QUOTE AND NEWS
Benzinga  Jun 25  Comment 
Analysts at Buckingham Research initiated coverage on shares of Genesco (NYSE: GCO) with a “neutral” rating. The target price for Genesco is set to $84. Genesco's shares closed at $80.87 yesterday. Wedbush initiated coverage on shares of...
SeekingAlpha  Jun 19  Comment 
ByMartin Vlcek: Investment thesis Genesco (GCO), a small-cap footwear and apparel retailer which I described and analyzed before, filed its most recent 10Q report with the SEC on June 10 for the fiscal Q1 2015 ending May 3, 2014, where the...
SeekingAlpha  May 30  Comment 
Genesco Inc. (GCO) Q1 2015 Earnings Conference Call May 30, 2014 08:30 am ET Executives Bob Dennis - Chairman of the Board, President, Chief Executive Officer Jim Gulmi - Chief Financial Officer, Senior Vice President - Finance ...
Benzinga  May 30  Comment 
Genesco (NYSE: GCO) shares are flat Friday morning after initially shooting lower on the company’s first quarter results. Revenue for the quarter came in at $629 million, 6.3 percent higher than the same quarter last year. Highlights include...
Wall Street Journal  May 30  Comment 
Hat-and-shoe retail company Genesco said its fiscal first-quarter profit slipped 3% as higher costs offset higher sales.
SeekingAlpha  Apr 13  Comment 
By Markus Aarnio: Genesco (GCO) is engaged in the retail and wholesale of footwear, apparel, and accessories. (click to enlarge) Insider selling during the last 30 days Here is a table of Genesco's insider activity during the last 30...
TheStreet.com  Apr 4  Comment 
Story updated at 9:50 a.m. to reflect market activity. NEW YORK (TheStreet) -- Genesco was upgraded to "buy" from "neutral" by Sterne Agee Friday. Shares of Genesco gained 4.9% to $79.69 in morning trading. The firm set a price target of $85...
SeekingAlpha  Mar 26  Comment 
ByMartin Vlcek: In my July 2013 analysis of Genesco, Inc. (GCO) when the stock was trading at $72, I estimated the fair value to be $73.65 and recommended to wait for a pullback to anywhere below $65 before buying because of short-term headwinds....
SeekingAlpha  Mar 13  Comment 
Genesco Inc. (GCO) F4Q 2014 Earnings Conference Call March 13, 2014 08:30 ET Executives Bob Dennis - Chairman, President and Chief Executive Officer Jim Gulmi - Chief Financial Officer Analysts Taposh Bari - Goldman Sachs ...
Benzinga  Mar 13  Comment 
Genesco (NYSE: GCO) reported an 8.7% rise in its fiscal fourth-quarter earnings. For the fiscal year, the company expects earnings of $5.40 to $5.55 per share, versus analysts' estimates of $5.65 per share. Genesco's quarterly profit surged...




 

image:genlogo.jpg


Company Overview

Genesco Inc. New York Stock Exchange (GCO), based in Nashville, Tennessee, is a specialty retailer of branded footwear, licensed and branded headwear, as well as a wholesaler of branded footwear. Genesco also designs, sources, markets and distributes footwear. Genesco is represented by more than 2,225 retail stores in the United States, Canada, and Puerto Rico and is composed of five main business segments; Journeys Group, Hat World/Lids Group, Underground Stations Group, Johnston & Murphy, and the licensed brands, consisting mainly of the Dockers Brand. [1]

Genesco began in 1924 as the Jarman Shoe Company manufacturing shoes. It then changed to the General Shoe Company in the 1930s, and became public in 1939. It eventually changed its name to Genesco in 1959, gave up shoe manufacturing and focused solely on retail in 2002. [2]

Genesco's overall business strategy is to "seek organic growth" by: 1) Increasing the Company's store base 2) Increasing retail square footage 3) Improving comparable store sales 4) Increasing operating margin 5) Enhancing the value of its brands. [3]

Business Segments

Journeys

Teen specialty retail, specializing in fashion forward footwear and accessories targeting 13 to 22 years old male and females. Journeys consists of retail stores, website (www.journeys.com) and catalog sales. Journeys is present in the U.S. Virgin Islands, Puerto Rico, and in all 50 states with 819 stores collectively. Journeys differentiates by having an upbeat environment and engaging the customer, using TVs in the store to display music videos or the newest styles. They also rely on their employees to deliver a fitting lifestyle to their customers. [4]

Journeys Kidz

Journeys Kidz began in 2001 as a spinoff of Journeys geared exclusively to children aged 5 to 12 years. The company sells trendy kids’ footwear and accessories in a kid friendly atmosphere, with cartoons playing and video games available to play. Journeys Kidsz now consists of 150 stores and also delivers through catalog and the Journeys Kidz website, www.journeyskidz.com, as well. [5]

Underground Station

This segment is more culturally diverse, and targets men and women ages 20-35 with their trendy street fashion in shoes and accessories. Underground Station delivers the most current brands and cutting-edge styles. Underground Station also integrates the fashionable and street lifestyle into the atmosphere of their retail stores. In addition to the 170 retail stores located in malls across the United States, Underground Station also sells through their website, www.undergroundstation.com. [6]

Shi by Journeys

Targets fashionable women ages 20 to mid 30s with their footwear and accessories. Shi was created as an extension of Journeys to cater more to the mature female consumer, and now consists of 56 stores, as well as website (www.shibyjourneys.com) and catalog sales. [7]

Hat World, Inc./Lids

Hat World, Inc is composed of the LIDS retail headwear stores, the LIDS Locker Room specialty fan retail chain, and the LIDS Team Sports wholesale team sports business. The LIDS and LIDS Locker Room portions consist of 900 retail stores located in malls and airports, as well as street level stores and factory outlets. The company sells specialty headwear and accessories out of their LIDS, Hat World, and Hat Shack Stores, and sports headwear, apparel, accessories, and novelties out of LIDS Locker Room stores and Sports Fan-Attic stores. In addition to the stores in the US, LIDS stores are also present in Hong Kong and China. Hat World Inc., also does business through the following websites, www.lids.com, www.lids.ca and www.lidsteamsports.com. [8]

Johnston & Murphy

J&M sell men’s footwear, apparel, luggage, leather goods and accessories, as well as women’s footwear, handbags, outerwear and accessories. J&M targets stylish, successful, and affluent men and women, and delivers superior service in an inviting environment. This segment also sells through their retail stores, as well as premier specialty and department stores internationally, catalog, and website at www.johnstonmurphy.com/ [9]

Dockers

Marketed under license from Levi Strauss & Co., this brand sells casual and stylish apparel and footwear through national chains. [10]

Error creating thumbnail
[3]
Journeys Underground Station Hat World, Inc. Johnston and Murphy
Avg. Sq. Ft.1841.6718001937.51475
Revenue Per Sq. Ft. $413 $616 $209$121
[3]

Competition

Genesco mainly competes with shoe, accessory, and headwear retailers, the four companies below being the main competition for Genseco:

Collective Brands, Inc. (PSS)- Better known as the brand under which Payless ShoeSource operates. This is a global company whose mission is to bring compelling lifestyle, fashion and performance brands for footwear and related accessories to consumers worldwide. Payless consists of close to 4500 retail stores, and is comprised of many brands. [11]

Bakers Footwear Group (BKRS)-A specialty retailer for women's stylish shoes and accessories. Although this group only sells women's products and Genesco sells men's and women's products, it is a competitor for Genesco as a whole, and the Shi by Journeys segment competes directly with Bakers. Bakers currently operates over 240 stores in 37 states in the United States. [12]

Foot Locker (FL) Foot Locker, Inc. is a global athletic footwear and apparel retailer, consisting of 1,911 stores in 21 countries. Foot Locker sells more athletic shoes than any other retailer in the United States. [13] In April 2007 Foot Locker proposed a $1.2 billion takeover bid, which was rejected by Genesco shareholders. [14]

Finish Line (FINL) The Finish Line, Inc. is an athletic footwear, apparel and accessories retailer, operating more than 660 stores in 37 states in the U.S. [15] In June of 2007, Finish Line announced it's intentions to buy out Genesco for $1.5 billion, or $54.50/share, which Genesco approved of. Eventually the deal was scrapped after Finish Line refused to close the merger, and Finish Line was ordered to pay $175 million and 12% equity stake to Genesco shareholders for backing out. [3]

Financials

Summary of Genesco Key Financials

2010 2009 2008 2007
Net Sales1,574,3521,551,5621,502,1191,460,478
Net Earnings28,813150,7565,17166,112
Earnings from Ops (% of Net Sales)3.80%16.70%2.80%8.10%
Net Earnings Per Share1.337.830.222.91
Total Assets863652816063801685729048
Long-term Debt011373514727198390
Working Capital280,415259,137238,093200,330
Current Ratio2.72.92.62.5
# Retail Outlets2,2762,2342,1752,009
# Employees13,92513,77513,95012,750
*All numbers in thousands, except eps
[3]

2010 overall was a stable year for Genesco, despite the current negative state of the economy. Revenues in 2010 rose to 1.57 billion, up from 1.55 billion in 2009, a 1.2% percent increase, while net earnings and earnings from operations decreased dramatically. The number of retail stores continues to increase, aligned with Genesco's overall business strategy of increasing the store base. Genesco ended 2010 with $82 million in cash, and no debt on it's balance sheet. The company also repurchased 85,000 shares at a cost of $2 million. [3]

Recent reports have been more promising for Genesco, as the first quarter reported an increase in net income of 19%, and a revenue increase of 17% over the last year's first quarter. [16]

In 2010, Genesco continued to expand their business by continuing to search for opportunities and acquire chains that complement their existing businesses. Sports Fan-Attic is one example of an acquisition that took place in 2010.Genesco also strives to be successful by enforcing accountability in all divisions, and encouraging an entrepreneurial spirit among it's operating managers by using performance based rewards and long term incentives. [3]

The recent economic downturn called for Genesco to make changes in 2010 to operate more efficiently throughout this period. They closed down underperforming stores, and negotiated lower rent amounts in others to reduce expenses. They also stated improving internal processes to reduce future store reconstruction costs. Answering to the current economic downturn, Genesco also focused more on inventory management and cash flow than opening new stores, despite their overall goal to expand their number of stores. Capital expenditures were decreased from $49.4 million in 2009, to $33.8 million in 2010. [3]

Genesco Collective Brands Bakers Foot Locker Finish Line
Market Cap969.12M1350M10.61M3380M1160M
Revenue1574.3M3380M185.63M5050M1230M
Profit Margin2.97%3.34%-5.01%3.35%5.60%
Operating Margin5.22%5.88%-3.26%5.39%9.05%
5 Year Revenue Growth6.87%4.82%-0.96%-2.23%-1.21%
Inventory Turnover2.584.186.093.373.55
Operating Cash Flow102.61M271.5M-.5M326MN/A
Current Ratio2.192.260.773.964.03
Beta1.651.871.871.151.6
ROA6.026.07-16.447.0811.03
ROIC8.928.8-29.138.428.06
# of Stores227645002401911664

[3] [17] [18] [19] [20]

As you can see from the table, Genesco has a significantly higher market cap and higher revenues than Bakers, but still falls behind the rest of the competition even though Genesco has more stores than Foot Locker and Finish Line. Inventory turnover is also lagging behind all competitors. This is a significant disadvantage to Genesco, because the ability to sell through inventory and be able to provide fresh styles is vital to any retail company. However, Genesco is the fastest growing company in the past five years of the five companies analyzed, with a revenue growth rate of 6.87%. This is significant, because Genesco has managed to continually increase revenues in a hard economic state.

Genesco has an average beta relative to competitors, which is expected since they all operate in the shoe and accessory industry. Genesco manages to pull off a ROIC of 8.92, which is higher than that of the other four companies, which means Genesco is efficient and effective at generating returns from their capital.

Human Resources

Genesco contributes a large amount of their success to the integrity and character of former CEO Hal Pennington. Pennington served the company for 48 years, and retired last year. [3]The following is a list of current executives who are heading Genesco:

Title Age Since Joined Co. Compensation
Robert DennisPresident & CEO57201020042,674,410
James S. GulmiCFO, Senior VP65200819711,208,990
Roger G. SissonSenior VP, Secretary 4720061994245,652
James C. EstepaSenior VP59200019851,205,210
Jonathan D. CaplanSenior VP5720031982894,587
Mimi Eckel VaughnSenior VP4420092003N/A
Kenneth KocherSenior VP45200619971,119,460
Paul WilliamsVP, CAO5620061977N/A
[21]


Five Forces Industry Analysis

Threat of New Entrants:High

The barriers to entry are very low for the footwear and accessory retail industry, as well as the capital requirements. This makes it simple for companies to enter and compete in the industry, and results in a large number of competitors for Genesco. Large companies, including Genesco, may benefit from economies of scale, however, small companies may successfully compete by strategic marketing and sales initiatives.

Threat of Substitutes:High

Although there are no overall substitutes for shoes or accessories, consumers are quick to switch brands or pick a less expensive model over an overpriced one, because the consumer's switching costs are very low. This puts Genesco in the position to lose customers in an instant, however, the key to success in the industry is to differentiate your products from competitors and create brand loyalty, which is hard to do in such a large industry. Genesco attempts to do this by creating unique shopping environments and experiences coupled with superior customer service aimed at niche markets.

Buyer Power:High

Consumers of the footwear retail industry hold a tremendous amount of buyer power. Information on companies and products in this industry are widely available, and sites like bizrate.com allow you to compare products and prices side by side for the best prices and quality. Since there are so many competitors in this industry, there are a large number of sellers available to choose from, increasing buyer power. As mentioned before, switching costs are also low for the buyer, increasing the buyer power even further, and the key to overcoming this is establishing brand loyalty.

Supplier Power:High

Suppliers to this industry also hold a significant amount of power. It is relatively difficult for retailers to integrate backwards, as this requires significant capital investments and competencies in design and manufacturing that retailers typically do not have. That being said, suppliers can integrate forward with ease, as they already are manufacturing their products and would simply have to market directly to buyers as opposed to retailers. The retailers have an advantage, in that they are already widely known and established, however, the suppliers could easily skip the retailer and move directly to the end consumer. There are also a relatively small number of suppliers compared to the amount of retailers, further increasing the supplier power. With the rivalry in the industry being so intense, retailers are continuing to focus on differentiating their products, which require a relationship with a supplier and making the ability to use multiple suppliers low. This increases the switching costs for retailers and thus increasing the power of suppliers.

Competition:High

Overall, rivalry in this industry is extremely high. Firms in the footwear/accessories industry face an intense amount of competition, and with the other forces all being high it is a difficult industry to succeed in. In order to be successful, firms must differentiate themselves from others in order to increase brand and product dedication and loyalty. Genesco competes in this intense industry by fulfilling a niche market through it's several business segments.

SWOT Analysis

Strengths

The main strength of Genesco is that is is composed of many different business segments, all of which are serving a specific niche market. This decreases the scope of competition. Genesco also has a team of executives heading their business which have been around for several years. This shows that these employees have the loyalty and know how to be successful in this business. This loyalty and dependability trickles down to the entire employee base of Genesco, as this is the culture of Genesco, to be successful through dependable and loyal employees. Genesco Inc. has been around since 1924, giving them brand recognition and experience in this industry, further giving them a competitive edge.

Weaknesses

Serving niche markets can also be seen as a weakness. Targeting such a small range of markets constricts the possibilities of growth for the company. If Genesco were to expand into different areas of business, they could serve a larger target market and possibly capture higher revenues.

Opportunities

Genesco has been successful in the past by acquiring businesses, so there are many opportunities for them to continue doing this and expand further. They could look into buying more sports businesses or shoe stores, as this has proved to work well for them in the past. Another opportunity for them is to merge with another firm, as they tried to do with Finish Line.

Threats

Competing in the retail industry always poses a high number of threats of new competitors, as the five forces model shows that the competition in this industry is intense. A specific threat to Genesco is their target market. Genesco aims for a relatively young age group, and as the years go by the median age in the United States is continually rising, gradually decreasing the number of potential customers. [22] Also, serving a niche market always runs the risk of failing by not keeping up with consumer's taste changes.

References

  1. About Genesco
  2. Wikipedia:Genesco
  3. 3.0 3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8 3.9 "Genesco 2010 Financial Report"
  4. Genesco:Journeys
  5. Genesco:Journeys Kidz
  6. Genesco:Underground Station
  7. Genesco:Shi by Journeys
  8. Genesco:Hat World
  9. Genesco:Johnston and Murphy
  10. Genesco:Dockers
  11. About Collective Brands
  12. About Bakers Shoes
  13. About Foot Locker
  14. Genesco Rejects Foot Locker Takeover Bid
  15. About Finish Line
  16. Genesco 4th Quarter
  17. Yahoo! Finance
  18. Daily Finance
  19. Finsh Line Investor Relations
  20. Foot Locker, Inc.
  21. Reuters: Genesco Inc.
  22. U.S. Census
Wikinvest © 2006, 2007, 2008, 2009, 2010, 2011, 2012. Use of this site is subject to express Terms of Service, Privacy Policy, and Disclaimer. By continuing past this page, you agree to abide by these terms. Any information provided by Wikinvest, including but not limited to company data, competitors, business analysis, market share, sales revenues and other operating metrics, earnings call analysis, conference call transcripts, industry information, or price targets should not be construed as research, trading tips or recommendations, or investment advice and is provided with no warrants as to its accuracy. Stock market data, including US and International equity symbols, stock quotes, share prices, earnings ratios, and other fundamental data is provided by data partners. Stock market quotes delayed at least 15 minutes for NASDAQ, 20 mins for NYSE and AMEX. Market data by Xignite. See data providers for more details. Company names, products, services and branding cited herein may be trademarks or registered trademarks of their respective owners. The use of trademarks or service marks of another is not a representation that the other is affiliated with, sponsors, is sponsored by, endorses, or is endorsed by Wikinvest.
Powered by MediaWiki