With sales same-store sales jumping a stronger-than-expected 13 percent in the quarter ending through Jan. 7, Genesco Inc. again raised its guidance for the year by a dime a share. In the same year-ago period, same store sales increased 9 percent.
By concept, comps jumped 15 percent at Journeys Group and 14 percent at Lids Sports Group. Johnston & Murphy Group saw an 8 percent comp gain. On the downside, same-store sales at Underground Station Group declined 2 percent.
Sales for the company's e-commerce and catalog direct sales businesses increased 7 percent in the quarter through Jan. 7.
Based on the stronger than expected sales for the quarter to date, the company has increased its adjusted EPS to a range of $1.63 to $1.68 for the fourth quarter ending Jan. 28. The company's most recent previously announced earnings expectations were in the range of $1.53 to $1.58 per share.
“These comps were achieved with full price selling,” Bob Dennis, Genesco’s chairman, president and CEO, said at the ICR Xchange investor conference last week. “We did not get any more promotional this year than we did last year and as such our expectations is that our gross margins for the quarter will be in the same neighborhood as they were last year.”
Elaborating on the concepts, Dennis said Journey’s growth in the quarter continued to be driven by favorable fashion trends.
“Our teenage customer for a long time was wedded to white athletic as the core of their fashion statement and they have moved on from that,” said Dennis. “They moved on to a lot of different looks and silhouettes, which means a lot of different vendors and that very much validates the fact that an edited assortment has presented by Journeys is what they really need to see.”
He also said Journeys is benefiting “a little bit” from industry consolidation, particularly in the skate space. Skate sales “continue to be strong despite reports that the industry has gotten tougher in that category. And so we think the consolidation that was driven by the recession and the unavailability of credit has played in our favor,” said Dennis.
Operating margin was up around 7 percent for Journeys Group in the three months, or about 240 basis points over last year.
Journeys will end the year with 13 stores in Canada with another 12 or 13 planned for 2012.
Regarding Lids, Dennis said the performance continues to be driven by its Hat stores, which will account for roughly 72 percent of the group’s revenues in its fiscal year ending at the close of January. Thirteen percent will come from Lids Locker Room, its broader fan concept, with 15 percent from Lids Team Sports.
He particularly highlighted the growth potential of Lids Locker Room, which now has 79 stores. The concept carries a large apparel selection in addition to hats with some including hard goods. It plans to roll up the Locker Room business through acquisitions and new stores and expects “to be the largest player in the space a couple of years from now.”
Lids Locker Room also operates 41 team stores primarily concentrated in Major League Baseball and in college stadiums that enables Genesco to tap the excitement around major sporting events. As an example, he pointed to how a store a block away from the National Championship in New Orleans did over $100,000 on game day.
Looking to 2012, Genesco is projecting low single-digit comps, particularly given the strong comps this past year. Looking further ahead, expansion will be driven by additional expansion for Journeys and to some extent, Johnson & Murphy in Canada and its Lids Locker Room concept.
The five-year plan calls for Genesco to achieve sales of $3.1 billion by 2016 with operating income reaching $280 million, or 9 percent of sales. Pre-recession, operating margins were in the 8 percent range.
“We're very comfortable that that is a reasonable goal,” said Dennis. “So we are very excited by our prospects, we obviously have a lot to do, but we have so many different avenues of growth off of the strong strategic position that we're very pleased with where we stand.”
