Genesco Inc. said that second quarter results exceed expectations due in large part to strong comps in all retail divisions. While the company certainly sees the consumer buying closer to need these days, the consumer is obviously finding more of what they want at the company’s Journeys, Underground Station, and Hat World retail nameplates.

GCO saw a nice lift in the bottom line as better IMU’s helped push gross margin up 90 basis points to 50.5% of sales from 49.6% in the year-ago period, easily offsetting a 10 basis point rise in SG&A expenses.

Management said they expected that “athletic will continue to be strong” and had not seen any “lessening of the strength of athletic” in their business.

The Journeys business saw footwear unit comps increase 9% in Q2 on strength in fashion athletic, Euro casuals, board sport shoes, and women's fashion footwear. Dollar comps were up 6% on top of a 3% gain in Q2 last year. Average selling prices were down 3.5% for the period, probably due in large part to a sandal business that was said to be “very solid” for the period. Sandals comped up 22% in Q2, with unit comps even greater.

Management said athletic is more than half of sales these days and described the business as “strong”. adidas, Puma, Converse, and Asics were called out as key performers. Fusion footwear also performed very well. The skate business was “very strong,” with Etnies, Adio, Globe, DVS, and Vans all performing well.

Journeys Kidz posted a 16% increase in total sales for the period, with comp store sales increasing 14% for the quarter. Unit comps were up 11% and average selling prices rose 4% for the period. Athletics is 50% of sales, driven by the skate category. Sales per square foot in the JK stores is not $446 per square foot. Management said they had “solid GM expansion, with meaningful expense leverage.”

The Underground Station Group includes both Underground Station and the remaining Jarman stores. Comps at the Station stores were up 12% for the period while Jarman comps were up just 1%, dragging down the average for the Group.

Underground Station saw unit comps improve 8%, while average selling prices rose just 6%. Fashion athletic is 44% of sales in Q2, up from 39% of sales last year. Converse, Puma, adidas, Nike, Diesel, Madden, and 310 Motoring were all called out as key brands here. Nike is in 125 doors, but only represents a “single digit” contribution to the total.

Hat World posted its first full quarter under the GCO umbrella, posting a 4% same-store sales increase, which was on top of a 16% comp increase a year ago.

Hat World said they continued to see “strong gains” in both core and fashion Major League Baseball product, as well as branded performance headwear. The division opened 43 stores in the second quarter and is on track to open 90 doors for the year. The off-mall stores are performing better than the mall locations.

Genesco raised guidance for the balance of the year, projecting EPS in the 56 cents to 57 cents per diluted share range on sales in the $316 million to $321 million range. Fourth quarter EPS is seen in the $1.12 to $1.13 per diluted share range on sales between $396 million and $404 million.

GCO sees Journeys and Underground comps both rising in the mid-single-digit neighborhood, while Jarman stores are expected to see flat comps. Hat World is seen up in low-singles.


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Genesco, Inc.
Fiscal Second Quarter Results
(in $ millions) Journeys Station/Jarman Hat World Total
Net Sales $118.9  $32.2  $69.1  $275.2 
Change +12.4% +13.1% +19.2% +11.9%
Pretax Profit  $7.0  ($0.7) $9.3  $11.3 
Change +14.3% -54.1% +24.3% +57.7%
Comp Sales +6.0% +9.0% +4.0% +7.0%
Total Company Results  2005 2004 Change
Net Income  $6.8  $4.8  +40.2%
Diluted EPS  27¢ 20¢ +35.0%
Inventories @ Qtr-End  $270.7  $263.4  +2.8%