s adjusted profits were flat year over year at $41.5 million, or $2.15 per diluted share — but handily topped market watchers’ bets for diluted earnings per share of $2.09. Reported profits were $56.3 million, or $2.91 per diluted share.

Genesco chairman, president and CEO Robert Dennis said a strong performance in the firm’s U.S. retail footwear businesses during the quarter was offset by specific challenges in other divisions.

“Fiscal 2018 was a difficult year as Journeys managed through a fashion rotation up until the start of back-to-school, Lids faced a number of specific marketplace headwinds, and consumers shifted their shopping from brick-and-mortar to online at an accelerated pace,” he added. “While comparable sales were flat, our profitability suffered, due primarily to deleverage from negative store results coupled with higher expenses from our omnichannel initiatives.”

Looking ahead, Dennis said he believes Genesco’s near-term performance will “continue to be shaped by the divergence in our two biggest businesses, although not to the degree we experienced in the fourth quarter.”

“Like our other businesses, Lids is subject to fashion cycles, and headwear is currently between trends, which we believe positions the business for the type of recovery that Journeys is now enjoying once a new fashion driver emerges. Though we don’t know the timing of when this will occur, history points to an eventual rebound,” he noted. “While we believe that Journeys’ current product assortment is well-positioned in terms of brands and styles to drive continued growth, this timing uncertainty, combined with generally weak store traffic across retail, causes us to be cautious about the current year.”

In fiscal 2019, the firm expects adjusted diluted EPS in the range of $3.05 to $3.45.

At market open, Genesco’s shares were down 2.1 percent to $39.65.

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