Back to top

Analyst Blog

This page is temporarily not available.  Please check later as it should be available shortly. If you have any questions, please email customer support at support@zacks.com or call 800-767-3771 ext.  9339.

Zacks Investment Research downgraded Genesco Inc (GCO - Snapshot Report) to a Zacks Rank #5 (Strong Sell) on Sep 28. Disappointing second quarter fiscal 2014 results and a tempered fiscal 2014 outlook led to the downgrade.

Why the Downgrade?

On Aug 29, Genesco reported dismal second quarter of fiscal 2014 (ending Aug 3, 2013) results. Though earnings of 56 cents per share grew 12% year over year, it missed the Zacks Consensus Estimate by 9.7%. We believe a challenging sales environment and lower comparable store sales (comps) growth led to the earnings miss.

Genesco’s sales increased 5.7% year over year to $574.7 million, but missed the Zacks Consensus Estimate by 13.7%. Comparable store sales declined 2% in the quarter due to lower consumer traffic. The comparable store sales improvement of 7% in Johnston & Murphy Retail was more than offset by the decline in comps in The Lids Sports Group, Journeys Group and Schuh Group.

Lower-than-expected sales were due to challenging retail/sales environment as consumers were more conscious about their spending habits and avoided unnecessary expenses.

The restrained consumer spending environment in the U.S. emanated from the recent hike in payroll taxes and higher gas prices. Besides taxes, weak pay and a tepid rate of hiring also curbed consumer spending leading to lackluster sales. Moreover, the company believes the gloomy consumer spending environment will not improve much in the next few quarters.

Genesco also began the back-to-school (August-September) on a disappointing note; recording a comp sales decline of 3% as of Aug 24. Based on a sluggish start to the third quarter, Genesco expects comparable store sales to fall about 1%-2% in the third quarter fiscal 2014.

Genesco also reduced its guidance for fiscal 2014 and now expects adjusted earnings per share in the range of $5.20 to $5.30 per share compared with the prior range of $5.57 to $5.67 per share. The company expects comparable store sales increase in the low single-digit range for fiscal 2014.

This footwear retailer witnessed sharp downward estimate revisions after announcing its second quarter fiscal 2014 results. All the estimates for the third quarter and fiscal 2014 declined over the past 60 days. The Zacks Consensus Estimate for the third quarter decreased 11.4% and that for fiscal 2014 went down 7.2% over the last 60 days.

Like Genesco, other retailers like Abercrombie & Fitch Co (ANF - Analyst Report), Aeropostale Inc (ARO - Snapshot Report) and American Eagle Outfitters Inc (AEO - Analyst Report) have reported declines in comparable store sales and expect continued weakness in back-to-school sales.

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

Learn more

Start for as little as $4.50 per trade.

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
BITAUTO HOLD BITA 34.13 +10.92%
CHINA DISTAN DL 14.97 +5.57%
NOAH HOLDING NOAH 13.94 +4.89%
INTERNATIONA ICAGY 33.09 +4.72%
E HOUSECHINA EJ 10.53 +4.67%