Genesco is seeing a sizeable drop in tourist-related foot traffic stemming from COVID-19 pandemic-related travel restrictions, the footwear company told investors as it reported its fiscal 2020 earnings Thursday.
In a Nutshell: Genesco president and CEO Mimi E. Vaughn said the company’s U.S. footwear businesses have started the year off slowly. She attributed this to a dual threat of unseasonably warm weather in parts of the country and decreased store traffic in tourist destinations in both the U.S. and the U.K. as a result of pandemic-driven travel restrictions.
Genesco stores located in airports have also been impacted by the outbreak.
“Despite these near-term headwinds, we are confident in the strategic course we have set for Genesco,” Vaughn said. “With a very healthy balance sheet, we have the flexibility to invest for growth and new capabilities in our current businesses, pursue new growth opportunities and return cash to our shareholders.”
Genesco spent $8 million in capital expenditures on new stores and remodeling—including $3 million directly related to “direct to consumer, omnichannel, information technology, distribution center and other projects.”
Sales: In the fourth quarter, Genesco reported revenue of $678 million, below the average Wall Street estimate of $679.7 million. Comparable sales increased by 1 percent but retail sales fell by 2 percent. Direct-to-consumer sales were up 19 percent across all brands, representing 16.6 percent of all retail sales in the quarter compared to last year’s mark of 13.7 percent.
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Net sales for Genesco hit $2.2 billion in fiscal 2020, with a comparable sales increase of 3 percent. This was in line with Wall Street estimates although revenue was flat year over year. Revenue increased by 1 percent during the year and direct-to-consumer sales were up 18 percent, accounting for 12.6 percent of all revenue from 10.8 percent last year.
Margins in fiscal 2020 rose 60 basis points to 48.4 percent due to decreased markdowns at Journeys and better margins on sale-price product for Schuh group. Wholesale margins also improved at Johnston and Murphy.
Genesco expects total sales to be up 3 percent to 6 percent after acquiring footwear licensing specialist Togast in the fiscal year. Comparable sales are expected to be down 1 percent to 2 percent, and Journeys will likely see flat to slightly depressed comparable revenue.
Earnings: Genesco recorded non-GAAP earnings per share (EPS) from continuing operations of $3.09, up 42 percent from last year and above the Wall Street estimate of $2.74.
For the full-year, positive comps, gross margin expansion, cost-reduction efforts and share repurchasing increased adjusted earnings per share by 40 percent to $4.58, above the average Wall Street estimate of $4.29.
The company expects continuing operations to produce adjusted diluted EPS between $4.90 and $5.40.
CEOs Take: After selling Lids in 2018, Genesco settled into an exclusive focus on shoes.
“Fiscal 2020, which marked our first year as a footwear focused company, was filled with many notable successes and important accomplishments,” Vaugh said. “We delivered strong results, building on the turnaround in profitability that began in fiscal 2019.
“This included positive consolidated comparable sales growth in every quarter, even as we faced more challenging comparisons, and positive store comps for the year,” she added.