Analysts Predict Strong Back Half for Genesco

Comp-store sales at Genesco’s two biggest businesses have been on the rise.

NEW YORK — Despite a second-quarter net loss at Genesco Inc., analysts are bullish about the firm’s prospects.

“There are some non-athletic units that are beginning to sell through pretty well, and therefore playing into the company’s hands,” said Steven Marotta, an analyst at CL King & Associates.

Mitch Kummetz, analyst at Robert W. Baird & Co., pointed out that Genesco reported an 8 percent comparable-store sales increase as a group for August, “indicating a strong start to the third quarter.”

Comp-store sales at Genesco’s two biggest businesses have been on the rise. At Journeys, they were up 2 percent in the quarter, and rose 7 percent last month. At the Lids Sports Group, comps were up 7 percent in the quarter, and increased 13 percent in August.

Speaking on a conference call, Robert Dennis, chairman, president and CEO of Genesco, said the firm’s five-year plan is to take Journeys sales to about $1 billion on low single-digit comps, as well as to grow the Lids Sports Group business to about $840 million.

“Overall, our business right now is fundamentally strong. We are seeing nice growth opportunities, and our profitability

continues to improve steadily. Each of our major businesses is well-positioned from a trend and economic standpoint and each has good growth opportunities,” added Dennis.

Genesco reported last Wednesday a net loss of $2.4 million, or 10 cents a share, on revenue of $363.7 million for the period ended July 31. That compares with a net loss of $2.7 million, or 12 cents, on revenue of $334.7 million for the second quarter of last year.

Losses from operations rose 19 percent, but bank fees of $900,000 from the second quarter of 2009 were reclassified from “interest expense” to “selling and administrative expenses” to conform to the current-year presentation. As a result, losses from continuing operations for the quarter were trimmed by 5 percent.

Genesco ended the quarter with $49 million in cash and no debt after buying back $11 million in stock in the quarter.

That compares with a $21.5 million cash balance and long-term debt of $53 million as of Aug. 1, 2009. Dennis said the balance sheet “easily supports [the company’s] growth plan,” and he reiterated the company’s fiscal 2011 outlook for full-year earnings of between $2.10 and $2.20.

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