Q3 2025 Genesco Inc Earnings Call

Good day, everyone and welcome to Genesco third quarter fiscal 2025 conference call.

Just a reminder, today's call is being recorded.

Genesco management included in the conference call will be Mimi Vaughn Board Chair, President and Chief Executive Officer, Sandra Harris.

Senior Vice President Chief Financial Officer.

Tom George Senior Vice President Principal accounting Officer, and Daryl Macquarie Senior director of P&I.

Speaker Change: I will now turn the call over to Darryl Macquarie Senior director of F. P. N. A please go ahead.

Darryl Macquarie: Good morning, everyone and thank you for joining us to discuss our third quarter fiscal 25 results.

Darryl Macquarie: <unk> on the call expect to make forward looking statements, reflecting our expectations as of today.

Darryl Macquarie: <unk> results could be different.

Darryl Macquarie: <unk> refers you to this morning's earnings release, and the Companys SEC filings, including its most recent 10-K and 10-Q filings for some of the factors that could cause differences from the expectations reflected in the forward looking statements made today.

Darryl Macquarie: Participants also expect to refer to certain adjusted financial measures during the call.

Darryl Macquarie: All non-GAAP financial measures are reconciled to their GAAP counterparts in the attachments to this morning's press release.

Darryl Macquarie: And in schedules available on the company's website in the quarterly results section we.

Darryl Macquarie: We have also posted a presentation summarizing our results here as well.

Darryl Macquarie: With me on the call today is Mimi Vaughn Board Chair, President and Chief Executive Officer.

Darryl Macquarie: Tom George Principal accounting officer and.

Darryl Macquarie: And Sandra Harris, Senior Vice President Finance, and Chief Financial Officer.

Speaker Change: Now I'd like to turn the call over to Mimi.

Thank you Dara good morning, everyone. Thank you for joining us I'd like to begin by welcoming Sondra, who joined genesco.

Speaker Change: <unk> financial officer in October with over 30 years of finance leadership experience, including 10 years at VF Corp, where she was responsible for driving global business and financial strategies across DFS iconic lifestyle brands.

Speaker Change: Experience with the App includes serving as Chief financial Officer for direct to consumer global supply chain and shared services, including information technology.

Speaker Change: She is a terrific addition to our team as we drive our return to profitable growth, bringing invaluable expertise from numerous multichannel multi brand consumer businesses.

Speaker Change: I also want to take a moment to thank Tom for his many contributions to genesco since stepping in as CFO in late 2020.

Speaker Change: Tom joined our company at a pivotal time of tremendous change in the consumer environment, helping us successfully navigate both record highs and some very unique challenges.

Speaker Change: After a 40 year career in finance, including 30 years as a public company CFO. We wish you all the best during your well deserved retirement.

I'll start with a review of the key drivers of our third quarter performance and provide an update on our strategic initiatives to drive growth at journeys and elsewhere across our company.

And Sandra will review our financials in more detail and walk through our raised outlook, then we'll be happy to answer questions.

Speaker Change: At first we were pleased to deliver third quarter results that exceeded expectations, marking another quarter of year over year sales increases and a strong return to positive comps.

Our outperformance was driven by journeys as the initial phase of our strategic growth plan unfolds underscoring the outstanding execution of journeys near term initiatives and the resilience of this business even in the face of continued consumer headwinds.

Speaker Change: Journeys comparable sales for the third quarter, not only inflected positive, but were up double digits fueled by continued improvement in the product assortment and the visual reset of our stores among other actions.

Speaker Change: Congratulations to Andy Gray and the entire journeys team for the speed in which they've been able to enhance the consumer experience and deliver an excellent back to school and strong finish to the third quarter.

Speaker Change: This performance more than offset modest comp declines for both schuh and Johnston <unk> Murphy, allowing us to deliver total comp growth of 6%.

Speaker Change: Both store and digital comps were nicely positive with the digital business, a standout up mid teens with digital penetration, reaching over 24% of retail sales.

Speaker Change: Overall sales gross margins and expenses as a percentage of sales all exceeded our expectations in Q3.

Speaker Change: And our clean inventory exiting the quarter positions us well for the balance of the year.

Speaker Change: Ongoing cost reduction and store optimization efforts contributed to adjusted EPS as well, which was also meaningfully above our projection and up versus last year.

Speaker Change: If you add back the approximately 35 to 40.

Speaker Change: The 50, <unk> week calendar shift, including the move of an important back to school week into the second quarter instead of the third quarter of this year EPS would have been up further highlighting the impact of positive comps driving profitable growth on the platform of reduced costs and lower.

Speaker Change: Share count we've been building.

Speaker Change: Our number one priority is to improve performance at journeys.

Speaker Change: As we have in the past most recently coming out of Covid with Schuh and J N M. We have demonstrated our ability to evolve our businesses to meet shifts in consumer preferences and changes in purchasing behavior emerging stronger through challenging cycles.

Speaker Change: The consumer dynamic and changes over the last few years have required accelerated and unprecedented ongoing evolution on our part to successfully meet our customers' needs.

Speaker Change: We are excited to accomplish this with journeys.

Speaker Change: As a reminder, step one of our plan centered around efforts to inject the product assortment with more newness and storytelling and to deliver that to our consumers through enhanced store digital and social experiences.

Speaker Change: The double digit comps in Q3 demonstrates solid progress against that plan.

Speaker Change: The attorneys consumer has become more interested in a broader range of brands and more diversified in the styles, they're wearing for the first time in several quarters. We saw a notable pickup in interest in footwear over back to school marked by growth in industry traffic this year.

Speaker Change: This shift plays well into journeys proposition as the expert curator of styles across both casual and fashion athletic brands.

Speaker Change: Importantly, we're seeing strong consumer response across both categories reinforcing journeys unique position as the footwear destination for the style led team, particularly the teen girl.

Speaker Change: Journeys traffic consequently considerably outpaced the growth in traffic in the industry.

Speaker Change: While sales at journeys have accelerated after a multi year positive sales runs traffic at Schuh and Johnston <unk> Murphy continues to trend lower than last year.

Speaker Change: <unk> performance is being hampered by the difficult macroeconomic environment in the U K, while in the U S softer demand for premium non athletic footwear is pressuring <unk> topline.

On both sides of the Atlantic consumer behavior remains need space and consumers remain very selective about what to buy.

Speaker Change: We continue to add newness and freshness into our assortments to satisfy shoppers who are looking for key footwear items and must have products and passing on everything else.

Speaker Change: As we entered the fourth quarter, we have been pleased with our performance to date and in our Black Friday Cyber Monday results in the midst of a heavily promotional retail environment.

Speaker Change: The arrival of more seasonable weather has encouraged sales of fall and winter merchandise.

Speaker Change: While we diligently work to deliver a strong holiday and finish to the year building on these positive Q3 results. We're in the very early innings of returning journeys and the overall company to historical rates of sales and profitability.

We're optimistic that these product changes and a sharper focus on the consumer along with initiatives around brand building and elevating the consumer experience will drive even greater improvement in fiscal 'twenty and beyond.

And now for more color on our individual businesses in Q3, starting with journeys.

Speaker Change: After turning positive in July comps accelerated as back to school shopping got underway in earnest and remained consistently strong throughout the quarter.

Speaker Change: Journeys skilled merchant team and new merchant leadership took aggressive and quick action with the order book and our key brand partners at the start of the year to bring in the styles that would resonate during back to school.

Speaker Change: Significant newness across a number of casual and athletic brands fueled strong full price selling including post labor day, even as the industry saw a pullback in demand when there wasn't much as much reason to shop.

Speaker Change: Journeys customers transition nicely into buying must have styles in the fall winter assortment at the end of September into October during what is typically a non peak time before holiday driving sales gains for the quarter, which outpaced the market.

Speaker Change: With greater depth of the brands and styles teens want we are well positioned to continue to drive demand through the holiday season.

Speaker Change: Journeys stores with positive traffic and higher Asps.

Inflected positive and journeys digital business remained very healthy posting another quarter of double digit growth and even sharper acceleration than stores, resulting in digital representing 17% of total sales.

Speaker Change: This performance is reflective of our recent cycle of investment in digital including all access loyalty program incentives CRM campaigns, and omnichannel delivery options targeted to entice shoppers to purchase online.

And moving to shoe.

Speaker Change: Comps improved versus the first half getting closer to positive territory, even as our footwear category continues to face market headwinds in the U K.

Speaker Change: While sell challenge the sequential improvement was driven by better performance in stores as traffic and conversion picked up relative to earlier in the year.

At the same time digital sales remained resilient and we're positive at over 40% of the business.

Speaker Change: The Schuh kids category remained a bright spot and delivered a solid back to school continuing its trend of outperformance as well.

Speaker Change: During Q3, U K consumers or motivated to buy only during key shopping periods and the market overall was more promotional driven to spur demand. We expect this choppiness to continue in the fourth quarter.

Despite the challenging backdrop. According to Kantar shoe held its number 10 position in the U K footwear market versus last year remaining a key destination for the youth shopper.

Speaker Change: Looking ahead. The team is focused on a number of initiatives to improve performance like journeys schuh is leaning into the opportunity to better serve the female customer and further differentiate shoe to both consumers and global brand partners.

With that positioning shoe has achieved success elevating its access to several key athletic and casual brands, an important franchises for future coming seasons and is working on others.

Speaker Change: She was also building awareness and engagement with its new brand agency and marketing campaigns. This work also includes leveraging in connection with its CRM programs. The growing shoe club loyalty program, which now stands at almost 3 million members and benefits from greater member purchase frequency.

Speaker Change: Now turning to our branded business, starting with Johnston <unk> Murphy.

Speaker Change: Like hue Jae <unk> comps improved over the first half as consumers responded favorably to new product launches and new product innovation and we Anniversaried last year's ERP implementation.

Store traffic was down in Q3, both conversion and transaction size were up demonstrating positive customer reaction to the assortment.

Speaker Change: Despite an ongoing slowdown in men's non athletic premium footwear <unk> continues to make inroads driving growth and more casual footwear and non footwear categories like apparel and accessories, which now represent about half of direct to consumer sales.

Speaker Change: Our strategy of evolving <unk> into a more casual multi category lifestyle brand in response to the changing needs of the Jay and in consumer has produced significant sales growth over the past four years as the team works to re imagine and reposition the brand from its legacy dress shoe HERA.

Speaker Change: <unk>.

Speaker Change: Looking ahead to the balance of the year, we expect and have seen an acceleration in sales of the fall winter assortment with items like outerwear as the weather has finally turned colder across the country.

Speaker Change: In addition, we're in a better inventory position in our stores for the holidays, including more depth in footwear outerwear and other items and with success Relaunching backpacks and other accessories.

Speaker Change: And looking further ahead, we have several initiatives underway to improve current trends and return to year over year growth.

Speaker Change: Most important of which are efforts to bring more distinctive product to the market built upon our unique brand style quality and design principles and to deliver more frequent year round freshness in our offering.

Speaker Change: This includes bringing back updated iconic styles for our 175 year brand anniversary next year.

Speaker Change: Coupled with efforts to increase brand awareness, we look forward to driving this renowned brand to new Heights.

Speaker Change: Wrapping up the branded discussion we continue to achieve very good success with the repositioning of Genesco brands group.

Speaker Change: Efforts to simplify the licenses portfolio to emphasize key brands and channels means lower sales in the short term, but consider really more profit which was evident once again in Q3 results.

Speaker Change: Now moving back to journeys in its strategic growth plan.

Speaker Change: Our broader plan centers on journeys unique positioning to address the underserved teen girl in the mall.

Speaker Change: While this customer is well served with fashion apparel, our in depth market research revealed journeys has an even greater opportunity to serve this consumers fashion footwear needs.

To that end, we've been expanding our consumer segmentation and sharpening our brand positioning to reach a wider teen audience with a more intentional focus on the style led team with a sharp point on her with an assortment of even more premium product.

Speaker Change: This consumer continues to evolve and today's teens are interested in expressing themselves in different ways from one day to the next and footwear is a key enabler to this.

Speaker Change: At the same time, the marketplace is quite segmented among athletic casual and fashion with no concept that goes across all footwear categories in the mall for the style led team.

Speaker Change: This is the opportunity and no one is better positioned than journeys to win with this customer.

Speaker Change: We have built three strategic growth priorities around product brand and experience to fuel, our new positioning and engage and excite more customers in.

Speaker Change: In addition to bringing in a new president we have also augmented our talented journeys leadership team this year with highly experienced new chief product and marketing officers, who bring tremendous expertise.

Speaker Change: Starting with product and diversifying our footwear leadership, our focus here is on expanding our leadership positions across athletic canvas and casual footwear with both breadth and depth of key leading styles.

Building more long term strategic partnerships with our best in class premium footwear brands and editing and focusing our non footwear business.

Speaker Change: Next is investing in our journeys brand. These efforts include creating a new brand purpose and platform to differentiate and be a positive inclusive connected force for teens and young adults increasing investment in brand marketing delivering journeys updated brand positioning and tone of voice.

Speaker Change: To drive awareness and consideration of the journeys brand through digital social and other media and ultimately building new footwear demand creation capabilities.

Speaker Change: And finally, elevating our consumer experience, we are introducing an updated store concept, which retains the journeys energy and DNA in an environment designed for the style led team who shops across footwear brands and categories with 10 initial locations opened to date.

Speaker Change: Strengthening our brand positioning and elevating the consumer experience on journeys dot com to enhance the transactional approach we've been delivering and.

Speaker Change: And lastly, evolving our all access membership program, where we've already signed up over 4 million members and a little over a year to provide a more personalized experience and increase long term customer value and retention.

Speaker Change: These actions will solidify journeys, leading market position for the longer term and we look forward to sharing more details of this plan with you going forward.

In closing with our outlook, we're pleased with the upside we delivered in Q3 and the momentum we've carried into Q4.

For journeys, we're optimistic we're in a position to drive solid results over the remainder of the year while at the same time based on recent trends, we've adopted a more cautious view for schuh and Johnston <unk> Murphy.

Speaker Change: This all results in us modestly raising our view for the year.

Speaker Change: Sandra will take you through the specifics.

Speaker Change: Before passing the call I'd like to thank our incredible people.

Speaker Change: Our unmatched ability to reinvent ourselves to evolve and grow over the years with a profound understanding of what our customer wants is our true competitive advantage and real cause for celebration with our 100th anniversary as a company this year.

Speaker Change: The work you've done has positioned us well for this busy holiday season, and I look forward to continued success as we finished strong in fiscal 'twenty five and build on this momentum to unlock the considerable growth and value in our company in fiscal 'twenty six and beyond.

Tom George: And with that I'll turn the call over to Tom.

Tom George: Thanks, Mimi we were pleased results for the quarter exceeded expectations getting back to positive comps at journeys provides us with great upside to drive earnings.

Tom George: Earnings per share meaningfully higher year over year, given the cost reductions and share repurchases.

And overall leverage in our operating model.

Tom George: Turning to results.

Consolidated revenue for Q3 was up 3%.

Tom George: $596 million, which was better than we anticipated and significant given the calendar, which included the shift of a strong back to school week into Q2 last quarter.

Tom George: Shift negative negatively impacted sales by approximately $17 million.

Tom George: Another 3%.

Tom George: In addition, the journeys stores, we closed over the last year.

Drove a roughly 4% reduction in the size of our total fleet.

<unk> improved overall productivity and have only a 1% impact on total sales.

Tom George: We continue to drive our digital business, which grew to 24% of direct to consumer revenues.

Tom George: Total company comps were up 6% with stores up 4% and E comm up 15%.

Tom George: This was a major sequential acceleration from the negative 5%.

Tom George: Negative, 2% total comps, we reported in Q1 and Q2.

Tom George: <unk>.

Tom George: Overall gross margin was down 30 basis points compared to last year.

Tom George: By Division journeys gross margin was down 80 basis points.

Tom George: Primarily to product mix as we are.

Tom George: Selling brands with lower initial margins, but higher average selling prices.

Tom George: <unk> gross margin decreased 20 basis points.

Tom George: And Jane EMS gross margin was up 170 basis points.

Tom George: Due to improved initial margins lower markdowns and channel mix.

Lastly, genesco brands gross margin was up 330 basis points due to improved initial margins.

Tom George: Moving down the P&L SG&A expense was 46, 1% of sales an improvement of 10 basis points compared to last year, the combination of our cost savings initiatives.

Tom George: Closure of unproductive stores.

Tom George: Some improvement in other expenses offset the increased variable expenses to support our direct sales growth as well as additional selling salaries and marketing expense.

Tom George: Optimizing our store fleet to reduce occupancy cost and fixed expense levels in.

Tom George: In the store channel remains one of our key financial objectives.

Tom George: In Q3, we achieved a 4% reduction in straight line rent expense on 67 lease renewals across the company.

Tom George: With an average term of approximately three years.

Tom George: This brings our year to date renewals to 231.

Tom George: 8% reduction in straight line rent expense.

Tom George: Looking further at cost savings, we continued to gain traction on our plan.

Tom George: To reduce costs by $45 million to $50 million on an annualized basis by the end of fiscal 'twenty five before reinvestment.

Tom George: The initiatives include lowering occupancy costs to improve store profitability as.

Tom George: As well as optimizing our inventory warehouse freight logistics costs.

Tom George: And the other procurement efficiencies.

Tom George: Summary for the third quarter, we incurred a better than expected.

<unk> operating income of $10 3 million compared to $11 million for Q3 last year.

Tom George: Keep in mind, the 50 <unk> week shift.

Tom George: Negatively impacted Q3 operating income by approximately $5 million to $6 million or <unk> 35 to <unk> 40 per share.

Tom George: Turning now to capital allocation and the balance sheet.

Tom George: We ended the quarter in a net debt position of approximately $67 million with clean inventories.

Tom George: 1% from last year.

Tom George: We plan to build up our inventory levels, especially for journeys to drive Q4 sales and be well positioned to drive sales in the first half.

Tom George: Fiscal year 'twenty six.

Looking at our financial flexibility, our strong balance sheet and free cash flow generation combined with our revolving line of credit.

Tom George: US with ample liquidity to pursue all of our strategic objectives.

Tom George: Capital expenditures in Q3 were $13 million.

Tom George: The investments, primarily directed to retail stores, and our digital and Omnichannel initiatives.

Our first cycle of investment in digital and Omni channel, where we are currently getting the benefits we are shifting the emphasis to investment and refresh our store base.

Tom George: Opened two stores and closed 14 stores.

Tom George: In the quarter was 1302 total stores.

Tom George: Year to date, we've closed 41 journeys stores.

We expect to close up to 10 more journeys stores. This year as part of our program to optimize our store fleet in order to best serve the shopping habits.

Tom George: Today's consumer.

We expect these closures to eliminate approximately $14 million of annualized SG&A cost, which is incremental to the roughly $25 million.

Tom George: <unk> savings, we realized from the stores, we closed last year.

And a $45 million to $50 million of run rate savings.

Tom George: We are targeting for this year.

Tom George: These actions to reshape our cost structure are designed to strengthen the economics of our store channel.

Tom George: And enable investment in our strategic investment initiatives to drive topline growth.

Tom George: Lastly, during the quarter, we repurchased almost 18000 shares.

Tom George: $4 $4 million or an average cost of $24.

Tom George: <unk> 50 per share we have $42 $3 billion remaining on our current authorization.

Tom George: Over the past six years, we have repurchased nearly 50% our outstanding shares.

Sondra: Let me now turn it over to Sondra for guidance.

Sondra: Thanks, Tom with third quarter results coming in ahead of expectations, we are raising our full year EPS guidance to 80 to $1.

Sondra: Up from our prior range of $62.

We now expect higher sales in total driven by journeys, partially offset by a more cautious view for schuh and Johnston <unk> Murphy for the balance of the year we.

Sondra: We also expect some additional expenses.

Sondra: For journeys the fourth quarter has started well thanks to the consumer focused investments we have made in our brand combined with the positive adjustments to the product assortment.

Sondra: And we expect Q4 comps to be positive, although not at the level, we saw in the third quarter.

We now expect sales this year to be somewhat more muted than our prior expectations given the weak market demand in the U K and we expect the ongoing weakness in the premium men's footwear category to put more pressure on Johnston <unk> Murphy.

Combining all of these factors, we now expect full year total sales to be flat to a decrease of 1% versus our prior expectations of down 1% to 2%.

Sondra: Excluding the 50, <unk> week impact, which we estimated to be approximately $25 million of itself and a small negative effect on earnings per share. We expect sales to be flat to slightly up year over year with the back half accelerating meaningfully over the front half.

Sondra: By Division total year in sales compared to last year are expected to be a low single digit increase for journeys.

Sondra: For <unk>, we now expect sales to be relatively flat and for Johnston <unk> Murphy, we expect to be down mid single digits, including the impact from the Johnston <unk> Murphy store closings.

Sondra: Shifting to gross margin, we do expect to be somewhat more promotional in some of our businesses in the fourth quarter that had a pickup in gross margin in Q3.

Sondra: Although we still expect gross margin to be impacted by the shift in consumer demand to lower margin athletic footwear, our cost savings initiatives should help offset this pressure.

Sondra: Therefore, we will still expect overall gross margin to be down 10 to 20 basis points versus last year.

Sondra: We now expect adjusted SG&A as a percentage of sales to be in a range of flat to 10 basis points of leverage compared to our prior guidance of flat to 20 basis points of leverage. This is largely the result of higher incentive compensation that was triggered by our stronger performance.

Sondra: Our guidance assumes no additional share repurchases, which results in a fiscal year 'twenty five average shares outstanding of approximately $11 million.

Sondra: And we expect the tax rate to be approximately 27%.

To close we are streamlining our operations and adapting swiftly to the changing consumer demands.

Sondra: These strategic changes will create a more efficient company that better serves our customers enhances profitability and creates greater value for our shareholders.

Operator, we are now ready to open the call for questions.

Thank you at this time well be conducting a question and answer session.

Sondra: If you'd like to ask a question. Please press star one on your telephone keypad.

<unk> tone will indicate your line is in the question queue you.

Sondra: You May press star two if you'd like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.

Speaker Change: Our first question comes from the line of Mitch comments with Seaport Research. Please proceed with your question.

Mitch: Yes, thanks for taking my questions.

Mitch: First off I wanted to.

Tom George: Thank you Tom again.

Mitch: For all the.

Mitch: All the help you provided over the years and saundra.

Mitch: We look forward to working with you.

Mitch: As far as.

Manny: Manny you talked about earlier.

Manny: And I'm curious I want to start with your Assortments.

You've made a lot of progress there, but where is that relative to where you'd like it to be how much opportunity is there for better access better allocation changing still changing some of the.

Manny: The brand mix and like to what extent.

Manny: Are the brand.

Manny: King notice I'm looking at the strong back to school results.

Speaker Change: And how does that help you going forward in terms of improving your auctions and allocations.

Speaker Change: Mitch Thanks for that nice tribute to Tom and the welcome to Saundra and for your question.

Speaker Change: And as far as that journeys change in the assortment.

We talked a lot about.

Speaker Change: Fact that consumers had gone through large a cycle of purchasing coming out of the pandemic and really had their closets full and we're looking for newness in the assortment and really looking for innovation.

And we went through a very long cycle as well of our customer wanting canvas product we call. It vulcanize product as well and had a lot of success with that and today, we see that our customer is much more diversified and what they are interested.

Speaker Change: And wearing theyre embracing teams are embracing more wearing occasions.

Journeys has us well positioned to take advantage of this and so this means a greater number of brands for us the back to school success was not one or two brands. It was seven or eight brands really driving the business.

Speaker Change: There is.

Speaker Change: Okay.

Speaker Change: <unk> fashion shift away as I said from where we've been and consumers are moving into more seasonal assortments as well and so I would say that we have a strong merchant team, we bolstered that merchant team at journeys, bringing in percentile are bringing Andy Gray we are typically the number one.

One or two.

Speaker Change: Partner for brands on the casual side and they helped us to increase our relationships on the athletic side in our teens want folks and so I'd say that.

Speaker Change: <unk> brand partnerships are strong they're getting stronger.

Speaker Change: Our brand is taking notice of our strong back to school results.

Speaker Change: Certainly hope so.

Speaker Change: It is not just <unk>.

Speaker Change: One action and saying hey, we'd like more allocation. It is the partnership that is a holistic approach to serving that teen customer, particularly that teen girl and our brands want access to that girl we have.

Speaker Change: Made a commitment to them to provide an excellent store environment, we have terrific people, who serve our customers with the floors and so we as we said we're in the early innings of where we.

Where are we believe we will go in terms of restoring the journeys brand to historically, the sales and levels of profitability and we look to build on.

Where we are today.

Speaker Change: And then maybe on the stores.

Really two parts to this question because youre youre closing some stores.

Speaker Change: And then you also have this.

Speaker Change: The new store design, so first of all I'm curious to know.

As you've closed stores and continue to close stores.

Speaker Change: What are you seeing in terms of our productivity.

Speaker Change: Stores that remain open and those markets where stores are closed it sounds like youre not seeing much of a.

Speaker Change: Our sales in general a little bit.

So I would imagine that some of those.

Speaker Change: Stores.

Speaker Change: We will see a productivity lift when they are in a market where there might be other stores of yours closing. So maybe you can just going to kind of go through that and then also on the new store design. It sounds like you've had 10 stores open there I don't know if there are any.

Speaker Change: Early results that you can speak to but I guess more so could you talk about.

Speaker Change: What you see as being the rollout there and kind of the potential.

Speaker Change: For that longer term.

Speaker Change: Sure. So the way we're thinking about it Mitch.

We're not necessarily calling at closing stores, we're Hollywood optimizing our footprint and there've been lots of changes in terms of consumer shopping patterns as you know.

Speaker Change: There is just really a need to serve customers differently. So we have some terrific store analytics that help us to really understand demographics and other patterns.

Speaker Change: And are able to make decisions about store closings based on that and so when we are closing stores and as you said they are in less productive places because of the shift of traffic patterns or the shift to different shopping venues, we've got more sophisticated capabilities to drive that traffic.

Speaker Change: Two other stores that are nearby or online and we've got more sophisticated information about the consumer that lets us lets us do that and so we're really optimizing the store footprint in response to the changes that we've been seeing and.

As he said certainly.

Speaker Change: Productivity in these locations are less but our overall strategy is to drive productivity in our best locations to make our best locations, even more productive than they are and so that is partially the assortment and some of what we've been doing with the assortment, but it also necessitates really invisible chain.

<unk> and we are really excited about this element of the plan with our new positioning and with the product assortment, we need a more aspirational environment that showcases this more premium product. It's designed for a style led team who shops across footwear brands and categories. We can showcase.

Speaker Change: Brands, it's a cleaner environment, we'd love you to see it we've got it set up in our showroom here in a couple of stores here in Nashville, I think we close the store to you as maybe in Utah.

Speaker Change: But it is a cleaner environment its a more neutral aesthetic.

Speaker Change: We can create brand statements as I said, but it retains that journeys energy in its DNA and the attitude and.

Speaker Change: And personalization for the locations. So it's a really open shopping environment and we have had its early days, we opened our first store in October.

Speaker Change: And so we've been quite pleased with the results that we have seen and are going to be tracking this carefully.

Speaker Change: And just again to follow up can you say what the rollout plan is.

Speaker Change: Going into next year.

Speaker Change: Yeah sure so tend to open so far it'll be about <unk> 15 for the year.

Speaker Change: We have at least that number designated for next year, but we do want to see some results.

Speaker Change: Mitch and we can pull forward.

Speaker Change: In fact, we have been really working with our real estate with working with our landlord partners, who are quite excited about this as well and so we can pull forward and we typically are doing this with lease renewal, but if the results really.

Speaker Change: Warranty, which we anticipate.

Speaker Change: They very well could we.

Speaker Change: We can pull forward some of these remodels and so we do we are planning on a wave of growth for this that these stores will create comps in excess of the comps that we're driving with our other initiatives. So 15, so far at least that many for next year and the open.

Speaker Change: Does it pull forward.

Speaker Change: Okay, and then maybe just a couple a couple of things one just.

Speaker Change: In terms of.

Speaker Change: Journeys comp, you've obviously bumped up the comp guide for the full year I think for the.

Speaker Change: Fourth quarter Saundra, you mentioned positive but.

Speaker Change: But not as strong as the reach.

Speaker Change: <unk>.

Speaker Change: A pretty wide range I'm wondering.

Speaker Change: You get a little bit more specific are you looking low single mid single high single.

Speaker Change: For journeys in the quarter and also.

Speaker Change: With.

Speaker Change: Where's the business quarter to date, if you can say and is it sort of quarter to date.

Speaker Change: Kind of in line with what Youre thinking for the quarter as a whole and then I guess I have one last one.

Speaker Change: Great.

Speaker Change: So in terms of earnings Com.

Speaker Change: Absolutely journeys is an outlier in the market I think as you've seen others report.

Speaker Change: Over the.

The earnings cycle.

Speaker Change: At most had a good back to school, but we anticipated and most people saw that in the end of September and October that and during non peak periods. The consumers' demonstrated that they're just sitting it out and waiting until there is a reason to buy.

And we did not see that in journeys, we saw rolling right out of back to school into into winter, but our consumer started buying the winter assortment and the fall assortment and really didn't Miss a beat and so we are.

Speaker Change: Our positive for Q4 as Saundra said not at the level I mean journeys had an 11% comp not at the level that we have that we saw in Q3.

Speaker Change: Because we don't know whether or not there was a pull forward of the winter purchasing alright that is I think thats the thing to really focus on and we.

<unk>.

Speaker Change:

Speaker Change: <unk>.

Whereas the business quarter to date I'll talk a little bit about black Friday in November and the calendar offsets I. Just described to you are spending a lot of time looking at that but I think we are comparable for black Friday in November and we're pleased with the results.

We saw that journeys was not promotional the rest of footwear, particularly athletic footwear was quite promotional the strength of our assortment carried the business and we did not need to match the promotional activity. We had a lot of full price selling and so we're well positioned in inventory for the fourth.

Speaker Change: Order and we are going to drive the business to the full extent that we can.

Speaker Change: And then I guess last question maybe.

Speaker Change: It was one of your priorities for journeys you talked about.

You talked about creating.

Speaker Change: Some new some new demand creation opportunities I was just hoping you could elaborate on that is that are you looking to do more.

Speaker Change: More digital advertising are you looking to apply some.

Speaker Change: Analytics to these 4 million loyalty members would be more targeted in the market what exactly when you say new demand creation opportunities.

Speaker Change: What might those be.

Sure. So it is all of those things that you talked about and more.

Speaker Change: Have been driving our digital business as you saw we've more than doubled our digital business since the pandemic, but when and we've also put in place. This loyalty club and we've been seeing really positive things and loyalty across all of our businesses and the ability to serve our customer even <unk>.

Speaker Change: Because we know who they are is something that is at our disposal right now between loyalty and CRM, but in terms of creating demand. It really is creating the brand brand purpose around journeys articulating that to the consumer in a better way.

Having journeys be even more top of mind as far as the decision for teens to shop part of our strategy and this isn't just spring journeys back to where it was this is take journeys to new levels.

Speaker Change: And we talked about widening the aperture more teens appealing to a broader group of teens, who may not consider journeys today were surprised at the opportunity for awareness, we think that all teens know about journeys, but we know there is an opportunity to to build the brand.

Awareness and so we put in a new head of marketing. She has terrific. She came from Levi's really very well versed in the teen consumer and we're working hard on increasing our social presence on platforms like Tictoc very important line, we've got exciting things in store here.

Speaker Change: Of really being able to articulate.

Brand.

Speaker Change: Positioning across store across online we have a new creative creative agency onboard to help with that and we're just going to increase the investment in brand marketing and.

Speaker Change: And talk about that updated positioning and so it's all of those things thats, an increasing our presence increasing our marketing dollars, reaching out in stores, reaching out on social reaching out on digital.

Speaker Change: Great. Thanks, Good luck.

Speaker Change: Alright, Thanks Mitch.

Speaker Change: Thank you. Our next question comes from the line of Montara Marino teeth with Jefferies. Please proceed with your question.

Speaker Change: Hello, and thank you for taking my question I guess I want to touch on journeys <unk>.

Speaker Change: Last quarter, you discussed how journeys had imprudent for me fluctuate a lot today.

Speaker Change: Holiday periods to show through.

Speaker Change: Hum pretty event driven premium football.

Speaker Change: Or anything else you want to add and how we should think about the rest of the holiday season with the fewer shopping days and then you called out strength in footwear and outerwear.

Speaker Change: But maybe wasn't working with will.

Speaker Change: Journeys <unk>.

Speaker Change: <unk> pocket perform a little better.

Speaker Change: Sure. So as I said, we are quite pleased with the assortment that we have in place the assortment between back to school and holiday does shifts there is more opportunity to be able to sell what is typically no.

Speaker Change: And as more.

Speaker Change: Cold weather product, but having said that we have observed that our teen customer is pursuing just really season less fashion. They are wearing sandals in cogs in the winter, we have a great assortment of clogs, which is driving our business.

Speaker Change: We expect during holiday, we brought in significantly more product.

Speaker Change: Aligned with the brands that we believe will drive our business specific specific items. The footwear market right. Now is very focused on must have product. We work on a model of scarce allocated product and we create the demand in partnership with our brands to say.

Speaker Change: That you need to buy it now because if you don't it's going to be sold out and you can't find what we sell everywhere and the allocation model means that there is going to be more demand than there is supply in the market and so we believe we're well assorted in what the consumer is looking for I think for the changes in our.

Our assortment and that we have those key items.

It will support the demand for the holiday in terms of.

Speaker Change: Strength in footwear.

I would say that we've talked a bit about boots and boots are typically something that sell this time of year. The last at least couple of years the demand on the part of the consumer for boots has not been as strong. So I'll talk about that for a minute and just say that we.

Speaker Change: We are not necessarily planning boots up.

Speaker Change: But we have seen and we're leaning into the trend for shorter or many boots.

Speaker Change: Moccasins are out there.

And as we go into the season this year, whether the category.

Speaker Change: It's going to be very focused on specific items and specific a specific brands.

Speaker Change: And then during the liquidity you mentioned it was a more promotional operating environment.

So product.

Speaker Change: Driving a lower gross margin, but just any early reason, how we should think about margins for next year.

Speaker Change: Yeah. So we have talked about the promotional environment and then we've talked about product mix. So I'm going to take both of those separately. So we are not more promotional in Germany. Its in fact were significantly less promotional we were significantly less promotional in the third quarter than we were last year.

Speaker Change: And so it's not it's not more markdowns are more promotional activity that is affecting.

Affecting our gross margin it really is mix and what we are what's affecting our mix is that we're moving from.

Speaker Change: Canvas and Balkanized product, which tends to be at a higher initial margin and selling a broader assortment of both.

Speaker Change: Casual and athletic brands that start with lower initial margins, but the good news and the positive news is that it's higher average selling prices and so we are.

Speaker Change: Well to really make that that formula work and so in terms of gross margin for next year, we will anniversary some of that in the back part of the year, but we may see some puts and takes on gross margin in the front part of the year as we shift our assortment and we have been anniversarying.

The canvas sales in those margins for some point some period of time, and so that should normalize over time.

Speaker Change: Okay perfect.

Speaker Change: One more for me.

Speaker Change: So E comm performed well across the board and then also performed well at journeys.

Speaker Change: Hum.

Ask him here.

Speaker Change: Anything else to add about how the opportunity that exists for journey to E com and if anything else you want to.

Speaker Change: And how youre thinking about your E com going forward.

Speaker Change: Sure. So our journeys team drove really tremendous E comm performance over this last quarter and certainly it was good product, but it's also lots of the actions that they have been taking and we have gone through an investment cycle in digital and in technology over the last set.

Speaker Change: All years with everything from improving our real time inventory to new order management systems to new front end.

Speaker Change: New new front and upgrading as well and so when we think about the opportunity for E. Comm for journeys Schuh is really very much the same business over in the UK and while the UK market is more advanced for digital our shoe penetration is.

Speaker Change: At 40%, we talked today about how journeys is less than 20% and so perhaps we don't get to 40 with journeys, but we still think that there is quite a lot more opportunity to be able to drive digital sales and it is important important part.

Our plan going forward is really being able to elevate the consumer experience online to use our CRM and our data analytics capabilities that we have been working very hard to build and we believe that's going to drive the next wave of growth for us in E com.

Speaker Change: Thank you.

Speaker Change: Thank you.

Speaker Change: Thank you. Our next question is a follow up from the line of Mitch comments with Seaport Research. Please proceed with your question.

Speaker Change: Yes, I guess I got a couple of follow ups.

One on journeys.

Speaker Change: If I remember correctly last year in the fourth quarter.

Speaker Change: You talked about how you had.

Speaker Change: It was very key item driven.

Speaker Change: You just didn't have enough of beds.

Speaker Change: <unk>.

Speaker Change: At journeys.

Speaker Change: We will do a good job, but you ran out of things to kind of steer the consumer towards other things.

Speaker Change: That wasn't happening a year ago I'm curious as you look at the business today and when you think about <unk> of Germany is is it really that you just now.

Speaker Change: A lot more of these key items and youre not assuming that as you potentially run out because youre going to have a better ability to consumers to other things. This year was that does that.

Speaker Change: Where do you think about it.

Speaker Change: So as you have a good memory and I would say that's exactly right that last year, we talked a lot about how it was a key item driven order and in fact, it remains a key item driven business.

Speaker Change: For the large part for this year and we expect a quite key item driven business for for this fourth quarter and the customer isn't isn't suitable we used to be that if you didn't have what they wanted to you could get them to buy something else, but in fact, the customer wants what they want a really positive.

Speaker Change: Aspect of this for US is that they are stretching up to much higher average prices for us and that we are able to serve that customer and so for this year. What's different is that what St was the same as that they will continue to be key item focus whats different is that we have.

Speaker Change: Of greater depth in some of the key items that.

Speaker Change: That we are excited about but there is also more breath in key items across more brands as I said it wasn't one or two brands that drove our business, but it was seven or eight brands that drove our business and so.

Speaker Change: Brad.

Brad: In depth will.

Brad: We anticipate being a better formula for for this year.

Speaker Change: And then I guess lastly, you mentioned in your prepared remarks on Hu.

Speaker Change: But going forward youre, hoping to.

Speaker Change: Better access.

Speaker Change: Yes.

The key brands I mean, you said getting better access for future seasons.

Speaker Change: Can you just again, if you kind of walk us through that is that I mean.

Speaker Change: Are you going to be leaning on like the new journeys team to help drive that or is it all just about the schuh team kind of kind of leverage off of one another.

And when might this happen is this do you expect improvement as early as spring or this is going to be more in the back half of next year.

Speaker Change: So much the journeys in the shoe business are very much the same business on both sides of the Atlantic and the top brands eight of the top 10 brands overlap at journeys and lids Schuh and so there is really great synergy.

Across our brand partnerships with with with.

Speaker Change: With these businesses and so there's a lot of good back and forth of sharing knowledge and sharing trends and sharing experiences across the teams and so we certainly lean on each other for exclusives, we carry some of the same exclusive and journeys that we carry and shoe and vice versa.

Speaker Change: In terms of the shoe business that business has performed remarkably well post pandemic in the face of some pretty big headwinds the consumer environment has been worse than the U S inflation was worse.

Speaker Change: <unk>.

Speaker Change: There is a lot of.

Speaker Change: Consumer confidence hasn't been good in schuh has been able to drive and build market share. We've moved up three places and market share with some of the same.

Speaker Change: Aspects of the playbook that we have rolled out for journeys and schuh has benefited from better access and has benefited from the positioning and the marketing and the brand purpose pillars that we have have rolled out it is a never ending quest for access to brands what brands really like is there ability to showcase.

Speaker Change: Their brands in a physical format.

Speaker Change: Journeys and schuh allow that to happen they like sitting and testing the reaction of the consumer when they are sitting on our shelves up against other brands and we talk over the longer term about about sharing customer information, we have and about how we are going to increase the business that we're doing with <unk>.

Speaker Change: Customers that our brands are very interested in particularly that teen girl and so we've got line of sight into access to some better product for sure.

Speaker Change: We have to have access to some brands that are coming in in spring, we will keep working at it and we do expect to see some improvement in this business because of the access but the consumer headwinds will continue to be a challenge.

Speaker Change: Thank you, ladies and gentlemen that concludes our question and answer session I will turn the floor back to Mr. Bob for any final comments.

Mr. Bob: Thank you for joining us today, we look forward to speaking with you all when we report our year end results and and holiday performance.

Have a great holiday.

Speaker Change: Thank you. This concludes today's conference call you may disconnect. Your lines at this time. Thank you for your participation.

Speaker Change: [music].

Speaker Change: Good day, everyone and welcome to Genesco third quarter fiscal 2025 conference call. Just a reminder, today's call is being recorded.

Speaker Change: Not to go management included in the conference call will be Mimi Vaughn Board Chair, President and Chief Executive Officer, Sandra Harris, Senior Vice President Chief Financial Officer.

Speaker Change: Tom George Senior Vice President Principal accounting Officer, and Daryl Macquarie Senior director of P&I.

Speaker Change: I will now turn the call over to Darryl Macquarie Senior director of F. P&I. Please go ahead.

Good morning, everyone and thank you for joining us to discuss our third quarter fiscal 25 results.

On the call expect to make forward looking statements, reflecting our expectations as of today, but actual results could be different.

Speaker Change: <unk> refers you to this morning's earnings release, and the Companys SEC filings, including its most recent 10-K and 10-Q filings for some of the factors that could cause differences from the expectations reflected in the forward looking statements made today.

Speaker Change: Participants also expect to refer to certain adjusted financial measures during the call.

Speaker Change: All non-GAAP financial measures are reconciled to their GAAP counterparts in the attachments to this morning's press release.

And in schedules available on the company's website in the quarterly results section.

Speaker Change: We have also posted a presentation summarizing our results here as well.

Speaker Change: With me on the call today is Mimi Vaughn Board Chair, President and Chief Executive Officer.

Tom George Principal accounting officer.

Speaker Change: And Sandra Harris, Senior Vice President Finance, and Chief Financial Officer.

Speaker Change: Now I would like to turn the call over to Mimi.

Mimi Vaughn: Thank you Darryl good morning, everyone. Thank you for joining us I'd like to begin by welcoming Sondra, who joined Genesco as Chief Financial Officer in October with over 30 years of finance leadership experience, including 10 years at VF Corp, where she was responsible for driving.

Mimi Vaughn: Global business and financial strategies across the iconic lifestyle brands.

Mimi Vaughn: Experience with the App includes serving as Chief financial Officer for direct to consumer global supply chain and shared services, including information technology.

Mimi Vaughn: She is a terrific addition to our team as we drive our return to profitable growth, bringing invaluable expertise from numerous multichannel multi brand consumer businesses.

I also want to take a moment to thank Tom for his many contributions to genesco since stepping in as CFO in late 2020.

Tom joined our company at a pivotal time of tremendous change in the consumer environment, helping us successfully navigate both record highs and some very unique challenges.

Mimi Vaughn: After a 40 year career in finance, including 30 years as a public company CFO. We wish you all the best during your well deserved retirement.

Speaker Change: I'll start with a review of the key drivers of our third quarter performance and provide an update on our strategic initiatives to drive growth at journeys and elsewhere across our company.

Tom and Sandra will review, our financials in more detail and walk through our raised outlook, then we'll be happy to answer questions.

Speaker Change: But first we were pleased to deliver third quarter results that exceeded expectations, marking another quarter of year over year sales increases and a strong return to positive comps.

Our outperformance was driven by journeys as the initial phase of our strategic growth plan unfolds underscoring the outstanding execution of journeys near term initiatives and the resilience of this business even in the face of continued consumer headwinds.

Speaker Change: Journeys comparable sales for the third quarter, not only inflected positive, but were up double digits fueled by continued improvement in the product assortment and the visual reset of our stores among other actions.

Speaker Change: Congratulations to Andy Gray and the entire journeys team for the speed in which they've been able to enhance the consumer experience and deliver an excellent back to school and strong finish to the third quarter.

This performance more than offset modest comp declines for both schuh and Johnston <unk> Murphy.

Speaker Change: Allowing us to deliver total comp growth of 6%.

Speaker Change: Both store and digital comps were nicely positive with the digital business, a standout up mid teens with digital penetration, reaching over 24% of retail sales.

Speaker Change: Overall sales gross margins and expenses as a percentage of sales all exceeded our expectations in Q3, and our clean inventory exiting the quarter positions us well for the balance of the year.

Speaker Change: Ongoing cost reduction and store optimization efforts contributed to adjusted EPS as well, which was also meaningfully above our projection and up versus last year.

Speaker Change: If you add back the approximately 35 to 40.

Speaker Change: From the 50, <unk> week calendar shift, including the move of an important back to school week into the second quarter instead of the third quarter of this year.

Speaker Change: <unk> would have been up further highlighting the impact of positive comps driving profitable growth on the platform of reduced costs and lower share count we've been building.

Speaker Change: Our number one priority is to improve performance at journeys as.

Speaker Change: As we have in the past most recently coming out of Covid with Schuh and J N M. We have demonstrated our ability to evolve our businesses to meet shifts in consumer preferences and changes in purchasing behavior emerging stronger through challenging cycles.

Speaker Change: The consumer dynamic and changes over the last few years have required accelerated and unprecedented ongoing evolution on our part to successfully meet our customers' needs.

Speaker Change: We are excited to accomplish this with journeys.

Speaker Change: As a reminder, step one of our plan centered around efforts to inject the product assortment with more newness and storytelling and to deliver that to our consumers through enhanced store digital and social experiences.

Speaker Change: The double digit comps in Q3 demonstrates solid progress against that plan.

Speaker Change: The attorneys consumer has become more interested in a broader range of brands and more diversified in the styles they're wearing for.

Speaker Change: For the first time in several quarters, we saw a notable pickup in interest in footwear over back to school marked by growth in industry traffic this year there.

Speaker Change: This shift plays well into journeys proposition as the expert curator of styles across both casual and fashion athletic brands.

Speaker Change: Importantly, we're seeing strong consumer response across both categories reinforcing journeys unique position as the footwear destination for the style led team, particularly the teen girl.

Speaker Change: Journeys traffic consequently considerably outpace the growth in traffic in the industry.

Speaker Change: While sales at journeys have accelerated after a multi year positive sales runs traffic at Schuh and Johnston <unk> Murphy continues to trend lower than last year.

Speaker Change: <unk> performance is being hampered by the difficult macroeconomic environment in the U K, while in the U S softer demand for premium non athletic footwear is pressuring <unk> topline.

Speaker Change: On both sides of the Atlantic consumer behavior remains needs based and consumers remain very selective about what to buy.

Speaker Change: We continue to add newness and freshness into our assortments to satisfy shoppers who are looking for key footwear items and must have products and passing on everything else.

Speaker Change: As we entered the fourth quarter, we have been pleased with our performance to date and in our Black Friday Cyber Monday results in the midst of a heavily promotional retail environment.

Speaker Change: The arrival of more seasonable weather has encouraged sales of fall and winter merchandise.

While we diligently work to deliver a strong holiday and finish to the year building on these positive Q3 results. We're in the very early innings of returning journeys and the overall company to historical rates of sales and profitability.

Speaker Change: We're optimistic that these product changes and a sharper focus on the consumer.

Speaker Change: Along with initiatives around brand building and elevating the consumer experience will drive even greater improvement in fiscal 'twenty and beyond.

Speaker Change: And now for more color on our individual businesses in Q3, starting with journeys.

Speaker Change: After turning positive in July comps accelerated as back to school shopping got underway in earnest and remained consistently strong throughout the quarter.

Speaker Change: Journeys skilled merchant team and new merchant leadership took aggressive and quick action with the order book and our key brand partners at the start of the year to bring in the styles that would resonate during back to school.

Significant newness across a number of casual and athletic brands fueled strong full price selling including post labor day, even as the industry saw a pullback in demand when there wasn't as much reason to shop.

Speaker Change: Journeys customers transition nicely into buying must have styles in the fall winter assortment at the end of September into October during what is typically a non peak time before holiday driving sales gains for the quarter, which outpaced the market.

Speaker Change: With greater depth of the brands and styles teens want we are well positioned to continue to drive demand through the holiday season.

Speaker Change: Journeys stores with positive traffic and higher Asps in.

Speaker Change: Inflected positive and journeys digital business remained very healthy posting another quarter of double digit growth and even sharper acceleration than stores, resulting in digital representing 17% of total sales.

Speaker Change: This performance is reflective of our recent cycle of investment in digital including all access loyalty program incentives.

M campaigns, and Omnichannel delivery options targeted to entice shoppers to purchase online.

And moving to schuh comps.

Speaker Change: Comps improved versus the first half getting closer to positive territory, even as our footwear category continues to face market headwinds in the U K.

Speaker Change: While still challenge the sequential improvement was driven by better performance in stores as traffic and conversion picked up relative to earlier in the year.

Speaker Change: At the same time digital sales remained resilient and we're positive at over 40% of the business.

Speaker Change: The Schuh kids category remained a bright spot and delivered a solid back to school continuing its trend of outperformance as well.

Speaker Change: During Q3, U K consumers or motivated to buy only during key shopping periods and the market overall was more promotional driven to spur demand. We expect this choppiness to continue in the fourth quarter.

Speaker Change: Despite the challenging backdrop. According to Kantar, our shoe held its number 10 position in the U K footwear market versus last year remaining a key destination for the youth shopper.

Speaker Change: Looking ahead. The team is focused on a number of initiatives to improve performance like journeys schuh is leaning into the opportunity to better serve the female customer and further differentiate shoe to both consumers and global brand partners.

With that positioning shoe has achieved success elevating its access to several key athletic and casual brands, an important franchises for future coming seasons and is working on others.

Speaker Change: She was also building awareness and engagement with its new brand agency and marketing campaigns. This work also includes leveraging in connection with its CRM programs. The growing shoe club loyalty program, which now stands at almost 3 million members and benefits from greater member purchase frequency.

Now turning to our branded business, starting with Johnston <unk> Murphy.

Speaker Change: Like hue Jae <unk> comps improved over the first half as consumers responded favorably to new product launches and new product innovation and we Anniversaried last year's ERP implementation.

Speaker Change: Store traffic was down in Q3, both conversion and transaction size were up demonstrating positive customer reaction to the assortment.

Speaker Change: Despite an ongoing slowdown in men's non athletic premium footwear JM continues to make inroads driving growth and more casual footwear and non footwear categories like apparel and accessories, which now represent about half of direct to consumer sales.

Speaker Change: Our strategy of evolving <unk> into a more casual multi category lifestyle brand in response to the changing needs of the Jay and in consumer has produced significant sales growth over the past four years as the team works to re imagine and reposition the brand from its legacy dress shoe HERA.

Speaker Change: <unk>.

Looking ahead to the balance of the year, we expect and have seen an acceleration in sales of the fall winter assortment with items like outerwear as the weather has finally turned colder across the country.

Speaker Change: In addition, we're in a better inventory position in our stores for the holidays, including more depth in footwear outerwear and other items and with success Relaunching backpacks and other accessories.

Speaker Change: And looking further ahead, we have several initiatives underway to improve current trends and return to year over year growth.

Speaker Change: Most important of which are efforts to bring more distinctive product to the market built upon our unique brand style quality and design principles and to deliver more frequent year round freshness in our offering.

Speaker Change: This includes bringing back updated iconic styles for our 175 year brand anniversary next year.

Speaker Change: Coupled with efforts to increase brand awareness, we look forward to driving this renowned brand to new Heights.

Speaker Change: Wrapping up the branded discussion we continue to achieve very good success with the repositioning of Genesco brands group.

Efforts to simplify the licenses portfolio to emphasize key brands and channels means lower sales in the short term, but consider really more profit which was evident once again in Q3 results.

Now moving back to journeys in its strategic growth plan.

Speaker Change: Our broader plan centers on journeys unique positioning to address the underserved teen girl in the mall.

Speaker Change: While this customer is well served with fashion apparel, our in depth market research revealed journeys has an even greater opportunity to serve this consumer is fashion footwear needs.

To that end, we've been expanding our consumer segmentation and sharpening our brand positioning to reach a wider teen audience with a more intentional focus on the style led team with a sharp point on her with an assortment of even more premium product.

Speaker Change: This consumer continues to evolve and today's teens are interested in expressing themselves in different ways from one day to the next and footwear is a key enabler to this.

Speaker Change: At the same time, the marketplace is quite segmented among athletic casual and fashion with no concept that goes across all footwear categories in the mall for the style led team.

Speaker Change: This is the opportunity and no one is better positioned than journeys to win with this customer.

Speaker Change: We have built three strategic growth priorities around product brand and experience to fuel, our new positioning and engage and excite more customers in.

Speaker Change: In addition to bringing in a new president we have also augmented our talented journeys leadership team this year with highly experienced new chief product and marketing officers, who bring tremendous expertise.

Speaker Change: Starting with product and diversifying our footwear leadership, our focus here is on expanding our leadership positions across athletic canvas and casual footwear with both breadth and depth of key leading styles.

Speaker Change: Building more long term strategic partnerships with our best in class premium footwear brands and editing and focusing our non footwear business.

Speaker Change: Next is investing in our journeys brand. These efforts include creating a new brand purpose and platform to differentiate and be a positive inclusive connected force for teens and young adults increasing investment in brand marketing delivering journeys updated brand positioning and tone of voice.

Speaker Change: To drive awareness and consideration of the journeys brand through digital social and other media and ultimately building new footwear demand creation capabilities.

Speaker Change: And finally, elevating our consumer experience, we are introducing an updated store concept, which retains the journeys energy and DNA and in an environment designed for the style led team who shops across footwear brands and categories with 10 initial locations opened to date.

Speaker Change: Strengthening our brand positioning and elevating the consumer experience on journeys dot com to enhance the transactional approach we've been delivering and.

And lastly, evolving our all access membership program, where we've already signed up over 4 million members and a little over a year to provide a more personalized experience and increase long term customer value and retention.

Speaker Change: These actions will solidify journeys, leading market position for the longer term and we look forward to sharing more details of this plan with you going forward.

Speaker Change: In closing with our outlook, we're pleased with the upside we delivered in Q3 and the momentum we carried into Q4.

Speaker Change: For journeys, we're optimistic we're in a position to drive solid results over the remainder of the year while at the same time based on recent trends, we've adopted a more cautious view for schuh and Johnston <unk> Murphy.

Speaker Change: This all results in us modestly raising our view for the year.

Sandra will take you through the specifics.

Speaker Change: Before passing the call I'd like to thank our incredible people.

Speaker Change: Our unmatched ability to reinvent ourselves to evolve and grow over the years with a profound understanding of what our customer wants is our true competitive advantage and real cause for celebration with our 100th anniversary as a company this year.

Speaker Change: The work you've done has positioned us well for this busy holiday season, and I look forward to continued success as we finished strong in fiscal 'twenty five and build on this momentum to unlock the considerable growth and value in our company in fiscal 'twenty six and beyond.

Tom George: And with that I'll turn the call over to Tom.

Tom George: Thanks, Mimi we were pleased results for the quarter exceeded expectations getting back to positive comps at journeys provides us with great upside to drive earnings.

Tom George: Earnings per share meaningfully higher year over year, given the cost reductions and share repurchases.

Tom George: And overall leverage in our operating model.

Tom George: Turning to results.

Consolidated revenue for Q3 was up 3%.

Tom George: $596 million, which was better than we anticipated and significant given the calendar, which included the shift of a strong back to school week into Q2 last quarter.

Tom George: Shift negative negatively impacted sales by approximately $17 million.

Another 3%.

Tom George: In addition, the journeys stores, we closed over the last year.

Tom George: Drove a roughly 4% reduction in the size of our total fleet.

Tom George: <unk> improved overall productivity and have only a 1% impact on total sales.

We continue to drive our digital business, which grew to 24% of direct to consumer revenues.

Tom George: Total company comps were up 6% with stores up 4% and E comm up 15%.

Tom George: This was a major sequential acceleration from the negative 5%.

Tom George: Negative, 2% total comps, we reported in Q1 and Q2, respectively.

Tom George: Overall gross margin was down 30 basis points compared to last year by.

Tom George: By Division journeys gross margin was down 80 basis points.

Tom George: Primarily to product mix, because we're selling brands with lower initial margins with higher average selling prices.

Tom George: <unk> gross margin decreased 20 basis points.

<unk> gross margin was up 170 basis points.

Tom George: Due to improved initial margins lower markdowns and channel mix.

Tom George: Lastly, genesco brands gross margin was up 330 basis points due to improved initial margins.

Tom George: Moving down the P&L SG&A expense was 46, 1% of sales an improvement of 10 basis points compared to last year, the combination of our cost savings initiatives.

Tom George: Closure of unproductive stores.

Some improvement in other expenses offset the increased variable expenses to support our direct sales growth as well as additional selling salaries and marketing expense.

Tom George: Optimizing our store fleet to reduce occupancy cost and fixed expense levels in.

Tom George: In the store channel remains one of our key financial objectives.

Tom George: In Q3, we achieved a 4% reduction in straight line rent expense on 67 lease renewals across the company.

Tom George: With an average term of approximately three years.

Tom George: This brings our year to date renewals to 231 with an 8% reduction in straight line rent expense.

Tom George: Looking further at cost savings, we continue to gain traction on our plan.

Tom George: To reduce costs by $45 million to $50 million on an annualized basis by the end of fiscal 'twenty before reinvestment initially.

Tom George: The initiatives include lowering occupancy costs to improve store profitability as.

Tom George: As well as optimizing our inventory warehouse freight and logistics cost.

Tom George: And the other procurement efficiencies.

Tom George: Summary for the third quarter, we incurred a better than expected.

Tom George: <unk> operating income of $10 3 million compared to $11 million for Q3 last year.

Tom George: Keep in mind, the 50 <unk> week shift.

Negatively impacted Q3 operating income by approximately $5 million to $6 million or <unk> 35 to <unk> 40 per share.

Speaker Change: Turning now to capital allocation and the balance sheet.

Speaker Change: We ended the quarter in a net debt position of approximately $67 million with clean inventories.

Speaker Change: 1% from last year.

Speaker Change: We plan to build up our inventory levels, especially for journeys to drive Q4 sales and be well positioned to drive sales in the first half.

Speaker Change: Fiscal year 'twenty six.

Speaker Change: Looking at our financial flexibility, our strong balance sheet and free cash flow generation combined with our revolving line of credit.

Speaker Change: US with ample liquidity to pursue all of our strategic objectives.

Capital expenditures in Q3 were $13 million.

Speaker Change: The investments, primarily directed to retail stores, and our digital and omni channel initiatives.

Speaker Change: Our first cycle of investment in digital and Omni channel, where we are currently getting the benefits we are shifting the emphasis to investment and refreshing our store base.

Opened two stores and closed 14 stores.

Speaker Change: In the quarter with 1302 total stores.

Speaker Change: Year to date, we've closed 41 journeys stores.

We expect to close up to 10 more journeys stores. This year as part of our program to optimize our store fleet in order to best serve the shopping habits.

Speaker Change: Today's consumer.

Speaker Change: We expect these closures to eliminate approximately $14 million of annualized SG&A cost, which is incremental to the roughly $25 million of annualized savings we realized from the stores, we closed last year.

Speaker Change: And the $45 million to $50 million of run rate savings.

Speaker Change: We are targeting for this year.

Speaker Change: These actions to reshape our cost structure are designed to strengthen the economics of our store channel.

Speaker Change: And enable investment in our strategic initiatives to drive topline growth.

Lastly, during the quarter, we repurchased almost 18000 shares.

Speaker Change: $4 $4 million or an average cost of $24.

Speaker Change: And <unk> 50 per share we have $42 $3 billion remaining on our current authorization.

Speaker Change: Over the past six years, we have repurchased nearly 50% for outstanding shares.

Sondra: Let me now turn it over to Sondra for guidance.

Sondra: Thanks, Tom with third quarter results coming in ahead of expectations, we are raising our full year EPS guidance to 80 to $1.

Sondra: From our prior range of $62.

Sondra: We now expect higher sales in total driven by journeys, partially offset by a more cautious view for schuh and Johnston <unk> Murphy for the balance of the year.

Sondra: We also expect some additional expenses.

Sondra: For journeys the fourth quarter has started well thanks to the consumer focused investments we have made in our brand combined with the positive adjustments to the product assortment.

And we expect Q4 comps to be positive.

Sondra: Although not at the level, we saw in the third quarter.

Sondra: We now expect <unk> to be somewhat more muted than our prior expectations given the weak market demand in the U K and we expect the ongoing weakness in the premium men's footwear category to put more pressure on Johnston <unk> Murphy.

Sondra: Combining all of these factors, we now expect full year total sales to be flat to a decrease of 1% versus our prior expectations of down 1% to 2%.

Excluding the 50, <unk> week impact, which we estimated to be approximately $25 million of cells and a small negative effect on earnings per share. We expect sales to be flat to slightly up year over year with the back half accelerating meaningfully over the front half.

Sondra: By Division total year in sales compared to last year are expected to be a low single digit increase for journeys.

Sondra: For <unk>, we now expect sales to be relatively flat and for Johnston <unk> Murphy, we expect to be down mid single digits, including the impact from the Johnston <unk> Murphy store closings.

Shifting to gross margin, we do expect to be somewhat more promotional in some of our businesses in the fourth quarter, but had a pickup in gross margin in Q3.

Although we still expect gross margin to be impacted by the shift in consumer demand to lower margin athletic footwear, our cost savings initiatives should help offset this pressure.

Sondra: Therefore, we will still expect overall gross margin to be down 10 to 20 basis points versus last year.

Sondra: We now expect adjusted SG&A as a percentage of sales to be in a range of flat to 10 basis points of leverage compared to our prior guidance of flat to 20 basis points of leverage. This is largely the result of higher incentive compensation that was triggered by our stronger performance.

Sondra: Our guidance assumes no additional share repurchases, which results in a fiscal year 'twenty five average shares outstanding of approximately $11 million.

Sondra: And we expect the tax rate to be approximately 27%.

Sondra: To close we are streamlining our operations and adapting swiftly to the changing consumer demands.

Sondra: These strategic changes will create a more efficient company that better serves our customers enhances profitability and creates greater value for our shareholders.

Speaker Change: Operator, we are now ready to open the call for questions.

Speaker Change: Thank you at this time, we'll be conducting a question and answer session.

Speaker Change: If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.

You May press star two if you'd like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.

Speaker Change: Our first question comes from the line of mid to comments with Seaport Research. Please proceed with your question.

Yes, thanks for taking my questions I guess first off on <unk>.

Paul: Thank you Paul again.

Paul: For all the.

Paul: All the help you've provided over the years and Sandra well.

We look forward to working with you.

Speaker Change: As far as.

Speaker Change: Manny you talked about earlier.

And I'm curious I want to start with your Assortments.

Speaker Change: You've made a lot of progress there, but where is that relative to where you'd like it to be how much opportunity is there for better access better allocation changing still changing some of the.

The brand mix and like to what extent.

Speaker Change: Are the brands.

Speaker Change: King notice I'm looking at the strong back to school results.

Speaker Change: And how does that help you going forward in terms of improving your auctions and allocations.

Speaker Change: Mitch Thanks for that nice tribute to Tom and the welcome to Saundra and for your question and as far as that journey has changed in the assortment.

Speaker Change: We talked a lot about the fab.

Speaker Change: That consumers had gone through large cycle of purchasing coming out of the pandemic and really had their closets full and we're looking for newness in the assortment and really looking for innovation.

Speaker Change: And we went through a very long cycle as well of our customer wanting canvas product we call. It vulcanize product as well and had a lot of success with that and today, we see that our customer is much more diversified and what they are interested.

Speaker Change: And wearing theyre embracing teams are embracing more wearing occasions.

Speaker Change: Journeys has us well positioned to take advantage of this and so this means a greater number of brands for us the back to school success was not one or two brands. It was seven or eight brands really driving the business.

Speaker Change: There is.

Hey.

Speaker Change: Fashion shift away as I said from where we've been and consumers are moving into more seasonal assortments as well and so I would say that we have a strong merchant team, we bolstered that merchant team at journeys, bringing in <unk>, bringing Andy Gray, we are typically the number one.

Speaker Change: Or to.

Speaker Change: Partner for brands on the casual side and they helped us to increase our relationships on the athletic side in our teens want folks and so I would say that.

Speaker Change: Our brand partnerships are stronger getting stronger.

Speaker Change: Our brand is taking notice of our strong back to school results.

Speaker Change: Certainly hope so.

Speaker Change: It is not just <unk>.

Speaker Change: One action of saying, Hey, we'd like more allocation. It is the partnership that is a holistic approach to serving that teen customer, particularly that teen girl and our brands want access to that girl we have.

Speaker Change: Made a commitment to them to provide an excellent store environment, we have terrific people, who serve our customers within stores and.

Speaker Change: So we as we said we're in the early innings of where we are.

Speaker Change: Where are we believe we will go in terms of restoring the journeys brand to historically, the sales and levels of profitability and we look to build on.

Speaker Change: On where we are today.

Speaker Change: And then maybe on the stores.

Speaker Change: Really two parts to this question because youre youre closing some stores.

And then you also have this new.

Speaker Change: Store design, so first of all I'm curious to know.

<unk> closed stores and continue to close stores.

Speaker Change: What are you seeing in terms of our productivity.

Speaker Change: Stores that remain open and those markets, where stores were closed and it sounds like youre not seeing much of a.

Speaker Change: Sales in general a little bit.

Speaker Change: I would imagine that some of those <unk>.

Stores.

Speaker Change: We will see productivity lift when they are in a market where there might be other stores of yours closing. So maybe you can just going to kind of go through that and then also on the new store design. It sounds like you've had 10 stores open there I don't know if there are any.

Speaker Change: Early results that you can speak to but I guess more so could you talk about.

Speaker Change: What you see as being the rollout there and kind of the potential.

Speaker Change: For that longer term.

Mitch: Sure. So the way we're thinking about it Mitch is we're not necessarily calling at closing stores, where Hollywood optimizing our footprint and there've been lots of changes in terms of consumer shopping patterns as you know.

Mitch: And there is just really a need to serve customers differently. So we have some terrific store analytics that help us to really understand demographics and other patterns.

Mitch: And are able to make decisions about store closings based on that and so when we are closing stores and as you said they are in less productive places because of the shift of traffic patterns or the shift to different shopping venues, we've got more sophisticated capabilities to drive that traffic too.

Other stores that are nearby or online and we've got more sophisticated information about the consumer that lets us lets us do that and so we're really optimizing the store footprint in response to the changes that we've been seeing and as.

Speaker Change: As you said certainly.

Speaker Change: Productivity in these locations are less but our overall strategy is to drive productivity in our best locations to make our best locations, even more productive than they are.

Speaker Change: So that is partially the assortment and some of what we've been doing with the assortment, but it also necessitates really a visible change and we are really excited about this element of the plan with our new positioning and with a product assortment, we need a more aspirational environment that showcases this more premium product.

Speaker Change: It's designed for a style led team who shops across footwear brands and categories. We can showcase the brands. It's a cleaner environment, we'd love you to see it we've got it set up in our showroom here in a couple of stores here in Nashville, I think we close the store to you as maybe in Utah.

Speaker Change: But it is a cleaner environment its a more neutral aesthetic.

Can create brand statements as I said, but it retains the journeys energy in its DNA and the attitude and and personalization for the location. So it's a really open shopping environment and we have had its early days, we opened our first store in October.

Speaker Change: And so we've been quite pleased with the results that we have seen and are going to be tracking this carefully.

Speaker Change: And just again to follow up can you say, what the rollout plan as you know as you go into next year.

Speaker Change: Yes, sure so tend to open so far it'll be about <unk> 15 for the year.

Speaker Change: We have at least that number designated for next year, but we do want to see some results Mitch.

And we can pull forward.

Speaker Change: In fact, we have been really working with our real estate with working with our landlord partners, who are quite excited about this as well and so we can pull forward and we typically are doing this with lease renewal, but if the results really.

Speaker Change: Warranty, which we anticipate.

Speaker Change: They very well could.

Speaker Change: We can pull forward some of these remodels and so we do we are planning on a wave of growth for this that these stores will create comps in excess of the comps that we're driving with our other initiatives. So 15, so far at least that many for next year and the open opportune.

Speaker Change: Does it pull forward.

Speaker Change: Okay, and then maybe just a couple a couple of things one.

Speaker Change: In terms of.

Speaker Change: Journeys comp, you've obviously bumped up the comp guide for the full year I think for the fourth.

Fourth quarter Saundra, you mentioned positive but.

Speaker Change: But not as strong as Q.

Speaker Change: A pretty wide range I'm wondering if.

Speaker Change: You get a little bit more specific are you looking low single mid single high single.

Speaker Change: For journeys in the quarter and also.

Speaker Change: With.

Speaker Change: Where's the business quarter to date, if you can say and is it sort of quarter to date.

Speaker Change: In line with what Youre thinking for the quarter as a whole and then I guess I have one last one.

Speaker Change: Great.

Speaker Change: So in terms of earnings Com.

Speaker Change: Absolutely journeys is an outlier in the market I think as you've seen others report.

Over the.

Speaker Change: The earnings cycle.

Speaker Change: Most had a good back to school, but we anticipated and most people saw that in the end of September and October that and during non peak periods. The consumers' demonstrated that they're just sitting it out and waiting until there is a reason to buy and.

Speaker Change: And we did not see that in journeys, we saw rolling right out of back to school into into winter.

Speaker Change: Our consumer started buying the winter assortment and the fall assortment and really didn't Miss a beat and so we.

Speaker Change: Our positive for Q4 as Saundra said not at the level I mean journeys had an 11% comp not at the level that we have.

Speaker Change: Half that we saw in Q3.

Because we don't know whether or not there was a pull forward of the winter purchasing alright that is I think that's the thing to really focus on and we are.

Speaker Change: <unk>.

Whereas the business quarter to date, I'll talk a little bit about black Friday in November.

Speaker Change: The calendar offsets I just described to you we're spending a lot of time looking at that but I.

Speaker Change: We are comparable for Black Friday in November and we're pleased with the results.

Speaker Change: We saw that journeys was not promotional the rest of footwear, particularly athletic footwear was quite promotional the strength of our assortment carried the business.

And we did not need to match the promotional activity, we had a lot of full price selling and so we're well positioned in inventory for the fourth quarter and we are going to drive the business to the.

For the full extent that we can.

Speaker Change: And then I guess last question maybe.

Speaker Change: Because one of your priorities for journeys you talked about.

Speaker Change: You talked about creating.

Speaker Change: Some new some new demand creation opportunities. So I was just hoping you could elaborate on that is that are you looking to do.

To be more digital.

Speaker Change: Advertising are you looking to apply.

Speaker Change: Analytics to these 4 million loyalty members would be more targeted in the market and what exactly are you seeing new demand creation opportunities.

Speaker Change: What might those be.

Speaker Change: Sure. So it is all of those things that you talked about and more.

Speaker Change: Have been driving our digital business as you saw we've more than doubled our digital business since the pandemic, but when and we've also put in place. This loyalty club and we've been seeing really positive things and loyalty across all of our businesses and the ability to serve our customer even <unk>.

Speaker Change: Because we know who they are is something that is at our disposal right now between loyalty and CRM, but in terms of creating demand. It really is creating the brand brand purpose around journeys articulating that to the consumer in a better way.

Speaker Change: Having journeys be even more top of mind as far as the decision for teens to shop part of our strategy and this isn't just bringing journeys back to where it was this is takes earnings to new levels.

Speaker Change: And we talked about widening the aperture more teens appealing to a broader group of teens, who may not consider journeys today were surprised at the opportunity for awareness, we think that all teens now about journeys, but we know there is an opportunity to build the brand.

Speaker Change: Awareness and so we've put in a new head of marketing she's terrific. She came from Levi's really very well versed in the teen consumer and we're working hard on increasing our social presence on platforms like Tictoc is a very important one we've got exciting things in store here.

Speaker Change: Of really being able to articulate.

Speaker Change: Brand.

Speaker Change: Positioning across store across online we have a new create creative agency onboard to help with that and we're just going to increase the investment in brand marketing and <unk>.

Speaker Change: And talk about that updated positioning and so it's all of those things thats, increasing our presence increasing our marketing dollars, reaching out in stores, reaching out on social reaching out on digital.

Speaker Change: Great. Thanks, Good luck.

Mitch: Alright, Thanks Mitch.

Speaker Change: Thank you. Our next question comes from the line of Montero Marino teeth with Jefferies. Please proceed with your question.

Speaker Change: Hello, and thank you for taking my question I guess I wanted to touch on journeys, but last quarter you discussed how journey had improved assortment.

Speaker Change: A lot today.

Speaker Change: Holiday shifts.

Speaker Change: Thank you.

Speaker Change: Mike.

Speaker Change: Hum.

Speaker Change: Or anything else you want to add and how we should think about the rest of the holiday season with the fewer shopping days and then you called out strength in food.

Speaker Change: We're in hardware.

Speaker Change: Maybe wasn't working as well.

Speaker Change: However, a few handful of juries underperforming pockets perform a little better.

Speaker Change: Sure. So as I said, we are quite pleased with the assortment that we have in place the assortment between back to school and holiday does shifts there is more opportunity to be able to sell whats typically.

Speaker Change: Known as more.

Speaker Change: Old whether product, but having said that we have observed that our teen customer is pursuing just really season less fashion. They are wearing sandals clogs.

Speaker Change: The winter, we have a great assortment of clogs, which is driving our business.

Speaker Change: We expect during holiday, we brought in significantly more product.

Speaker Change: Lined with the brands that we have.

Speaker Change: Believe will drive our business specific specific items. The footwear market right. Now is very focused on must have product. We work on a model of scarce allocated product and we create the demand in partnership with our brands to say that you need to buy it now because if you don't.

It's going to be sold out and you can't find what we sell everywhere and the allocation model means that there is going to be more demand than there is supply in the market and so we believe we're well assorted in what the consumer is looking for thanks to the changes in our assortment and that we have those key items.

Speaker Change: That will support the demand for the holiday in terms of.

Strength in footwear.

Speaker Change: I would say that we've talked a bit about boots and boots are typically something that sell this time of year. The last at least couple of years.

Speaker Change: The demand on the part of the consumer for Boots has not been as strong. So I'll talk about that for a minute and just say that we are not necessarily planning boots up.

Speaker Change: But.

We have seen and we're leaning into the trend for shorter or many boots Lauder moccasins are out there and.

Speaker Change: And as we go into the season this year, whether the category.

Speaker Change: It's going to be very focused on specific items and specific.

Speaker Change: Pacific brands.

Speaker Change: And then during the quarter you mentioned there was a more promotional in the operating environment and then also product mix.

A lower gross margin, but just any early reason, how we should think about margins for next year.

Speaker Change: Yeah. So we have talked about the promotional environment and then we've talked about product mix. So I'm going to take both of those separately. So we are not more promotional in Germany. Its in fact were significantly less promotional we were significantly less promotional in the third quarter than we were last year.

Speaker Change: And so it's not it's not more markdowns are more promotional activity that is.

Speaker Change: Affecting our gross margin it really is mix and what we are what is affecting our mix is that we're moving from canvas in baltimore's product, which tends to be at a higher initial margin and selling a broader assortment of both.

Speaker Change: Casual and athletic brands that start with lower initial margins, but the good news on the positive news is that it's higher average selling prices and so we are we are.

Speaker Change: <unk> able to really make that that formula work and so in terms of gross margin for next year, we will anniversary some of that in the back part of the year, but we may see some puts and takes on gross margin in the front part of the year as we shift our assortment we have been anniversarying.

Speaker Change: The canvas sales in those margins for some point some period of time, and so that should normalize over time.

Speaker Change: Okay, perfect and then just.

Speaker Change: One more for me, we discussed so E comm performed well across the board and then also performed well at journeys.

Yeah.

Speaker Change: That's good to hear.

Speaker Change: Anything else to add about how the opportunity.

Speaker Change: For journey to E com and anything else you want to add too.

Speaker Change: Youre thinking about your E com going forward.

Speaker Change: Sure. So our journey the team drove really tremendous E comm performance over this last quarter and certainly it was good product, but it's also lots of the actions that they have been taking and we have gone through an investment cycle in digital and in technology over the last several years.

Speaker Change: Ears with everything from improving our real time inventory to new order management systems to new front end.

<unk>.

Speaker Change: New new front and upgrading as well and so when we think about the opportunity for E. Comm for journeys Schuh is really very much the same business over in the U K and while the UK market is more advanced for digital our shoe penetration is at 40%.

<unk>, we talked today about how journeys is less than 20% and so perhaps we don't get to 40 with journeys, but we still think that there is quite a lot more opportunity to be able to drive digital sales and it is important and important part of our.

Speaker Change: Plan going forward is really being able to elevate the consumer experience online to use our CRM and our data analytics capabilities that we have been working very hard to build and we believe that's going to drive the next wave of growth for us in E com.

Speaker Change: Thank you.

Speaker Change: Thank you.

Speaker Change #100: Thank you. Our next question is a follow up from the line of mid to come in with Seaport Research. Please proceed with your question.

Speaker Change #101: Yes, I guess I got a couple of follow ups.

Speaker Change #101: Maybe on journeys.

Speaker Change #101: I remember correctly last year in the fourth quarter.

Speaker Change #101: You talked about how.

Speaker Change #101: <unk> had.

It was very key item driven.

Speaker Change #101: You just didn't have enough of beds.

Speaker Change #101: Shortly.

Speaker Change #101: At journeys.

Speaker Change #101: Able to do a good job if you ran out of things to kind of steer the consumer towards other things.

Speaker Change #101: That wasn't happening a year ago I'm curious as you look at the business today and when you think about <unk>, Germany is.

Speaker Change #102: Is it really that you just now.

Speaker Change #101: A lot more of these key items and youre not assuming that.

Speaker Change #101: As you potentially run out because youre going to have a better ability to consumers to other things. This year is that does that.

Speaker Change #103: Where do you think about it.

Speaker Change #103: So unless you have a good memory and I would say that's exactly right that last year, we talked a lot about how it was a key item driven quarter and in fact, it remains a key item driven business.

For the large part for this year and we expect a quite key item driven business for for this fourth quarter and the customer isn't isn't suitable we used to be that if you didn't have what they wanted to you could get them to buy something else, but in fact, the customer wants what they want a really positive.

Speaker Change #103: Aspect of this for US is that they are stretching up to much higher average prices for us and that we are able to serve that customer and so for this year. What's different is that let's say, what's the same is that they'll continue to be key item focus whats different is that we have.

Speaker Change #103: Greater depth in some of the key items that are there.

We are excited about but there is also more breadth and key items across more brands as I said it wasn't one or two brands that drove our business, but it was seven or eight brands that drove our business and so.

Speaker Change #103: Brad.

Speaker Change #104: In depth will.

We anticipate being a better formula for for this year.

Speaker Change #105: And then I guess lastly, you mentioned in your prepared remarks on Hu.

Speaker Change #105: That going forward you are hoping to have better access.

Speaker Change #105: Sure.

Speaker Change #105: The key brands I think you said getting better access for future seasons.

Speaker Change #106: Just again, if you kind of walk us through that is that I mean.

Speaker Change #107: Are you going to be leaning on like the new journeys team to help drive that or is it all just about the <unk>.

Speaker Change #107: Team kind of kind of leverage off of one another.

And when might this happen is this.

Speaker Change #107: Do you expect improvement as early as spring or that's going to be more in the back half of next year.

Speaker Change #108: So much the journeys in the shoe business are very much.

Speaker Change #108: Same business on both sides of the Atlantic and the top brands eight of the top 10 brands overlap with journeys and with Schuh and so there is really great synergy.

Across our brand partnerships with with.

Speaker Change #108: With these businesses and so there's a lot of good back and forth of sharing knowledge and sharing trends and sharing experiences across the teams and so we certainly lean on each other for exclusives, we carry some of the same exclusives and journeys that we carry into and vice versa.

Speaker Change #108: In terms of the shoe business that business has performed remarkably well post pandemic in the face of some pretty big headwinds the consumer environment has been worse than the U S and inflation was worse.

Speaker Change #108: <unk>.

Speaker Change #108: There is a lot of the <unk>.

Consumer confidence hasn't been good and she has been able to drive and build market share. We've moved up three places and market share with some of the same.

Speaker Change #108: Aspects of the playbook that we have rolled out for journeys and schuh has benefited from better access and has benefited from the positioning and the marketing and the brand purpose pillars that we have have rolled out it is a never ending quest for access to brands what brands really like is there ability to showcase.

Their brands in a physical format.

Speaker Change #108: Journeys and schuh allow that to happen they like sitting and testing the reaction of the consumer when they are sitting on our shelves up against other brands and we talk over the longer term about about sharing customer information, we have and about how we are going to increase the business that we're doing with <unk>.

Speaker Change #108: Customers that our brands are very interested in particularly that teen girl and so we've got line of sight into access to some better product for sure.

Speaker Change #108: We have to have access to some brands that are coming in in spring, we will keep working at it and we do expect to see some improvement in this business because of the access but the consumer headwinds will continue to be a challenge.

Speaker Change #109: Thank you, ladies and gentlemen that concludes our question and answer session I'll turn the floor back to Mr. <unk> for any final comments.

Speaker Change #110: Thank you for joining us today, we look forward to speaking with you all when we report our year end results and and holiday performance.

Speaker Change #110: Have a great holiday.

Speaker Change #111: Thank you. This concludes today's conference call you may disconnect. Your lines at this time. Thank you for your participation.