Genesco, Inc. exceeded internal forecasts in both sales and earnings for the quarter as strength in the company’s Journey’s and Hat World Groups boosted overall sales to $370.4 million. Overall same-store sales for the first quarter were up 2% on comps increases of 3% and 7% from Journeys Group and Hat World, respectively.


The company recorded a net loss of $5.8 million, or 31 cents per diluted share, compared to net income of $129.3 million, or $5.14 per diluted share, in the year-ago period. Earnings reflected pretax charges of $11 million that included costs incurred from converting debt to common stock. As adjusted, earnings for the first quarter were $3.5 million, or 17 cents per diluted share, compared to $3.8 million, or 17 cents per diluted share, in the year-ago period.


In a conference call with analysts, Genesco management noted that they were encouraged by the continued “resilience of teen spending,” and added that inventory control issues from financially weaker competitors had likely contributed to strength.


Still, for the second earnings call in a row, management described business as “choppy,” referencing sporadic comps within the fiscal first quarter. The company said February comps were strong while March comps suffered from the Easter retail shift. The front half of April was strong — boosted by the Easter holiday — but fell off dramatically in the back-end.  May comps through Memorial Day were off by 9%.

Journeys Group posted a 4.8% gain in net sales to $176.8 million. Comps for Journeys Group were up 3% compared to flat comps last year. In Journey’s stores alone, first quarter comps were up 3% compared to a 1% increase in Q1 last year. Footwear unit comps slid 1.3%, while ASPs increased 5.1%. Strength was fueled by women’s fashion, canvas and core skate.  The Journeys direct business showed strength in the quarter as well, increasing 5% for the period.
Genesco opened four new Journeys stores during the quarter and closed two stores. The company remains on track to open 12 stores this fiscal year, and expects to end the year with 818 total stores.

Comps for Journeys Kidz, which management said was hurt by the “Heelys comparison,” rose 5% for the quarter compared to an 8% decrease last year. Footwear comps were up 1.8% while ASPs rose 4.3% for the quarter. Management said the same product trends driving growth in Journeys stores also drove strength for Journeys Kidz. Genesco opened four new Kidz stores during the quarter and expects to have 151 stores in operation by the end of the fiscal year.

Shi by Journeys followed up on a strong 2008 fourth quarter by posting an 11% increase in comps for Q1. Athletic products represented 28% of sales for the quarter as compared to 17% in the year-ago period. Management attributed a 12% boost in footwear ASP to the introduction of higher priced merchandise. There are currently 55 Shi stores in operation and the company plans to add three more in fiscal 2010 for a total of 58 stores.


The company listed notable strength in the Hat World segment, as the Group posted sales of $98.8 million, up 12.versus the year-ago period. Comps for Hat World increased 7% for the quarter versus a 4% increase a year ago. Management attributed sales growth to strength from action brands, martial arts brands, fashion labels and Major League Baseball, which is the company’s largest category. Management added that strength could also have stemmed from “credit issues and further store rationalization in the industry with fall-out particularly in the ‘mom-and-pop’ retail category.”


Hat World reported operating earnings were up 75% to $6.5 million from $3.7 million a year ago. Genesco opened a total of five Hat World stores and closed ten in the first quarter. The company expects to open 35 stores for the fiscal year and close 21 to end with 894 total Hat World stores. Management added that they now have embroidery in 385 stores. Embroidery is up 19% year-over-year, and management said the category is a “high gross margin business.”


The Underground Station Group reported sales slid 7.8% to $26.7 million. The operating loss for the quarter was $450,000 as compared to a loss of $981,000 a year ago. Comps for Underground Station slid 5% as compared to an increase of 9% in the first quarter of last year. Management refererenced the “persistent challenges in the urban market” but maintained that they continue to look at the long term prospects of the business.


Footwear unit comps for the first quarter were roughly flat and ASPs declined 2.7%. Women’s and kids’ footwear made up about half of unit footwear sales and about 45% of dollar footwear sales for the quarter.
Genesco has closed 13 Underground Station stores in the last 12 months and does not plan to open any new stores this year. The company plans to close eight stores by year end, bringing the total store count to 169.