Schuh, the British shoe retail chain bought by Genesco in 2011 for £125 million (€147.4m-$195.6m), suffered a 20 percent decline in its sales during the first quarter of the U.S. parent company's financial year, ended May 4. A tough comparison was set by last year's scores which also created an 11 percent decline on a comparable store basis at Schuh as well as a 12 percent drop for the company's biggest chain in the U.S., Journeys.

These negative scores were partly offset by a 16 percent increase in Genesco's digital business and positive trends for Johnston & Murphy, the men's shoe retail chain in the group.

Schuh and Johnston & Murphy are the two banners that have developed their online sales capabilities the most. Genesco wants to grow its digital business strongly in the future, particularly by creating a new order platform for direct drop-shipping from selected vendors and by setting up online kiosks that will offer digital-only items. This practice would seem to apply best to small-volume SKUs for which there is not enough shelf space in most of the stores operated by any of the group's chains.

Across the Genesco group, pure e-commerce is generating about 7 percent of the total turnover. Another 4 percent comes from digitally assisted sales, including, for example, the possibility for a customer visiting one of the group's stores to place an order that will be fulfilled from another location.

Meanwhile, Genesco is planning to add a total of 46 physical stores to its network in the course of the current financial year, partly through acquisitions and by taking advantage of favorable real estate opportunities. In the U.K., the plan calls for the addition of 20 new stores, although four of these are new Schuh Kids stores many of the others are replacing leased departments. There are no plans yet for a roll-out of the Shi by Journeys concept for women, which went through a generally slow quarter aside from some weather-induced improvements.

For the first quarter ended last May 4, Genesco reported profit from continuing operations of $18.5 million, down from $20.8 million for the first quarter ended April 28, 2012. The latest quarterly results include extraordinary expenses of $4.2 million, including $2.9 million related to deferred payments in connection with the acquisition of Schuh Group in the U.K. The results for the previous year's first quarter included expenses of $3.1 million, primarily related to Schuh's takeover. Adjusted for the above items in both periods, earnings from continuing operations were $22.2 million for the first quarter of fiscal 2014, down slightly from $23.8 million for the first quarter of fiscal 2013.

The Nashville-based specialty retailer's total sales dipped by 1.5 percent to $591.4 million in the quarter. Strong gains in the company's direct channel helped mitigate the negative impact of soft retail traffic. Consolidated comparable sales in the quarter, including same-store sales and comparable e-commerce and catalog sales, were off by 4 percent.

The company is optimistic about its sales prospects for the upcoming back-to-school season, considering that the improved sales trends witnessed during the March-April period, after a soft February, further accelerated during the second quarter, with May comparable sales up by 1 percent through May 25.

Based on first-quarter results and current visibility, the company is maintaining its previously issued guidance for a 10 to 12 percent increase in adjusted earnings for the full year, excluding extraordinary charges. This forecast assumes an increase in comparable sales in the low single-digit range for the full fiscal year. 

In the medium term, the company plans to achieve a five-year target of $3.5 billion in sales and an operating margin of 9.5 percent by fiscal 2017. The company will continue to invest in improved e-commerce infrastructure and selective store openings. Genesco sells footwear, headwear, sports apparel and accessories through more than 2,455 retail stores throughout the U.S., Canada, the U.K. and the Republic of Ireland, principally under the names Journeys, Journeys Kidz, Shi by Journeys, Underground by Journeys, Schuh, Lids, Locker Room by Lids, and Johnston & Murphy, as well as on a number of internet websites. In addition, the company sells shoes to wholesale customers under its Johnston & Murphy brand, the licensed Dockers brand, SureGrip, and other brands, and operates the Lids Team Sports team dealer business.