Back-to-school woes force Journeys owner Genesco to cut forecast

Thu Aug 29, 2013 10:54am EDT

(Reuters) - Footwear retailer Genesco Inc (GCO.N), known for its Journeys brand, slashed its adjusted profit outlook for the year as it battles a tough back-to-school season.

Genesco shares fell 14 percent in morning trading, making them the top percentage losers on the New York Stock Exchange.

The company, which also sells Schuh footwear and Lids caps, estimated second-quarter results below analysts' expectations due to the challenging sales environment.

Genesco cut its full-year profit forecast to $5.20-$5.30 per share from $5.57-$5.67. Analysts on average were expecting a profit of $5.63 per share.

The company said comparable store sales fell 2 percent in the second quarter and were down 3 percent in the current quarter, as of August 24.

"Back-to-school has been a disappointment for us relative to what we were expecting, and it has been a pretty steady disappointment," Chief Executive Robert Dennis said on a conference call with analysts.

Some companies have said U.S. shoppers are waiting longer to buy back-to-school items, suggesting they are waiting for deals.

Based on the slow start to the current quarter, Genesco expects comparable store sales to fall about 1-2 percent in the third quarter, Chief Financial Officer James Gulmi said on the call. He, however, said the company expects the sales to rise about 3 percent in the fourth quarter.

Teen retailers Abercrombie & Fitch Co (ANF.N), Aeropostale Inc (ARO.N) and American Eagle Outfitters Inc (AEO.N) have reported declines in comparable store sales and forecast continued weakness in the back-to-school season.

Genesco said it expects net income to rise to $12.1 million, or 52 cents per share, in the second quarter ended August 3, from $10.6 million, or 44 cents per share, a year earlier.

On an adjusted basis, Genesco estimated earnings of 56 cents per share.

Analysts on average were expecting a profit of 60 cents per share, according to Thomson Reuters I/B/E/S.

Genesco said its profit estimate for the quarter was based on a potential change in accounting for certain bonus awards payable under an incentive plan.

The company said it may restate certain prior financial statements depending on any charges associated with the accounting changes.

Genesco's sales rose 5.7 percent to $574.7 million in the quarter, missing market estimates of $596.2 million.

Genesco shares, which have risen 26 percent since January, were trading down 10 percent at $62.61.

(Reporting By Maria Ajit Thomas in Bangalore; Editing by Maju Samuel)