Genesco has reported flat net sales for the third quarter ended Oct. 31, at $390.3 million. Comparable store sales dropped by 2 percent, with drops of 2 percent for the Journeys Group and Johnston & Murphy, while those at Underground Station’s stores fell by 6 percent.
Earnings from continuing operations rose by 27.8 percent to $11.5 million, and reflected pre-tax charges of $2.6 million, primarily related to the impairment of fixed assets. Earnings for the same quarter in 2009 included charges associated related with its failed merger with Finish Line, asset impairments, lease terminations, other legal matters and a higher effective tax rate. Adjusted for all these items, earnings from continuing operations grew by 29.5 percent to $12.3 million.
Genesco’s gross margin climbed by 0.5 percentage points to 51.3 percent. Net earnings went up by 27.6 percent to $11.4 million.
In absolute terms, Journeys Group reported a 1.2 percent drop in sales to $198.4 million for the third quarter. Underground Station had a 9.6 percent decline to $21.9 million, and Johnston & Murphy fell by 3.4 percent to $40.4 million. Journeys Group’s operating income grew by 5.9 percent to $17.9 million and Johnston & Murphy’s rose by 8.9 percent to $1.7 million. Underground Station had an operating loss of $1.9 million, but this was an improvement over a loss of $2.2 million for the same period last year.
As of Oct. 31, Journeys Group had 1,022 retail stores as one Journeys store opened during the quarter. These consisted of 819 regular Journeys shops, 148 for Journeys Kidz and 55 for Shi by Journeys. Underground Station closed two stores, finishing up with 174 at the end of the quarter, and Johnston & Murphy opened two but closed one to end with 162.
For the nine months ended Oct. 31,Genesco saw sales creep down by 0.4 percent to $1,095 million, while earnings from continuing operations plunged by 97.6 percent to $3.3 million. The gross margin was almost flat, up by 0.1 percentage point to 51.1 percent. Net earnings for the first nine months plummeted by 97.7 percent to $3.0 million.
For the year through October, Journeys Group’s sales fell by 1.2 percent to $523.8 million, and its operating income declined by 17.6 percent to $20.3 million. Its comparable store sales were down by 3 percent. Underground Station saw a decrease of 12.5 percent to $67.2 million, and its operating loss improved to $6.1 million compared with a loss of $6.3 million in 2008. It saw a 10 percent drop in comparable store sales. Johnston & Murphy’s revenues fell by 10.3 percent to $118.7 million, and its operating income nose-dived by 83.4 percent to $1.4 million on a 12 percent decrease in comparable store sales.
In a statement, Robert J. Dennis, Genesco’s president and chief executive, said that third-quarter earnings exceeded expectations. Through the first three weeks of November, comparable store sales were down by 3 percent compared with last year, but the company remains optimistic that customers will continue to shop during the peak holiday season. Genesco is forecasting flat to slightly positive fourth-quarter comparable store sales, compared with a 5 percent drop last year.
Genesco said it planned to spend most of 2010 on integrating its newly bought Sports Fan-Attic chain, possibly adding new stores with an eye to an eventual aggressive national expansion. Its first task is to get this chain of fan sports items on the inventory replenishment system of Genesco’s distribution center, and to combine buying leverage with its Hat World chain. Genesco is looking at other chains it would consider buying to add to the Sports Fan-Attic roster. It expects the new acquisition’s operating margins to be close to Hat World’s, 9.0 percent in 2009.