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Genesco Inc. (GCO - Snapshot Report), a retailer and wholesaler of branded footwear, apparel, and accessories, posted lower-than-expected fourth-quarter fiscal 2014 results yesterday. The company’s fourth-quarter adjusted earnings of $2.16 per share from continuing operations came below the Zacks Consensus Estimate of $2.18 per share. However, quarterly earnings were in line with fourth-quarter fiscal 2013.

On a reported basis, the company’s earnings from continuing operations came in at $1.79 per share compared with $1.64 per share in the year-ago quarter.

Quarter in Detail

Net sales for the quarter dropped 0.5% year over year to $792.5 million and missed the Zacks Consensus Estimate of $805.0 million. The decline in the top line was mainly due to one extra week in the fourth quarter of fiscal 2013. Excluding the one extra week effect, Genesco’s net sales increased 4% year over year.

Further, the company reported a 1% rise in comparable-store sales (comps). On segment basis, the company witnessed an increase of 4% in Lids Sports Group's comps and 11% rise in Johnston & Murphy Group’s comps while a decline of 7% in Schuh Group comps and flat Journeys Group’s comps.

Gross profit for the quarter inched up to $385.6 million from $384.2 million. Moreover, gross margin expanded 50 basis points (bps) to 48.7%. The year-over-year improvement in gross margin was mainly driven by lower cost of sales as a percentage of sales.

Adjusted operating income rose 0.5% in the quarter to $82.4 million from $82.0 million in the comparable year-ago quarter. Adjusted operating margin improved 10 bps to 10.4% from 10.3% reported in the prior-year quarter. The rise was primarily attributable to higher gross margin, partially offset by increased selling and administrative expenses as a percentage of sales.

Fiscal 2014 Performance – A Synopsis

Genesco’s net sales for the fiscal inched up 0.8% year over year to $2,625.0 million. However, it missed the Zacks Consensus Estimate of $2,634.0 million. The company’s adjusted earnings from continuing operations came in at $5.09 per share, slightly above the fiscal 2013 earnings of $5.06. However, it fell short of the Zacks Consensus Estimate by a penny.

Financials

Genesco ended fiscal 2014 with $59.4 million of cash and cash equivalents, $26.9 million of long-term debt (excluding current maturities) and $918.1 million of shareholders’ equity. As of Feb 1, 2014, inventories totaled $567.3 million as compared with $505.3 million as of Feb 2, 2013.

Store Update

In the reported quarter, Genesco opened about 48 retail outlets and acquired 8 stores while shuttering 25 stores. Consequently, the company’s store base expanded to a total of 2,568 as of Feb 1, 2014 from 2,537 stores as of Nov 2, 2013.

Outlook for Fiscal 2015

Looking at the current business environment, Genesco projects fiscal 2015 adjusted earnings in the range of $5.40–$5.55 per share. The Zacks Consensus Estimate of $5.71 per share is quite high in comparison to the company’s guidance. Hence, the estimates may see revisions in coming days. The company’s guidance is based on comps rise in low single digits for the fiscal.

Other Stocks to Consider

Genesco currently holds a Zacks Rank #4 (Sell). Some better-ranked stocks in the apparel-shoe space include Iconix Brands Group Inc. (ICON - Analyst Report), American Apparel Inc. (APP - Snapshot Report) and Foot Locker, Inc. (FL - Snapshot Report). While Iconix Brands sports a Zacks Rank #1 (Strong Buy), American Apparel and Foot Locker have a Zacks Rank #2 (Buy).

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