Genesco, Inc., the parent company of Journeys, Schuh and Johnston & Murphy, said they delivered second quarter bottom line results that were significantly better than last year and well ahead of internal expectations.

Genesco Board Chair, President and CEO Mimi Vaughn said, “The quarter provides further evidence that our Footwear First strategy is working and our momentum is building. Journeys and Johnston & Murphy both delivered positive comparable sales in the quarter, and earnings improvement reflected the operating leverage we set out to build, with more full-price selling aiding gross margin recapture and disciplined expense management driving the stronger performance. As we anticipated, the decline in sales was driven by strategic actions: store closures, our license transition, and pullback on discounting at Schuh. As we move past these shorter-term headwinds, we expect sales trends to improve, and we remain confident that the initiatives underway across our company position us for profitable growth.”

Second Quarter Sales Summary
Net sales for the fiscal 2027 second quarter decreased 3 percent to $530 million for the period ended August 1, compared to $546 million in the second quarter of Fiscal 2026. The performance was said to be “in-line” with analysts’ expectations of $527.6 million in revenue for the quarter.

The decrease in net sales was said to reflect the impact of net store closings, decreased licensed sales, a 6 percent decrease in e-commerce comparable sales from reduced Schuh discounting and an unfavorable foreign exchange impact, partially offset by a 1 percent increase in same store sales and higher sales from enlarged stores.

The overall sales decrease was reportedly driven by a 10 percent decrease at UK-based Schuh and a 21 percent, or $7 million, decrease at Genesco Brands, partially offset by a 5 percent increase at Johnston & Murphy. Sales at Journeys were said to be flat.

On a constant-currency basis, Schuh sales were reportedly down 10 percent for the second quarter.

Profitability & Expenses Summary
Gross margin for the second quarter improved to 51.4 percent of net sales, including tariff refunds, compared to 45.8 percent in Q2 last year. Adjusted gross margin for Q2 was 47.2 percent of net sales, increasing 140 basis points y/y as a percentage of sales. The year-over-year increase in gross margin was said to be due primarily to less promotional activity and higher full-price selling at Schuh, favorable changes in sales mix, license exit benefit and pricing and tariff mitigation actions across our branded businesses.

Selling and administrative (S&A) expenses were 49.0 percent of sales in Q2, compared to 48.4 percent in Q2 last year. Adjusted S&A expenses for Q2 decreased almost $6 million but deleveraged 40 basis points as a percentage of sales to 48.8 percent. This compared to 48.4 percent of sales in Q2 last year, reportedly due to the sales decline this year.

The increase as a percentage of sales primarily reflected increased occupancy and performance-based compensation expenses, partially offset by decreased selling salaries and marketing expenses. Excluding performance-based compensation expense, S&A expenses were only up 10 basis points y/y for Q2, reflecting cost savings initiatives in a quarter with decreased sales.

Genesco’s GAAP operating income for the second quarter was $3.6 million, or 0.7 percent of sales this year, including tariff refunds, compared with an operating loss of $14.4 million, or 2.6 percent of sales in the second quarter last year.

Adjusted for the Excluded Items in the second quarters of both Fiscal 2027 and Fiscal 2026, the operating loss for the second quarter was $8.3 million this year compared to a loss of $14.3 million last year. Adjusted operating margin was a loss of 1.6 percent of sales in the second quarter of Fiscal 2027 compared to a loss of 2.6 percent of sales in the second quarter last year.

The effective tax rate for the second quarter was negative 2.5 percent in Fiscal 2027 compared to negative 15.0 percent in the second quarter last year. The adjusted tax rate, reflecting Excluded Items, was 5.7 percent in Fiscal 2027 compared to 26.5 percent in the second quarter last year. The lower adjusted tax rate for the second quarter of Fiscal 2027 compared to the second quarter last year primarily reflects a lower expected tax rate for Fiscal 2027 versus Fiscal 2026 due to the impact of the valuation allowance in certain jurisdictions combined with the income tax law changes from the One Big Beautiful Bill Act.

GAAP earnings from continuing operations were $3.5 million in the second quarter of Fiscal 2027, including tariff refunds, compared to a loss of $18.5 million in the second quarter last year.

Adjusted for the Excluded Items, the second quarter loss from continuing operations was $8.8 million, or a loss of 83 cents per share, in Fiscal Q2 2027, compared to a loss of $11.7 million, or a loss of $1.14 per share, in the second quarter last year. Analysts were expecting an EPS loss of $1.37 per share this year.

Tariff Refunds
The company received $22.5 million in tariff refunds, including interest, during Q2 related to its branded businesses under the International Emergency Economic Powers Act. The tariff refunds are excluded from the adjusted loss from continuing operations. In addition, no additional tariff refunds are included in the company’s guidance for the full year.

Cost Savings Program
In connection with its IT Transformation and programs to drive automation, operating efficiencies and spend optimization, the company commenced a new cost reduction program earlier this year which is expected to generate cost savings of $40 to $50 million between now and Fiscal 2029 with up to $20 million realized this year. This program is aimed at structurally reducing the cost base, continued investment in growth initiatives, further supporting operating margin expansion and continued utilization of AI capabilities which unlock additional opportunities.

Balance Sheet Summary
Cash at quarter-end was tallied at $57.1 million, compared with $41.0 million as of August 2, 2025.

Total debt at the end of the second quarter was $15.8 million, compared with $71.0 million at the end of last year’s second quarter.

Inventories increased 8 percent on a year-over-year basis primarily reflecting increased inventory at Journeys.

Capital Expenditures (CapEx)
For fiscal Q2 2027, CapEx was $17 million, related primarily to retail store remodels.

Depreciation and amortization was $13 million.

Stores
During the quarter, the company opened three stores and closed 25 stores. The company ended the quarter with 1,186 stores compared with 1,253 stores at the end of the second quarter last year, or a decrease of 5 percent.

Square footage was down 5 percent on a year-over-year basis.

Share Repurchases
The company did not repurchase any shares during the second quarter. The company has repurchased 317,503 shares during the third quarter as of August 31, 2026 and currently has $18.8 million remaining on its expanded share repurchase authorization announced in June 2023. Genesco, Inc. continues to view share repurchases as an important component of its balanced capital allocation strategy and is committed to deploying excess capital.

Fiscal 2027 Outlook
Vaughn said the fiscal 2027 third quarter is off to a good start with back-to-school and Journeys accelerating to a mid-single-digit comp in August on top of very strong growth the last two years.

Based on better than expected second quarter results including stronger gross margins and better expense management, partially offset by lower sales assumptions for Schuh in the back half, the company is raising its adjusted diluted earnings per share outlook for Fiscal 2027.

  • Adjusted diluted earnings per share from continuing operations are now expected to be at the high end of the range of $2.00 to $2.403, versus the midpoint of the same range as outlined in previous guidance.
  • Comparable sales are now expected to be flat for the year, compared to prior guidance of positive 1 percent to 2 percent, reflecting greater pressure at Schuh, resulting in total sales now down approximately 2 percent versus prior guidance of flat to down 1 percent.
  • Operating income, reflecting stronger gross margins, is now expected to be at the high end of the previous range of $34 to $40 million, versus the prior view of the midpoint of the range.

Guidance reflects repurchases through August 31 and assumes no further share repurchases for this year and a tax rate of 30 percent for Fiscal 2027 but due to the valuation allowance, the tax rate for the third quarter of the year will be in the range of approximately 7 percent to 8 percent.

Jonathan M. Collins, SVP, Finance and CFO, Genesco, Inc., added, “With strong execution across our businesses, continued traction from our strategic initiatives and a focused approach to cost management, we are working to unlock meaningful earnings opportunity and create further shareholder value.”

Image courtesy Journeys/Genesco, Inc.