Stymied by weakening sales trends at Lids over the holiday period,
Genesco Inc. indicated last week that EPS for its fiscal year ending Feb. 2 would now land in the low end to the middle of the upwardly revised guidance range of $5.00 to $5.08 announced on Nov. 30.
That’s still well-above 2011’s earnings of $4.09.
Comparable sales, including both stores and direct sales, decreased 1 percent for the quarter-to-date period through Jan. 12, compared to a 13 percent increase for the same period last year. Comps at its store network declined 2 percent while e‑commerce and catalog direct sales increased 17 percent on a comp basis.
By concept, comps in the holiday period declined 10 percent at Lids Sports Group while growing 2 percent at Journeys Group, 1 percent at Johnson & Murphy and 8 percent at Schuh.
At the ICR XChange Conference, Bob Dennis, Genescos chairman, president and CEO, said Lids saw a 50 percent tumble in NHL gear due to the leagues strike, taking 2 percent off comps. With the strike settled and first games starting on Saturday, the NHL cap business has rebounded.
The business was also hurt because Lids operates seven St. Louis Cardinals that benefitted when the team won the World Series in 2011. But Lids doesnt have any stores supporting 2012s winner, the San Francisco Giants. Dennis estimated the World Series switch impacted comps by 1 percent.
The remaining 7 percent of the negative comp reflects the trend toward snapbacks that has seen a flood of competitors. Dennis said its easier for other retailers to address this trend since its a one-size-fit-all rather than fitted offering; its been dominated by a limited number of SKUs, with the two biggest by far being the Chicago Bulls and the Brooklyn Nets; and its a strong color fashion play. Said Dennis, That has allowed a lot of people to get into the business, because it does not require the sophistication that we have in the Lids business to manage a huge amounts of SKUs on a sized basis.
Dennis still sees snapback as a fad with an expected recovery in fitted, although it is very difficult for us to predict the timing on that. A new batting practice hat from MLB and a refreshed collection around the Cooperstown is expected to add some newness to the fitted category.
Lids will also increase offerings in the franchise category, which Dennis describes as sort of the preppy, yuppie version of a hat, to reestablish that category.
On the positive side, the segments 93 Lids Locker Room and 53 Clubhouse stores are seeing continuing growth, and the busienss combined has 500-store potential. Lids.com saw a 31 percent gain in the holiday period, benefiting from a 51 percent hike in the number of SKUs year-over-year in the quarter.
Journeys holiday performance, according to Dennis, was solid considering the chain was going against double-digit comp gains in the year-ago period. The chain continues to benefit from a very broad-ranging fashion trend ranging from canvas to boat shoes to boots. Said Dennis, We are enjoying a demand pattern that allows our merchants to get narrower and deeper in what we know is working, and that is always a merchant’s friend.
He also noted that in-season boots have been liquidated with inventories in better shape than the same time a year ago.
Journeys.com was very strong, benefiting from stores being structured to get e-commerce shipments to online customers. Computer screens in smaller stores direct consumers to online ordering for sizes that are out-of-stock in the location. Its free-shopping threshold was lowered to $39.99 to also support he business. Said Dennis, We just dont want to ship free pairs of socks. So we are really delighted with how well we are positioned to drive the business.
Schuh, its U.K. footwear chain acquired in 2011, are benefiting from strength in American brands overseas. Said Dennis, They are essentially playing catch-up to the assortment in many ways to what Journeys has already had for over a year. And that catch-up on the assortment is a big part of what has been driving comps.
A down real estate environment, due to economic challenges in the U.K., is opening up greater real estates opportunities. Sixteen stores are set to open this year. It currently has 60 Schuh locations, including a test of three kids stores.
Johnston & Murphys comps were down 1 percent in the stores, but e-commerce was up 9 percent for an overall positive 1 percent comp. The fiscal cliff discussions had an impact on the chains dress customer over the holiday period.
Looking at expansion, new stores are expected to come from Schuh, Lids Locker Room and Clubhouse, and growth across all banners in Canada to support 9 percent annual sales growth over the next five years. Comps are expected to rise at a 2 to 3 percent rate over the period. Operating margin is projected to improve at a faster rate, lifting to about 9.5 percent over the next five years from mid-7 percent expected in its year ending in January.
The recession took its hit on our bottom line, but we have recovered quite nicely, said Dennis. The assumption on operating margin requires that each of our businesses get to double-digit operating margins, something they all have done in the past pre-recession. So we think that this is not an especially outrageous target.
