Genesco Q3 Earnings Beat, Journeys Group Drives Results, FY25 View Up

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 InsightsThis 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.Find the latest EPS estimates and surprises on Zacks Earnings Calendar.Genesco Inc. Price, Consensus and EPS Surprise Genesco Inc. price-consensus-eps-surprise-chart | Genesco Inc. QuoteNet 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 SnapshotGenesco 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 UpdateIn 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 OutlookWith 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.Image Source: Zacks Investment ResearchOther Stocks to ConsiderAbercrombie & Fitch Co. ANF operates as an omnichannel retailer, which offers an assortment of apparel, personal care products and accessories for men, women and kids, currently sporting a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.ANF delivered a trailing four-quarter earnings surprise of 14.8%, on average. The Zacks Consensus Estimate for Abercrombie’s current financial-year sales and earnings indicates growth of 14.9% and 67.5%, respectively, from the year-ago figure.Deckers Outdoor Corporation DECK designs, markets and distributes footwear, apparel and accessories for casual lifestyle use and high-performance activities in the United States and internationally, currently flaunting a Zacks Rank #1. DECK delivered an average earnings surprise of 41.1% in the trailing four quarters.The Zacks Consensus Estimate for Deckers’ current financial-year sales and earnings indicates growth of 13.6% and 12.8%, respectively from the year-ago figure.The Gap, Inc. GAP operates as an apparel retail company, which offers apparel, accessories and personal care products for men, women and children. It currently flaunts a Zacks Rank #1.The Zacks Consensus Estimate for Gap’s fiscal 2024 sales and earnings indicates growth of 0.8% and 41.3%, respectively, from the year-ago quarter’s reported numbers. GAP delivered a trailing four-quarter earnings surprise of 101.2%, on average.Free Today: Profiting from The Future’s Brightest Energy SourceThe demand for electricity is growing exponentially. At the same time, we’re working to reduce our dependence on fossil fuels like oil and natural gas. Nuclear energy is an ideal replacement.Leaders from the US and 21 other countries recently committed to TRIPLING the world’s nuclear energy capacities. 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