Genesco (NYSE:GCO) reported improved second-quarter fiscal 2027 earnings despite lower revenue, as gross-margin expansion and expense discipline offset sales pressure from store closures, reduced promotions at Schuh and licensed-brand transitions.
Revenue declined 3% year over year to $530 million, while consolidated comparable sales fell 1%. Adjusted gross margin increased 140 basis points to 47.2%, and adjusted operating loss narrowed to $8 million from $14 million a year earlier. Adjusted diluted loss per share improved to $0.83 from $1.14 in the prior-year quarter.
Store Closures and Promotions Weigh on Sales
The company ended the quarter with 1,186 stores, following three openings and 25 closures. Genesco had 67 fewer stores than a year earlier, representing about 5% of its store fleet and square footage. Collins said the closures have been accretive to operating income, with many producing sales transfers above 15%.
Comparable store sales rose 1%, while e-commerce comparable sales declined 6%, largely reflecting Schuh’s lower promotional activity online. By division, Journeys comparable sales increased 2% and Johnston & Murphy comparable sales rose 4%, while Schuh comparable sales fell 9%.
Chief Executive Officer Mimi Vaughn said the lower sales base was anticipated and tied to actions intended to improve longer-term profitability. Those actions include continued fleet optimization, a license transition ahead of the Wrangler footwear launch and Schuh’s deliberate reduction in discounts and promotions.
“These actions are in pursuit of a healthier, more profitable business over time,” Vaughn said.
Journeys Extends Comparable-Sales Streak
Journeys recorded its eighth consecutive quarter of positive comparable sales, with gains in both stores and e-commerce. Vaughn cited higher transaction sizes, more full-price selling and improved conversion, supported by product strength in lifestyle running, sandals and low-profile athletic fashion.
The retailer also saw momentum in newer fashion trends, including Mary Janes and sneaker ballerinas. During the question-and-answer session, Vaughn said lifestyle athletic products were the largest contributor to growth, though the company also sees an opportunity for casual interpretations of current footwear trends.
Journeys’ 4.0 store format remained a central part of the growth plan. The format has delivered sales lifts exceeding 25%, according to Vaughn. The company opened 25 new-format locations in the second quarter and had opened about 130 4.0 stores through the quarter. Genesco raised its full-year target to 95 4.0 openings, which would bring the total to roughly 180 locations, or 20% of the Journeys fleet, by year-end.
Vaughn also said Journeys comparable sales accelerated to the mid-single digits in August, aided by back-to-school demand and the company’s “Life On Loud” campaign. Genesco increased media spending by more than 30%, and the campaign generated more than 260 million media impressions in its first four weeks, the company said.
Schuh Prioritizes Margin Recovery
At Schuh, Genesco is accepting near-term sales pressure as it reduces reliance on promotions in a challenging and price-sensitive U.K. consumer market. Schuh’s gross margin improved 300 basis points from the prior year, while its full-price sales mix increased by 10 percentage points.
Despite lower revenue, Schuh delivered nearly flat operating income year over year after cost actions that included six store closures during the quarter, selling-salary efficiencies and digital-marketing optimization.
Genesco appointed Tomas Petersson as Schuh president in late July, succeeding Colin Temple, who retired after 38 years with the business and 15 years as president. Petersson previously served as geographic leader and general manager for Europe, the Middle East and Africa at Foot Locker.
The company said it is making progress in gaining access to product from brands including adidas, Nike, ASICS, UGG, New Balance and Birkenstock. However, Vaughn said the full effect of the assortment changes has not yet been realized because of product lead times.
Johnston & Murphy Growth and Updated Outlook
Johnston & Murphy produced its third consecutive quarter of positive comparable sales. Vaughn said stores led the division’s growth, with traffic outperforming the industry, conversion improving and transaction sizes increasing. Apparel was the largest growth driver, while casual and casual-athletic footwear also grew.
The company extended its partnership with brand ambassador Peyton Manning for two additional years. Vaughn said revenue from new customers has grown at a double-digit rate this year and has increased for 10 consecutive months since the first campaign launched.
Genesco received approximately $22 million in tariff refunds during the quarter, but excluded the proceeds from adjusted results and said its outlook assumes no benefit from potential future refunds. The company plans to use the proceeds in line with its capital-allocation priorities, including growth investments and shareholder returns.
For fiscal 2027, Genesco now expects adjusted diluted earnings per share toward the high end of its previously increased $2.00 to $2.40 range. The company now forecasts flat comparable sales for the year, versus its prior expectation for 1% to 2% growth, and expects total sales to decline about 2%.
Gross margin is expected to expand 60 to 80 basis points for the full year, while adjusted operating income is still projected at $34 million to $40 million, with the higher end of that range now viewed as the most likely outcome.
About Genesco (NYSE:GCO)
Genesco Inc is a Nashville, Tennessee-based retailer, wholesaler and licensee specializing in branded footwear, headwear, apparel and accessories. Through its portfolio of retail chains, wholesale distribution channels and licensing agreements, Genesco brings a range of product offerings to consumers in North America and Europe.
The company’s retail segment includes specialty chains such as Journeys, which targets fashion-focused teens and young adults in the United States and Canada, and Schuh, a footwear retailer with locations in the United Kingdom and Ireland.
