8-K: Genesco Inc. Reports Mixed Fiscal 2024 Results with Record Sales in Some Divisions

Genesco Inc. reported a 2% increase in fourth-quarter sales, driven by a 5% rise in e-commerce, but a full-year sales decrease of 2.5% despite record sales in some divisions.

Summary

• Genesco Inc. reported its fourth quarter and full fiscal year results for the period ending February 3, 2024.
• Fourth-quarter net sales increased by 2% to $739 million compared to the same period last year, which had 13 weeks compared to 14 weeks this year.
• Excluding the extra week, sales would have decreased by 2% for the quarter.
• Comparable sales decreased by 4%, with store sales down 7% and direct sales up 5%.
• E-commerce sales accounted for 27% of retail sales, up from 25% last year.
• GAAP earnings per share from continuing operations were $1.84, down from $3.23 last year, while non-GAAP EPS was $2.59, down from $3.06.
• Full-year net sales decreased by 2.5% to $2.3 billion, compared to $2.38 billion last year.
• Excluding the 53rd week, sales would have decreased by 4% for the full year.
• Comparable sales for the year decreased by 4%, with store sales down 7% and direct sales up 8%.
• E-commerce sales represented 23% of retail sales, up from 20% last year.
• GAAP loss per share from continuing operations was $2.10, compared to earnings of $5.69 last year, while non-GAAP EPS was $0.56, down from $5.59.
• The company closed 94 Journeys stores in fiscal 2024 and plans to close up to 50 more in fiscal 2025.
• Genesco is targeting $45-$50 million in annualized cost reductions by the end of fiscal 2025.
• For fiscal 2025, the company expects total sales to decrease by 2% to 3% compared to fiscal 2024, and adjusted diluted earnings per share to be in the range of $0.60 to $1.00.

Sentiment

Score: 4

Explanation: The sentiment is moderately negative due to the overall decline in sales and earnings, despite some positive aspects like e-commerce growth and record sales in certain divisions. The forward guidance is also weak.

Positives

• E-commerce sales increased both in the fourth quarter and for the full year.
• Johnston & Murphy and Schuh achieved record sales in fiscal year 2024.
• Journeys showed sequential improvement in comparable sales each quarter.
• The company is actively working to reduce costs and optimize its store footprint.
• Inventory was down 17% year over year, indicating better inventory management.
• The company has an expanded share repurchase authorization with $52.1 million remaining.

Negatives

• Full-year net sales decreased by 2.5% compared to the previous year.
• Comparable sales decreased by 4% for both the fourth quarter and the full year.
• GAAP earnings per share from continuing operations decreased significantly for both the quarter and the full year.
• The company experienced a GAAP operating loss for the full year.
• Selling and administrative expenses increased as a percentage of sales.
• Journeys experienced a decrease in sales for both the quarter and the full year.

Risks

• The company faces challenges in meeting the needs of changing consumer behavior, particularly in the Journeys division.
• The current sales dynamic is expected to remain a significant headwind in the first half of fiscal 2025.
• The company is experiencing weakness in store and shopping mall traffic.
• There are risks associated with the ability to pass on price increases to customers.
• The company is exposed to risks related to tariffs, supply chain disruptions, and geopolitical events.
• There are risks related to the effectiveness of the company's omnichannel initiatives.
• The company faces risks related to competition and fashion trends in its markets.
• The company is exposed to risks related to public health and safety events.

Future Outlook

For fiscal 2025, the company expects total sales to decrease by 2% to 3% compared to fiscal 2024, and adjusted diluted earnings per share to be in the range of $0.60 to $1.00. The company anticipates the current sales dynamic to remain a significant headwind in the first half of fiscal 2025.

Management Comments

• Mimi E. Vaughn, Genesco's CEO, stated that the fiscal 2024 results reflect a significant shift in Journeys consumers shopping behavior.
• Vaughn also mentioned that the company reacted quickly to implement strategies that drove sequential improvement in Journeys comp every quarter of the year.
• Thomas A. George, Genesco's CFO, commented that the company delivered sales largely in line with their most recent guidance and better-than-expected gross margin, but earnings were impacted by winter storms and higher expenses at Journeys.

Industry Context

The results reflect the challenges faced by many retailers in the current environment, including shifts in consumer behavior and economic headwinds. The company's focus on e-commerce and cost savings aligns with broader industry trends.

Comparison to Industry Standards

• Genesco's performance is mixed when compared to other footwear and apparel retailers.
• While some companies have seen stronger e-commerce growth, Genesco's 5% increase in Q4 is still positive.
• The decrease in comparable sales is a concern, as many retailers are striving for positive comps.
• Companies like Foot Locker and DSW have also faced challenges in store traffic, but some have managed to maintain or grow overall sales.
• Genesco's focus on cost savings and store closures is similar to strategies employed by other retailers facing similar challenges.
• The record sales in Johnston & Murphy and Schuh are a positive sign, indicating strength in those specific brands, similar to how some retailers have seen success in specific product categories.

Stakeholder Impact

• Shareholders will be impacted by the decrease in earnings and the negative outlook for fiscal 2025.
• Employees may be affected by store closures and cost-saving measures.
• Customers may experience changes in store locations and product offerings.
• Suppliers may be impacted by changes in the company's purchasing patterns.
• Creditors may be concerned about the company's financial performance and future outlook.

Next Steps

• The company will continue to optimize its store footprint, including closing up to 50 more Journeys stores in fiscal 2025.
• Genesco will focus on improving its core product assortment and meeting the needs of its changing consumer.
• The company will continue to implement cost-saving initiatives, targeting $45-$50 million in annualized savings by the end of fiscal 2025.
• The company will work to accelerate the pace of Journeys improvement and initiatives already underway.

Key Dates

Keywords

footwear, retail, e-commerce, sales, earnings, Journeys, Schuh, Johnston & Murphy, omnichannel, cost savings