Genesco Inc. got another terrific boost from its acquisition of Hat World to post solid gains for the fourth quarter and the year ended January 29. Sales excluding the contribution from Hat World would have increased 7.7% to $272.1 million in the fourth quarter and would have grown just 7.0% for the year to $896.4 million. Operating profit would have increased 7.1% for the quarter and 4.4% for the year. But including the Hat World numbers, which Genesco will start to anniversary in two months, the company reported that fourth quarter net sales jumped 39.6% to $352.8 million, compared to $252.7 million in the year-ago period. Earnings before discontinued operations increased 43.3% to $25.5 million, or 97 cents per diluted share, compared to $17.8 million, or 71 cents per diluted share, for the fourth quarter last year.
Hat World sales increased 17% to $81 million when comparing the division numbers to last year as a private company. Comp store sales increased 6% on top of a 16% gain in the year-ago quarter. The division delivered $14.0 million in operating profit for the quarter, or 17.3% of sales, roughly 32% of the total for the company while contributing about 22% of the sales.
Management said they saw strength in MLB headwear and as well as the fashion and branded business, trends they see continuing going forward. The division opened 59 new stores in the last year and GCO has plans to add another 90 doors this year. They said they already have 70 deals in their pocket. One nice metric was that the new stores are coming out of the box delivering sales per square foot numbers that are just about even with existing doors.
For fiscal 2006, Hat World comps are expected to be around +2% for the full year, with management taking a conservative approach due to the Red Sox phenomenon last year. They must not like the off-season moves in Beantown, stating they do not expect a repeat of last year. Comps are expected to rise 3% in Q1, stay flat in Q2 and Q3, and then pick up again in Q4 with comps rising 2% to 3% for the period.
Journeys saw a move to more athletic product and less boots hurt average selling prices in the fourth quarter, as athletic delivered 42% of total sales in the period versus 37% of the total in Q4 last year. Unit comps were up roughly 6%, but a 2.2% decline in ASP held comp store sales to a 4% gain for the period. Journeys Kidz is becoming a success story as improving ASPs and increased traffic drove same-store sales up 24% for Q4. Footwear unit comps were up 20%. Total sales for the 41-door unit were up 28% to $7.6 million.
Operating profit for the division rose 3.6% for the quarter to $27.0 million, or 16.5% of sales, contributing nearly 62% of total operating profit for the company while representing 46.5% of sales. Gross margin was said to be “above last year and better than expected”, due primarily to lower markdowns.
Journeys is making a bigger statement in Manhattan and “remains on track” to open a 7,000 sf store at 34th and Broadway. The success story at Journeys Kids had the division testing Kidz towers in 25 select Journeys stores over the Holiday season. They said they were “very pleased” with the result and will roll the concept out to 400 stores this year.
GCO had a net gain of 29 Journeys stores in fiscal 2005 and one Journeys Kidz store, ending the year with 695 doors. They plan to open 65 new Journeys stores and close five this year, while adding 10 Journeys Kids doors and closing four for net gain of 66 doors.
Management sees continued moderation in the ASPs at Journeys keeping comps store sales gains in check. They expect a mid-single-digit increase for fiscal 2006.
The Underground Station group saw comps rise 2% in the back half of the year after a 6% in the first half. Fourth quarter sales increased 5.6% to $50.2 million from $47.5 million in the year-ago period. Comps for the Underground Station stores increased 5% for the quarter and total division comps rose 3% due to a 2% comp sales decline for the remaining Jarman stores. The Station gains were said to be driven by a 5.5% gain in ASP that management said was “across the board”. Third quarter ASP was up 4%.
Operating profit jumped 22.7% to $6.1 million in the quarter, due primarily to improving gross margins positively affected by product mix and lower markdowns.
GCO continued to reduce its mix of Jarman stores, ending the year with 64 stores after closing 20 doors and converting another 12 doors. They ended the year with 165 Station stores, a net gain of 28 doors. Underground Station is on track to open a new 3,200 sf store in Brooklyn in April.
