After posting its highest comparable sales increase in more than two years in the third quarter, Genesco once again reported strong comparable sales for the fourth quarter ended on Feb. 2, up by 4 percent, on the back of the ongoing strength of its U.S. footwear retail businesses. These figures include the Lids business, which the company has sold at the end of the year for $100 million to FanzzLids Holdings, a company controlled by affiliates of Ames Watson Capital. The sale was completed on Feb.2, 2019.
However, total sales were down by 2 percent from the year-ago quarter to $675 million, weighed down by a weak performance by the Schuh chain in the U.K. The company also had a difficult comparison base because of the extra week in last year's quarter. Excluding this extra week and the impact of lower exchange rates this year, revenues were up by 4 percent.
Comparable sales from continuing operations increased by 4 percent, with sales at physical stores up by 3 percent and direct-to-consumer (DTC) revenues up by 10 percent. In total, DTC sales accounted for 14 percent of total retail sales from continuing operations for the quarter, compared with 13 percent last year.
During the quarter, the company opened eight new stores and closed 33. It ended the quarter with a total of 1,512 stores under various banners, led by Journeys.
While Journeys and Johnston & Murphy delivered strong performances both in-store and online, sales trends were still negative at the U.K.-based Schuh Group.
Schuh saw revenues decline by 8 percent to $108.6 million in Genesco's fourth quarter, with its operating income dropping by 55.1 percent to $4.1 million. The chain's comparable store sales fell by 8 percent, in contrast with a gain of 1 percent registered in the same period last year.
The management said that the banner faced a difficult environment, amid weak consumer demand for apparel and footwear in the U.K., and even greater uncertainty around Brexit. While Schuh expected the selling environment to be characterized by heavy discounting, participation in promotional activity didn't translate into sales as planned until it took even heavier markdowns.
In addition, Schuh's online business was negatively affected by the implementation of the new data privacy requirements in the spring of last year. Given the decline in operating income, it has implemented a 20-point program taking action to immediately address profitability, while working on more medium-term actions to improve Schuh's positioning with the consumer and with the brand itself, although it hasn't given any details of this plan yet.
At the company's Journeys chain in the U.S., comparable sales were up by 7 percent, while Johnston & Murphy recorded a 4 percent gain.
Genesco's gross margin inched up by 0.7 percentage points to 46.7 percent in the quarter. The group recorded a net loss of $63.9 million, compared with net income of $56.0 million for the same period a year ago, due to a $93.6 million loss from discontinued operations.
For the full year, sales from continuing operations increased by 3 percent to $2,200 million. Comparable sales increased by 5 percent, with sales at physical stores up by 4 percent and DTC up by 10 percent. The gross margin rose by 0.3 percentage points to 47.8 percent, reflecting decreased markdowns for the Journeys Group and an increased mix of retail sales for the Johnston & Murphy Group, partially offset by increased promotional activity for the Schuh Group. Genesco's net loss narrowed down from $111.8 million to $51.9 million.
The management noted that, after the disposal of the Lids Sports Group, the company is now again a footwear-focused company. For the fiscal year 2020, it expects comparable sales from continuing operations to grow by 1 to 2 percent.