Genesco's 2026Q3 Earnings Call: Contradictions in Journeys' Growth, Consumer Demand Shifts, and Sales Outlook

Date of Call: December 4, 2025

Financials Results

• Revenue: $616M, up 3% YOY
• EPS: $0.79 adjusted diluted EPS, up $0.18 YOY (from $0.61)
• Gross Margin: 46.8%, down 100 bps YOY
• Operating Margin: Approximately 2.1% adjusted operating margin (adjusted operating income $12.9M on $616M revenue), up from ~1.7% prior year (adjusted operating income $10.3M)

Guidance:

• Full-year adjusted EPS now expected to be approximately $0.95 (previously higher).
• Total revenue growth ~2% for the full year; comparable sales ~3%.
• Journeys comps expected mid-single-digits for the full year.
• Gross margin down ~100 bps YOY; SG&A leveraging ~100 bps.
• Capital expenditures $55M–$65M; positive free cash flow expected.
• Adjusted tax rate ~34%; average diluted shares ~10.6M.

Business Commentary:

• Journeys Performance and Strategic Growth:
• Journeys achieved 6% comp growth in Q3, representing more than a 50% increase in operating income.
• The growth was driven by successful execution of strategic plans, increased brand awareness, and product elevation, despite challenging industry trends.

• Schuh Operational Challenges and Strategic Initiatives:
• Schuh's overall comps took a step back in Q3, facing declines in store conversion and average transaction size.
• Challenges in the U.K. market and heightened promotional activity led to reduced margins, but strategic initiatives are planned to improve operations and customer value proposition.

• Tariff and License Exit Impact:
• The Genesco Brands Group saw significant margin pressure due to tariff headwinds and the exit of Levi's license.

• These challenges led to a significant decline in gross margins, although plans for a new Wrangler footwear launch are positive for future growth.

• Marketing and Brand Investment:

• Genesco increased marketing investments, particularly in brand awareness campaigns, without compromising expense leverage.
• This strategy aims to expand brand awareness and attract new customers, supporting overall growth and profitability.

  Sentiment Analysis:

  Overall Tone: Neutral

  • Management lowered full-year EPS and flagged material Schuh and tariff headwinds—"we are disappointed to be lowering our overall outlook"—but emphasized strong Journeys momentum: "Journeys remains on track to deliver an outstanding year with comps projected to increase mid-single digits and operating income that almost doubles."

Q&A:

• Question from Mitchel Kummetz (Seaport Research Partners): Do you expect Journeys to comp flat to slightly positive in Q4 given the lowered sales outlook?
  Response: Expect positive Q4 comps for Journeys overall; moderating e‑commerce comps vs strong prior-year compares while stores remain strong.

• Question from Mitchel Kummetz (Seaport Research Partners): What was the lift from Journeys 4.0 stores in Q3?
  Response: 4.0 stores continue to outperform the fleet, driving higher conversion, transaction size and meaningful sales lift; rollout accelerated to >80 by year-end.

• Question from Mitchel Kummetz (Seaport Research Partners): Was Journeys positive comp in November and how should the rest of the quarter play out?
  Response: Journeys was positive in November with record Black Friday/Cyber Monday and strong full‑price selling; expect a very positive holiday/December then a consumer pullback in January.

• Question from Mitchel Kummetz (Seaport Research Partners): How many doors launched Nike and plans to expand?
  Response: Nike launched Nov 12 in a limited number of Journeys doors and online (dozens initially); rollout will be tested and expanded if successful, not an immediate large-volume driver.

• Question from Joseph Civello (Truist Securities): Color on demand trends between Canvas and Athletic and the innovation pipeline for 2026?
  Response: Athletic/lifestyle gaining versus canvas; expect more innovation and product investment on the athletic lifestyle side in 2026.

• Question from Joseph Civello (Truist Securities): Are boot gains driven by innovation or better access?
  Response: Boot gains are brand‑specific and fashion‑driven (lower shafts, moccasin styles, fur), with iconic brands driving demand rather than broad category innovation.

• Question from Joseph Civello (Truist Securities): Any demographic skew in the pullback you saw?
  Response: Customers are 'stretching up' to buy desired items and paying up; higher‑income cohorts spending more, while overall shoppers conserve between purchases.

• Question from Mantero Moreno-Cheek (Jefferies LLC): Next steps to expand Journeys' brand portfolio and how momentum shapes growth outlook?
  Response: Pursuing diversification (e.g., HOKA, Saucony, Nike) to validate categories; momentum and brand/4.0 initiatives should sustain growth despite anniversary comparisons.

• Question from Mantero Moreno-Cheek (Jefferies LLC): Where are the greatest opportunities to improve margin and levers to pull?
  Response: Key levers: complete license liquidation (improves margins), rightsize Schuh inventory/assortment, price actions to offset tariffs, and continued SG&A discipline; Schuh and license exits were primary margin drivers this year.

• Question from Mantero Moreno-Cheek (Jefferies LLC): Any update on marketing/ad spend and how it drives conversion/traffic?
  Response: Shifting spend from performance to brand marketing (Life on Loud, Peyton Manning) to build awareness and new customers while funding it via broad expense reductions; expect long‑term payoff.

Contradiction Point 1

Journeys' Consumer Demand and Product Assortment

It indicates a shift in the company's strategic direction and consumer demand, which could impact sales and marketing strategies.

Given the lowered annual sales outlook for Journeys, are you expecting flat to slightly positive same-store sales growth in Q4? - Mitchel Kummetz(Seaport Research Partners)

2026Q3: Expecting positive comps for Journeys in Q4 with a balanced approach, strong store growth, and moderated e-commerce expectations. The 4.0 stores continue to perform strongly, contributing to a stronger portfolio. - Mimi Vaughn(CEO)

How does the current product assortment compare to last year's back-to-school period in terms of inventory access and product allocations? Could you provide additional details? - Mitchel John Kummetz(Seaport Global Securities)

2026Q2: We've been working on the assortment to reflect this, with a balanced mix of casual, canvas, and athletic products. Six brands are up double digits, and we're elevating price points, making the assortment broader and deeper. - Mimi Vaughn(CEO)

Contradiction Point 2

Consumer Demand for Athletic vs. Canvas Footwear

It involves changes in consumer trends and demand for different types of footwear, which directly impacts product assortment and sales strategy.

Can you provide more details on the demand trends between Canvas and Athletic? - Joseph Civello (Truist Securities, Inc., Research Division)

2026Q3: The consumer is moving towards wearing athletic footwear more year-round, showing growth in athletic brands. Canvas remains an important part of the mix but with less demand than in the past. - Mimi Vaughn(CEO)

Can you discuss the trends for vulcanized footwear? - Joseph Civello (Truist)

2026Q1: Vulcanized products have faced pressure, but strong growth in athletic and casual brands offsets this. - Mimi Vaughn(CEO)

Contradiction Point 3

Journeys Sales Outlook and Comps

It involves changes in expectations for sales performance and comps, which are critical for investor forecasting.

Given the reduced sales outlook for Journeys this year, are you expecting a flat to slightly positive comp for Journeys in Q4? - Mitchel Kummetz (Seaport Research Partners)

2026Q3: Expecting positive comps for Journeys in Q4 with a balanced approach, strong store growth, and moderated e-commerce expectations. - Mimi Vaughn(CEO)

What is the expected compensation for Journeys in Q2? - Mitchel Kummetz (Seaport Research Partners)

2026Q1: Journeys comps are tracking similar to Q1, with a high-single-digit comp expected. - Mimi Vaughn(CEO)

Contradiction Point 4

Journeys' Performance and Growth Strategy

It highlights differing perspectives on the performance and growth strategy of the Journeys division, which is a crucial aspect of the company's overall strategy.

Are you expecting flat to slightly positive comps for Journeys in Q4? - Mitchel Kummetz(Seaport Research Partners)

2026Q3: The 4.0 stores continue to perform strongly, contributing to a stronger portfolio. Journey's outlook is optimistic for robust sales during peak shopping periods. - Mimi Vaughn(CEO)

None (Introduction to the call) - Darryl MacQuarrie(Genesco)

2025Q4: Journeys' performance far outpaced the overall market. - Mimi Vaughn(CEO)

Contradiction Point 5

Consumer Demand Trends

It reflects differing views on consumer demand trends, which can impact product offerings and overall business strategy.

Can you provide more details on the demand trends between Canvas and Athletic? - Joseph Civello(Truist Securities, Inc., Research Division)

2026Q3: The consumer is moving towards wearing athletic footwear more year-round, showing growth in athletic brands. Canvas remains an important part of the mix but with less demand than in the past. - Mimi Vaughn(CEO)

None? - Darryl MacQuarrie(Genesco)

2025Q4: Consumers continued to favor athletic footwear over other categories and casual footwear brands. - Mimi Vaughn(CEO)