Footwear, apparel, and accessories retailer Genesco (NYSE: GCO) reported revenue ahead of Wall Street’s expectations in Q2 CY2025, with sales up 4% year on year to $546 million. Its non-GAAP loss of $1.14 per share was 8.6% above analysts’ consensus estimates.

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StockStory’s Take

Genesco’s second quarter results were received unfavorably by the market, despite sales and adjusted earnings per share both exceeding Wall Street expectations. Management attributed the quarter’s performance to continued strength at its Journeys business, which saw broad-based gains across teen-focused footwear brands and benefited from successful store investments and refreshed product assortments. CEO Mimi Vaughn emphasized that “Journeys continues to gain market share,” driven by newness and a diversified offering. However, softness in the U.K. market, particularly at Schuh, along with margin pressures from increased promotional activity and tariff impacts, weighed on overall profitability.

Looking ahead, Genesco’s guidance is shaped by ongoing momentum at Journeys, strategic initiatives to broaden its customer base, store remodels, and new marketing campaigns. Management is focused on mitigating risks from tariff increases and challenging consumer environments, especially in the U.K. Vaughn highlighted the rollout of the Life on Loud campaign and continued investments in product elevation and store formats as key drivers for the second half, while cautioning that volatility in international markets and promotional pressures could persist.

Key Insights from Management’s Remarks

Management pointed to Journeys’ sustained comp growth and early results from transformation initiatives as key drivers of the quarter, while also addressing challenges in other segments and the impact of tariffs.

• Journeys Transformation Drives Growth: The Journeys brand maintained strong momentum through a diversified product strategy, expanding its reach with new and reintroduced brands and delivering four consecutive quarters of positive comparable sales. Management credited its broadened assortment and targeted marketing for attracting a wider teen audience.

• Store Investments Show Results: The new Journeys 4.0 store format delivered over 25% sales lifts at remodeled locations. Management highlighted that these stores are attracting new customers and supporting higher average transaction values, with plans to accelerate the rollout to over 80 stores by year-end.

• Schuh Faces U.K. Headwinds: Schuh experienced significant traffic declines and increased promotional activity in the U.K., pressuring margins. Management responded with inventory actions and initiatives to drive store traffic, but expects volatility and margin pressure to continue in the near term.

• Johnston & Murphy Rebound: The Johnston & Murphy segment returned to positive comparable sales, driven by fresh assortments in both footwear and apparel. Management noted particular strength in blazers, pants, and revamped dress shoes, with further product innovation planned for upcoming quarters.

• Portfolio Reset at Genesco Brands Group: The company continued to wind down certain licenses while activating a notable new partnership with Wrangler for footwear, targeting a launch in 2026. Liquidation of legacy inventory affected margins, but management views the Wrangler partnership as a significant growth opportunity.

Drivers of Future Performance

Genesco expects ongoing product and brand investments, along with continued progress in store optimization, to drive results, while tariffs and consumer caution remain key risks.

• Journeys Expansion and Marketing: Management is banking on the broader customer reach enabled by refreshed Journeys branding, digital campaigns, and the rollout of the Life on Loud platform. They view these efforts as essential to sustaining sales momentum, especially during key back-to-school and holiday periods.

• Margin Pressure from Tariffs: The company expects continued margin headwinds from a second round of tariff increases, particularly affecting Schuh and Genesco Brands Group. Management is attempting to offset this through cost controls and inventory management, but acknowledges that gross margin could remain under pressure through the remainder of the year.

• Store Optimization and Remodels: Ongoing investments in the Journeys 4.0 store format and targeted store closures are expected to drive efficiency and profitability. Management believes these store initiatives, combined with enhanced customer experience, will be critical to recapturing peak operating profit levels.

Catalysts in Upcoming Quarters

Looking forward, the StockStory team will be focused on (1) the pace and impact of Journeys 4.0 store remodels and their effect on traffic and conversion, (2) the ability of new marketing campaigns like Life on Loud to attract and retain a broader teen customer base, and (3) ongoing margin management as tariff and promotional pressures continue. The progress of the Wrangler partnership and recovery in the U.K. market will also be important markers for sustained performance.

Genesco currently trades at $31.04, down from $32.99 just before the earnings. Is there an opportunity in the stock?Find out in our full research report (it’s free).

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