Genesco ((GCO)) has held its Q4 earnings call. Read on for the main highlights of the call.
Genesco’s recent earnings call painted a picture of a company navigating both triumphs and challenges. The sentiment was largely positive, buoyed by strong fourth-quarter performance, particularly in the Journeys segment and digital growth. However, the call also acknowledged hurdles in the Schuh and Johnston and Murphy businesses, alongside anticipated pressures on gross margins in the coming fiscal year.
Strong Performance in Fourth Quarter
Genesco reported a robust fourth quarter, with revenue and gross margins surpassing expectations. The company achieved operating profit at the high end of its forecast, driven by a 10% increase in comparable sales. Store sales rose mid-single digits, while digital sales surged by high teens, showcasing a well-rounded performance.
Journeys Segment Success
The Journeys segment was a standout performer, outpacing the overall market with double-digit comparable sales growth for the second consecutive quarter. Strategic growth initiatives played a crucial role in this success, leading to increased allocations and successful full-price selling.
Digital Business Growth
Genesco’s digital business continued its impressive trajectory, growing by double digits and expanding its penetration to 25%. Over the past five years, the digital segment has effectively doubled in size, now contributing over half a billion dollars to the company’s revenue.
Loyalty Program Expansion
The company’s loyalty programs saw significant growth, with membership surpassing 10 million. This expansion has enhanced Genesco’s data analytics and CRM capabilities, providing valuable insights into customer behavior and preferences.
Store Optimization
In a strategic move to align with changing shopping patterns, Genesco executed 64 store closures in the Journeys segment. This optimization effort is expected to improve productivity and profitability, reflecting the company’s adaptability to market dynamics.
Challenges in Schuh Business
The Schuh business faced a challenging environment in the UK market, characterized by high promotional activity and a declining market. This resulted in flat top-line performance and decreased profitability due to store deleverage and promotional pressures.
Johnston and Murphy Headwinds
Johnston and Murphy encountered headwinds as the market for men’s non-athletic premium footwear slowed down. Despite introducing strong products, the segment experienced challenges in sales and profitability.
Genesco Brands Group Sales Decline
Efforts to simplify the license portfolio led to a decline in sales for the Genesco Brands Group. While this impacted both the fourth quarter and full-year results, it resulted in more profit in the short term.
Gross Margin Pressure Expected
Looking ahead to fiscal 2026, Genesco anticipates a gross margin decline of 20 to 30 basis points. This is attributed to product and channel mix shifts, as well as the exit of certain licenses, indicating a cautious approach to future profitability.
Forward-Looking Guidance
Genesco’s forward-looking guidance reflects optimism tempered with caution. The company expects a 2% to 4% increase in overall comparable sales for fiscal 2026, despite anticipated impacts from store closures and currency fluctuations. Strategic investments and store remodels in the Journeys segment are expected to drive growth.
In conclusion, Genesco’s earnings call highlighted a company that is successfully leveraging its strengths in digital growth and strategic initiatives, particularly in the Journeys segment, while also addressing challenges in other areas. The overall sentiment was positive, with a clear focus on navigating future challenges and capitalizing on growth opportunities.