Genesco, Inc. described the fourth quarter as “choppy,” with the early part of the quarter described as “weak” until a few days before Christmas. Sales then reportedly accelerated through early January, then softened dramatically again. GCO ended the quarter with total sales down 3.3% to $451.7 million and comp sales down 5%, a bit below forecasts in mid-January.
Management described the start of the new year as choppy as well, but more to the positive as total company comps rose 7%. Journeys Group February comps were up 10%, with Journeys stores up 9%, Journeys Kidz increasing 15% and Shi February comps jumping 21%. Hat World Group February comps were positive 12%, while Underground Station Group February comp sales declined 1%.
Journeys Group posted a 1.2% increase in sales in Q4 to approximately $229.5 million from $226.8 million in the year-ago quarter. Comps for the Journeys Group were down 2% on top of a 7% comp sales decrease in the prior-year period.
The Journeys stores saw fourth quarter comps decrease 3% on top of a 7% decline in the fourth quarter last year. Men's footwear made up about 44% of Journeys' footwear sales for the quarter and women's and kids footwear represented the balance of 56%, compared with 52% in the year-ago period. Footwear comps decreased 3.2% for the quarter and unit comps decreased 3.2%. Average selling prices increased 1.7%. The company opened one Journeys store in the quarter and ended the year with 816 stores in operation.
For the full year, ASPs at Journeys were up about 1%, the first annual ASP increase in the Journeys' stores since fiscal 2001. Full year comps were up 1%.
Journeys Kidz posted a 3% comp store sales increase for the fourth quarter, reversing the 3% decline in the prior-year quarter as the retailer finally put the Heelys issue behind them. Fourth quarter footwear unit comps decreased about 1% and ASPs rose 6.6%. Full year ASPs improved 3.2%.
GCO opened four new Journeys Kidz stores and ended the year with 141 stores in operation. For the full year they opened 26 new stores, with 17 of the stores said to be conversions of “highly profitable but size-constrained Journeys stores.”
Shi by Journeys, which is the companys womens concept, appears to be coming into its own as fourth quarter comps jumped 11% and average selling prices increased 12.7% for the period. Management said they continue to adjust the product offering in the format by increasing the “selection of athletic products and higher priced branded fashion merchandise.” They said they were “particularly pleased” with the strong gross margins they were able to maintain.
GCO opened two Shi stores in the fourth quarter and ended the year with 55 stores in operation.
Journeys Group operating income was up 2.1% to $24.5 million in the fiscal fourth quarter, or 10.7% of sales, compared to $24.0 million, or 10.6% of sales, in the prior-year period. Journeys' gross margin was actually up about 50 basis points in the quarter due primarily to higher initial mark downs.
Genesco expects to open 12 new Journeys stores in fiscal 2009 and close 10 stores. They expect to open up to 10 Journey Kidz stores and two or three Shi by Journeys stores.
Hat World Group sales were up about a half point to $122.4 million in the fourth quarter from $121.8 million in the prior-year period. Comp sales for the quarter declined 4% on top of a 4% decline in the prior-year quarter and a 1% decline in Q4 two years ago. Full year comps were up 2% against the previous year.
Management said that major league baseball continues to be Hat World's largest category and “performed well.” Action brands were said to be “extremely strong” once again. They said comps were hurt in the quarter due in part to weakness in the NFL sideline hat. The MLB business has apparently “taken a lot away” from the retailers NCAA business, which carries higher margins.
GCO opened a total of 13 new HW stores in the fourth quarter and closed seven to end the year with 885 stores in the Hat World Group. For 2009, GCO plans to open up to 40 Hat World Group stores, including up to 15 new stores in Canada where performance was said to have been “outstanding.” They will close 34 stores.
They now have embroidery in 380 stores and posted a 13% increase in the category. While only a small piece of the business — 5% of sales it was described as “highly profitable.”
Underground Station Group Falls Flat in Q4; Hat World Enters Team Dealer Market…
Hat World Group operating earnings were down 14.5% to $14.8 million, or 12.1% of sales, in the fourth quarter, compared to $17.3 million, or 14.2% of sales, in the prior-year period. Hat World's gross margin declined in the quarter primarily due to “timing differences on vendor discounts.” Still, operating margins rose to 9% of sales for the full year, compared to 8.4% in the prior year.
The Underground Station Group, which has been positioned to focus on womens and kids more since the loss of the Nike business, was a tale of two periods as a 10% increase in YTD comps through August was completely erased with a 12% fourth quarter comp store sales decline. Comps in the year-ago quarter were down 5%. Footwear unit comps decreased 7% and ASPs declined 3%. Full year comps were flat.
Operating income for the Station Group fell 74.0% to $593,000, or 1.7% of sales, compared to $2.3 million, or 5.3% of sales, in Q4 last year. Underground Station Group's gross margin was down due to “higher markdowns to keep inventory fresh.”
Operating income for the Station Group fell 74.0% to $593,000, or 1.7% of sales, compared to $2.3 million, or 5.3% of sales, in Q4 last year. Underground Station Group's gross margin was down due to “higher markdowns to keep inventory fresh.”
Management said they had expected to have Underground Station profitable in fiscal 2010, but given “how economic conditions have deteriorated, that is now unlikely.” Underground Station has 109 profitable stores and 71 stores that are unprofitable on a four wall basis. GCO ended last year with 180 stores in the Underground Station Group, down from 223 just two years ago. They expect to be down to approximately 170 stores by the end of 2009.
One interesting twist for GCO is a small acquisition they made that will roll under the Hat World Group umbrella. Impact Sports was described as a team dealer that sells branded athletic and team products to college and high school teams. Management believes the team dealer business is consolidating and this is their first move into the market. They said the Hat World guys have known the Impact Sports people for some time. They said they see it as “tangential to what they already do” at Hat World.
