Genesco said it expects earnings from continuing operations between $9 million and $9.5 million, or 41 cents to 43 cents a share, in the third quarter. That's up from the $5.6 million, or 23 cents a share, after restructuring charges last year, but less than Wall Street expectations. The owner of Journeys also lowered its guidance for the fourth quarter due to further weakening sales trends in November.
For the third quarter ended Nov. 2, Genesco expects net sales to increase 5% to approximately $390 million from $372 million a year ago. Same-store sales for the third quarter increased 2%, with the Journeys Group up 5%, Hat World Group up 2%, Underground Station Group up 1% and Johnston & Murphy Group down 15%.
The company now expects to report earnings per diluted share of 41 cents to 43 cents for the third quarter compared to 23 cents for the corresponding period a year ago. Analysts were expecting earnings of 53 cents a share in the quarter on net sales of $397.2 million, according to Thomson Reuters. Genesco expects to officially announce results on Nov. 25.
Genesco said third quarter earnings per diluted share are expected to reflect restructuring charges of approximately $2.3 million pretax, which included fixed asset impairments and store closing costs, and $0.2 million pretax of merger-related expenses, offset by a favorable FIN 48 tax adjustment of $1.2 million. Adjusting for these items, earnings from continuing operations would have been $9 million to $9.5 million, or 41 cents to 43 cents per diluted share, in the third quarter. Last year's results included $6.2 million pretax, or approximately 16 cents per diluted share, primarily of litigation and other expenses related to the company's proposed merger and retail store impairment charges. Adjusting for such items, earnings from continuing operations would have been $10.0 million, or approximately 39 cents per share, in the third quarter last year.
The company also stated that it expects inventories to be down approximately 4% for the quarter.
Genesco president and CEO Robert J. Dennis said, “We were pleased with the performance of both the Journeys Group and Hat World Group during the quarter, particularly given the extremely challenging retail environment, and the solid results underscore their strong competitive positions in the marketplace. And while Underground Station missed its sales targets, stronger than expected gross margins allowed it to essentially meet its profit expectations. The biggest shortfall was at Johnston & Murphy, as the difficult macroeconomic environment, especially for retailers at the better end, negatively impacted its results for the quarter.”
Fourth quarter guidance
Looking ahead, Genesco said it expects same-store sales in the fourth quarter would drop between 1% to 4%. It said that would mean earnings per share in the fourth quarter would fall in a range of between $1.06 and $1.20. Analysts had predicted the company would earn $1.35 a share in the fourth quarter, according to Thomson Reuters.
The company said it is basing its wider range of guidance for the fourth quarter on same-store sales trends in the third quarter and into early November. November-to-date total same store sales through November 16 are down 9%, with Journeys Group down 9%, Hat World Group down 6%, Underground Station Group down 15% and Johnston & Murphy Group down 20%.
The company believes that the early November same store sales trends at Journeys reflect unfavorable period-to-period comparisons for certain key product lines, primarily due to changes in the timing of vendor shipments this year, and it expects to experience meaningful same store sales improvements at Journeys beginning at the end of November as additional shipments this year help drive sales.
Dennis continued, “In the near term, we remain focused on what we can best control in these difficult times, namely, costs, inventory management and ensuring that we have the right merchandise in our stores to meet our customers' wants and needs. Longer-term, our strong portfolio of leading brands and concepts positions us well for the future.”
