The net earnings reported by Genesco for the third quarter ended Oct. 29 topped analysts' estimates, reaching $25.9 million - or $1.30 per share - while Wall Street was expecting earnings of 91 cents per share. The better-than-expected results sent the group's share price up by almost 5.0 percent to $66.40, even though they were down by 20.3 percent on the same period last year.
Genesco's revenues decreased by 8.0 percent over the year-ago quarter to $711 million, falling below the consensus estimate of $716.9 million. The owner of Journeys, Schuh and Lids said this decline reflected the sale of the Lids Team Sports business in the fourth quarter of last year and a decrease of about three percent in revenues from the group's ongoing operations.
Consolidated comparable sales - including same-store sales and comparable e-commerce and catalog sales - fell by 3.0 percent. This included a drop of 8.0 percent in the Journeys Group, an increase of 2.0 percent in the Lids Sports Group, flat comparable sales for the Schuh Group, and an increase of 1.0 percent in the Johnston & Murphy Group.
Comparable sales reflected a drop of 4.0 percent in same-store sales and a 7.0 percent hike in e-commerce reveue. The company's management said comparable sales came in ahead of expectations, thanks to better-than-expected sales at the Lids sports stores in the U.S. and the Schuh stores in the U.K.
However, it highlighted sluggish sales for the back-to-school period in its flagship Journeys division. Like other U.S. retailers, the chain experienced a sudden and strong shift to athleisure styles, and Genesco admitted that it will take a few quarters to reset the offer at its Journeys stores in the U.S.
Overall, the company's gross margin gained 1.7 percent to 50.0 percent, while the operating margin decreased by 1.0 percentage point to 5.7 percent.
Moving forward, Genesco reported a further 2.0 percent drop in comparable sales through Nov. 29. Good prospects for Lids Sports will likely be offset in the fourth quarter by a more challenging fourth quarter at Journeys due to unseasonably warmer weather that has hurt sales and the continued impact of the fashion shift that began to affect Journeys' sales in the second quarter.
The group said that, while the headwinds for Journeys are likely to continue in the near term, it has made purchase commitments for spring products that reflect the shift in fashion and that should reverse the negative trend.