Shares of Genesco Inc. (GCO) plunged 13.2% on Friday after the company reported dismal third-quarter fiscal 2015 earnings and lowered its earnings forecast for fiscal 2015. In a separate release, the company announced the planned retirement of its current chief financial officer, James S. Gulmi, by the end of fiscal 2015. Further, the board named its current Senior Vice President-Strategy and Shared Services, Mimi E. Vaughn, the new CFO.
Coming back to the financial results, the company’s adjusted earnings declined 10.5% year over year in the third-quarter to $1.28 per share, from continuing operations, and also came below the Zacks Consensus Estimate of $1.44 per share. The fall in bottom line was mainly due to lower-than-expected sales at the Lids Sports Group segment that resulted in expense deleverage and gross margin contraction, offset by strong comps gains and top-line growth in other businesses.
On a reported basis, the company’s earnings from continuing operations came in at $1.21 per share compared with $1.18 per share reported in the year-ago quarter.
Net sales for the quarter increased 8% year over year to $723 million and surpassed the Zacks Consensus Estimate of $711 million. Growth in top line was mainly driven by better-than-expected performance at the Journeys Group. Further, other divisions delivered sales as planned, except for the Lids Sports Group.
Consolidated comparable-store sales (comps), including same store sales and comparable e-Commerce and catalog sales, rose 3%. On segment basis, the company witnessed an increase of 6% in Journeys Group and 1% rise in the Lids Sports Group comps, while Schuh Group and Johnston & Murphy Group’s comps remained flat.
Additionally, the company indicated that it has been witnessing solid comps performance so far in the fourth quarter with consolidated comps rising about 9% through Dec 2, 2014.
Gross profit for the quarter increased 7.9% to $358.5 million from $332.1 million. However, gross margin contracted 20 basis points (bps) to 49.6%.
Adjusted operating income declined 12.4% in the quarter to $48.6 million from $55.5 million in the comparable year-ago quarter. Adjusted operating margin declined 160 bps to 6.7% from 8.3% 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.
Financials
Genesco ended the quarter with $38.0 million of cash and cash equivalents, $79.7 million of long-term debt (excluding current maturities) and $970.7 million of shareholders’ equity. As of Nov 1, 2014, inventories totaled $737.6 million compared with $694.3 million as of Nov 2, 2013.
Outlook
Considering its dismal third-quarter results and ongoing margin pressures for the Lids segment in the fourth quarter, the company trimmed its earnings guidance for fiscal 2015. The company now expects earnings in the range of $4.75 to $4.85 per share versus $5.10 to $5.20 projected earlier. This compares with earnings of $5.09 per share reported in fiscal 2014.
Other Stocks to Consider
Genesco currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the apparel-shoe space include Pacific Sunwear of California Inc. (PSUN), Shoe Carnival Inc. (SCVL) and Foot Locker Inc. (FL). While Pacific Sunwear and Shoe Carnival sport a Zacks Rank #1 (Strong Buy), Foot Locker has a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment