Genesco’s Strategic Turnaround: Can Journeys’ Momentum Overcome U.K. and Margin Challenges?

Genesco Inc. (GCO) has embarked on a high-stakes strategic overhaul, betting on the Journeys brand to drive a broader retail transformation while navigating persistent challenges in its U.K. operations and margin pressures. The company’s fiscal 2025 results reveal a mixed picture: Journeys delivered robust growth, but Schuh’s struggles and gross margin declines underscore the fragility of its turnaround plan.

Journeys’ Momentum: A Beacon of Progress

Journeys, Genesco’s flagship U.S. brand, has emerged as a key growth engine. In Q2 2025, the brand posted a 9% year-over-year increase in comparable sales, driven by product diversification and the “Journeys 4.0” store remodeling program [1]. This momentum accelerated in Q3, with 11% comp sales growth, as store resets and improved product assortments elevated the customer experience [1]. Management’s decision to raise fiscal 2025 guidance—from a projected 3% sales decline to a range of down 1% to flat—reflects confidence in Journeys’ ability to offset broader portfolio headwinds [1].

However, this optimism is tempered by the reality of store closures. Genesco shuttered 14 locations in Q3, including 12 Journeys stores, as part of its strategy to optimize its physical footprint [1]. While this reduces fixed costs, it also raises questions about the long-term sustainability of relying on fewer, higher-performing stores to drive growth.

U.K. Market Challenges: A Persistent Drag

The U.K. remains a critical vulnerability. Schuh, Genesco’s U.K. footwear division, reported a 4% decline in constant-currency comparable sales in Q2 2026, despite a nominal 2% dollar-based increase [1]. This divergence highlights the impact of currency fluctuations and soft consumer demand. The highly promotional environment in the U.K. has eroded gross margins, with Schuh’s margin falling 100 basis points to 45.8% in Q2 2026 [1].

Genesco’s response has focused on store optimization and cost-cutting. The company has closed underperforming locations and shifted investment to digital initiatives and profitable formats [1]. Yet, these measures have not reversed Schuh’s trajectory. Management remains cautious, citing ongoing competition, promotional pricing, and currency volatility as risks to profitability [1].

Margin Pressures and Strategic Trade-Offs

Gross margin contraction has been a recurring theme. In Q2 2025, Genesco’s overall gross margin declined 100 basis points to 45.8%, driven by tariffs, promotional activity, and supply chain costs [1]. While Journeys’ full-price selling in Q4 2025 improved margin dynamics for that brand [3], the broader portfolio continues to grapple with pricing pressures.

The company’s cost-cutting initiatives, including $45–50 million in annualized savings, aim to offset margin declines [2]. However, these savings come at the expense of flexibility. For instance, reduced marketing spend or delayed technology investments could hinder long-term growth, particularly in markets like the U.K. where differentiation is critical.

The Path Forward: Balancing Optimism and Caution

Genesco’s turnaround hinges on two key factors: sustaining Journeys’ momentum and mitigating U.K. risks. The upcoming Wrangler footwear collaboration offers a potential growth catalyst, leveraging Journeys’ brand equity to tap into new consumer segments [2]. Meanwhile, digital transformation and enhanced customer experiences remain central to its strategy [1].

Investors should monitor whether Journeys’ gains can offset Schuh’s underperformance and whether margin stabilization is achievable without sacrificing growth. The company’s guidance for flat to slightly negative sales in fiscal 2025 suggests a focus on profitability over top-line expansion—a pragmatic approach in a challenging retail environment.

Conclusion

Genesco’s strategic portfolio optimization has yielded progress at Journeys but faces an uphill battle in the U.K. and on margins. While the company’s cost discipline and brand-led initiatives are commendable, the path to a sustainable turnaround remains uncertain. For now, Journeys’ momentum provides a glimmer of hope, but investors must weigh this against the risks of a fragile U.K. business and margin pressures.

Source:
[1] Genesco Inc. Reports Fiscal 2026 Second Quarter Results [https://www.genesco.com/news-releases/news-release-details/genesco-inc-reports-fiscal-2026-second-quarter-results]
[2] Genesco’s Fiscal Q2 Earnings: A Turning Point Amid Strategic Reforms [https://www.ainvest.com/news/genesco-fiscal-q2-earnings-turning-point-strategic-reforms-2508/]
[3] Genesco Ends the Financial Year 2025 with a Positive Set of Signs [https://www.worldfootwear.com/news/genesco-ends-the-financial-year-2025-with-a-positive-set-of-signs/10506.html]