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Black Friday Success at Journeys Prompts Genesco to Up Full-Year Guidance

Genesco announced positive in-store comps for the ninth consecutive quarter on Friday, despite “ongoing traffic challenges,” and raised its year-end guidance accordingly.

In a Nutshell: Genesco brands, including Journeys, Johnston & Murphy and its U.K. retailer, Schuh, performed well on Black Friday, which helped the company exceed earnings expectations. Following the release of its Q3 financial results, Genesco saw its stock increase by more than 25 percent, from $36.90 to $49.51 at the height of the surge.

Genesco was well prepared for the holiday season and unperturbed by the abbreviated shopping season that could drive losses totaling $1 billion for brands and retailers, senior vice president and chief operating officer Mimi Vaughn said tn the company’s quarterly earnings conference call.

“We feel good about our current momentum and believe we are well prepared to capitalize on the ramp-up in consumer spending leading up to Christmas,” Vaughn said during the call. While the holiday calendar is compressed with six fewer days between Thanksgiving and Christmas compared to last year, “we are confident in our team’s ability to execute and we don’t foresee a shorter holiday season materially affecting our business.”

In November, Vaughn was selected to be the successor to current CEO and chairman, Robert J. Dennis, who will stay on as executive chairman when the transition is complete in February.

Genesco said Journeys benefitted from the company’s decision to “accelerate holiday hiring timelines” in order to onboard and train more seasonal employees. The company’s accelerated use of “cross-docking,” a process that helps the retailer get inventory out of warehouses more quickly, increased the number of online orders shipped from a warehouse instead of a store by more than 60 percent, Genesco said.

“Shipping directly from the [distribution center] is the most effective way of processing e-comm orders and it allows us to keep a stronger inventory position in our small footprint stores where we have the opportunity to sell it while freeing up our store associates to focus on serving customers instead of packing orders to ship,” Vaughn said.

Sales: Revenue was flat for Genesco in Q3 at $537.0 million, below the $540.6 million expected by Wall Street analysts. Same-store sales were positive, up 3 percent over last year’s third quarter. In-store sales increased by just 1 percent while direct sales increased by 19 percent, Genesco said.  Direct-to-consumer sales made up 11.4 percent of all Genesco sales in Q3, up from 9.6 percent last year.

At Journeys, higher initial margins and decreased markdowns helped the company achieve a gross margin of 49.2 percent, up 70 basis points from its mark of 48.5 percent last year, Genesco said. Journeys recorded 4 percent revenue growth in same-store sales versus 9 percent last year.

Johnston & Murphy was down 6 percent in comparable sales thanks to a tough comp of 10 percent in last year’s third quarter, along with lower store traffic and average transaction size. Schuh sales were up 3 percent, led by consumer demand for fashion boots and athletic fashion footwear.

Genesco maintained its guidance for comparable sales improvement between 2 percent and 3 percent at year end.

Earnings: Genesco’s third-quarter EPS of $1.31—up from $1.00 last year and above the $1.08 prediction leveled by Wall Street—prompted the company to raise its full-year outlook.

Genesco previously expected between $3.80 and $4.20 in year-end earnings. The adjusted FY20 earnings outlook now lands between $4.10 and $4.40.

CEO’s Take: Dennis believes his efforts have led Genesco into a strong position to succeed during and after his transition from the company.

“The fourth quarter has started well, highlighted by solid results during the Black Friday through Cyber Monday period versus the comparable period last year,” Dennis said.

“Our year-to-date performance highlights the success we are having as a footwear-focused company, he added. “Looking ahead, we believe the strong market positions occupied by each of our footwear businesses provide us with compelling future growth prospects which we are committed to capitalizing on to generate greater value for our shareholders.”

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