Zacks Investment Research downgraded
) to a Zacks Rank #5 (Strong Sell) on Sep 28. Disappointing
second quarter fiscal 2014 results and a tempered fiscal 2014
outlook led to the downgrade.
Why the Downgrade?
On Aug 29, Genesco reported dismal second quarter of fiscal
2014 (ending Aug 3, 2013) results. Though earnings of 56 cents
per share grew 12% year over year, it missed the Zacks Consensus
Estimate by 9.7%. We believe a challenging sales environment and
lower comparable store sales (comps) growth led to the earnings
Genesco's sales increased 5.7% year over year to $574.7
million, but missed the Zacks Consensus Estimate by 13.7%.
Comparable store sales declined 2% in the quarter due to lower
consumer traffic. The comparable store sales improvement of 7% in
Johnston & Murphy Retail was more than offset by the decline
in comps in The Lids Sports Group, Journeys Group and Schuh
Lower-than-expected sales were due to challenging retail/sales
environment as consumers were more conscious about their spending
habits and avoided unnecessary expenses.
The 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.
Genesco also began the back-to-school (August-September) on a
disappointing note; recording a comp sales decline of 3% as of
Aug 24. Based on a sluggish start to the third quarter, Genesco
expects comparable store sales to fall about 1%-2% in the third
quarter fiscal 2014.
Genesco also reduced its guidance for fiscal 2014 and now
expects adjusted earnings per share in the range of $5.20 to
$5.30 per share compared with the prior range of $5.57 to $5.67
per share. The company expects comparable store sales increase in
the low single-digit range for fiscal 2014.
This footwear retailer witnessed sharp downward estimate
revisions after announcing its second quarter fiscal 2014
results. All the estimates for the third quarter and fiscal 2014
declined over the past 60 days. The Zacks Consensus Estimate for
the third quarter decreased 11.4% and that for fiscal 2014 went
down 7.2% over the last 60 days.
Like Genesco, other retailers like
Abercrombie & Fitch Co
American Eagle Outfitters Inc
) have reported declines in comparable store sales and expect
continued weakness in back-to-school sales.
AMER EAGLE OUTF (AEO): Free Stock Analysis
ABERCROMBIE (ANF): Free Stock Analysis Report
AEROPOSTALE INC (ARO): Free Stock Analysis
GENESCO INC (GCO): Free Stock Analysis Report
To read this article on Zacks.com click here.