Genesco Inc. GCO, a retailer and wholesaler of branded footwear, apparel, and accessories, had a soft start to fiscal 2016 as both top and bottom lines for the first quarter fell short of the Zacks Consensus Estimate. Moreover, the company lowered its outlook for the fiscal year.
The company’s adjusted earnings from continuing operations declined 37% year over year in the first quarter to 51 cents per share, and also came below the Zacks Consensus Estimate of 68 cents per share. The fall was mainly due to lower gross margin and expenses associated with the e-commerce business.
Genesco Inc. – Earnings Surprise | FindTheCompany
On a reported basis, including one-time items, the company’s earnings from continuing operations came in at 42 cents per share compared with 60 cents per share reported in the year-ago quarter.
Detailed Performance
Net sales for the quarter increased 5.1% year over year to $661 million but fell short of the Zacks Consensus Estimate of $664 million.
The company reported a 4% rise in consolidated comparable-store sales (comps). On a segment basis, the company witnessed an increase of – 5% in the Journeys Group, 3% in the Lids Sports Group, 4% in Schuh Group and 3% in the Johnston & Murphy Group.
Further, Genesco revealed that it has witnessed solid comps performance so far in the second quarter with consolidated comps rising about 7% through May 23, 2015.
Gross profit for the quarter increased about 3.2% to $326 million from $316 million. However, gross margin contracted 90 basis points (bps) to 46.4%.
Adjusted operating income declined 37% year over year to $20 million in the quarter.
Financials
Genesco ended the quarter with $89.9 million of cash and cash equivalents, $15.8 million of long-term debt (excluding current maturities) and $1,016.7 million of shareholders’ equity. As of May 2, 2015, inventories totaled $636.8 million compared with $587.2 million as of May 3, 2014.
Lowers Outlook
With regard to further costs associated with the Lids turnaround, the company has lowered its guidance for fiscal 2016.
Management hinted that the Lids Sports Group's turnaround would result in further gross margin pressure and additional expenses than originally expected.
The company now expects fiscal 2016 adjusted earnings in the range of $4.70 to $4.80 per share, down from the previous forecast of $5.10 to $5.20 per share. The current Zacks Consensus Estimate for the fiscal year stands at $4.75. However, comps for the fiscal are still expected to rise in the range of 3–4%.
Genesco currently carries a Zacks Rank #2 (Buy). Other favorably placed stocks in the industry include American Eagle Outfitters, Inc. AEO, Boot Barn Holdings Inc. BOOT and Bebe Stores Inc. BEBE. While American Eagle sports a Zacks Rank #1 (Strong Buy), Boot Barn Holdings and Bebe Stores carry a Zacks Rank #2.
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