Shares in Genesco Inc.—parent of Zionsville-based Lids Sports Group—dropped almost 30 percent Thursday after the company reported lower-than-expected sales in the second quarter and downgraded its full-year outlook.
The Nashville, Tennessee-based company posted revenue of $625.6 million in the quarter ended July 30, down 4.6 percent from a year ago. Four analysts surveyed by Zacks Investment Research predicted revenue of $641.2 million.
For the year, Genesco said it now expects adjusted earnings per share in the range of $3.80 to $4, down from its previous guidance of $4.80 to $4.90. Analysts had expected full-year adjusted earnings of $4.91.
In written remarks, Genesco CEO Robert Dennis said the “third quarter is off to a difficult start” and company officials “are disappointed with our reduced outlook.”
Genesco shares were down 28.6 percent, to 51.92 each, in mid-morning trading, erasing the stock’s gains for the year.
Dennis blamed a “fashion shift” during the “height of the back-to-school season” for a 4 percent drop in comparable-store sales at the company’s Journeys Group, which operates 1,220 athletic shoe and apparel stores.
Overall sales at the Journeys unit actually rose 2 percent over the year-ago quarter, to $252.1 million, due to an increase in stores, but earnings dropped 51 percent, to $4.5 million.
Revenue dropped 15 percent at the Lids Sports unit, to $188.9 million, after the subsidiary reduced its store count by 42 during the period. But earnings rose 27 percent, to $7.1 million. The unit had 1,275 stores as of July 30.
Comparable store sales at the Lid Sports division remained flat.
Lids, which got its start as Hat World in 1995, had been Genesco’s most successful subsidiary for years after it was acquired in 2004, but has struggled in recent years after it stumbled in a bid to diversify into providing apparel and equipment to youth and school sports teams.
In January, Genesco announced it was abandoning team sports after six years and selling Lids Team Sports to BSN Sports, a division of Memphis, Tennessee-based Varsity Brands. The next month, Dennis sent Lids Sports Group CEO Ken Kocher packing after 10 years in the post.
Overall, Genesco turned in a profit of $15.6 million in the latest quarter, up from $7.5 million a year ago. Earnings, adjusted for one-time gains and costs, were 34 cents per share, topping the average estimate of 26 cents per share by seven analysts surveyed by Zacks.
Earnings and revenue were up significantly at the company’s 174-store Johnston & Murphy unit, which sells shoes and apparel.
"We experienced a sudden shift away from many of the core styles that have fueled Journeys' strong performances in recent years,” Dennis said. “We were able to offset the effect this headwind had on our bottom line through a meaningful improvement in Lids Sports Group and continued strength at Johnston & Murphy combined with share repurchases over the past year."