Fifth Consecutive Quarter of Positive Comparable Sales Growth Driven by Journeys
Genesco Inc. (NYSE: GCO) reported its Fiscal 2026 third quarter results with net sales rising 3% to $616 million and comparable sales up 3% versus last year. This quarter marked Genesco's fifth straight period of positive comparable sales growth, primarily driven by the Journeys brand, which posted a notable 6% increase in comparable sales during the crucial back-to-school season.
Journeys Shines Amid Segment Divergence—6% Comp Growth, Schuh Lags
The performance within Genesco’s operating groups diverged. While Journeys surged, benefiting from ongoing strategic efforts in product and market positioning, Schuh and Johnston & Murphy both saw a 2% decrease in comparable sales, echoing the difficult retail environment in the UK and a general retreat in non-peak consumer demand.
| Segment | Q3FY26 Comp Sales | Q3FY25 Comp Sales | Q3FY26 Net Sales ($000) | Q3FY25 Net Sales ($000) |
|---|---|---|---|---|
| Journeys Group | +6% | +11% | 376,707 | 362,517 |
| Schuh Group | -2% | -1% | 123,766 | 121,826 |
| Johnston & Murphy Group | -2% | -1% | 81,157 | 78,463 |
| Genesco Brands Group | n/a | n/a | 34,587 | 33,522 |
Margins Compressed as Promotional Activity and Tariff Costs Rise
Despite sales growth, Genesco’s gross margin slipped 100 basis points year-over-year to 46.8%, largely due to heightened promotional activity at Schuh and persistent tariff pressures at Genesco Brands. Meanwhile, operating expenses improved, leveraging down 140 basis points as cost controls took effect. Adjusted operating margin rose to 2.1% from 1.7% a year ago.
EPS Turns Positive but Guidance Revised Down Amid Schuh Margin Headwinds
Genesco’s bottom-line picture improved: GAAP EPS reached $0.51 versus a $1.76 loss in Q3FY25, while adjusted EPS rose to $0.79 from $0.61. However, facing a "meaningful pullback" in post-back-to-school demand, weaker traffic on non-peak shopping days, and worsening margins at Schuh, management trimmed the full-year outlook. Fiscal 2026 adjusted EPS guidance now stands at $0.95, below prior guidance of $1.30 to $1.70, with sales and margin forecasts reflecting a tougher retail environment.
| Metric | Q3FY26 | Q3FY25 |
|---|---|---|
| Net Sales ($M) | 616.22 | 596.33 |
| Gross Margin | 46.8% | 47.8% |
| Adj. Operating Margin | 2.1% | 1.7% |
| Adj. EPS | $0.79 | $0.61 |
| Inventory Growth YoY | +7% | - |
Cash, Inventory, and Store Footprint—Steady Cost Controls Remain Focus
Cash at quarter end stood at $27 million, down from $33.6 million a year ago. Debt decreased to $89.5 million. Inventories increased 7%, mainly at Journeys, Schuh, and Johnston & Murphy, offset by declines at Genesco Brands. Genesco continued to optimize its store fleet, ending the quarter with 1,245 locations—down 4% from last year—highlighting its commitment to managing costs in a shifting retail landscape.
Management Perspective: Emphasis on Product Elevation, Cost Discipline, and Selective Optimism
CEO Mimi Vaughn stressed the "momentum of our product elevation and diversification strategy" at Journeys, which continues to capture style-driven teen shoppers. Despite Schuh’s ongoing UK headwinds, management remains confident that lessons learned will drive improvement in underperforming units next year. Genesco is prioritizing tight cost control and remains selective with growth, aiming to preserve margins and improve long-term profitability as retail trends evolve.
Key Takeaways: Steady Performance Amid Retail Challenges, Cautious Near-Term Outlook
While Genesco has successfully sustained comparable sales growth, near-term caution is warranted. Softening discretionary spending, international market weakness, and persistent promotional intensity—especially at Schuh—are set to pressure earnings and margins in coming quarters. Investors will want to watch for any further updates on store fleet rationalization, product initiatives at Journeys, and ongoing efforts to reinvigorate Schuh.
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