Genesco (GCO) Reports Earnings Miss in Q3, Sales Down 4%

Key Highlights

• Financial Performance: Genesco Inc. (NYSE: GCO) reported a decrease in net sales to $579 million in Q3FY24, a 4% decline compared to the same quarter last year.
• Earnings Per Share: The GAAP EPS from continuing operations was $0.60, significantly lower than the $1.66 reported in the previous year. The Non-GAAP EPS was $0.57, compared to $1.65 in the previous year, missing the expected EPS of $0.83.
• Business Segments: Despite the overall decline, certain segments had positive signs, such as an 8% increase in e-commerce sales and record third-quarter sales in the Schuh and Johnston & Murphy groups.

Genesco Inc. (NYSE: GCO) faced a challenging third quarter in Fiscal 2024, with its net sales falling to $579 million, a 4% decrease from the previous year’s figure of $604 million. This decline was mainly due to decreased store sales in the Journeys Group and a drop in the Genesco Brands Group wholesale sales. However, there was a silver lining as e-commerce sales, representing 21% of retail sales, grew by 8% compared to the previous year, indicating a robust online presence.

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EPS of $0.57 Fell Short of Expectations for Genesco’s Q4

The company’s profitability took a hit, with GAAP EPS from continuing operations plummeting to $0.60 from $1.66 last year and Non-GAAP EPS dropping to $0.57 from $1.65. This significant decrease in earnings per share fell short of market expectations of an EPS of $0.83. The gross margin decreased to 48.1% from 48.7% last year, affected by increased promotional activities and higher e-commerce penetration.

While the overall performance showed a downturn, certain segments of Genesco’s business painted a different picture. The Journeys business showed improvement, and both Schuh and Johnston & Murphy groups achieved record third-quarter sales. This mixed performance reflects the varying impacts of the current economic environment on different parts of the business.

Genesco Remains Cautiously Optimistic

Looking ahead, Genesco remains cautiously optimistic. The company expects a challenging consumer environment but is hopeful about its strategic initiatives, especially for the Journeys brand. The revised Fiscal 2024 outlook anticipates a 1% to 2% sales decrease and an adjusted diluted EPS from continuing operations in the range of $1.50 to $2.00.

Genesco’s third-quarter results reveal a complex picture: while certain segments show resilience and growth potential, the overall decline in sales and profitability highlights the challenges faced by the retail sector in a dynamic and competitive market. The company’s focus on e-commerce and strategic initiatives for key brands like Journeys and Schuh may well be crucial in navigating these turbulent times.