Journeys and E-Commerce Carry Genesco in Q2, Back-to-School Delays Will Impact the Second Half
Shares for Genesco Inc. are advancing in pre-market trading after the company posted second-quarter earnings results that topped expectations across the board.
As of 7:45 a.m. ET, Genesco’s shares were in the green 2% to $22.30.
The parent of Journeys, Johnston & Murphy and Schuh said today that its revenues for the period ended Aug. 1 — during which its stores were opened 70% of the days — dipped just 20% to $391 million, besting forecasts for sales of $369 million.
The company said the sales decrease was driven by those store closures, as well as a later start to back-to-school, lower store comps and lower wholesale sales, partially offset by digital comp growth of 144%.
Adjusted second-quarter losses amounted to $17.4 million, or $1.23 loss per share, compared to adjusted earnings of $2.5 million, or 15 cents loss per share, in the same year-ago period. Those losses also fared significantly better than market watchers had predicted: Wall Street expected Genesco to see a loss of $1.85 per share.
By division, Journeys continued to bring in the lion’s share of revenues at the company, drawing in the bulk of shoppers across Genesco’s owned-brands as its stores reopened.
Its overall sales were down 12%; meanwhile sales at Schuh dipped 22%. Johnston & Murphy saw the steepest declines at 64%. Sales were up 62% at Licensed Brands due to the Togast acquisition, announced December 2019.
Mimi Vaughn, Genesco board chair, president and CEO, said the company saw consumers “enthusiastically returning” to its physical stores in Q2 as state and local restrictions were lifted. Vaughn, in a statement today, also touted the firm’s ongoing digital strength, noting that the triple-digit gains in e-commerce were instrumental in offsetting some brick-and-mortar losses.
“The speed and executional excellence our teams demonstrated in getting our stores open and operational was a huge advantage as we often opened on the first day permitted by local authorities,” she added. “Equally encouraging was our ability to reduce expenses and inventories in line with sales and to generate cash during the quarter. Journeys generated a positive operating income for the quarter, but gross margin headwinds especially at Johnston & Murphy and Schuh led to a consolidated operating loss.”
Operating loss for the second quarter was $20.9 million compared with operating income of $4.7 million last year.
Genesco’s Q2 gross margin was 42.7%, down 590 basis points, compared with 48.6% last year’s same period. The decrease in gross margin as a percentage of sales (5.3%), the company said, is due mostly to higher shipping and warehouse expenses across its divisions driven by the increase in penetration of e-commerce, “significant” inventory reserves taken at Johnston & Murphy and increased promotional activity at Schuh.
Looking ahead, Vaughn noted that towards the end of the second quarter and at the beginning on the current third quarter, business in North America had been significantly impacted by the changes in back-to-school timing brought on by the pandemic — including schools in some states and counties starting later than last year and others not returning to in-person learning.
“As such we believe the back-to-school selling season will extend deeper into the third quarter which has limited visibility as we head into the back half,” Vaughn added. “I am incredibly proud of how our teams have responded to the unprecedented challenges we’ve faced thus far in Fiscal 2021. This, along with the strong strategic positioning of our businesses and current liquidity, gives me confidence that we will successfully weather this storm and emerge strong to take advantage of the many opportunities on the other side.”
Currently, the company has resumed operations at 96% of its locations, including 1,130 Journeys stores, 160 Johnston & Murphy outposts, and 125 Schuh locations.
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