Genesco Inc. - Value


How are the consumers holding up? We're about to find out as Genesco Inc. ( GCO ) is scheduled to report fiscal first quarter results on May 23. Shares of this Zacks #1 Rank (Strong Buy) have been hot, trading near 5 year highs. But there's plenty of value as GCO has a P/S of 0.7.

Genesco has been involved in retail since 1924 so its seen its share of both good and bad economies. Headquartered in Nashville, it now operates 2,380 footwear and headwear retail stores in the U.S., Canada and Puerto Rico.

Its brands include Journeys, Journeys Kidz, Hat Zone, cap Connection and Head Quarters. It also designs footwear for its own Johnston & Murphy brand and for the licensed Dockers brand.

Great Earnings Surprise Track Record

On Mar 2, Genesco reported fiscal fourth quarter 2012 results and once again surprised on the Zacks Consensus Estimate. Earnings were $1.97 compared to the consensus of just $1.67.

It was the 6th consecutive beat but the company's track record is even better than that. It actually hasn't missed on the estimate since all the way back in early 2008. It has met estimates 3 times in between there though.

Sales rose 29% to $723 million from $560 million in the year ago quarter.

Same store sales rose an impressive 12%, led by a 14% increase in the Journeys Group followed by a 13% rise in the Lids Sports Group's comparables. These are the company's largest segments.

Operating margins also rose to above 10% for the first time in 5 years as Genesco was able to sell merchandise at full price in both its stores and on its web site.

Genesco Expects Double Digit Earnings Growth In Fiscal 2013

In its fourth quarter press release, Genesco said it saw fiscal 2013 starting well. In February, same store sales rose 13%.

While the company didn't expect sales to remain that hot for the entire first quarter, it still expected a solid fiscal 2013.

Earnings were expected in the range of $4.58 to $4.70, a 12% to 15% increase over last year.

Zacks Consensus Estimates Rise

Over the last 90 days, analysts have adjusted their estimates to get in-line with the company's outlook. But one estimate was just revised higher in the last week, just before first quarter earnings results. That's a bullish sign.

The 2013 Zacks Consensus Estimate has risen 6.6% to $4.69 in the last 90 days.

Still Has Value

Even though shares have been hot, there's still value in Genesco.

The company has a forward P/E of 14.3 which is just under the 15x cut-off I use for value. But that's also cheaper than its peers which trade with an average of 14.6.

Genesco also has an attractive price-to-book ratio of 2.3. A P/B under 3.0 usually indicates value.

It's P/S ratio, which is under 1.0, also signals value. A P/S under 1.0 can mean a company is undervalued.

We'll see just how fiscal 2013 is shaping up this week when Genesco reports first quarter results. The Zacks Consensus is looking for 74 cents. Stay tuned.

Tracey Ryniec is the Value Stock Strategist for . She is also the Editor of the Turnaround Trader and Insider Trader services. You can follow her on twitter at @TraceyRyniec .

GENESCO INC (GCO): Free Stock Analysis Report
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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 , Stocks

Referenced Stocks: GCO

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