Genesco issued a more conservative outlook for the rest of the year after seeing a slowdown in demand through November.
The footwear firm behind Journeys, Johnston & Murphy and Schuh reported net sales of $604 million, up 1% from last year. GAAP earnings per share from continuing operations was $1.66. By brand, sales were flat at Journeys, up 19% at Johnston & Murphy and up 14% at Licensed Brands, offset by a 13% decline at Schuh.
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Traffic and sales slowed down in the last few weeks of October through the start of November, but picked up over Thanksgiving, CEO Mimi Vaughn told analysts on the company’s earnings call on Friday.
While sales lifted in the back to school period, inflation and a competitive promotional environment across retail hampered sales in Q3. Brands saturated with too much merchandise are pumping discounted product into the market to work through inventory excesses. As such, retailers like Journeys are competing with these brands to sell similar product.
“There is a large amount of inventory in the system, and we are seeing a lot of promotional activity,” Vaughn said. “And therefore, everyone is pulling back on receipts and trying to work through the inventory that’s in the system. And so we do think that will continue somewhat into the patterns of next year.”
When it comes to the Journeys consumer, inflation impacted spending patterns, with shoppers visiting stores less frequently, trading down to more cheaper products and pulling back on non-footwear purchases, Vaughn said.
Given these headwinds, the Nashville, Tenn.-based company changed its fiscal year 2023 guidance and now expects sales to be down between 1% and 2% compared to the prior year. Adjusted diluted earnings per share from continuing operations are expected to land in the range of $5.50 to $5.90.
Despite the conservative outlook, Genesco expects a strong turnout for the holidays, given the retailer’s strong inventory position and value proposition. Vaughn said she expects bargain-hungry shoppers to push off most of their shopping until closer to the holidays this year.
“We have increased our planned promotional activity at Journeys and elsewhere over the holidays in order to be competitive as consumers search for bargains,” Vaughn said.