Genesco is the latest company to lower its guidance for the year after inflation impacts consumer behavior in the second quarter.
The Nashville, Tenn.-based company reported net sales of $535.3 million in the second quarter of 2023, a decrease of 4% from $555.2 million last year and an increase of 10% from $487 million in Q2 of fiscal 2020, prior to the pandemic.
The results caused a negative impact on Wall Street, with Genesco’s stock down 14.35% on Thursday.
On the company’s earnings call on Thursday, CEO Mimi Vaughn told analysts that stronger-than-expected results in its Schuh and Johnston & Murphy businesses helped overcome some softness late in the quarter at Journeys, due to an increasingly challenging macro environment.
By division, overall sales in the second quarter at Journeys were down 7% compared to last year year, with Schuh down 4% and Licensed Brands down 10%. Johnston & Murphy was the only business unit in the black this quarter, with overall sales up 22%.
Vaughn credits Johnston & Murphy’s success to the brand’s recent repositioning. “Our efforts to reimagine Johnston & Murphy for a more casual, more comfortable, post-pandemic environment is delivering outstanding results,” Vaughn said. “With return to the office figures well below 50%, the brand is experiencing this growth from a shift in strategy from not just the footwear consumers’ need for work, but for footwear and apparel they desire for everyday life driving market share gains.” Vaughn added that nine of the top 10 SKUs in Johnston & Murphy’s direct-to-consumer business in Q2 were casual and casual athletic styles.
Over at Journeys, Vaughn noted that the company is seeing some evidence of the Journeys’ consumer getting squeezed by inflation, making fewer trips to the mall and waiting for tax-free events to shop. These factors are delaying purchases until the time of need and result in customers trading down to more affordable price point footwear.
“The strength of Journeys vendor relationships and the breadth of its assortment have allowed the team to quickly pivot its current offering to more excessively priced products that aligns with the current more budget-conscious consumer,” the CEO said. Vaughn reiterated on the call that the current fashion cycle is “shifting away” from fashion athletic more into casual, which Journeys is continuing to push as a bigger part of its assortment.
Looking ahead, the company has revised its fiscal 2023 full year guidance in large part to reflect the trends it’s currently seeing in Journeys. Genesco now expects sales to be down 3% to flat, compared to last year, versus prior guidance of up 1% to 3%.
“We as a company are very good at navigating challenges and will manage through this period of high inflation and a pressured consumer much in the way we managed and emerged from the pandemic, a stronger and a more profitable company,” Vaughn added.