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Genesco Inc (GCO) Faces Headwinds in Q3 Fiscal 2024, Earnings Dip Amid Challenging Market Conditions

  • Genesco Inc (NYSE:GCO) reports a 4% decrease in net sales for Q3 fiscal 2024.

  • E-commerce sales climb to 21% of retail sales, up from 18% last year.

  • GAAP EPS from continuing operations falls to $0.60 compared to $1.66 in the previous year.

On December 1, 2023, Genesco Inc (NYSE:GCO) released its 8-K filing, detailing its financial performance for the third quarter of fiscal year 2024. The company faced several challenges, including a softer demand in October, a delayed start to the fall selling season, and disruptions from the implementation of a new ERP system. These factors contributed to a net sales decrease of 4% to $579 million compared to the same quarter in the previous year.

Financial Performance Overview

Comparable sales were down by 4%, with a notable 7% decrease in stores, partially offset by an 8% increase in direct sales. E-commerce continued to show strength, representing 21% of retail sales, up from 18% last year. Despite the overall decline, Genesco Inc (NYSE:GCO) saw sequential improvements in its Journeys business and record third-quarter sales in Schuh and Johnston & Murphy.

Genesco Inc (NYSE:GCO)'s GAAP EPS from continuing operations significantly decreased to $0.60 from $1.66 in the prior year, while non-GAAP EPS from continuing operations was $0.57, down from $1.65 last year. Gross margin for the quarter was 48.1%, a decrease from 48.7% in the previous year, primarily due to increased promotional activity and higher e-commerce penetration costs.

Balance Sheet and Cash Flow Highlights

Cash at the end of the quarter stood at $21.7 million, with total debt increasing to $128.2 million from $89.4 million at the end of the third quarter of the previous fiscal year. Inventory levels decreased by 8% year over year, reflecting a decrease in inventory for Journeys and Johnston & Murphy, partially offset by an increase at Schuh.

Capital expenditures for the quarter were $15 million, mainly related to retail stores and digital and omnichannel initiatives. The company opened five stores and closed 20 stores during the quarter, ending with a total of 1,360 stores.

Outlook and Strategic Initiatives

Genesco Inc (NYSE:GCO) revised its fiscal 2024 outlook, now expecting sales to be down 1% to 2%, or down 2% to 3% excluding the 53rd week this year. Adjusted diluted earnings per share from continuing operations are projected to be in the range of $1.50 to $2.00, with an expectation that EPS will be near the mid-point of the range.

Despite the current challenges, Mimi E. Vaughn, Genescos Board Chair, President, and CEO, expressed confidence in the company's strategic initiatives and efforts to elevate Journeys in the marketplace. She anticipates these efforts will drive progress in the near term and strengthen the company's position for long-term value creation.

For a detailed financial commentary and supplemental financial presentation of third-quarter results, interested parties can access the information on Genesco Inc (NYSE:GCO)'s website.

Genesco Inc (NYSE:GCO) remains focused on navigating the challenging operating environment and is committed to executing its cost reduction and store closure plans, aiming for up to $40 million in cost reductions by the end of Fiscal 2025.

For more detailed information on Genesco Inc (NYSE:GCO)'s financial performance, please refer to the full 8-K filing.

Explore the complete 8-K earnings release (here) from Genesco Inc for further details.

This article first appeared on GuruFocus.

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