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01/11 11:27
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call reveals mixed signals: strong sales growth and strategic store remodels at Journeys, but declining margins and increased losses. The Q&A highlights positive momentum at Journeys but uncertain performance at Schuh and a lack of clear guidance for the U.K. market. The reiterated EPS guidance and market volatility suggest a balanced outlook. Despite positive developments, such as the Wrangler partnership, the lack of strong catalysts and increased expenses lead to a neutral sentiment, with stock price likely remaining stable in the short term.
Total Revenue $546 million, up 4% compared to last year, driven by overall comparable sales growth of 4%, reflecting 9% comps at Journeys, 1% comp growth at J&M, partially offset by 4% lower comps at Schuh. Reasons include strong comp momentum, positive growth in both store and digital channels, and favorable exchange rates in the U.K.
Gross Margin 45.8%, down 100 basis points compared to last year. Reasons include a more promotional environment at Schuh, higher tariffs, and product liquidations at Genesco Brands Group, partially offset by margin expansion at J&M and Journeys.
SG&A Expense 48.4% of sales, leveraging 20 basis points year-over-year. Reasons include significant SG&A leverage at Journeys due to strong comp results and store fleet optimization efforts, partially offset by Schuh's deleverage and increased brand awareness marketing.
Adjusted Operating Loss $14.3 million, compared to last year's loss of $9.3 million. Reasons include early impact of tariffs, pull forward of strategic marketing investments, and promotional pressures.
Adjusted Diluted Loss Per Share $1.14, versus a per share loss of $0.83 a year ago. Reasons include the same factors affecting adjusted operating loss.
Free Cash Flow $72 million, compared to $20 million in the same period last year. Reasons include receipt of a U.S. federal tax refund, partially offset by increased capital spending.
Inventory Up 11% to support higher back-to-school demand and reflects a better assortment of new and key products.
Capital Expenditures $15 million, focused on store remodels, new stores, digital investments, and other customer experience enhancements.
Journeys 4.0 store remodels: The company has remodeled 57 Journeys 4.0 stores, which have outperformed across all key metrics, including comps, traffic, conversion, and average transaction size. More than 80 stores are expected to be remodeled by year-end.
Johnston & Murphy product innovation: The company introduced new footwear and apparel designs, including blazers, pants, and a revamped dress shoe collection, which contributed to positive comps in Q2.
Wrangler footwear partnership: Genesco announced a new footwear partnership with Wrangler, with the official product launch planned for fall 2026.
Journeys market share growth: Journeys' comps grew 9% in Q2, with trailing 12-month comps up over 10%, indicating market share gains.
Schuh market challenges: Schuh faced a challenging U.K. retail environment with promotional pressure and cautious consumer behavior, but late summer and back-to-school shopping turned comps positive.
Store and digital channel growth: Both store and digital channels posted positive growth, with stores being the highlight due to strategic investments and improved store conversion.
Loyalty program milestone: The company reached 12 million loyalty program members, supporting growth in Q2 and upcoming holiday seasons.
Journeys transformation plan: The plan focuses on product elevation, brand investment, customer experience enhancement, and leveraging store teams. Initiatives include premium product offerings, a new brand platform 'Life on Loud,' and the rollout of 4.0 store formats.
Johnston & Murphy brand repositioning: The brand is being repositioned as a casual, multi-category lifestyle brand, supported by new store remodels, marketing campaigns, and product innovation.
Challenging U.K. Market: The U.K. retail environment remains challenging with cautious and selective customers, leading to major store traffic and comp declines. Schuh faced significant promotional pressure to maintain market share, which negatively impacted gross margins.
Tariff Increases: The company is facing a second round of tariff increases, which is expected to impact gross margins and create additional cost pressures.
Consumer Environment Uncertainty: The external consumer environment in both the U.S. and U.K. remains uncertain, with choppy consumer behavior and cautious spending patterns.
Promotional Pressure: Increased promotional activities, especially in the U.K., have pressured gross margins and created challenges in maintaining profitability.
Inventory Management: Efforts to rightsize inventories in a sluggish market have led to additional promotional activities, impacting profitability.
Schuh Performance: Schuh's performance has been volatile, with significant declines in store traffic and comps in May and June, although there was some improvement in late summer.
Wholesale and Factory Store Softness: Johnston & Murphy experienced softness in wholesale and factory stores, which cater to more price-sensitive customers, offsetting gains in other channels.
Licensing Portfolio Reset: The Genesco Brands Group is undergoing a licensing portfolio reset, including sunsetting some licenses and liquidating products, which has substantially affected gross margins.
Revenue Growth: Total revenue growth is projected at 3% to 4% for the full fiscal year, with comp sales growth expected at 4% to 5%, driven by mid-single-digit growth in Journeys sales.
Earnings Per Share (EPS): Full year adjusted EPS guidance is reiterated at $1.30 to $1.70, with third-quarter adjusted EPS expected to be $0.15 to $0.30 higher than last year.
Gross Margin: Gross margin is expected to decline by 50 to 60 basis points year-over-year due to promotional pressures, tariffs, and product liquidations.
SG&A Expense: SG&A is expected to leverage 80 to 100 basis points as a percent of sales, reflecting benefits from cost initiatives and store optimization efforts.
Capital Expenditures: Capital expenditures are projected at $55 million to $65 million, focusing on store remodels, new stores, and digital investments.
Journeys Performance: Journeys sales are expected to grow mid-single digits, supported by strong back-to-school momentum, new product introductions, and store remodels.
Schuh Performance: Schuh's performance is expected to remain volatile, with initiatives to improve product offerings, customer conversion, and traffic.
Johnston & Murphy (J&M): J&M plans to introduce more newness in footwear and apparel, ramp up innovation, and continue its brand repositioning efforts.
Genesco Brands Group: The group is resetting its portfolio, including the launch of a new footwear partnership for Wrangler in fall 2026.
Share Repurchase Program: We did not repurchase any shares in the quarter, but we did repurchase approximately 600,000 shares in the first quarter, approximately 5% of shares outstanding, leaving $29.8 million remaining under our current share repurchase authorization.
The earnings call and Q&A provide a generally positive outlook. Adjusted operating income and EPS have improved year-over-year, and free cash flow has increased. Journeys and the 4.0 stores show strong performance, and the introduction of Nike is promising. Despite some margin pressures and inventory increases, the strategic initiatives such as brand diversification and marketing shifts are positive. The sentiment in the Q&A is mostly optimistic, with robust sales expected during peak periods. The lack of specific guidance is a minor concern but doesn't outweigh the positive indicators.
The earnings call reveals mixed signals: strong sales growth and strategic store remodels at Journeys, but declining margins and increased losses. The Q&A highlights positive momentum at Journeys but uncertain performance at Schuh and a lack of clear guidance for the U.K. market. The reiterated EPS guidance and market volatility suggest a balanced outlook. Despite positive developments, such as the Wrangler partnership, the lack of strong catalysts and increased expenses lead to a neutral sentiment, with stock price likely remaining stable in the short term.
The earnings call presents mixed signals: strong financial metrics with a 4% revenue increase and 5% comparable sales growth are offset by declining margins and a significant negative free cash flow. The Q&A reveals positive impacts from new brand relationships but also highlights management's evasiveness on key metrics. The share repurchase program is a positive indicator, but tariff uncertainty and competitive pressures pose risks. Overall, these factors suggest a neutral stock price movement, with no clear catalyst for a significant upward or downward shift.
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