- Consolidated Revenue: $458 million, down approximately 5% compared to last year.
- Journeys Inventory: Down 20% year-over-year.
- Journeys Digital Business: Posted double-digit growth.
- Total Company Comps: Down 5%.
- Total Store Comps: Down 7%.
- Direct Comps: Up 3%.
- Digital Sales: Accounted for 23% of total retail sales, up from 21% last year.
- Adjusted Gross Margin: Up 30 basis points compared to last year.
- SG&A Expense: 54.2% of sales, 220 basis points above last year.
- Adjusted Operating Loss: $30 million compared to $22.7 million last year.
- Adjusted Diluted Loss Per Share: $2.10 compared to $1.59 last year.
- Net Debt Position: Approximately $40 million.
- Inventories: Down 17% from last year.
- Capital Expenditures: $6 million.
- Store Openings and Closures: Opened 1 store and closed 21, ending the quarter with 1,321 total stores.
- Journeys Store Closures: Closed 17 stores in Q1, primarily mall-based locations.
- Annualized Cost Savings from Store Closures: Approximately $14 million.
- Full Year Earnings Per Share Guidance: $0.60 to $1 per share.
- Fiscal '25 Total Sales Expectation: Decrease 2% to 3% or down 1% to 2% excluding the 53rd week last year.
- Gross Margin Rate Expectation: Flat to up 10 basis points for the year.
- Adjusted SG&A Expectation: Flat to deleverage of 20 basis points.
- Fiscal '25 Average Shares Outstanding: Approximately 11.2 million.
- Expected Tax Rate: Approximately 26%.
Release Date: May 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Genesco Inc (GCO, Financial) delivered first-quarter top and bottom-line results ahead of their most recent guidance.
- Sales at Journeys exceeded expectations, contributing positively to overall performance.
- Clean inventories and cost reduction efforts helped improve gross margins.
- Journeys' digital business posted double-digit growth, indicating strong online engagement.
- The company is making significant progress with its cost-saving initiatives, targeting a reduction in the annualized run rate of $45 million to $50 million by the end of fiscal year '25.
Negative Points
- The consumer environment remains choppy, with ongoing inflationary pressures affecting consumer behavior.
- Schuh and Johnston & Murphy faced pressure due to robust multiyear comparisons and a delayed start to the spring selling season.
- The company expects continued top-line pressure in Q2, with a low single-digit sales decline anticipated.
- SG&A expenses increased by 220 basis points compared to last year, driven by sales deleverage and increased variable expenses.
- Genesco Inc (GCO) is maintaining a cautious view on the wholesale business, anticipating potential challenges in reorder rates from wholesale accounts.
Q & A Highlights
Q: Can you provide more details on the expected comps for Journeys in Q2 and the back half of the year?
A: (Thomas George, CFO) We are taking a cautious view for Q2 due to pressures in the vulcanized business and challenges in Schuh and Johnston & Murphy. We expect a positive comp in Q4, albeit small, while Q3 might still face some challenges.
Q: Why isn't there a more optimistic margin outlook despite the Q1 outperformance?
A: (Mimi Vaughn, CEO) While we had lower markdowns in Q1, we are seeing a mix shift in product that could pressure gross margins. However, higher average selling prices are a positive. We are also cautious about wholesale business performance.
Q: How significant will the assortment changes at Journeys be by the back half of the year?
A: (Mimi Vaughn, CEO) There will be a significant change in the assortment, with a broader range of brands and products. The new Chief Merchant, Chris Santaella, has made major improvements, and we are encouraged by the consumer reaction so far.
Q: Can you quantify the shift away from vulcanized products at Journeys?
A: (Mimi Vaughn, CEO) Vulcanized products will be a materially smaller part of our mix but will not go away entirely. We are seeing interest in other categories like sandals and athletic products, which is positive for diversifying our offerings.
Q: What does segmentation and differentiation mean for Journeys' strategy?
A: (Mimi Vaughn, CEO) We are focusing on the teen girl segment and providing a mix of fashion athletic and casual assortments. Our investments in CRM and data analytics will help us market more specifically to different consumer segments.
Q: How is the Journeys loyalty program performing, and what are the future plans?
A: (Mimi Vaughn, CEO) The All Access program has 2.5 million members since its launch last July. We are seeing higher spend and frequency among members. The program is integrated with our CRM and data analytics to drive higher customer lifetime value.
Q: Can you provide early reads on the new Johnston & Murphy marketing campaign?
A: (Mimi Vaughn, CEO) The campaign has been well-received and highlights our evolution into a more casual, modern lifestyle brand. We are attracting younger customers and expanding into apparel and accessories.
Q: What are the strategic initiatives at Journeys for long-term positioning?
A: (Mimi Vaughn, CEO) We are focusing on product reinvigoration, customer segmentation, and building the Journeys brand. Digital acceleration, leveraging our people, and enhancing our brand presence are key components of our strategy.
Q: Are there any notable trends in add-on purchases?
A: (Mimi Vaughn, CEO) We are seeing higher average selling prices and focusing on attachment sales through buy online, pick up in store (BOPUS). This has been successful in driving additional sales when customers come to pick up their orders.
Q: How are you managing SG&A expenses given the current environment?
A: (Thomas George, CFO) We are focused on reducing occupancy costs and optimizing selling salaries. We achieved a 9% reduction in straight-line rent expense on 119 lease renewals and continue to target further cost savings.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
