In the first quarter ended on May 1, Genesco “meaningfully” exceeded its expectations by posting a 93 percent year-over-year increase in net sales to $539 million. Compared with two years ago, revenues were up by 9 percent despite the ongoing impact of the Covid-19 pandemic, especially in the U.K. and Canada, resulting in the American company’s overall store fleet being open for slightly less than 90 percent of possible operating days.
Comparable direct sales for the first quarter of fiscal 2022 were up by 43 percent year-on-year.
Overall sales grew by 123 percent year-on-year to $376.5 million for the Journeys’ banner, were up by 46 percent to $68.7 million at Schuh, up by 26 percent to $48.8 million at Johnston & Murphy and up by 84 percent to $44.7 million for the Licensed Brands business. When compared with two years ago, Journeys’ sales were up by 16 percent and Licensed Brands up by 122 percent, while Schuh decreased by 11 percent and Johnston & Murphy fell by 35 percent.
The company’s gross margin was 47.8 percent, up by 4.80 percentage points from last year but down by 1.60 percentage points from two years ago.
The operating margin stood at 2.9 percent, against a negative 55.9 percent last year and a positive 1.8 percent two years ago. On an adjusted basis, the operating margin was 3.5 percent of sales in the first quarter of fiscal 2022, a negative 24.9 percent last year and 1.7 percent two years ago. Genesco noted that its online business generated double-digit operating margins, partially due to a focus on full-price selling.
Earnings from continuing operations were $8.9 million, compared to a loss of $134.6 million last year and a profit of $6.5 million two years ago. Adjusted earnings from continuing operations were $11.6 million, up from a loss of $51.4 million last year and earnings of $5.9 million two years earlier.
In the first quarter, Genesco’s capital expenditure was $12 million. The company opened one store and closed 17 units. It ended the quarter with 1,444 stores compared with 1,479 stores at the end of the first quarter last year. As of May 27, the company was operating 96 percent of its locations.
In the fiscal second quarter, which is typically Genesco’s quarter with the lowest sales volumes, the momentum seen in the first quarter continued during the month of May. The company expects that second-quarter revenues will be higher than two years ago, but slightly lower than the 9 percent increase booked in the first quarter.
It anticipates that the gross margin will decline from two years ago but by less than the 1.6 percentage point drop seen in the first quarter. Genesco expects its second-quarter operating income to be around breakeven.
Looking at their back-to-school season, which generally starts late July, peaks in August and tails off in September, is expected to be underpinned by higher child tax credits, resulting in consumers receiving direct payments into their bank accounts from the government. The payments are expected to support consumption into the year-end holiday season, according to Genesco.
The child tax credit was increased under the American Rescue Plan, a $1.9 trillion stimulus package passed by U.S. President Joe Biden to relaunch the economy in the wake of the Covid-19 pandemic.
The annual benefit for children up to the age of 17 was increased to $3,000 from $2,000 for 2021. It also provides an additional $600 benefit for children under the age of six for the current tax year.
The company did not provide a guidance for the full year but Genesco’s chairwoman and CEO Mimi Vaughn said “we see lots of great signs in the economy.”