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Genesco (NYSE: GCO ) reported a 72% jump in its first-quarter profit, helped mainly by double-digit sales growth in its Journeys footwear and Lids hat-store chains. The strong start to the year emboldened the company to boost its annual earnings forecast, which investors obviously loved and probably didn't expect.
Reacting to the strong earnings, Genesco's shares popped by as much as 15%.
A look at the numbers
Footwear and apparel retailers have had a surprisingly strong start to the year. Genesco's peer Foot Locker (NYSE: FL ) posted a 74% increase in its net income for the first quarter, helped by a 13.3% rise in sales. Ohio-based retailer DSW (NYSE: DSW ) also reported a strong earnings increase of 27.2%.
Staying true to the trend, Genesco's revenues rose to $481.5 million, up 20% from the year-ago period. Comparable-store sales climbed by 14%, supported by the strong performances at Lids and Journeys. Lids saw comps rise 16%, while Journeys notched a 15% comps gain. Together, the chains comprise nearly 80% of Genesco's sales.
Genesco opened 11 new stores this quarter but closed 29 others. Capital expenditure for the first quarter was $9.6 million, and it predicts total capital expenditures of around $55 million for the rest of the fiscal year, as the company opens about 83 new stores and closes 76 underperformers.
Genesco ended the quarter with a cash balance of almost $57 million, down from $105 million this time last year. However, Genesco has no debt, so it's well placed to go ahead with expansion plans in the future.
Despite the strong start, the NFL labor dispute could adversely affect the performance at Lids. Genesco said that the resulting hit to its bottom line could take as much as $0.14 per share from earnings.
Nevertheless, Genesco raised its yearly earnings guidance to a range of $2.90 to $2.97 a share, from its previous outlook of $2.78 to $2.85. The new guidance suggests that the company will achieve a 17% to 20% earnings increase for 2011.