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Genesco, the footwear firm behind Journeys, Johnson & Murphy, and more brands saw a strong third quarter as a return to in-store shopping and its casual merchandise mix helped to deliver a robust performance.
The Nashville-based company posted record results for the third quarter, with net sales up 25% from last year to $601 million. Net income was $32.9 million, or $2.25 per share. And revenue growth, better-than-expected gross margins and expense leverage resulted in an operating income increase of almost 70% over pre-pandemic levels.
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Strong consumer demand for a variety of brands and styles drove continued momentum as Journeys achieved record third quarter revenue and operating profit — marking the fourth consecutive quarter of record profitability even while operating with inventory almost 30% below pre-pandemic levels.
“The current fashion cycle, which I’ve been describing [as] shifting more into casual, plays into Journeys strength with a nicely diversified assortment,” Genesco CEO Mimi Vaughn noted on the company’s third quarter earnings call. “However, for this back-to-school, performance was strong in several categories across both casual and fashion athletic. Nine of the top 10 brands experienced year-over-year growth. In addition, the in-person back-to-school also drove a big pickup in non-footwear sales like backpacks, with non-footwear up over 50%.”
“Back-to-school is a major driver of Q3 sales in a normal year, and we prepared for and experienced very strong seasons in both the U.S. and the U.K. as students largely returned to in-person classes. While sales volumes typically moderate after the back-to-school rush, we were very encouraged that demand accelerated throughout the quarter and remained strong into October,” the executive said.
Plus, robust consumer appetite for in-person shopping, even as the number of COVID cases spiked, allowed the company to drive a 30% increase in store sales over last year, according to Vaughn. “Although traffic is still below pre-pandemic levels, it improved across the board to the best levels we’ve seen.”
As for Genesco’s branded side of the business, Vaughn noted that the company’s plan to reimagine Johnston & Murphy for a “more casual, more comfortable post-pandemic environment” is delivering tangible results. Hard hit by COVID, Johnston & Murphy is tracking well ahead of its turnaround goals, according to Vaughn. Sales improved further in Q3, both online and in stores but are still below levels seen two years ago due to the extended delays of return to the office and lower inventories from supply chain disruption, delayed deliveries and much stronger-than-expected demand. “We are especially pleased with the performance of Johnston & Murphy’s new athletically inspired casual product,” Vaughn said. “Casual footwear now makes up more than 70% of DTC footwear product sales with casual athletic increasing 120% versus last year.”
Rounding out the discussion on today’s earnings called, Vaughn called out Genesco’s licensed brands division as facing the biggest challenges from supply chain disruption, which led among other things, to much higher-than-expected freight costs. “On a positive note, there was strong demand for both Levi’s and Dockers footwear in value and full-price channels, which positions the business for improved profitability and supply challenges subside,” she said.
“Our footwear-focused strategy is delivering results,” Vaughn added. “COVID has provided the real opportunity to transform our business at a more rapid rate and we are on a very good pace delivering growth and improved operating margins and EPS.”