Genesco’s ‘Footwear-Focused Strategy’ Pays Off as Third Quarter Sales Increase
Genesco, the footwear company behind Journeys, Johnson & Murphy, and other brands had a strong third quarter thanks to the return of in-store shopping and its casual product mix delivered a strong performance.
The NashvilleThe Montreal-based company posted record third quarter results, with net sales up 25% from a year ago to $ 601 million. Net income was $ 32.9 million, or $ 2.25 per share. And revenue growth, better-than-expected gross margins and spending leverage resulted in an increase in operating profit of nearly 70% from pre-pandemic levels.
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Strong consumer demand for a variety of brands and styles kept the momentum going as Journeys posted record third quarter revenue and operating profit, marking the fourth consecutive quarter of record profitability, even with inventories of almost 30% lower than pre-pandemic levels.
“The current fashion cycle, which I described [as] shifting more to casual builds on the strength of Journeys with a well-diversified assortment, ”noted Mimi Vaughn, CEO of Genesco, during the company’s third quarter earnings call. “However, for this comeback, performances have been solid in several categories that are both casual and athletic in fashion. Nine of the top 10 brands saw year-over-year growth. In addition, the in-person re-entry also saw a sharp increase in non-footwear sales like backpacks, with more than a 50% increase in non-footwear items. “
“Going back to school is a major sales driver in the third quarter of a normal year, and we’ve been preparing and having had some very strong seasons in the US and UK with students largely returning to face-to-face classes. . While sales volumes generally moderate after the back-to-school rush, we were very encouraged that demand accelerated throughout the quarter and remained strong through October, ”said the leader. .
What’s more, consumers’ strong appetite for in-person shopping, even as the number of COVID cases increased, allowed the company to increase in-store sales by 30% from last year, according to the report. Vaughn. “While traffic is still below pre-pandemic levels, it has improved across the board to the best levels we’ve seen.”
On the business side of the Genesco brand, Vaughn noted that the company’s plan to reinvent Johnston & Murphy for a “more relaxed and comfortable post-pandemic environment” is showing tangible results. Hard hit by COVID, Johnston & Murphy is well ahead of its recovery goals, according to Vaughn. Sales improved further in the third quarter, both online and in-store, but remain below levels of two years ago due to prolonged delays back to the office and lower inventory due to the disruption of supply chain, delayed deliveries and much higher than expected demand. “We are particularly pleased with the performance of Johnston & Murphy’s new athletic-inspired casual product,” said Vaughn. “Casual shoes now account for over 70% of DTC footwear product sales, while casual athletic shoes are up 120% from last year. “
To complement today’s earnings discussion, Vaughn characterized Genesco’s Licensed Brands division as facing the greatest challenges related to supply chain disruption, which has led, among other things, to at much higher transport costs than expected. “On a positive note, there was a strong demand for Levi’s and Dockers footwear in value and full-price channels, which positions the company for improved profitability and supply issues are easing,” said she declared.
“Our footwear-focused strategy is paying off,” added Vaughn. “COVID has provided a real opportunity to transform our business at a faster pace and we are on a very good pace in terms of growth and improving operating margins and EPS. “
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