Genesco Inc. GCO reported solid fiscal third-quarter 2025 results, wherein both the top and the bottom lines beat the Zacks Consensus Estimate and increased year over year. Better-than-expected results prompted management to lift the fiscal 2025 view.

This performance was driven by a return to positive comparable sales, surpassing expectations once again. Following a solid start to the third quarter, including the peak of the back-to-school season, sales trends at Journeys remained strong through September and October, resulting in a double-digit comparable sales increase. The results indicate the early stages of Journeys' strategic growth plan, which focuses on enhancing the customer experience, refining the product assortment and visually refreshing the stores. Despite this success, earnings per share were moderated by the calendar shift of a key back-to-school week into the second quarter.

GCO’s Quarterly Performance: Key Insights

This retailer of branded footwear and accessories posted adjusted quarterly earnings of 61 cents per share, which outperformed the Zacks Consensus Estimate of 30 cents. Also, the bottom-line figure increased 7% from 57 cents in the prior-year period.

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Net sales of the company rose 3% year over year to $596 million and beat the Zacks Consensus Estimate of $578 million. This increase was driven by a 6% rise in comparable sales, including 15% growth in e-commerce sales and a 4% uptick in comparable store sales, along with a favorable foreign exchange impact. However, this was partially offset by the negative impact of moving a strong week of back-to-school sales of approximately $17 million from the third quarter to the second quarter this year related to the 53-week calendar shift and the impact of net store closures.

On a segment basis, comparable sales increased 11% at the Journeys Group, while declining 1% at both the Schuh Group and the Johnston & Murphy Group.

Gross profit was up 2.5% to $285.3 million while the gross margin contracted 30 basis points (bps) to 47.8%. The gross margin fell due to changes in the product mix at Journeys.

Selling and administrative expenses were up 2.8% to $274.9 million. However, as a percentage of sales, the same fell 10 bps to 46.1%. This improvement indicates the impact of cost-containment efforts, the closure of underperforming outlets and some improvement in other expenses, partly offset by additional selling salaries and marketing expenses. 

Adjusted operating income was $10.3 million, slightly down from $11 million in the prior year quarter. The adjusted operating margin declined 20 bps to 1.7%.

Genesco’s Financial Snapshot

Genesco ended the quarter with approximately $33.6 million of cash, $100.1 million of long-term debt and $516.9 million of shareholders’ equity. As of Nov. 2, 2024, inventories were $523.2 million, increasing 1% year over year. This increase was driven by higher inventory levels for Genesco Brands, partially offset by a decrease at Schuh and Johnston & Murphy, while Journeys remained stable.

Further, the company bought back 17,922 shares worth $0.4 million during the quarter. GCO had $42.3 million left under its expanded share repurchase authorization.

GCO’s Store Update

In the third quarter, Genesco incurred $13 million as capital expenditures. It opened two stores while closing 14 stores. The company also expects to close up to another 10 Journeys stores in fiscal 2025. GCO exited the quarter with 1,302 stores compared with 1,360 stores at the end of the third quarter last year.

Sneak Peek Into GCO’s Outlook

With the strong performance in the third quarter and positive momentum, the near-term outlook for the business is increasingly optimistic, particularly for Journeys. The company expects fourth-quarter comps to be positive, though not at the exceptional levels achieved in the third quarter. 
 
For Fiscal 2025, management now anticipates total sales to be down 1% to flat year over year or flat to up 1% excluding the 53rd week compared with the previous expectations of a total sales drop of 1-2% or flat to down 1% excluding the 53rd week in fiscal 2024. 

The company continues to expect a gross margin contraction of 10 bps to 20 bps. 

GCO forecasts SG&A expenses, as a percentage of sales, to be flat to 10 bps leverage compared with the previous guidance of flat to 20 bps leverage.

The company now anticipates adjusted earnings from continuing operations to be in the band of 80 cents to$1.00 per share, which represents an upward revision from the previous guidance of 60 cents to$1.00. 

Shares of this Zacks Rank #1 (Strong Buy) company have risen 55.5% in the past three months compared with the industry’s 14.6% growth.

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