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Genesco (GCO) Jumps on Positive Holiday Comps, Cuts View

Zacks Equity Research
Updated

Shares of Genesco Inc. GCO jumped 6.9% after the company announced a 5% increase in its comparable-store sales (comps), including both stores and direct sales, so far in the fourth quarter through Jan 2, 2016.

On a stand-alone basis, comps at this Nashville, TN-based company’s stores were up 3%, while its eCommerce and catalog direct sales businesses reported comps growth of 20%.

Management remains pleased with its overall sales trends across North America amid a tough holiday season. The company mainly gained from robust performance witnessed at its Journeys Group division, which has been consistently performing well.

Going by divisions, overall comps improvement was primarily led by 7% growth at the Journeys Group division. This was followed by 5% and 6% comps growth at the Lids Sports Group and Johnston & Murphy Group divisions, respectively. On the flip side, Schuh Group posted a 2% drop in comps for the period.

While the Lids Sports Group posted positive overall comps for the period, the company is aggressively on track to clear the excess inventory at this segment, which in turn is likely to weigh upon Genesco’s bottom line in the fourth quarter and fiscal 2016.

Consequently, management lowered its adjusted earnings guidance for fiscal 2016. The company now projects earnings per share in the range of $4.30–$4.40, compared with the prior expectation of $4.50–$4.60 per share.

However, based on the expectations of enhancement at the Lids Sports Group division and impressive trends at its Journeys Group segment, this Zacks Rank #3 (Hold) company remains optimistic about fiscal 2017. Management is particularly hopeful about the Lids Sports Group’s performance, given the anticipated benefits from its inventory cleanup and favorable year-over-year comparisons with fiscal 2016 that was marked by intense promotional activity.

Though Genesco posted positive holiday season comps, the 2015 holiday shopping season was tough for most retailers due to a heavy promotional environment, intense competition and slow consumer traffic. Evidently, December comps for The Gap, Inc. GPS, Zumiez Inc. ZUMZ and Rite Aid Corp. RAD, fell 5%, 8.9% and 0.1%, respectively.

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ZUMIEZ INC (ZUMZ): Free Stock Analysis Report
 
GAP INC (GPS): Free Stock Analysis Report
 
GENESCO INC (GCO): Free Stock Analysis Report
 
RITE AID CORP (RAD): Free Stock Analysis Report
 
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Zacks Investment Research