Genesco Sees Planets Aligned for Mall Formats…

Genesco Inc. looks to be sitting in the catbird seat these days as they capitalize on fashion trends that appear to be aligning directly with a number of their mall retail formats. Journeys, always the darling of the fashion athletic business, is now ground zero for the trend to the low-profile, fusion, or euro casual looks in athletic footwear. The rest of the mall is now playing catch up while Journeys continues to get a first look at the next generation of a category they have carried for years. While the licensed apparel fashion business took a dive over the last two years, the headwear business continued to perform as hip-hop artists rounded out their new dressed-up looks with tone-on-tone baseball caps adorned with pro team logos. Hat World, the purveyor of sports headwear that Genesco acquired in spring 2004, is at the center of that phenomenon as well with the Lids stores multiplying rapidly under GCO’s guidance.

Journeys posted a 17.5% increase in sales in the fourth quarter to approximately $192.6 million from $163.9 million in the year-ago quarter. Comps were up 10% for the period. Footwear unit comp sales were up 12%, but average selling prices dipped about one percent as strength in both athletic and fusion product cut into ASP’s. Fashion athletic, fusion, board sport, and women's fashion and casual footwear all “performed well” in the quarter. Men’s and women’s skate sales were said to be “very robust.” Operating income was up 15.1% in the period to $31.1 million, or 16.1% of sales, compared to $27.0 million, or 16.4% of sales, in the fiscal 2004 fourth quarter.

Journeys, with 700 doors currently, will open another 60 doors in 2006 and close three. The Journeys Kidz business will continue to grow and is seen with a potential of 250 doors. Journeys will open eleven of the “Shi” women’s concept stores in 2006. Management said Shi “did not cannibalize” Journeys sales with the first location.

Hat World posted another strong quarter despite having to anniversary the Red Sox World Series run from the previous year. Total sales for the unit were still up 21% to $97.7 million for the period from $80.8 million in the prior year period. Same-store sales rose 6% on top of a 6% gain in the year-ago quarter. The Steelers’ run to the Super Bowl probably helped offset some of the energy from the BoSox action in 2004. GCO said Hat World continues to roll out embroidery machines in the larger stores which is proving to be an “attractive add-on business” in those stores. Operating earnings were up 27.8% to $17.7 million, or 18.2% of sales, in the fourth quarter, compared to $13.9 million, or 17.2% of sales, in the prior year period.

HW plans to open 85 new Lids locations in fiscal 2007. GCO feels they can grow this division to more than 900 stores in North America.

The Underground Station Group, which still includes some Jarman stores, saw total net sales increase 6.9% to $53.6 million from $50.2 million in Q4 last year. Same-store sales rose 4% in the fourth quarter. Underground Station stores posted a 6% comp store sales gain, primarily driven by a 7% increase in average selling prices. The Station stores continued to see growth in athletic, but apparel and accessories also outpaced footwear sales, growing to 19% of the mix during the period from only 14% pf the total last year. Operating income for the Group increased 14.6% to $7.0 million, or 13.0% of sales, compared to $6.1 million, or 12.2% of sales in Q4 last year.

GCO ended the year with 180 Underground Station stores and plans to open 15 new Station stores in fiscal 2007, while closing five Jarman stores and converting another two stores.