Genesco's Q1 Earnings Miss Ests, Revs Beat - Analyst Blog

Genesco Inc. ( GCO ), a retailer and wholesaler of branded footwear, apparel, and accessories, reported mixed results for the first quarter of fiscal 2015 wherein its top-line surpassed the Zacks Consensus Estimate while the bottom-line fell short of it.

The company's adjusted earnings declined 13.8% year over year in the first-quarter to 81 cents per share from continuing operations, and also came below the Zacks Consensus Estimate of 91 cents per share. The fall in bottom-line was mainly due to higher cost of sales and operating expenses partially offset by increased top-line performance.

On a reported basis, the company's earnings from continuing operations came in at 60 cents per share compared with 61 cents per share reported in the year-ago quarter.

Net sales for the quarter increased 6.3% year over year to $628.8 million and surpassed the Zacks Consensus Estimate of $621.0 million. The growth in the top line was mainly driven by improved consolidated comparable-store sales (comps) performance which includes same store sales and comparable e-Commerce and catalog sales.

The company reported a 1% rise in comps. On segment basis, the company witnessed an increase of 1% in Journeys Group's and Lids Sports Group's comps while a decline of 1% each was registered in Schuh Group and Johnston & Murphy Group's comps.

Further, Genesco revealed that its business is gaining momentum now, since from the start of the second quarter through May 24 comps have improved 3%. Based on the recently reported quarterly performance and the current retail environment the company has reaffirmed its guidance for fiscal 2015.

The company continues to expect earnings in the range of $5.40 and $5.55 per share in the fiscal. Currently, the Zacks Consensus Estimate is pegged at $5.53 per share which is more inclined towards the higher end of guidance range.

The company's optimistic guidance for fiscal 2015, as well as second-quarter's to date performance boosted investor confidence despite mixed first-quarter results. Genesco's shares closed trade at $74.89 on Friday, up approximately 5.5% from the previous day's closing price.

Coming back to the quarterly discussion, gross profit for the quarter increased 5.9% to $315.9 million from $298.4 million. However, gross margin contracted 30 basis points (bps) to 50.2%. The year-over-year improvement in gross margin was mainly due to higher cost of sales as a percentage of sales.

Adjusted operating income declined 13.9% in the quarter to $31.4 million from $36.4 million in the comparable year-ago quarter. Adjusted operating margin declined 120 bps to 5.0% from 6.2% reported in the prior-year quarter. The decline was primarily attributable to lower gross margin and increased selling and administrative expenses as a percentage of sales.


Genesco ended the quarter with $71.9 million of cash and cash equivalents, $25.6 million of long-term debt (excluding current maturities) and $941.5 million of shareholders' equity. As of May 3, 2014, inventories totaled $587.2 million compared with $509.1 million as of May 4, 2013.

Store Update

In the reported quarter, Genesco opened about 29 retail outlets, while it shuttered 23 stores. Consequently, the company's store base expanded to a total of 2,573 as of May 3, 2014 from 2,568 as of Feb 1, 2014.

Other Stocks to Consider

Genesco currently holds a Zacks Rank #2 (Buy). Some other better-ranked stocks in the apparel-shoe space include Citi Trends, Inc. ( CTRN ), American Apparel Inc. ( APP ) and Foot Locker, Inc. ( FL ). While Citi Trends sports a Zacks Rank #1 (Strong Buy), American Apparel and Foot Locker have a Zacks Rank #2 (Buy).

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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 Nasdaq, Inc.

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

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