Value Play: Genesco (GCO)

Consumers continue to look for easy ways to update their wardrobes and one of those ways is through accessories. Genesco Inc. (GCO), a specialty shoe and hat retailer, has been riding that sentiment to double digit earnings growth in 2010.

This Zacks #1 Rank (strong buy) has been involved in retail since 1924 so its seen its share of both good and bad economies. Headquartered in Nashville, it now operates 2,225 footwear and headwear retail stores in the U.S., Canada and Puerto Rico.

Its brands include Journeys, Journeys Kidz, Hat Zone, cap Connection and Head Quarters. It also designs footwear for its own Johnston & Murphy brand and for the licensed Dockers brand.

Genesco Surprised by 30.5% in the Fiscal Third Quarter

On Nov 23, Genesco reported its fiscal third quarter results and surprised on the Zacks Consensus by 18 cents. Earnings per share were 77 cents compared to the Zacks Consensus of 59 cents. It made just 53 cents in the third quarter of last year.

Sales rose 19% to $464.8 million from $390.3 million in the third quarter of fiscal 2010. Comparable store sales also rose by 9%. The Lids Sports Group led the way with an increase of 13%. The Journeys Group gained 9%, Johnston & Murphy Retail climbed 7% and the Underground Station rose 3%.

The quarter was boosted by a strong back-to-school season but sales throughout the rest of the quarter also tracked higher than expected.

Outlook Raised for the Fourth Quarter and Full Year

Because Genesco reported just before Black Friday, it was already able to see trends developing for the holiday season.

Comparable store sales through the first 3 weeks of the fourth quarter were up 11%.

Given the strong comps and the better-than-expected third quarter results, Genesco raised its full year guidance to the range of $2.38 to $2.43 from its prior guidance of $2.10 to $2.20 per share.

Zacks Consensus Estimates Rise

Not surprisingly, given the raised guidance, analysts scrambled to also raise estimates.

The fiscal 2011 Zacks Consensus rose to $2.44 from $2.22 per share in the last month. That is a penny higher than the company’s own guidance. It is also earnings growth of 27.6%.

The fiscal 2012 Zacks Consensus Estimate also moved higher by 27 cents to $2.79 per share which is another 14.6% earnings growth.

Is GCO a Value Stock?

Genesco’s shares have been rallying in the past 2 months. Despite the double digit earnings growth, with the shares rising, the stock is no longer really cheap.

It has a forward P/E of 14.9, which is just within the range of a value stock. But that is still cheaper than some of its peers like Foot Locker Inc. (FL) which trades at 18x forward estimates and DSW Inc. (DSW) with a forward P/E of 16.

Genesco also has a price-to-book of 1.5, which is within the value range of under 3.0.

You can see the recent rally in shares in the 1-year chart.

GENESCO INC (GCO): Free Stock Analysis Report

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About Tracey Ryniec 60 Articles

Affiliation: Zacks Investment Research

Tracey Ryniec is the Value Stock Strategist for She is also the Editor in charge of the market-beating Zacks Value Trader service. You can follow her at

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  1. Genesco no longer cheap, but still a value : Post Business: Business News and Views for Nashville

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