Poor sales at Lids stores dragged down third-quarter results for parent company Genesco Inc., leading the Nashville, Tennessee-based company on Friday to cut its full-year earnings outlook as its stock price tumbled.
For the quarter ended Oct. 28, Zionsville-based Lids Sports Group, which sells athletic apparel with an emphasis on caps, reported a 9.5 percent drop in sales, to $181.3 million. Earnings also fell, 76 percent, to $2 million. The Lids unit had 1,177 stores as of Oct. 28, down from 1,240 at the beginning of the year.
The Lids unit also turned in a 6 percent decline in same-store sales. Same-store sales measure revenue from stores open at least a year and are generally regarded as an important performance metric in the retail industry.
Shares in Genesco were hit hard by the news, falling to $24.62 Friday morning, down nearly 21 percent, from $31.10, at the market’s close on Thursday. Shares have fallen 60 percent this year.
Genesco CEO Robert Dennis cited several factors for the disappointing results at Lids. He said some of the decline was expected because the company received a huge burst in business a year ago when the Chicago Cubs won the World Series, leading to a major boost in related apparel sales.
“While we expected tough comparisons lapping the anniversary of the Cubs’ World Series victory, unfortunately, due to other challenges, current trends at Lids are running well below our expectations,” he said in a written statement. “These challenges include, among others, dampened demand for NFL licensed merchandise resulting from the well-publicized challenges facing the league and disruption in our Canadian business from the NHL vendor transition. Therefore, we have adopted a more conservative outlook for Lids.”
For the year, Genesco said it now expects adjusted earnings per share in the range of $3.05 to $3.35, down from its previous guidance of $3.35 to $3.65.
Genesco posted quarterly revenue of $717 million, a 1 percent increase from the year-ago period. That beat the prediction of analysts, who forecast revenue of $707 million.
The company, however, reported a loss of $164.8 million, or $8.55 per share, compared with a profit of $25.9 million, or $1.30 per share, in the year-ago quarter. Earnings, adjusted for one-time gains and costs, came to a profit of $1.02 per share.
That failed to meet the expectations of analysts, who predicted adjusted earnings of $1.10 per share.
Genesco’s third-quarter results reflect a goodwill impairment charge of $182.2 million, or $8.13 per share, primarily related to the company’s market value to a level below book value, the company said.
Genesco’s Journeys Group, which operates 1,237 athletic shoe and apparel stores, reported a 4 percent increase in same-store sales, while its Johnston & Murphy unit, which sells shoes and apparel, reported a 1 percent decrease.
“Our third quarter results are the tale of two businesses,” Dennis said in the release. “Journeys built on its momentum following its emergence from the recent fashion shift in its markets and posted a solid comp gain. Meanwhile Lids, after a tough second quarter, faced additional challenges that pressured its performance.”
Dennis added that a “dramatic” shift in consumer shopping behavior, away from stores to digital outlets, continued to affect all Genesco divisions.
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 it has struggled in recent years after stumbling in a bid to diversify into apparel and equipment for youth and school sports teams.