Genesco (GCO) is down 20% after missing earnings estimates excluding a large write down for the Lids business and lowering earnings guidance.
Net sales for the third quarter of Fiscal 2018 increased 1% to $717 million. Comparable sales, including same store sales and comparable e-commerce and catalog sales, increased 1%, with a 4% increase in the Journeys Group, a 4% increase in the Schuh Group, a 6% decrease in the Lids Sports Group, and a 1% decrease in the Johnston & Murphy Group. Comparable sales for the Company included a 2% decrease in same store sales and a 24% increase in e-commerce sales.
Adjusted earnings fell to $1.02/share from $1.28/share last year. That excludes a $8.13/share after-tax ($182 million) goodwill impairment charge, primarily for the Lids Sports Group stores. Hurricane Maria also had a $0.03/share negative impact on the quarter.
Chief executive Robert Dennis: "Our third quarter results are the tale of two businesses. Journeys built on its momentum following its emergence from the recent fashion shift in its markets and posted a solid comp gain. Meanwhile Lids, after a tough second quarter, faced additional challenges that pressured its performance."
He added: "Top line results for our footwear businesses for the fourth quarter to date, including sales and e-commerce bookings over Black Friday Weekend and Cyber Monday, accelerated over the third quarter, and we are now more optimistic about Journeys' fourth quarter prospects. Strong e-commerce sales growth continues in our retail businesses, while store traffic remains challenging. While we expected tough comparisons lapping the anniversary of the Cubs' World Series victory, unfortunately, due to other challenges, current trends at Lids are running below our expectations. These challenges include, among others, dampened demand for NFL licensed merchandise resulting from the well-publicized challenges facing the League and disruption in our Canadian business from the NHL vendor transition."
As a result, Genesco lowered adjusted EPS guidance for the year to $3.05-3.35 from $3.35-3.65 but reaffirmed comparable store sales down 1% to up 1% year-over year.
The company's low valuation reflects the challenging mall retail environment. The stock trades at ~8x earnings.
The stock is now testing support in the mid-$20s while ~12% of the ~19 million share float is sold short.