GENESCO INC Q1 FY2026 earnings call

• First quarter sales and operating income were above expectations, with sales growth outpacing the industry. - Journeys' comps increased high-single digits, continuing momentum from its strategic plan, with strong performance in athletic and casual brands. - Schuh had low-single digit comps for the second consecutive quarter, benefiting from brand and product elevation. - Johnston & Murphy is repositioning to a more casual lifestyle brand, with product innovation and marketing efforts. - Genesco Brands Group is simplifying its license portfolio. - Journeys' strategic growth and transformation focus on four areas: product diversification and leadership, brand investment, customer experience elevation (including 4.0 store design), and people empowerment. - Cost reduction efforts led to SG&A expense being 170 basis points better than the prior year.

For the first quarter, total revenue was $474 million, an increase of approximately 4%. Comparable sales increased 5%, marking the third consecutive quarter of positive comps. Store comps improved 5% and direct comps increased 7%. Journeys led with comps up 8%, Schuh had comps up 1%, while Johnston & Murphy comps declined 2%. Retail channels all posted positive growth. Journeys' comps increased high-single digits, Schuh's comps were low-single digits for the second consecutive quarter, and Johnston & Murphy's comps were down 2%. Revenue contribution: Retail is the largest portion, with Journeys and Schuh being key components. Journeys' strong performance contributed significantly to overall sales growth, and Schuh's e-commerce and brand elevation also played roles.

• Reiterated full year EPS guidance range of $1.30 to $1.70. - Now expects comp sales for the year to be up 2% to 3% (down from previous 2%-4% guidance), total sales increase of 1% to 2% due to favorable pound sterling rate. - Journeys' total fiscal year sales expected to be up low-single digits; Schuh's total sales up low-single digits due to foreign exchange favorability; Johnston & Murphy's sales up low-single digits; Genesco Brands' sales down high-single digits. - Gross margin expected to be down 20 to 30 basis points. - Adjusted SG&A as a percentage of sales expected to leverage 50 to 70 basis points.

• Consumer environment remains choppy with uncertainty, affecting shopping behavior. - Tariff uncertainty poses risks, including potential cost increases and impact on gross margins. - Dependence on China sourcing and related tariff risks. - Retail market competition and changes in consumer preferences pose challenges. - Inventory management risks, especially with inventory build-up and potential impact on margins.

Q: Congrats on a great quarter. Just wanted to ask a few questions about the Journeys strength. In addition to some wider assortments with existing partners, we also saw you establish some new relationships last year with some hot athletic brands. Can you talk about the impacts of those on the 1Q comp and give us a little more color on how scaled those assortments are through your footprint?

A: Good morning, Joe. Thanks for joining us this morning. And we are really excited about the momentum that we have been seeing in our Journeys business as a result of not just great product, but the number of other efforts that I did talk about. And part of our overall strategy as we think about our product initiatives is to show our leadership and it's to show our leadership across athletic, across casual and across canvas to meet the needs of our teen consumer. Part of what leadership means is being -- is having the most relevant styles in the most relevant brands. And as we think about our assortment, that's the objective as we add new product to the brands that we already carry. And so the comp in the quarter was actually driven by our existing brands. But the impactful newer brands, and we got HOKA this quarter, we introduced HOKA. We usually don't talk about brands, but since you asked the question, Saucony was another one that we have reintroduced. They're really impactful in terms of our customers' reaction to the new offerings. They help validate Journeys in these categories that we haven't had historical strength in. Lifestyle running is a really good example of a category that's important to our teen consumer. And our portfolio of brands shows our commitment to the category. And so -- and the trend development. So as I said, in terms of comp, we typically start with a handful of stores. And by a handful, I mean, like 50-plus stores that we begin a new brand, and then we ramp that up over time. And so in development of brands, it really is a start, test, react. We were very pleased with the reaction that we saw. And then we scale up from there, and we can scale quickly and we can put a lot of effort behind moving significant volume when we know it's the right time.

Q: I've got a few. Let me start with the second quarter and the guide there. Cassandra, I think you said that you expect a positive comp from Journeys. I don't know if you could be more specific there. Mimi, I think in your prepared remarks, you said that Journeys is tracking -- early 2Q is tracking similar to the first quarter. Is your guidance -- your sales guidance on 2Q assuming Journeys is at a high-single digit comp? Or is there a different underlying assumption embedded in the outlook?

A: Thanks for your question, Mitch. We were pleased with Journeys results. Journeys had a plus 8% comp in the first quarter. And as I said, we are tracking at about the same level where we were. We have seen quite a lot of choppiness out there where the consumer retreats during periods of non-shopping -- they don't shop during times when there isn't a reason to shop, and then they come and they shop in a huge force and Journeys capitalized on that. And so we have taken that. We start to anniversary stronger comps as we go through the back part of the year. We're very optimistic about where Journeys business is going. And Sandra talked about an overall comp for the year. So we've taken our trends and built that into the second quarter. We do still expect a very nicely positive Journeys comp.

Q: 2 more questions. One, on the back half for Journeys, obviously, the back half is much more important for you guys, particularly at Journeys. And you guys are going to start lapping much more difficult comparisons starting in the third quarter. Talk to us about what are going to be the -- first of all, what kind of a comp are you assuming for Journeys in the back half? I assume something positive. And talk about the drivers. How much impact do you expect to see from the 4.0 stores on the back half? How does your product access compare, you think it will compare versus maybe a year ago that could help drive the comp? And then you also talked about a trend towards low profile, assuming that, that continues to develop like how positive might that be for you guys at Journeys in the back half? So just maybe kind of walk through some of the drivers of the Journeys in the back half as you start to lap much more difficult comparisons.

A: Mitch, that's a lot of questions. So let's get started here. We are -- we know we are lapping more difficult comparisons for Journeys, but you'll have to go back to the past several years, and we have a lot of opportunity. The most important thing I'll say is that our strategy is geared at serving a much broader market. It's 6 to 7x bigger. We see an opportunity to serve this teen girl really well in a way that nobody else is doing. And so that is just the cornerstone of the strategy. Not only are we serving a broader market, but we're also serving the customer with more premium product. And so if you think about that, you think about more customers, you think about more premium product that drives lots of opportunity for growth. The first phase of our overall Journeys program was to inject the assortment with a lot better product. We knew that the customer preferences were changing. And so that's what our merchant team and Chris Santaella led to let that happen in the back part of the year. And of course, we're benefiting in the front part of the year. But we're not finished. We're going to continue to build on our overall product assortment. I talked a little bit about the new brands that we have introduced. We're not counting on those. What we're counting on is more allocation, better allocation of product that we are currently selling. And so strengthening further our product leadership, again, we've just begun, strengthening our inventory position, differentiating our scale across these number of in-demand brands and building our longer-term strategic partnerships. And so this isn't necessarily we've got 1 year worth of growth. It is we've started in one place, and we'll continue to build on that. So product, product, product in this first phase. In addition to that, the plans, the strategic plans to grow Journeys are centered right back around what I started with, which is to serve that customer and to let that customer know that we have -- that we welcome them into Journeys. And so we've invested in the Journeys brand. I talked about the marketing initiatives. And I think the best representation of where we are headed is our 4.0 stores. And that speaks to the consumer. It's a visible representation of the fact that we have changed the assortment, elevated the opportunity for that consumer. And we are -- that store refresh is paying great dividends. We've moved quickly. We've remodeled 39 stores and expect to do 75 plus this year, which is more than 10% of our portfolio. We think we can get about 50 -- close to 50% of our portfolio done in over the next 3 or so years. And so the results there have been fantastic. We are up 25% plus in those stores, and that's just another wave of growth. And so when you think about the plan that we've put together, the first phase is about product. Then all of these other initiatives kick in to drive the awareness of what the Journeys brand is all about and to bring new customers into the brand and then just continue to serve them with great product.

Q: You mentioned that the consumer continues to be very focused on kind of must-have key items. And you also made a comment so much to the effect that the brands with the most momentum are the ones that are probably best positioned to take price. So when you think about your business and maybe some price increases coming your way, like what percent of your business is kind of must-have key items? And how confident are you that if prices increase on some of those products that the consumer will be pretty willing to spend more to get what they want?

A: Yes. So typically, when we talk about key items, we're talking about just a specific model. I think when I'm talking about key items now, I'm just really talking about brands, key brands and key franchises. So we have a lot to pick from, Mitch, in terms of where our consumer is going. Again, the momentum across a range of brands has been good, really being able to satisfy what needs the customer has, what brands they're looking for, which styles they are looking for. And it's not just one style, but it's multiple styles is really what we are focused on. And so we have seen in prior times when the customer gets squeezed that the customer gravitates toward lower price point product. And they're not doing it this time around, and they are stretching up to buy what they want. And so you asked about price increases. We haven't heard a lot yet from our brand partners about price increases. We expect we will hear some about that. But I think that it is the in-demand brands that have more opportunity to take price and the less demand brands don't. So our brands are working carefully through where opportunities are and where they aren't. I think there is really high awareness that there's a lot of price sensitivity in the market, and everyone is trending cautiously here.

Q: Mimi, I just was curious to get your perspective on the recent M&A in the footwear and footwear retail landscape. Does that cause you to think differently at all about the space, your competition and maybe some of your key brand partners?

A: Corey, thanks for joining us this morning, and thanks for the question. So there has been some M&A activity certainly in the footwear landscape, and it's largely been focused on more of the performance athletic side and more of the performance side, and there's been consolidation in general there. I think when you think about what we do, we talked about being -- strengthening our positioning with the team, with a style-led team who is interested in a diversified assortment across athletic, and they use athletic for lifestyle purposes. We're really lifestyle-driven. So it's about lifestyle for us. It's about style. It's about being able to offer the assortment across a number of different categories. And so we're quite -- we're positioned quite differently from a place where much of that activity has been taking place. And we feel great about the opportunity in Journeys, the opportunity to serve more customers with the strategies that I have been talking about.

Q: On the gross margin, I was curious if you could maybe talk a little bit more about the impacts in the quarter and maybe perhaps what sticks and then how you think about between balancing price increases versus, I guess, cost absorption as it relates to tariffs for the full year?

A: So we had called out that we had expected that -- if you remember, we had been shifting out of canvas product to an athletic -- more of an athletic assortment. And the margin profile is different between canvas. Canvas has the best margin profile, but the athletic part of the assortment has highest price points. And so we are getting more gross margin dollars. So it's not necessarily a bad trade-off here. So we had called that out in terms of we expected the pressure until we anniversary that in the first half of the year. And so that really was the largest driver around gross margin, and we expect that, that will let off a bit through the back part of the year. We do and Sandra did call out that we have some onetime unusual hits in the second quarter in particular, but we're working hard because of tariffs, and we're working hard to offset that. And so we think that structurally, there isn't anything that over the longer term will be affecting gross margins beyond what I just mentioned. In terms of balancing price increases versus cost absorption, I did say that we are not expecting to get any -- to take any gross margin -- have any gross margin impact as a result of tariffs. We are working with our brand partners there. We are in a place where we are rebuilding Journeys overall margins. You know our story, and we're in the process of rebuilding. And in rebuilding, we've got an eye on overall profitability. And so we're, again, working with our brands to make the best decisions in this area.

Q: Lastly on inventory. Is there a way to break down what's price versus units in the first quarter? And then how does that shape throughout the remainder of the year?

A: Price was not yet a factor in Q1. I think tariffs went in place. We were already selling inventory in Q1 that we had on hand before tariffs really came into be. So you can know that our ASPs are up pretty significantly. And so there is a trade-off between ASPs and units, and we're trying to hit a sales plan. And we think that our inventory is in really good shape. It is up because we were at pretty low levels in inventory last year. We had sold through, rationalized a lot of the Journeys inventory to keep it clean. And so we were down 20% when we started the year last year. And so there is a buildup to be able to support the sales momentum. And so we feel like we've got the inventory that we need. And our partners work with us no matter sort of what happens through the course of the year to help us to manage inventory in a really positive way.