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Footwear, apparel, and accessories retailer Genesco (NYSE:GCO) announced better-than-expected results in Q2 CY2024, with revenue flat year on year at $525.2 million. It made a non-GAAP loss of $0.83 per share, improving from its loss of $0.85 per share in the same quarter last year.
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Genesco (GCO) Q2 CY2024 Highlights:
- Revenue: $525.2 million vs analyst estimates of $512.2 million (2.5% beat)
- EPS (non-GAAP): -$0.83 vs analyst estimates of -$1.12 (beat)
- EPS (non-GAAP) guidance for the full year is $0.80 at the midpoint, roughly in line with what analysts were expecting
- Gross Margin (GAAP): 46.8%, in line with the same quarter last year
- Locations: 1,314 at quarter end, down from 1,375 in the same quarter last year
- Same-Store Sales fell 2% year on year, in line with the same quarter last year (beat vs. expectations of down 3%)
- Market Capitalization: $343 million
Spanning a broad range of styles, brands, and prices, Genesco (NYSE:GCO) sells footwear, apparel, and accessories through multiple brands and banners.
FootwearBefore the advent of the internet, styles changed, but consumers mainly bought shoes by visiting local brick-and-mortar shoe, department, and specialty stores. Today, not only do styles change more frequently as fads travel through social media and the internet but consumers are also shifting the way they buy their goods, favoring omnichannel and e-commerce experiences. Some footwear companies have made concerted efforts to adapt while those who are slower to move may fall behind.
Sales GrowthA company’s long-term performance can give signals about its business quality. Even a bad business can shine for one or two quarters, but a top-tier one tends to grow for years. Genesco struggled to generate demand over the last five years as its sales were flat. This is a tough starting point for our analysis.
We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new product or emerging trend. Genesco’s recent history shows its demand has stayed suppressed as its revenue has declined by 1.8% annually over the last two years.
We can dig further into the company’s revenue dynamics by analyzing its same-store sales, which show how much revenue its established locations generate. Over the last two years, Genesco’s same-store sales averaged 1.8% year-on-year declines. This number doesn’t surprise us as it’s in line with its revenue growth.
This quarter, Genesco’s $525.2 million of revenue was flat year on year but beat Wall Street’s estimates by 2.5%. Looking ahead, Wall Street expects revenue to decline 2.1% over the next 12 months, a deceleration from this quarter.
Operating MarginOperating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses–everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.
Genesco’s operating margin has shrunk over the last year and averaged 1.1%. The company’s profitability was mediocre for a consumer discretionary business and shows it couldn’t pass its higher operating expenses onto its customers.
In Q2, Genesco generated an operating profit margin of negative 2%, in line with the same quarter last year. This indicates the company’s overall cost structure has been relatively stable.
Key Takeaways from Genesco’s Q2 Results We were impressed by how significantly Genesco blew past analysts’ EPS expectations this quarter. We were also glad its revenue outperformed Wall Street’s estimates. Full-year EPS guidance was in line with expectations, showing that the company remains on track, and this is comforting since a number of footwear and apparel companies struggled this quarter. Overall, we think this was a decent quarter with some key metrics above expectations. The stock remained flat at $29.50 immediately following the results.
