What happened
Following its third-quarter earnings report, shares of footwear and apparel retailer Genesco (GCO 1.25%) fell as much as 20.7% on Friday. Shares are down 16.4% at the time of this writing. The stock's slide on Friday likely reflects disappointment in the company's earnings.
Not only did Genesco swing from a profit in the year-ago quarter to a loss in Q3, but its adjusted earnings per share of $1.02 was below a consensus analyst estimate for $1.12. In addition, adjusted EPS was below adjusted EPS last year of $1.28.
Genesco's GAAP net loss per share was about $165 million, compared to a profit of about $26 million in the year-ago quarter. Notably, though, its third-quarter net loss was impacted by a goodwill impairment charge of about $182 million.
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So what
While Genesco's Journeys brand notably posted a 4% increase in comparable stores, the ongoing shift in consumer shopping from physical stores to digital continued to negatively affect overall results. In addition, Lids Sports brand saw a steep year-over-year decline in comparable store sales of 6%.
Management commented on the performance:
The combination of these factors with gross margin headwinds in many of our businesses, the deleverage resulting from negative store comps and higher expenses from our omnichannel initiatives led to earnings below last year's level but slightly ahead of our internal forecasts.
Now what
Lids' underperformance led management to adopt a more conservative outlook for the fiscal year ending Feb. 3, 2018. Management now expects adjusted EPS for fiscal 2018 to be between $3.05 and $3.35, down from a previous forecast for a range between $3.35 and $3.65.
