By Thomas J. Ryan
Journeys business picked up for Genesco Inc. in December and is primed to rebound come spring with the arrival of on-trend fashions, officials said.
Same-store sales at Journeys were down 6 percent in the November/December holiday period, but December marked an improving rate with Journeys being down 12 percent in November.
“We dropped some of that hot product in the stores during December and the sell-throughs were terrific,” said Bob Dennis, Genesco’s CEO, at ICR Conference.
“And we’re going to have that assortment right-sized by spring, dropping that product in February. And the merchants are working hard to try and pull some of that forward into January.”
The December performance was also helped by the arrival in the month of the seasonal boot business, which is unaffected by some of the fashion trends have been pulling down comps.
As previously reported, Journeys was impacted by a rotation in fashion that was quicker than merchants expected. Added Dennis, “We think we’re very close to turning the corner and have really good evidence that we’re tracking in that direction quite fine.”
Prior to Genesco’s session, the company indicated comps were running flat to minus one in the two-month quarter-to-date period, above previous guidance calling for a decline of 2 to 3 percent. Genesco officials also expect to reach the high end or possibly exceed its EPS range for the quarter of $3.90 to $4.
Among its segments, same-store sales were up 1 percent for Schuh Group in the two-month period, ahead 8 percent for Lids Sports Group and off 1 percent for Johnston & Murphy Group.
At the conference, Dennis highlighted two near-term profit opportunities for Genesco as well as three growth opportunities.
The first profit opportunity is the improving sales trend at Journeys. Dennis said a close partnership with vendors has helped the teen footwear chain quickly get back on trend with its mix. Said Dennis, “We think that trend is there. And we have reasserted spring to be where it needs to be and got great support in the vendors to make that happen.”
Margins in the overall Lids business should be helped by a merchandise reset caused by an over-inventoried situation over the last year. The store base at the Lids Locker Room and Lids Locker Room at Macy’s segment are also expected to benefit profit-wise from an ongoing rationalization.
Lids Locker Room, which carries apparel and hard goods in addition to caps, still has over 200 stores. Lids also operates in-store shops inside Macy’s, down from 200 at its peak. In its third year, the Macy’s business has faced a “steep learning curve” in how to sell licensed apparel inside a promotional environment. Said Dennis of the downsizing, “It’s not quite near where we want it to be yet, but we are definitely, definitely headed in the right direction.”
On the plus side, Lids’ comps have rebounded due to the World Series win by the Chicago Cubs. Comps were up in the mid-teens in November. The Cubs win should provide some boost to sales through the start of the MLB season, but Dennis still said Lids this year “will be more of a gross margin story than a comp story.”
Among its growth prospects is e-commerce and omni-channel, as the company has lately been benefiting from numerous investments in its digital platform. The flat comp in the November/December period was boosted by a gain of 11 percent in e-commerce that offset a 2-percent decline at its physical stores.
Journeys Kids, which has seen a number of years of positive comp gains, is on target to expand to 400 stores, up from about 200 currently. The chain is expected to benefit from Wolverine World Wide’s move to shut down the Stride Rite chain.
Schuh and Schuh Kids, its U.K.-based footwear chains, also hold expansion potential although its performance has recently been impacted by a “choppy environment,” in part due to Brexit as well as challenging currency translations against the U.S. dollar.
About a year ago, Genesco acquired a 36-store chain in Canada, Little Burgundy, that’s been a “strong double-digit performer” and has room to grow. But Dennis noted that the company is using its cash on stock buybacks rather than to pursue acquisitions because overall valuations have been high. Said Dennis, “We continued to be active but very disciplined in looking in the acquisition market. And over the last several years we have not been able to justify the valuation on some of the things in our space that have traded.”
Photo courtesy Journeys
