While consumer spending remains challenging, Genesco, Inc. sees many benefits from the economic downturn. Speaking last week at the Telsey Advisory Group Consumer Conference, Bob Dennis, Genesco, Inc. president and CEO, said this includes gaining lease negotiations and reduced construction costs as well as increased market share as stores go out of business.

As an example, Dennis pointed out that Converse had been sold at Mervyn's, the California retailer which has shuttered its doors.  “We don't think of our Journeys customer was frequenting Mervyns a whole lot, but as you take capacity out of the industry it has to go somewhere, and we think at least some of that flows to us,” said Dennis.  He also said Journeys has benefited from as Pacific Sunwear exit from the shoe business last summer. Said Dennis, “We can't quantify how much of that business we picked up, but we do believe a chunk of it went in our direction.” 

Regarding leases, Dennis said the company is getting “remarkably improved terms with landlords,” and also noted that 45% of its store base is up for renewal or is kicking out. Said Dennis, “With a soft economy and a lot of the malls reeling from occupancy, there we are being able to sit down across the table and rework the terms.”
 Dennis also said that its core Journeys and Hat World concepts carry “pretty affordable price points” that helps somewhat insulate the company from the recessionary selling climate.

“Very importantly, the teenager tends not to have a 401K — or we call it a 201K,” said Dennis. “They tend not to have a mortgage. They are a little more insulated from this.”

Dennis also said many of the brands Journeys and Hat World carry aren't feeling the full brunt of that markdown pressures across retail.
“Our brands, particularly within Journeys and in Hat World, are not widely distributed; and the vendors are very careful about how that product gets presented and how it gets priced. And so we have not found ourselves exposed to any kind of price wars,” said Dennis.
Regarding Underground Station, Dennis also said the chain had been showing success in shifting to a men's/women's/kid's concept last year and was on its way to returning to profitability in 2009. With the economy's collapse in the fourth quarter, Dennis said that's “likely not to happen” now.

“The core customer is challenged. It's heavily an Afro-American customer who is more impacted by the employment trend, and that's reflected in their spending patterns.”

The company will continue to shorten the lease life of Underground Station while tweaking the new strategy. He noted that outright closing stores without a lease expiration or a kick-out “will be enormously expensive.”