Rising gas prices have severely constricted consumers' purchasing power, hurting retailers. However, chic shops such as Abercrombie & Fitch (NYSE: ANF) and Coach (NYSE: COH), which cater to higher-end consumers, have managed to buck that trend. Both recently reported strong quarterly earnings.

Add footwear and apparel retailer Genesco (NYSE: GCO) to the stack, after the company enjoyed a strong start to the year. Genesco reported a 72% jump in its first-quarter profits and boosted its annual earnings outlook.

Income matters
Genesco's five-year compounded revenue growth stands at 7.3%. However, in the last 12 months, that rate has accelerated to 16.6%. This has owed mainly to strong sales growth in its Journeys footwear and Lids hat store chains. The two contribute nearly 80% of Genesco's overall sales. In the last 12 months, Genesco's operating margin has increased to 5.5% from 4.7% the same time a year ago.

Growth initiatives
Genesco opened 11 new stores during the first quarter and closed nearly 29 underperforming stores. Consequently, the company ended the quarter with 2,291 stores, up from 2,267 stores in the year-ago period. Genesco plans to open 83 stores and shutter 76 this year.

For Genesco, this could be a step in the right direction. It would help the company get rid of the laggards and focus on boosting sales through new store openings. Also, a 14% jump in same-store sales during the first quarter suggests that even many of the old stores, with the exception of a few that are scheduled for termination, have been performing well.  

Genesco has been pretty acquisitive lately, spending nearly $75.5 million to purchase companies including Sports Avenue.

Stability
From a financial health perspective, Genesco's cash and equivalents stand at $56.8 million, down from $105.4 million a year ago, and the company maintains zero debt. Its free cash flow slid to $46.3 million from $125.5 million a year ago. A current ratio of 2.3 indicates that it is in a comfortable position to pay off its short-term obligations or any recurring interest payments.

Value

Company

Trailing P/E

Forward P/E

TEV/FCF

Genesco 21.9 13.4 27.0
DSW (NYSE: DSW) 21.0 16.9 25.4
Collective Brands (NYSE: PSS) 9.5 8.7 13.9
Foot Locker (NYSE: FL) 17.0 12.7 10.1

Source: Yahoo! Finance.

Genesco looks more expensive on a free cash basis when compared with its peers. It seems the market has valued the stock pretty rationally, possibly taking into account that the company has performed well so far and has a strong balance sheet.

Though it is slightly expensive, I would seriously consider buying this stock because of its growth potential and cash-generating ability.

The Foolish bottom line
The company's strong performance, strength of its balance sheet, and future growth initiatives make it an attractive prospect in the long run. I wouldn't mind paying a higher price for the company now when I expect good things up ahead.

Shubh Datta doesn't own any shares in the companies mentioned above. The Motley Fool owns shares of Coach. Motley Fool newsletter services have recommended buying shares of Coach. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.