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Optimistic Sales Trend Drive Genesco to a New 52-Week High

Zacks Equity Research

Shares of Genesco Inc. (GCO) reached a new 52-week high of $82.92 yesterday and closed the trading session at $82.06. The shares have been gaining mass since the company reported strong top line performance for first-quarter fiscal 2015 and came up with optimistic comments on sales trends for rest of the year. Notably, the stock price of this retailer and wholesaler of branded footwear, apparel, and accessories rose approximately 12.2% year-to-date and 15.6% since its earnings release on May 30, 2014.

The average volume of shares traded over the last 3 months was approximately 156K. Moreover, the company currently trades at a forward P/E of 14.9x, representing a 16.8% discount to the industry average of 17.9x, implying the stock has further upside potential. Moreover, the company has long-term estimated earnings per share (EPS) growth rate of 15.0%.

Though the company posted lower-than-anticipated earnings results for the first quarter, sales improved on the back of improved consolidated comparable-store sales (comps) performance which includes same store sales and comparable e-Commerce and catalog sales.

Investors are optimistic about this Zacks Rank #3 (Hold) stock given the improved sales trends at the company’s stores following the soft trends witnessed at the end of fiscal 2014. Along with its first quarter fiscal 2015 results, the company revealed that its business is gaining momentum now, since from the start of the second quarter through May 24 comps have improved 3%. Moreover, it indicated that the trends for April have also been positive driven by the Easter shift and arrival of warmer weather.

The company also highlighted that some of the fashion developments at its Journeys brand are gaining traction this spring season which will boost comps for the brand. Additionally, it continues to expect further comps growth in the latter half of the year as casual footwear becomes a bigger percentage of Journeys and Schuh's product mix and as these newly identified product trends take hold.

Moreover, the company remains focused on enhancing its digital presence as well as omni-channel growth. Gaining traction on developing the omni-channel platform the company is busy implementing new front-end e-commerce systems, installing new order management systems that allow customers to interact effortlessly with the company across one channel to another, building new systems architecture to accelerate cross-channel abilities and investing in new warehouse systems to enhance direct order shipments.

We believe the company’s investments in omni-channel across the digital media and stores bode well for its future growth.
Apart from Genesco, Citi Tends Inc. (CTRN), Constellation Brands Inc. (STZ) and Big Lots Inc. (AAN) achieved new 52-week highs of $23.10, $88.94 and $46.36 respectively, on Jul 1, 2014.

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