Genesco Down to Strong Sell - Analyst Blog

By
A A A

Zacks Investment Research downgraded Genesco Inc ( GCO ) to a Zacks Rank #5 (Strong Sell) on Dec 13. Weak comps and margins in the third quarter coupled with a tempered fiscal 2014 outlook led to the downgrade.

Why the Downgrade?

Genesco has been reporting declining comps for the past several quarters. On Dec 6, 2013, during its third quarter fiscal 2013 conference call, Genesco slashed its fiscal 2014 outlook based on downward trend in comps and lower earnings reported in the third quarter. Genesco now expects adjusted earnings per share for fiscal 2014 to be in the range of $5.10 to $5.20 compared with the prior range of $5.20 to $5.30.

Genesco also began the fourth quarter on a disappointing note recording a flat comp for the five weeks ended Nov 2013.

During the third quarter Genesco reported a 1% decline in comps due to lower comps in most of its business segments. Operating margin also contracted 110 basis points due to higher selling, general and administrative expenses. Although both the bottom line and top line results were beat the Zacks Consensus Estimate, they declined year over year following restrained consumer spending in the country.

Genesco is facing tough retail conditions due to restrained consumer spending environment in the U.S. emanated from the recent hike in payroll taxes and higher gas prices. Besides taxes, weak pay and a tepid rate of hiring also curbed consumer spending leading to lackluster sales. Moreover, the company believes the gloomy consumer spending environment will not improve much in the next few quarters.

This footwear retailer witnessed sharp downward estimate revisions after the announcement of the third-quarter fiscal 2014 results. While the Zacks Consensus Estimate for the fourth quarter decreased 4.3% in the past 30 days that for fiscal 2014 went down 1.1%.

Some better-ranked stocks in the shoes & relative apparel sector are Sequential Brands ( SQBG ), Iconix Brand Group Inc. ( ICON ) and Anta Sports Product Ltd ( ANPDF ). All these stocks carry a Zacks Rank #2 (Buy).



ANTA SPORTS PRD (ANPDF): Get Free Report

GENESCO INC (GCO): Free Stock Analysis Report

ICONIX BRAND GP (ICON): Free Stock Analysis Report

SEQUENTIAL BRND (SQBG): Get Free Report

To read this article on Zacks.com click here.

Zacks Investment Research



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: ANPDF , GCO , ICON , SQBG

Zacks.com

Zacks.com

More from Zacks.com:

Related Videos

My Career No Longer Exists
My Career No Longer Exists          

Stocks

Referenced

Most Active by Volume

105,767,201
  • $46.30 ▲ 19.98%
80,574,036
  • $15.58 ▲ 1.56%
66,424,299
  • $3.46 ▲ 1.76%
42,459,394
  • $3.82 ▲ 0.79%
36,704,800
  • $13.98 ▼ 14.02%
35,625,113
  • $74.677 ▲ 1.31%
33,067,430
  • $29.26 ▼ 0.71%
32,374,580
  • $98.15 ▼ 0.23%
As of 7/30/2014, 04:04 PM