Shares of Genesco dropped more than 20 percent in trading on Friday morning after the company cut its full-year profit outlook.
In the third quarter of fiscal 2024, the Nashville-based footwear company reported net sales of $579 million, a decrease of 4 percent from $604 million in the same period last year. Net earnings in Q3 were $6.5 million, down from $20.4 million in the third quarter of fiscal 2023.
Genesco reported an 8 percent decline at Journeys and a 22 percent, or $8 million, drop in sales at Genesco Brands. This was partially offset by a 13 percent increase at Schuh and a 2 percent growth at Johnston & Murphy. On a constant currency basis, Schuh had record third-quarter sales, which were up 5 percent over the same time last year.
The softness was partially offset by an 8-percent increase in e-commerce comparable sales and a favorable foreign exchange impact.
Genesco now expects full-year sales for fiscal 2024 to be down 1 to 2 percent compared to the prior year. Adjusted diluted earnings per share for the full year are now expected in the range of $1.50 to $2.00, with an expectation that EPS will be near the mid-point of the range.
Genesco president, CEO and board chair Mimi Vaughn said in a statement that after a “good” back-to-school season, softening demand in October and a delayed start to the fall selling season added pressure to the business.
But despite these headwinds, Vaughn added that the company is “pleased” to see sales trends within its Journeys business continue to “sequentially improve,” while Schuh and Johnston & Murphy delivered record third-quarter sales.
“In the meantime, we continued to inject Journeys’ product assortment with more of the newness and must-have items our customer desires, while also executing on our cost reduction and store closure plans,” Vaughn said.
As for how business is doing going into the holiday season, Vaughn said that she is pleased with total comps so far in the fourth quarter to-date. However, as consumer shopping behavior remains choppy, the CEO added that Genesco plans to increase its promotional activity, especially at Journeys, for the remainder of the holiday season to be more competitive and drive sales in this environment.
“Our revised fiscal 2024 outlook reflects this, partially offset by a somewhat more conservative view for our other businesses,” Vaughn said. “Looking ahead, I have confidence that our strategic initiatives and specific efforts to elevate Journeys in the marketplace will help us continue to drive progress in the near term while positioning us even more strongly to create value for the longer term.”
The company’s latest earnings come just days after Genesco announced the hiring of Foot Locker alum Andy Gray as the new president of Journeys. Gray succeeds former Journeys president Mario Gallione who announced a planned retirement in August. At the time, Genesco named company veteran Mike Sypert as its chief operating officer.
After reporting challenging first quarter results in May, Genesco announced it would close more than 100 underperforming Journeys stores in fiscal 2024, versus prior expectations to close 60 stores, to help cut costs at the retailer.
In Friday’s Q3 earnings report, Genesco reiterated that it “remains on track” with its slated Journeys’ store closures and that it continues to anticipate up to $40 million in cost reductions by the end of fiscal 2025.