Reacting to an analyst’s comments at last week’s WSA Financial Conference sponsored by Susquehanna International Group that suggested that the skate category was slowing, and subsequent comments from Skechers suggesting the same, executives at Genesco indicated that the category was still seeing strength across a number of brands and price points at its Journeys nameplate. 

Specifically asked in a question & answer session about the health of the skate category, Mario Gallione, SVP of Journeys Group, said, “There are brands that are up strong and there are brands that are down-everybody takes their turn in the barrel. But the skate business as a whole is very healthy.”

He qualified his statements by noting that skate has been “one of our core competencies” since Journeys was founded in 1986, and the core brands Journeys carries are Vans, DC, Osiris, DVS, Etnies and Globe. The store also carries a few more mainstream shoes “that kind of draft off skate,” such as the Converse Chuck Taylor, which he called “such as universal shoe.” It also carries some skate-like shoes from Nike and adidas because the model’s silhouette – such as the Nike Dunk or the adidas shell toe – have been accepted by the skate crowd.
“Those shoes are part of the culture and not really skate shoes,” said Gallione.

Asked if any certain areas in skate, such as performance, were performing better, Gallione said Journeys basically has three tiers of skate, and “all three of them are very healthy.”   The first tier is technology/performance represented by innovations such as air bag technologies and features such as extra padding to support core riders.
These shoes, represented by brands such as DC, Globe and DVS at prices ranging from $80 to $100, have “definitely helped average prices” at Journeys.  The second is the “low-tech” category, which he described as “that fat, puffy shoe that’s done on a cut sole” and sells from $60 to $70. The third category, low-tech or vulcanized, represents opening price points under $60.

Mr. Gallione said the Journeys chain will continue to primarily focus on skate as part of a “Back to the Grind” campaign this BTS. In-store marketing is being more closely tied to the Journeys BBQ Skate tour this summer, the third year for the tour. Secondarily, the focus will be on fashion athletic brands with a big focus on color. He also noted that DC was recently given its own tower display within the store, joining Converse, Vans and Puma. 

He also said skate also “remains a very, very important part” of Journeys Kidz. Assortments mostly reflect take-downs from the core flagship chain. Although it’s “not what it used to be,” Heelys remains an important part of the Journeys Kidz mix.

Regarding Shi by Journeys, which targets women in their early twenties to mid-thirties, Gallione says the concept “continues to evolve” but the fashion category, represented by heels and wedges, continues to be strong for the chain. Casual, specifically Birkenstock and Clarks, is expected to be important for BTS. Athletics, an even smaller category for Shi, is largely driven by color, and represented by Steve Madden, some low-profile New Balance, and Rocket Dog high-tops. “These shoes arent really athletic shoes; theyre just really cool casual shoes,” said Gallione.

Management Outlines Differentiation…
Genesco reiterated that expansion plans for many of its banners have been scaled back this year due to the tough economy. Asked about the possible impact of consolidation efforts at the mall, Gallione noted that Pacific Sunwear’s move last year to pull footwear from its stores “helps some people and hurts others.”

Asked specifically about Foot Locker’s stated intentions to more aggressively pursue skate, Gallione said he expects Foot Locker will likely pursue the category “from a generic standpoint” with many of the athletic brands Foot Locker has already mentioned, like “iconic shoes like the Dunk or the shell toe that have resonated as a fashion item with a broad variety of consumers and then theyll do certain shoes that they call ‘skate and well just have to see how successful it is.”

Genesco President and COO Bob Dennis said the Hat World chain “right-sized” inventories in the second half of last year after the fashion side of the MLB business slowed down after several years of strength. But Dennis noted that a number of other trends are now working for Hat World. 

MLB Core, which are the authentic hats worn by professional players, is being bolstered because a number of teams from major markets are in the playoff hunt. Hat World has also seen a shift back to basics, similar to what’s going on in footwear. For instance, Reds and Pirates caps are seeing significant increases because “the basic black hat and the basic red hat are important.”  Many consumers are buying basic colors for the fashion hook-up. Hat World is seeing a resurgence of basic whites and basic blacks overall. At the same time, Dennis noted that Hat World “is still doing a good business in wilder looks” and that has been a strong trend for three to four years.

In other areas, skate branded caps continue to grow as part of Hat World’s mix. A property doing particularly well is Ultimate Fighting Championship hats. Another strong trend is fitted New Era hats with cartoons imagery for adults. “It shouldnt be a surprise to anybody that were pretty much in love with the Batman movie now and that’s been important for us,” said Dennis.

Underground Station likewise is following a “back to basics” campaign for BTS catering to “clean basic styles,” said Pete Hicks, SVP/DMM. Brands being focused under the basics positioning are adidas, Converse, Puma, Polo and Reebok. Its women’s campaign, called “High Style,” focuses on bright colors, print materials, and patent leather.
A big focus will remain on high-tops in women’s. Women’s brands being featured include Baby Phat, Pastry, Apple Bottoms, Converse, adidas, Reebok and Ecko Red. On the men’s casual/dress side, Ed Hardy, Georgio Brutini, and Timberland are performing well.

In athletics, Puma, Converse, Fila and 310 Motoring are being emphasized. The chain will also continue to concentrate on the “hook-up” story between footwear and apparel.

Addressing overall shakeout possibilities given the weak economy, Jim Estepa, president of Genesco Retail, feels that the fact that the Journeys team has been together for awhile is a “competitive advantage.” He noted that the last time major consolidation occurred was when Kinney, Thom McAnn and Father & Son all exited the market. At the time, he surmised there was a two-year shakeout period, but the remaining players had robust sales following that. “I think we had 3 or 4 years of double-digit comps after that shakeout,” he recalled.  Similarly, he expects to see consolidation at both retail and wholesale this year and in 2009.

“As you plan your success, youve got to look at taking it from someone else and youre going to see a lot of changes in the marketplace.”