Q4 2025 Genesco Inc Earnings Call
Good day, everyone and welcome to the Genesco fourth quarter fiscal 2025 conference call.
Just a reminder, today's call is being recorded.
Macquarie: I'll now turn the call over to down Macquarie Senior director of F. P. N. A please go ahead sir.
Speaker Change: Good morning, everyone and thank you for joining us to discuss our fourth quarter fiscal 'twenty five result.
Speaker Change: Participants on the call expect to make forward looking statements, reflecting our expectations as of today, but actual results could be different.
Speaker Change: Historically as you to this morning's earnings release, and the company's SEC filings, including its most recent 10-K and 10-Q filings.
Speaker Change: 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 all.
Speaker Change: All non-GAAP financial measures are reconciled to their GAAP counterparts in the attachments to this morning's press release.
Speaker Change: And in schedules available on the company's website in the quarterly results section we.
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.
Sandra Harris: And Sandra Harris, Senior Vice President Finance, and Chief Financial Officer.
Speaker Change: Now I'd like to turn the call over to me.
Speaker Change: Thanks, Darryl and good morning, everyone and thank you for joining us.
Speaker Change: We were pleased to deliver a very strong finish to the year highlighted by revenue and gross margins that exceeded our expectations and operating profit at the high end of our forecast.
Speaker Change: Our performance was driven by journey as the initial phase of our strategic plan to accelerate growth continued to gain traction and journeys performance far outpaced the overall market.
Speaker Change: These results underscore the team's outstanding execution of our near term initiatives and the strong consumer positioning and resilience of the journeys business.
Speaker Change: On the whole the consumer environment remains choppy consumers continue to show a willingness to shop when Theres a reason like we saw during the holidays and retreat when there's not.
Speaker Change: And they remain quite selective.
Speaker Change: In response, we continue to innovate and add freshness to our assortment to satisfy shoppers who are looking for a must have product and a reason to buy something new and passing on everything else.
Speaker Change: We've taken major actions to evolve in response to the substantial changes in consumer shopping behavior. We've also demonstrated a strong track record of successfully evolving each of our businesses emerging even stronger when confronted with economic and consumer disruption.
Speaker Change: The fourth quarter as evidence of this with comparable sales, increasing 10% with both stores up mid single digits and digital up high teens.
Speaker Change: Journeys comps accelerating and increasing double digits for the second consecutive quarter and comp trends at schuh and J N N improving sequentially.
Speaker Change: Gross margins, expanding 60 basis points, driven by strong full price selling.
Speaker Change: Operating profit increasing 24%, even with the shifts are an important week out of the quarter and adjusted EPS of $3 26, compared to last year's $2 59.
Speaker Change: So Andre will walk through our year over year comparisons in more detail, but I want to remind everyone that Q4 last year had an extra week due to the 50 <unk> week in the retail calendar.
Speaker Change: Adjusting for this extra week the shift of this high volume week out of the fourth quarter into the third this year total sales would have been up 7% versus the 1% we reported.
In terms of the full year, it's incredibly encouraging to look back and see we accomplish priorities we outlined at the start of fiscal 'twenty five and then our work led to improved results as the year progressed.
Speaker Change: For fiscal 'twenty, five comparable sales returned to positive territory rising 3%.
Speaker Change: Total sales were at the high end of our guidance range, even as we closed more stores than initially planned.
Speaker Change: And EPS came in at the higher end of our range and was up meaningfully versus fiscal 'twenty four.
Speaker Change: Journeys turnaround with our number one priority as we started the year.
Speaker Change: Like the fourth quarter, our annual performance was led by journeys along with strength in digital following a multiyear investment cycle in this channel and meaningful progress against several growth initiatives.
Speaker Change: Some important highlights for the year include we grew our digital business by double digits, expanding our digital penetration to 25% effectively doubling the size of this profitable channel over the last five years to over a half a billion dollars.
Speaker Change: We significantly grew membership in our loyalty programs to achieve the important milestone of over 10 million members, allowing us to hook, our data analytics and CRM programs into this first party data to drive repeat purchases and increased customer value going forward.
Speaker Change: We further leveraged the interaction between stores and online accelerating buy online pickup in store since implementing it a year ago to a peak of almost 20% of journeys online sales in December.
Speaker Change: We positioned the business for better productivity and profitability with 64 journeys store closures as we reshape our footprint to align with the shopping patterns of today's consumer.
Speaker Change: And we achieved our targeted run rate of annualized cost savings in connection with the work over the last two years realigning our cost base.
Speaker Change: We're really proud of the strides we have made driving improvements in the business. We still have a lot of work to do to recapture the operating profit we gave back over the past couple of years, but fiscal 'twenty five was a step in the right direction.
Speaker Change: Now for more color on our individual businesses, starting with journeys fiscal 'twenty five was the tale of two halves our focus in the first half was on the initial phase of journey and strategic growth plan.
Speaker Change: We on boarded a new president Andy Gray and a new chief product officer at the beginning of the year, who collectively brought strong merchant background excellent vendor relationships and expertise in brand building and product innovation, adding to the strong team in place.
Speaker Change: This phase centered on injecting the product assortment with more newness excitement and storytelling to drive an inflection in journeys comps.
Speaker Change: The team did an amazing job quickly, adding significant newness across several casual and athletic brands.
Speaker Change: Our key brand partners very enthusiastic about journeys unique team customer proposition stepped up with tremendous support of our strategic direction to better serve this customer with a spotlight on the team girl through elevated assortments and depth.
Fueled by improvement in the product offering and the visual reset of our stores among other actions comps improved sequentially from Q1 to Q2 turning positive in July.
Speaker Change: The plan for the second half was to build on this strong product momentum coupled with increasing investments in the journeys brand and elevating the customer experience to deliver improved results during the important back to school and holiday seasons.
Speaker Change: We added an exceptional marketing leader as the new Chief marketing officer at journeys at this time to further augment our leadership.
Speaker Change: The team worked hard in response to the top line softness to manage expenses despite wage pressure in store deleverage, but it wasn't enough to offset the lower store sales and gross margin pressures and profitability took a step backwards in fiscal 'twenty five.
Speaker Change: Despite the challenging backdrop. According to Kantar shoe maintained the number 10 position overall in the U K footwear market picking up share and moving up to places and ranking in the youth market, becoming more important as a key destination for this youth shopper for casual and athletic footwear.
Speaker Change: With the promotional activity shoes inventory is also in a clean position as we start the new year.
Now turning to our branded business, starting with Johnston <unk> Murphy similar tissue after years of growth and strong comps in two consecutive years of record sales JM faced headwinds this past year.
Speaker Change: Earlier records resulted from the team's success at re imagining J N N from its heritage as a dress shoe brand to a more comfortable more casual lifestyle brand with product completely redefined for today's more casual dressing.
Speaker Change: This year, however, overall demand in the market for men's non athletic premium footwear slowed at a high single digit pace.
Speaker Change: Despite the slowdown <unk> continues to make inroads with more casual footwear and in apparel and accessories like outerwear and leather goods, which now represent about half of the direct to consumer sales.
Speaker Change: Like our other businesses JM sales trends improved in the second half versus the first with flat comps in Q4, representing the best quarterly performance of the year.
New product introductions performed very well during the holiday season, selling through at full price and driving transaction value in gross margins higher year over year.
Speaker Change: This helped offset lower traffic levels across all channels to deliver higher operating profit in Q4, despite the decline in sales and operating profit declines earlier in the year.
Speaker Change: Wrapping up the branded discussion we achieved notable 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 considerably more profit, which was the case in both our Q4 and full year results.
Speaker Change: Genesco brands group was a significant contributor to our performance this year and I'd like to congratulate and thank Rick Higgins and the <unk> team.
Speaker Change: Now turning to our outlook for fiscal 'twenty six we are pleased with our start to the year and although we are navigating a very fluid external environment, we plan to build on the comp and earnings momentum. We achieved this past year and in general shipped to a cycle of store improvement and investment for growth and higher productivity.
Speaker Change: <unk>.
Speaker Change: We expect positive comps overall with higher comps in the first half as we anniversary journeys negative compares with total sales growth being offset to some extent by continued store footprint optimization and foreign exchange pressure.
Speaker Change: Like this year, we expect our improvement to come from better overall productivity, especially in the higher volume back half when we can more meaningfully impact the bottom line, even with lower topline growth.
Speaker Change: All of this starts and ends with our amazing and talented people.
Speaker Change: Our unmatched ability to reinvent ourselves evolve and grow over the years with a deep understanding of what our customer wants is our true competitive advantage and real cause for celebration as we bring our 100th anniversary year as a company to a close.
Speaker Change: Before passing the call I'd like to thank you all for your tremendous efforts and dedication, which paves the way for further exciting growth and progress ahead.
Speaker Change: Sandra will now cover the financial results for the fourth quarter and details of our outlook for the coming year, after which I'll provide more specifics on the key initiatives that will drive our business forward.
Speaker Change: Thanks Amy.
Speaker Change: Overall for the quarter, we grew revenue, including comps up double digits improved our gross margin leverage SG&A and delivered adjusted EPS of $3 26.
Speaker Change: 67 higher than last year finished.
Speaker Change: Finishing the year at the higher end of our guidance range and achieving consensus for the full year adjusted EPS of <unk> 94 cents.
Speaker Change: Revenue of $746 million was up approximately 1% with one less week of sales in the current quarter and fewer stores.
Speaker Change: The increase in revenue was attributable to total company comps up 10% with stores up 6% and direct comps up 18% with all measure showing sequential quarterly improvement throughout the year.
Speaker Change: All of the businesses delivered improved comps in the quarter led by journeys up 14%.
Speaker Change: Jane M, even with traffic shortfalls had flat comps and schuh comps were up 2% driven by E Commerce and promotions.
Speaker Change: The positive contribution from comps were partially offset by lower revenue due to closed stores and the impact of the 50 <unk> week shift.
Speaker Change: For the year, the 50, <unk> week negatively impacted sales by $25 million, whereas the impact on the fourth quarter was approximately $15 million higher due to the shift of key retail weeks between the quarters.
Speaker Change: Overall gross margin improved 60 basis points compared to last year.
Speaker Change: Journeys gross margin was higher by 60 basis points on fewer markdowns.
Speaker Change: Janet <unk> improved by 90 basis points on strong full price selling at better cost.
Speaker Change: Genesco brands group delivered higher gross profit dollars on lower sales and improved gross margin.
Speaker Change: The continued promotional environment in the U K resulted in 170 basis points of lower gross margin than our shoe business.
Speaker Change: Moving down the P&L SG&A expense was 45% of cells 60 basis points better than the prior year.
Speaker Change: The improvement was from better occupancy cost and various cost savings initiatives that were partially offset by increased marketing investment to drive sales as well as from the rebuilding of our bonus expense.
Speaker Change: We continued our store optimization efforts ending the quarter was 63 net fewer stores versus a year ago.
Speaker Change: Which was an increase over the 46 that we had previously anticipated.
Speaker Change: The closures overall represented 6% of the fleet, 5% of the square footage, but only 2% of cells.
Speaker Change: And closing these stores was accretive to operating income.
Speaker Change: For many of these stores. We have also seen positive sales transfer rates that have helped offset any operating income loss impact.
Speaker Change: For the 16, new four point as journeys Remodels open since we started the program in October we've seen well above average performance in comp traffic conversion and transaction size.
Speaker Change: We will continue to optimize the fleet to better support the consumers preference to shop, both in store and online and to enhance and improve the in store experience across our fleet.
Speaker Change: In addition to the four wall savings related to right sizing. The fleet, we have achieve the higher end of our target run rate range of $45 million to $50 million of total expense savings before reinvestment through the cost reduction program that began in fiscal 'twenty four.
Speaker Change: The savings were from reduced rent optimizing cost and warehouse freight and logistics and labor and other procurement efficiencies.
Speaker Change: Our strong performance throughout the fourth quarter resulted in adjusted operating income of $47 9 million compared to $38 5 million.
Speaker Change: Fourth quarter last year.
Speaker Change: This all resulted in adjusted diluted earnings per share of $3.26 for the quarter versus $2 59 last year.
Speaker Change: Turning now to capital allocation and the balance sheet.
Speaker Change: We generated approximately $103 million of free cash flow in the fourth quarter ending the year in a positive net cash position.
Speaker Change: We ended the year with clean inventories up 12% from last year as we changed distribution models and our Genesco brands group that resulted in overall cost savings and as we rebuilt inventories and position journeys to have more of the key items that consumers are seeking a strategy.
Speaker Change: That paid off in the fourth quarter.
Speaker Change: Our strong cash flow balance sheet and liquidity under our revolving line of credit provides the financial capacity to support all of our strategic efforts.
Speaker Change: Capital investments in the fourth quarter were $14 million, primarily directed to retail stores and our digital and omni channel initiatives.
Speaker Change: We opened four stores in the quarter and closed 28.
Speaker Change: Ending with 1278 total stores.
Speaker Change: Lastly, we didn't repurchase any shares during the quarter, but brought back 3% over the year and our current authorization remains at $42 million.
Speaker Change: Over the past six years, we've repurchased almost 50% of our outstanding shares.
Speaker Change: Now turning to guidance.
Speaker Change: We are excited about our momentum in the back half of fiscal 'twenty, five and look forward to continuing to build upon that in fiscal 'twenty six as we transition during this year towards investing for growth with a main focus on journeys.
Speaker Change: While reducing cost will continue to be important as we rebuild operating income we must drive the topline to reverse the deleverage on our largely fixed expense base in recent years.
Speaker Change: In this transition year the bottom line grows more than the top line as store optimization and closures offset positive comps.
Speaker Change: We expect overall comp sales for fiscal 2026 to be up 2% to 4% driven by journeys with total comps higher than the front half of the year as journeys anniversaries negative comps last year.
Speaker Change: And we are more conservative about comps in our other businesses.
Speaker Change: This comp growth is offset by roughly $30 million from the impact of net store closures and approximately $14 million from a weaker pound sterling leading to total sales growth of flat to up 1%.
Speaker Change: We do expect first quarter comps to be at the higher end of our annual range due to the easier compares to last year.
Speaker Change: By Division.
Speaker Change: Total year sales compared to last year are expected to be a low single digit increase for journeys.
Speaker Change: For <unk>, we expect slightly positive comps, but sales to be down low single digits, largely as a result of the FX headwinds.
Speaker Change: For Johnston <unk> Murphy, we expect total sales to be up low single digits and for Genesco brands, we expect sales to be down low single digits as we manage through the expiration of certain licenses.
Speaker Change: For gross margin, we expect the year to be down 20 to 30 basis points.
Speaker Change: This is driven by lower margins at Genesco brands as we clear inventory related to the exit of licenses.
Speaker Change: Product mix at journeys and channel mix at Johnston <unk> Murphy Paul.
Speaker Change: Partially offset by improvement at shoe after a year of heightened promotional activity.
Speaker Change: We do expect more pressure on gross margins in the first quarter.
Speaker Change: Almost double as compared to the remainder of the year largely due to product mix shift at journeys.
Speaker Change: With regard to tariffs.
Speaker Change: We estimate that only about 15% or less of our fiscal 'twenty six cost of goods sold are exposed to China and our gross margin outlook include and incorporates the higher tariff that are currently in place for China and elsewhere.
Speaker Change: We expect SG&A expenses as a percent of sales to leverage 50 to 70 basis points, which is largely driven by our store fleet optimization and cost saving efforts over the past two years.
Speaker Change: Partially offset by the operational investments to grow our businesses.
Speaker Change: We expect a similar trend in the first quarter.
Speaker Change: Overall, we expect higher year over year sales growth in the first half with less growth and profitability.
Speaker Change: As leverage in SG&A is not enough to offset the gross margin pressures.
Speaker Change: As we enter the higher sales volume back half of the year, we expect that year over year profitability accelerates from better productivity.
Speaker Change: Lower occupancy and operating expenses associated with the fleet optimization and the anniversary of the incentive comp.
Speaker Change: This results in a fiscal year earnings per share range of $1 30 to $1 70, with only a few cents of EPS improvement in the first half peer with more upside in the back half primarily in the fourth quarter.
Speaker Change: We expect total capital spend of between 50 and $65 million led by investments in store Remodels to fuel journeys growth of which we are planning approximately 70, remodels or 7% of the journeys fleet.
Speaker Change: The plan also includes capital to invest in new stores and Remodels for Johnston <unk> Murphy as we see market conditions improve.
Speaker Change: Finally, we will continue to invest in technology to enhance our customer experience and drive sales growth, particularly in our digital channels.
Speaker Change: Our guidance assumes no additional share repurchases, resulting in a fiscal 'twenty six average share count of approximately $11 3 million and.
Speaker Change: And we expect the tax rate to be approximately 29%.
Speaker Change: The tax rate reflects higher volatility associated with the valuation allowance for deferred tax assets, which are contingent upon operating earnings in our various regions.
Speaker Change: In closing as we look to fiscal 'twenty six we will continue to reshape each of our businesses and invest in the topline to drive overall leverage as we look to rebuild the company to historical profitability levels and further unlock value for our shareholders.
Speaker Change: I will now turn it back over to me. Thanks.
Speaker Change: Thanks Sondra.
Speaker Change: <unk> to our footwear focused company strategy, our five strategic pillars to drive growth and meet the evolving needs of our consumers and to improve our cost structure in response to the dynamic changes in our industry.
Speaker Change: These pillars across both our retail and branded platforms or accelerate digital to grow direct to consumer.
Speaker Change: <unk> is the relationship between physical and digital deepen consumer insights to strengthen customer relationships and brand equity intensified product innovation and trend insight and reshape the cost base to reinvest for future growth.
Speaker Change: We're also looking forward to making major advances in our talent initiatives accelerated by the recent edition of our new Chief Human Resources Officer.
Speaker Change: We have in the past out of the six pillars pursue synergistic acquisitions.
We believe this is an important pillar longer term for now we're intensely focused on driving profitability and growth in our current portfolio.
While these pillars form our overall company strategy and I highlighted in my opening comments progress we have made against them. Each business has its own important slate of initiatives for fiscal 'twenty, six and I'll go into more depth on the journey strategic growth plan.
Speaker Change: The initial phase I've talked about this past year was to quickly inject the assortment with more newness and storytelling and expand our leadership position across athletic canvas and casual categories.
Speaker Change: The next phases execute a robust plan to serve a larger addressable market of teams.
Speaker Change: <unk> journeys brand positioning and offer an assortment of even more premium product.
Speaker Change: This brought our plan centers on journeys unique market proposition to reach the underserved teen girl in the mall.
Speaker Change: While this customer is well served with fashion apparel, our recent market research underscored that journeys has an even greater opportunity to serve this customer's fashion footwear needs.
Speaker Change: We've talked about expanding our consumer segmentation building off the independent style customer base. We currently serve to reach a wider teen audience, who is also interested in style and trend that is 6% to seven times bigger.
Speaker Change: Today's teens want to express themselves in different ways from one day to the next and footwear is a key enabler of this at the same time the market places quite segmented among athletic casual and fashion with no concept that goes across all footwear categories in the mall for the style led team. This is the opportunity.
Speaker Change: And no one is better positioned than journeys to win with this customer.
Speaker Change: In fiscal 'twenty six you will see us focus on four key areas, starting with product and diversifying our footwear leadership. Our efforts here are focused on strengthening further our product leadership inventory position differentiation and scale across a number of existing in demand brands.
Speaker Change: We plan to drive growth in both casual and athletic and further elevate the assortment this year.
Speaker Change: Building on our longer term strategic partnerships with our best in class premium footwear brands driving ASP increases through outpaced premium growth and enhancing our incubation strategy for new brands and new model launches.
Speaker Change: Second is investing in our journeys brand, bringing our updated brand positioning to this expanded group of teen customers.
Speaker Change: Our focus here to significantly boost customer engagement is an increasing investment in brand media more unique and identifiable in store and website marketing and enhanced social engagement.
Speaker Change: Launching a new brand platform and campaign for back to school and leveraging further our investments in data insights CRM and our all access loyalty program, where we more than doubled membership in fiscal 'twenty five.
Speaker Change: Third elevating our customer experience, we are elevating our customer experience online with improved site content editorial features and online storytelling and accelerating our store remodels.
Andre has discussed the success, we're having with the initial pilot group of four stores, which retains the journeys energy in DNA in a fresh new and compelling environment. We've been very pleased with these initial results. This elevated setting is essential to attracting these new customers and showcasing our more premium brand.
Speaker Change: And product.
Speaker Change: We expect that we will have 70 plus stores with the updated design by year end and have developed a tiered remodel strategy to reach a higher percentage of stores over the next few years.
Speaker Change: Finally, unlocking the power of our people.
Speaker Change: Among other initiatives, we're investing in top performing high tenured managers in key markets to strengthen leadership and drive the absolute best shopping experience in the mall, we believe in stores the ability to differentiate based on store experience and we're putting investments behind this.
Speaker Change: Altogether, we are excited about journeys evolution and the tremendous growth ahead.
Speaker Change: Broadening our reach and bringing new customers to the brand that will be coming for the premium curated assortment. That's just right for them delivered in an amazing new in store and upgraded online experience, we will invite them to connect deeper with us through all access and other offerings and we'll grow from there.
Speaker Change: She will have a similar focus as journeys this year with the goal of driving share gains in a challenging consumer market the.
The team is leaning into its work on product elevation and brand access to the top brands and styles sharpening its customer focus and intensifying the messaging around the shoe brand with encouraging initial results from tests in fiscal 'twenty five giving us confidence this will continue to attract new customers.
Speaker Change: And rolling out digital and loyalty enhancements for greater customer engagement and sales.
Turning to our branded platform Johnston <unk> Murphy's primary focus will be on delivering fresh and distinctive product and accelerating its brand repositioning.
Speaker Change: On the footwear front, Jean Ann will deliver a 15% increase in new footwear constructions in the front half and 60% in the back with some distinctive new introductions.
Speaker Change: On the apparel front the brand will bring more <unk> for performance programs into apparel and introduced new fabrics and design details in several categories.
Speaker Change: Jean <unk> will promote its renewed brand platform to build awareness and acquire new customers and will launch a limited edition collection of shoes, and apparel and celebration of its 175th anniversary as a brand this year.
Speaker Change: Rounding out the brand positioning work Jae Nam will introduce an updated brand book and shift marketing spend to brand building, while optimizing performance marketing using its extensive customer information and the JM then insider's program.
Speaker Change: Finally, as the business improves JM is evaluating opportunities to grow its distribution and opened new stores in key markets.
Speaker Change: So in closing, we're looking forward to fiscal 'twenty, six and building off the momentum we created this past year.
Speaker Change: We recognize this year has begun with some challenges in the consumer markets with uncertainty about the economy tariffs and other factors, but we're confident in the strong strategic positioning of our businesses, our ability to evolve and meet the needs of our consumers and our execution to make our brands the desk.
Speaker Change: The nation for our consumers' favorite fashion footwear.
Speaker Change: All of which will allow us to grow and unlock the considerable earnings potential we know exists.
Speaker Change: Operator, we're now ready to open the call to questions.
Speaker Change: Thank you we'll.
Speaker Change: I will now be conducting a question and answer session.
Speaker Change: You'd like to ask a question. Please press star one on your telephone keypad and a confirmation tone will indicate your line is in the question queue.
Speaker Change: You May press Star two true yourself from the queue.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys.
Speaker Change: One moment. Please so we poll for questions. Thank you.
Speaker Change: Thank you. Our first question is from the line of Mitch governance with Seaport Research. Please proceed with your questions.
Mitch: Yes, thanks for taking my questions.
Speaker Change: Maybe a handful I hope you'll indulge me.
Speaker Change: In your prepared remarks, I think earlier in your remarks, you said you were pleased with the start.
Speaker Change: To the first quarter, but then kind of in wrapping up you mentioned.
Speaker Change: Uncertainty around the macro I don't know if you can.
Speaker Change: To elaborate a little bit more on what you're seeing quarter to date I know that.
Speaker Change: As other retailers have reported there's been talk about how difficult February.
Speaker Change: Was partly from a weather standpoint, too so maybe if we could start there.
Speaker Change: Sure Mitch Thanks for your questions.
So as I said, we're pleased with our start to the year overall February has been a bit of a roller coaster it started with snow and cold weather in places that.
Speaker Change: No it wasn't supposed to be.
Speaker Change: In the south across Florida, and Louisiana and other places.
Speaker Change: But during the month it has also.
Speaker Change: Ben.
Speaker Change: Ups and downs in terms of Valentine's day was incredible we.
Speaker Change: When the consumer is ready to come out and shop, we are seeing them come out in force and really buying and spending the third week had delayed taxes and the fourth week was a huge rush in from the consumer as that.
Speaker Change: Those tax payments really caught up so the bottom line is that when there is a reason to shop. The consumer is turning out in force. We've got some great assortments for them to purchase and when you wrap up the whole start to the year.
Speaker Change: We are quite pleased with where we began.
Speaker Change: Okay. That's helpful. Thank you and then.
Speaker Change: Just to drill down a little bit more on good journeys.
Speaker Change: Outlook for fiscal 'twenty six.
Speaker Change: So that you are seeing sales up low single and then UK comp outlook for the enterprise Q4, just wondering what you're thinking in terms of journeys comp obviously youre closing some stores. There. So that's a pressure point on sales I mean are you looking at like three.
Speaker Change: Three to five 4% to 6% journeys comp growth.
Speaker Change: And how should we think about that kind of first half versus second half given the comparisons is it fair to kind of think about the year on a two year stack in order to kind of come up with.
Speaker Change: Comps for the quarters this year.
Speaker Change: Let's let me start and then I will ask if Andre has anything to add but our plan is to build on the comp and the earnings momentum from this past year.
Speaker Change: We're excited about the initiatives to acquire new customers and drive sales and that is important I think we talked about higher comps in the first half as we anniversary the easier journeys compares.
Speaker Change: But we also know we have the ability to drive comps in the back half for back to school and holiday. So we're going to be Anniversarying some pretty.
Speaker Change: Some pretty great comps for journeys in the back part of the year. So we're expecting positive. So I'll remind you you're right. We left off with negative front half comp from journeys from last year and the compares and we plan to continue this great journey has run that we've been on and bringing the incredible back half into the front half of the year.
Speaker Change: We are.
Speaker Change: We are not expecting at the double digit levels, but expecting some very strong comps to begin the year with journeys and Youre right. We are offsetting that with some store closures, which at the end of the day, we think that the optimization of the store fleet makes us stronger over the long term and that does pressure the top line, but it brings more to the bottom line.
Speaker Change: So net net net stronger comps for journeys in the first part of the year continued positive comp in the back part of the year and then offset with some overall overall store closures.
Speaker Change: Yeah in Michigan, one thing I would add to that is that you're right, we guided 2% to 4% for the overall company, we talked about our conservative comps within our other businesses. So that can help guide you with journeys and then to reiterate we are definitely seeing higher comps toward the higher end of our range in the first quarter.
Speaker Change: Just due to the easier compares to last year and there is about a $30 million impact from the net store closures on revenue, which brings the total sales down into that low single digit.
Speaker Change: Range that we quoted and so net net we also have on the total sales the FX impact for shoe, but for the comps definitely in the first half in the first quarter of the higher end of the range.
Speaker Change: And then maybe.
Speaker Change: You talked about the strategic pillars.
Speaker Change: Particularly around.
Speaker Change: Journeys and I'm, just trying to better understand I know these are this is not just about fiscal 'twenty.
Speaker Change: This is more of an intermediate long longer term.
Speaker Change: Plan as well, but I'm just trying to understand how.
Speaker Change: Some of those items.
Speaker Change: Are likely to have an impact on the business.
Speaker Change: This year I mean, the first of the pillars has to do with product I think.
Speaker Change: I know, we've obviously already seen a lot of the benefit.
Speaker Change: The changes there, but in terms of like customer engagement.
Speaker Change: Consumer experience unlocking the power of the people.
Speaker Change: How does that impact this year.
Speaker Change: Kind of the runway.
Speaker Change: Some of those strategic pillars.
Speaker Change: We are so excited about the opportunity for journeys we are in absolutely. The early innings of what we are going to do with this business and I think the bottom line is that we are taking journeys to a place that it's never been before it's always been the place to go <unk>.
Speaker Change: Ever footwear, fourteens, but it is going to an even better place than it's ever been before and I did talk about the pillars and the first part of this year was just too rapidly inject the assortment with new and fresh product and we did a lot in the back part of the year.
Speaker Change: Our chief merchant and our team at journeys did a lot to really really moved the assortment, which you can see when you go into our stores.
Speaker Change: And we will continue that momentum through the front part of the year, but what is important are a few elements out of the plan that I discussed and the first is this aspiration to serve a much larger customer group with a much larger addressable market we have been.
Speaker Change: Been serving the independent style customer self expression, that's been really important to this customer and the work. We've done has said that there's a much larger customer base out there focused on that team girl because that's our point of differentiation within the market, but when you broaden the market by six to seven times then.
Speaker Change: That's a really important element of the strategy. So it's a broader customer group that we are targeting and the important way to be able to serve those customers are first of all by the assortment and so I've talked a lot about elevating the assortment and we did that this year and elevation means that we've got a diversify.
Speaker Change: Set of brands that we've got the right models and styles that that customer is looking for that we have access to them. We've got great brand partnerships that we are bringing together to elevate the overall assortment elevation also means higher average selling prices. So you think about a broader customer.
Speaker Change: <unk> do you think about higher selling prices you think about an assortment altogether that is that is appealing to this to this team customer and then I'll come back and say that we would then wrap that up in overall outreach and marketing to be able to touch this consumer it is so.
Speaker Change: To see the changes that we've made online and in our new four four point on the stores that I'll come back and talk more about but it's a physical difference to really visible difference in this outreach to customers.
Speaker Change: With this more elevated assortment in a more elevated environment that is reaching out to more to more new consumers.
The all access loyalty program is important because once we get people into our ecosystem. We are seeing that there is more purchase frequency and higher overall transaction size, which is a real positive we will drive those repeat purchases and get those customers to keep on coming back and then.
Speaker Change: Finally this.
Speaker Change: This new store is driving comps well in excess of what we saw in the back half of the year, which was really strong and so.
Speaker Change: It's a formula altogether to say that we're serving a broader customer base, we're doing it with.
Speaker Change: Great.
Speaker Change: <unk> that has even better product than we've been able to offer up before and there are just so many elements of this plan that will come together that gives us a long runway and a multiyear cycle of opportunity for journeys and Mitch how that comes to life through our P&L in 'twenty six specifically related to the new store format.
Speaker Change: His name you said its early innings that we've seen since we've launched the first prototypes about 16 that we're seeing double digit improvements in all areas, whether it's called conversion average transaction size traffic, we're seeing really great results.
Speaker Change: And we're targeting 70 stores by the end of this year, which we're really excited about and that represented 7% of the fleet. So all of that our comps are higher than our market right now at 2% to 4%, but were excited that these store formats will help support that that higher than market average comp.
Speaker Change: All right great all of that was very helpful and one last one for me just trying to better understand.
Speaker Change: The margin outlook for 'twenty, six and I guess, maybe the two pieces in particular I was hoping you could elaborate on is on the gross margins.
Speaker Change: We understand what the pressure is.
Speaker Change: In the first half of the year.
Speaker Change: I gave you some of that had to do with mix at least in the first quarter, but maybe just a little bit more color. There and then secondly on incentive comp I know that was shipped to the fourth quarter.
Speaker Change: How should we think about that in 26 more for more normal in 'twenty six and if so how much.
Speaker Change: How much do you get back as a result of that.
Speaker Change: I will start and then hand, it to saundra, but on gross margins I'll, just say that for journeys with the.
Speaker Change: A significant shift in the assortment that we.
Speaker Change: Enacted in the last part of the year last year that then also carries over into the front part of the year this year and so.
Speaker Change: Canvas product Balkanized product is at a at a higher initial margin than some of the product that we have shifted to but overall average selling prices are much higher gross profit dollars per pair of shoes is much higher and so.
Speaker Change: There is a mix shift as a result of that and that's what we were calling out specifically, we also are going to be.
Speaker Change: Shifting out of some licenses at Genesco brands group and that led suggested a one time disproportionate effect on overall margins, but we will recapture that going forward. After we anniversary some of that clearance and just to call out specifically incentive comp.
Speaker Change: In the SG&A line.
Sandra Harris: I'll hand over to Sandra just talk about about the impact of that yes, I can start there Mitch with the incentive comp yeah, we talked about rebuilding as we had the performance come back for journeys and also for corporate in the fourth quarter. So we do expect to anniversary that based upon the performance.
Sandra Harris: So in our SG&A not too much anticipation of any additional impact from the incentive comp program I do want to highlight a few other things in margin. We are facing some of the initial inflationary impacts in the first half.
Sandra Harris: That obviously impacts our productivity in our stores and how effective and profitable they are and specifically in the UK business, we have inflationary impacts driven by the national insurance increases in statutory wage increases that are occurring and then also here in the U S. The minimum wage pressures.
Sandra Harris: And higher rents are starting to to start to come back into our P&L. So in Q1, where we have the lower sales is a little harder to cover from a margin perspective.
Sandra Harris: Thank you.
Speaker Change: Our next questions are from the line of Montero Marino Shake with Jefferies. Please proceed with your questions.
Speaker Change: Thank you for taking my call today.
Speaker Change: So I guess my first portion of your revenue locked in journeys Remodels and I think you said like 37% of your store base is expected to be remodeled this year.
Speaker Change: The stores that you did remodeled did witness better comp. So I guess I'm curious any more color you can provide us on these remodels and how we should think about it for the year.
Montero: Good morning Montero.
Montero: The Remodels are an essential part journey strategy. We are really excited about this element of our plan with our new consumer positioning and our product assortment, we need an aspirational environment to showcase more premium product and what is exciting here is that the average selling prices.
Montero: Theyre up across our whole business, they're up even more and in these stores because we are attracting a different customer that is willing to spend more on this product.
Montero: It's designed for our style of teen it's a cleaner environment, it's more neutral aesthetic to showcase the footwear, it's really exciting if you haven't seen it we invite you to national.
Montero: Also.
New store in Garden State Plaza, which you can go check out it retains the journeys energy in its DNA and its attitude. We've opened 16, so far as Saundra said, it's early but we are very pleased with the results.
Montero: We've got 70 planned for the coming year, but.
Montero: But we can accelerate as the results come in and then we have an opportunity because we've got a tiered set of Remodels, where we can do.
Montero: Do 100 stores the following year, and then 100 beyond that so we have an opportunity there to really be able to change the look of the fleet.
Montero: Pretty rapid period of time, and what I would absolutely underscore here is that our aim is to drive the productivity within our existing stores to drive the overall volume of these stores to invest in our best locations because we know.
Montero: That we can move the needle significantly within our best locations and we're seeing that in terms of the well above average performance in comp and traffic and conversion and then again the transaction size is really essential and so when you think about how we are going to be rolling this out 7%. This year more next year and the following year then that gives us.
Montero: <unk> leverage to be able to continue to drive comp for journeys in the Terra from an investment standpoint, depending on the location and square footage size of the store, but this can be half the cost of opening a new store, but yet it has a much quicker payback because we're already in the market and the consumer knows us and they see the new style of the store so a much quicker payback.
Montero: On less investment.
Montero: Thank you and then I guess.
Montero: Turning to modeling.
Montero: Should we think about the shape of sales and earnings by quarter. This year and also how should we think about your inventory positioning exiting.
Montero: Fiscal 'twenty six.
Speaker Change: I'll start with inventory and I'll give some color on the shape of sales and then just turn it over to Sandra.
Speaker Change: But overall our inventories are in a great position, our gross margins were higher by 60 basis points in the quarter.
Speaker Change: We began the year at low inventory levels I think we were close to 20% down as we as we began the year and we knew we needed to do a huge push on journeys re inventory and we've been chasing that all year.
Speaker Change: We intended to build back inventories and we are up on inventories, but it is fresh product in order to drive sales in the front part of this year and so when you when you look at our inventory levels.
Speaker Change: It is increased with journeys in order to drive overall inventory for this year. We also had a distribution shift.
Speaker Change: One of our other businesses and for the time being brought more product onto our balance sheet, but we expect that that will.
Speaker Change: That will.
Speaker Change: Level out as we go forward, so we need the inventory to drive the level of sales that we have and that inventory is really clean. So we talked about the shape of sales and margins and I'll turn it over to Sandra to talk about that you have antara.
Speaker Change: <unk> guidance is 2% to 4% largely driven by journeys and as we noted earlier in the call. We do expect the first half to be much stronger as we anniversary the softer comps from the prior year and we expect Q1 to be at the higher end of that comp guidance, but I do want to remind you in regard to total sales.
Speaker Change: We have three factors that will impact our total sales and the purchase of store closures, which is estimated to be a net impact of $30 million for the full year. We do have the FX headwinds for our shoe business and then as Mimi talked about earlier, we have lower revenue coming from our genesco brands business as we work through the exit of those licenses so.
Speaker Change: So flat to up 1% for the year, but we do expect to that earlier in the year from a comp perspective, it will be the higher end of the range.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: At this time I would like to turn the floor back to Mimi Vaughn for closing remarks.
Mimi Vaughn: Okay. Thank you for joining us today, we are looking forward to talking with you again, when we report our first quarter results.
Speaker Change: Thank you. This does conclude today's teleconference. We thank you for your participation you may now disconnect. Your lines at this time I'd have a wonderful day.