Genesco Inc. (NYSE: GCO) had a good Thursday morning. The footwear retailer reported its fiscal 2027 second-quarter results, and investors liked what they saw. The stock rose over 3% in premarket trading.
Here's the headline number: the company posted an adjusted loss of 83 cents per share. That's not exactly a celebration-worthy figure, but context matters. Analysts were bracing for a loss of $1.37 per share, and a year ago the company lost $1.14 per share. So this is a meaningful improvement, even if the bottom line is still in the red.
Sales came in at $529.858 million, down 3% from $545.965 million a year earlier. But again, expectations were lower, with the consensus estimate sitting at $527.260 million. So Genesco managed to beat on both the top and bottom lines.
Digging into the sales numbers, comparable sales declined 1% overall. Same-store sales rose 1%, but comparable e-commerce sales fell 6%. The real bright spot was Journeys, the mall-based chain that has been the company's turnaround story. Journeys comparable sales increased 2%, and Johnston & Murphy, the dress shoe brand, rose 4%. Schuh, the UK-based retailer, was the laggard with a 9% decline.
The gross margin story is worth noting. Adjusted gross margin expanded 140 basis points to 47.2%, driven by less promotional activity and stronger full-price selling. That's a sign that the company is getting better at not discounting everything, which is a good habit for a retailer.
The adjusted operating loss narrowed to $8.3 million from $14.3 million a year earlier, and the adjusted operating margin improved to negative 1.6% from negative 2.6%. On a GAAP basis, the company actually earned 32 cents per share, compared with a loss of $1.79 per share a year ago.
CEO Mimi Vaughn was upbeat in her comments. She said the company delivered a much stronger second quarter than a year ago and exceeded its own expectations. She credited the company's Footwear First strategy, with Journeys and Johnston & Murphy both posting positive comparable sales. Improved earnings were supported by stronger full-price selling, which helped rebuild gross margins, along with disciplined cost management.
Vaughn also addressed the sales decline, noting that it was largely tied to deliberate moves, including store closures, the company's license transition, and reduced discounting at Schuh. She said those temporary pressures are expected to ease, and the company anticipates improving sales trends. She's confident that the ongoing initiatives can support profitable growth.
And there's a bit of good news for the current quarter. Vaughn said the third quarter has started on a positive note, with back-to-school demand helping Journeys accelerate to mid-single-digit comparable sales growth in August. That builds on strong gains over the past two years.
