Genesco Inc. (GCO) Earnings Call Transcript & Summary

And thank you for having us at the conference today. As you saw from the video, Genesco is a portfolio company of leading footwear brands, which Mimi is going to talk about after I report our holiday results. We're pleased today to report that for the 8-week period ended December 28, 2024, the Genesco's total comparable sales increased 10%, both with great performance in our stores, at plus 6% and online, plus 20%. Our Journeys business was up 14% with product assortment that our customers desired and with the right level of inventory to meet that demand. And we saw strong full price selling through the period. Our Schuh business that's located in the U.K. and Ireland was in a highly promotional market, but we saw comp sales of plus 3%. Our Johnston & Murphy business was down 1%, following a really strong prior year holiday period that saw comps in excess of 11%. Traffic was down, but we are encouraged by our positive conversion and our increased selling prices in a market that has been down for the period. With this performance, we are reaffirming our full year outlook of earnings per share in the range of $0.80 to $1, which reflects this performance. The incentive compensation expense has been triggered by this performance. And an acceleration of our optimization of our store fleet with 15 additional stores closed in the quarter, more than we said at the end of Q3, bringing our total store closures to 75 for the period. With that, I'll turn it over to Mimi.

Thank you. Thank you, Sandra. Thank you, Brendon, for having us. I'm going to talk a little bit more about our portfolio, and then everybody is pretty interested in what's happening at Journeys. So I'm going to spend quite some time talking about that. But we have strategically well-positioned concepts. It is the reason why when we have fashion cycles or economic cycles that we can adapt to what the consumer is interested in. We have a retail platform and a branded platform. We seek to be the destination for footwear for our consumer groups that we serve small slices of the consumer market, we want to be top of mind. Our consumer has changed profoundly. Consumers have changed profoundly since the pandemic, both in terms of what they buy and how they shop. And so we have been evolving to meet those needs. Our Schuh and our Journeys brands are the destination for youth and teen, fashion footwear. And the cornerstone of our branded side is Johnston & Murphy, a 175-year-old brand that serves footwear and other needs for professional men. We have, as I said, significantly evolved all of our concepts with Johnston & Murphy and Schuh leading the pack. Right now, we are focused a lot on Journeys. And evolving to emerge stronger on the other side. So for those of you who know Journeys, it is a -- many are interested in the progress that we're making. It's been our #1 priority. Today's teen is the way the consumer has evolved is interested in expressing themselves in different ways. It all starts with the consumer from one day to the next. They are interested in a lot more wearing occasions and really interested in a more diversified footwear offering. And footwear is a great enabler for teens to express themselves. The marketplace is quite segmented among athletic and casual, and there's no other retailer who serves both sides of it. And so Journeys is very well positioned. This is our opportunity to serve the multi-category, multi-branded needs of today's teens with the most relevant brands. We've done a lot to accelerate the Journeys business. We put new leadership in. We have a new President, Andy Gray. We have a new Head of Product. We have a new Head of Marketing to augment and supplement the very strong team that we had in place already. The first phase of our Journeys work has been to think hard about the product and really tilt the assortment pretty significantly. And so you'll see that the plus 14% comp for Journeys was the result of that. We are offering a much more diversified offering and our merchants were super aggressive about chasing into product that they knew after a lull in interest in footwear on the part of our consumer that they knew would really resonate in back-to-school and holiday. And so that was the first phase of our overall strategic growth program, and I'm going to talk more now about where we're heading, because where we're heading is to take Journeys to a new and a different place than we have been before. And so it all starts with the white space in the market. I did talk about the consumer is really well served among athletic and casual, but nobody does both. And the male consumer is especially well served among the athletic and the city specialty folks. And so our broader plan after doing a battery of research is to serve and to sharpen our focus on that female consumer. We think she's underserved in the market for footwear. She's really well served for apparel when you think about all of the apparel teen retailer providers. And Journeys is the answer to that Team Girl on the other side of it. And so we are working to -- with this unique positioning that's really style-led and it's not sneakerhead. So a lot of sneakerhead providers out there, but we, at Journeys are style-led and have got really strong support of our branded partners who are interested in serving this Team Girl. To that end, we started with our consumer segmentation. And the message I'd like you to take away is that we're serving a broader consumer market. We started on the left side, serving our traditional Journeys consumer, which is a very important part. It's our heritage. We -- it's an independent style-led type of customer that is interested in self-expression. It's what gives Journeys our attitude. So we're keeping that consumer, but we're expanding our presence. If you go all the way over to the right side, you can see that we've got the DYNAMICEXPLORER. And this is a group of teams that is interested in leading the way when it comes to fashion and when it comes to style. And in the middle is our STYLECHASER, and that's the team who wants to follow the pack and certainly be on trend, but isn't ready to step out there ahead of everyone else. And so bottom line is the sharp point is on her and the bottom line is that we're widening our overall approach to consumers and the consumers that we're serving. And so we're doing that with 3 key strategies around product, brand and experience. And to start with overall product development and footwear leadership, we are building with our best-in-class footwear partners. We're a really important partner to our brands. We're typically #1 or #2 in terms of -- on the casual side, in terms of being an important partner for our brands. We are leaning more into athletic. Our new leadership in Journeys brings athletic expertise in a way that augments what we already have today. And what we are doing is really leaning into leadership and leadership around footwear on the casual side, on the athletic side and on the Canvas side, which is the most recent style era that we have come out of. And so much more volume and depth of styles is what drove our comp, and we're going to build upon that. The marketplace leadership for women's is what will be most distinctive for us. And we are chasing into more premium product, and we saw the results of that with higher ASPs over the course of the holiday. In addition to that, we're investing in our Journeys brand. Typically, we have promoted the brands that we sell, but Journeys as the destination for the style-led team is what we -- is the message that we're getting out there. Absolutely, Journeys has always been an inclusive positive environment. And today's teen absolutely needs that inclusive positive environment today. And promotion of Journeys as a leading retail brand, that messaging around our positioning in the broader teen audience is a really important part of this next wave of work. We've got a new creative agency. You'll see some really phenomenal things if you've been in our stores in terms of promoting Journeys as a brand. We're increasing our investment in brand marketing. We are letting consumers know about this brand positioning through digital, through social. Social is a super important part of this. And to be the destination for this market that we are working to serve. And the last part is elevating our consumer experience. It starts overall with a better experience on our website. It involves leaning into our overall program, our All Access loyalty program, which has 4 million members after about a year. And then a really exciting part of this, and I'll show you a video in a minute and give Brendon some time to ask us some questions, is around an enhanced store experience. And the store experience is to be able to represent -- be a visual representation of the direction that we're taking. And the video says a lot in terms of what we're doing with the store look. But we're excited about this new store concept. We've got 10 open, 5 more underway in the near term, and we'll have a chance to chat more. [Presentation]

Awesome. Thanks for that.

So Journeys -- or Genesco has been coming here for over 20 years. I think you've been coming nearly that long, not to date you. You've shared some of the stuff you're doing at Journeys, but how would you compare to what you're doing today to what you're doing 5 years ago, maybe before the pandemic and maybe 10 years? Like how has Journeys changed over that last 10, 15 years?

Yes. So Journeys has always represented the place to go and discover footwear and to be very on top of whatever the latest trends are. And we've gone through waves of surf and skate and preppy and whatever the -- whatever is happening on the apparel side, we're the complement on the footwear side. So we've always been known as the expert for selling brands and whatever is relevant. What's really different today and where we're heading in the future are 3 things. One is this expanded focus on the consumer, the sharp point on girl, on the girl and then the selling of more premium product. And so as we are thinking about the opportunity for Journeys going forward, it is to build on the strong heritage and the base that we've had, but then to open the aperture of the consumer that we're serving and really think hard about how do we serve her with more premium product.

And you've lived through it, but everybody here is probably let's say the fashion cycles that are inherent in this business they can be painful for a period of time, you emerge stronger. Is the work you're doing on the product side, does that help insulate the business a little bit more maybe from these fashion cycles that, again, pop up every few years?

Yes. So fashion cycles are part of our business. And we've got more insight and intelligence with that -- on fashion cycles than anybody else in the retail world. What has happened in the most recent period is that during the pandemic, our consumer, our teen was least affected in terms of consumer group. So they came out and they shopped a lot. And a confluence of factors is that they shopped a lot, they bought a lot, and there was a slowing of the innovation cycle on the part of us and on the part of our brands. And so -- and then there was a lot of promotional activity when there was a lot of inventory out there in the market. So we've come through a period of time that is pretty unusual in terms of our consumer having no interest in footwear. And that's a very unusual thing to have happened. We move up and down in terms of the fashion cycles. Our merchants navigate those. We're constantly testing. We've got our ear to the ground. We're plugged into what our consumer is doing all the time. And so we've come through a period of time when there was just no interest in fashion. And with the inflationary environment, consumers having to make a choice about what they're buying, what they're not buying. And so after really absorbing a lot of footwear, they just took a pause. And around back-to-school, good timing in terms of how we were flowing our product, we saw a real pickup in interest in footwear, in part motivated because teens are interested in different apparel bottoms and just interested in this more diversified assortment. And so with a more diversified assortment, with a broader teen audience, certainly more diversification will help over time. And navigating the ins and outs of fashion cycles is what we're good at and what we'll continue to do.

Great. You showed a slide that Journeys concept 4.0 video, but maybe dig a little deeper, like what would the consumer notice? What's different when they walk into the store this time around or with the remodel?

Yes. I mean it's totally different. And we don't believe in store remodels just for the sake of remodels. Certainly, you've got to keep your stores looking good, but this is to give a visible sign to the consumer about what's different at Journeys. And if you walk in, you're going to see that it's very shoppable. It's easy to navigate. There is amazing storytelling in our store, in our new prototype in terms of just the brand stories that we're able to tell. So a fantastic environment, a digital environment highlighting, showcasing the overall brands, but still with the Journeys overall attitude. And so we've got a lot more flexibility in the store design, and it allows us to extract an even higher price point. So our ASPs are up overall. But in this better, more upscale, more elevated environment, a place to be able to sell more premium product is what we're especially excited about.

What's the schedule for remodels going forward? You touched on a handful. To date, what is...