In fact, the parent to footwear retailers Journeys and Schuh said demand accelerated throughout the quarter and remained strong into October, even though sales volumes typically moderate after the back-to-school rush, Mimi Vaughn, Genesco’s board chair, president and CEO, said.
Despite rising Covid-19 case numbers, consumer appetite for in-person shopping continued to improve, with in-store sales rising 30 percent over last year. Store traffic also improved to the best levels Genesco has seen since the pandemic began, Vaughn said, though they remain below where they were pre-pandemic. Thanks to increased conversion, however, like-for-like store sales increased against pre-Covid levels for the first time.
In a Nutshell: At Journeys, “strong” consumer demand helped the retail brand achieve record third-quarter revenue and operating profit—its fourth straight quarter of record profitability—despite inventory almost 30 percent below pre-pandemic levels, Vaughn said. During the back-to-school season, both casual and fashion athletic footwear styles performed well, with nine of Journeys’ top 10 brands experiencing year-over-year growth. The return to in-person schooling also boosted non-footwear sales, such as backpacks, more than 50 percent.
Genesco’s U.K.-based Schuh business saw constant-currency sales rise 17 percent compared to 2019. Though students attended school in-person last year, Vaughn said this past back-to-school season prompted a greater return to physical retail, where store teams drove higher conversion and more “multi-sales.” Online sales, meanwhile, built on top of last year’s “meaningful growth,” more than doubling on a two-year basis.
Given extended delays in returns to the office and lower inventories from supply chain disruptions, sales at Genesco’s Johnston & Murphy brand remained below two-year-ago levels. Delayed deliveries and “much stronger-than-expected” demand put its inventory nearly 50 percent below 2019.
Though overall sales remain down, Johnston & Murphy’s casual footwear business—now 70 percent of direct-to-consumer footwear sales—is flourishing, with casual athletic sales up 120 percent year over year. The brand’s apparel business, led by printed woven shirts and knits, improved more than 30 percent on a two-year basis.
Looking at the current quarter, sales so far have “tracked nicely ahead of pre-pandemic levels,” with boot sales off to a good start, Vaughn said. Though almost all of Genesco’s stores closed on Thanksgiving Day, she added, the company was “pleased” with Black Friday weekend results.
Genesco had cash and cash equivalents of $282.8 million as of Oct. 30, up from $115.1 million as of Oct. 31, 2020. Inventories decreased 8 percent year over year and 28 percent against two years ago.
Net Sales: In the three months ended Oct. 30, Genesco’s net sales increased 25 percent year over year to $601 million. Versus 2019, revenue grew 12 percent. Journeys posted a 7 percent sales increase compared to the third quarter of fiscal 2020, while Schuh’s revenue grew 17 percent on a constant-currency basis. Johnston & Murphy’s sales decreased 8 percent on a two-year basis. Genesco’s e-commerce business—18 percent of total retail sales—grew 79 percent versus two years ago.
The company expects full-fiscal year sales to be up 9 percent to 11 percent. This guidance places fourth-quarter sales growth at a midpoint in the mid-single digits.
Net Income: Genesco’s third-quarter gross margin came in at 49.2 percent, a 210 basis-point increase compared to last year’s 47.1 percent, but flat against fiscal 2020 as fewer markdowns at Journeys and Johnston & Murphy balanced out freight and logistics cost increases and a higher mix of e-commerce and wholesale, chief financial officer Tom George said.
The company’s GAAP operating income for the third quarter totaled $43.8 million, or 7.3 percent of sales. This compared to $8.2 million, or 1.7 percent of sales, last year and $25.9 million, or 4.8 percent of sales a year earlier.
Genesco’s adjusted operating income was $45.2 million, up from $13.9 million and $26.7 million the past two years. Adjusted operating margin was 7.5 percent of sales in the third quarter of this year, 2.9 percent last year and 5 percent two years ago.
GAAP earnings from continuing operations reached $33 million, up from $7.5 million and $19 million in fiscal 2021 and fiscal 2020, respectively.
Adjusted earnings totaled $34.5 million, or $2.36 per share, up from $12.1 million, or $0.85 per share last year, and $19.3 million, or $1.33 per share, two years ago.
Genesco expects to post adjusted earnings between $6.40 and $6.80 per share for the full fiscal year. The middle point of this guidance would represent an increase of about 45 percent compared to two years earlier.
CEO’s Take: “We entered the pandemic in a position of strength, are navigating the pandemic well and will enter the post-pandemic phase even stronger,” Vaughn said. “While the current market conditions have presented a number of external challenges, including supply chain disruptions, labor shortages and wage increases, elevated freight expense, and other cost pressures, we are managing through them adeptly.”