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Will Genesco Get a Decent Boost from Holiday Season?


Shares of Genesco Inc. GCO gained 5.4% since the company reported encouraging fourth quarter-to-date fiscal 2018 comparable sales (comps) results on Jan 8.

Genesco’s fourth-quarter period mainly covers the holiday season, which turned out to be the best one in the last few years. According to MasterCard SpendingPulse, sales (excluding automobiles) from Nov 1 to Dec 24, 2017 jumped 4.9%, compared with 3.7% rise in the prior-year period. This marked the biggest year-over-year increase in holiday spending since 2011.

Also, retailers like American Eagle Outfitters Inc. AEO, Kohl's Corp. KSS and J. C. Penney Company, Inc. JCP have witnessed a blissful holiday season, which is evident from comps growth of 8%, 6.9% and 3.4%, respectively.

A Brief Introspection

Genesco reported comps growth of 1%, including both stores and direct sales, for the fourth-quarter-to-date period that ended on Jan 4, 2018. Comps at e-commerce business rose 17% year over year. However, excluding e-commerce, comps dipped 2%.

Segment-wise, comps (including stores and direct) improved 10%, 5% and 1%, respectively, at Journeys Group, Johnston & Murphy Group and Schuh Group while comps plunged 14% at Lids Sports Group.

Management stated that the company was successful in creating momentum for its Journeys division this holiday season after a robust back-to-school season. On the contrary, the company’s Lids Sports segment witnessed a tough time this holiday season. Furthermore, the Schuh Group witnessed a solid holiday period in the United Kingdom backed by increased promotions.

Consequently, Genesco continues to project comps for the fiscal fourth quarter in the range of flat to up 1%. However, the company expects soft gross margin to achieve these sales, hence ending the fiscal with optimal inventory.

Driven by the current trends and fourth-quarter-to-date performance, management envisions adjusted earnings per share for fiscal 2018 to come toward the lower end of $3.05-$3.35 range. The Zacks Consensus Estimate for the fiscal year is currently pegged at $3.13.

Genesco is slated to release its fourth-quarter fiscal 2018 results on Mar 15, 2018.

Stock’s Performance

A look upon the company’s share price shows that it gained 10.9% in the last six months, underperforming the industry’s growth of 18.6%. This underperformance can be primarily attributable to the company’s unimpressive surprise history.

Evidently, the company’s earnings lagged the Zacks Consensus Estimate in three consecutive quarters, delivering a trailing four-quarter average miss of 33.1%. Further, its sales missed the consensus mark in six out of seven straight quarters.

Let’s see whether the decent holiday comps will lead to a turnaround in the company’s performance, pushing the stock higher. Genesco currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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