Congestion in maritime shipping, due to the lack of containers, is causing four to six weeks in delays in footwear deliveries. But, the situation is expected to improve and the supply chain to be “in much better shape” in summer, when the back-to-school season kicks off, according to Mimi Vaughn, president and CEO of Genesco.
The delays affected the group’s performance during the year-end holiday season, especially for its Journeys and Schuh banners. However, the arrival of replenishment orders after the holiday period actually coincided with the first wave of checks distributed to Americans under a Covid-related stimulus program approved in December which enabled Genesco to finish its fiscal fourth quarter on a strong note.
In the quarter that ended on Jan. 30, the group posted sales of $637 million, down by 6 percent from a year earlier due to weak sales at its Johnston & Murphy (J&M) banner and store closures stemming from Covid-19 restrictions. Weak sales in stores, down by 10 percent on comparable basis, were partially offset by a 55 percent increase in comparable online sales. E-commerce represented 27 percent of Genesco’s retail business compared to 17 percent a year earlier. Vaughn revealed that the digital channel is ”highly profitable” and profitability increases as volumes grow.
In the quarter, overall comparable sales for Genesco rose by 1 percent, with Journeys up by 2 percent, Schuh up by 35 percent and J&M down by 35 percent. Overall sales by banner, saw Journeys flat, Schuh declining by 13 percent and J&M down by 42 percent.
The group gross margin narrowed by 1.10 percentage points to 45.8 percent mainly due to higher shipping and warehouse expenses. But, the reported operating margin rose to 9.8 percent from 6.7 percent and the adjusted margin widened to 10.2 percent from 8.8 percent. Genesco enjoyed a 12 percent decline in expenses primarily due to rent cuts and government relief programs.
Earnings from continuing operations rose to $90.0 million from $35.5 million a year earlier thanks to a lower tax burden. On an adjusted basis, earnings were down to $40.0 million from $44.1 million.
In the full year, Genesco posted sales of $1.8 billion, down by 19 percent, and a reported loss from continuing operations of $56.0 million against a profit of $61.8 million. Nevertheless, cash generation reached $134 million. The group’s store network was trimmed to 1,460 stores from 1,480 units a year earlier. The number of stores was down by 1 percent and the square footage by 2 percent.
Because of the uncertainty caused by the Covid-19 pandemic, the company did not release a full-year guidance. As of March 11, the group was operating in 90 percent of its store network, including 1,145 Journeys, 160 J&M and two Schuh locations.
Thanks to a new customer relationship management system introduced last year at Schuh, the British chain is expected to launch a loyalty program this year. Genesco is studying how to upgrade Journeys’ CRM and introduce a loyalty program in the future.
The group will also initiate this year pilot buy online, pickup in store (Bopus) projects in the U.S. It noted that Bopus services already represent about 20 percent of Schuh’s online business in the U.K.
Regarding current market conditions, Genesco believes that it can continue winning market share as weaker competitors close down in the wake of the disruption caused by the pandemic. It noted that it experienced gains in market share at the end of the Great Recession, which ran from 2007 to 2009 in the U.S.