Genesco’s growth strategy is working
Strong same-store sales in the third quarter did not keep Genesco Inc. from lowering its guidance, as the company takes steps to reduce inventory through promotions and discounts.
The specialty retailer of hats and accessories said that for the third quarter ended Oct. 31, same-store sales increased 7%. Income was $32.9 million, or $1.43 per diluted share, compared to earnings from continuing operations of $28.8 million, or $1.21 per diluted share, for the prior year quarter. Revenue was $774 million from $723 million in the third quarter of fiscal 2015.
"Our results were driven by strong full price selling combined with higher promotional activity in line with our strategy to right size the Lids Sports Group's inventory levels. The pressure on gross margins from our clearance actions offset some of the earnings upside from our solid top-line performance," said Robert J. Dennis, chairman, president and CEO. "Recent comparable sales trends have been volatile and we expect that the retail market will remain promotional through the balance of the Holiday season. Given these factors in combination with the incremental promotional activity we now plan at Lids Sports Group through the fourth quarter to conclude its inventory reduction initiative and to position it for the freshest possible start to the next fiscal year, we are revising our full year outlook."
In November, the company acquired 37-store Canadian retail footwear chain Little Burgundy.
Dennis concluded: "While we are disappointed with our reduced outlook, we believe that the steps we are taking now will allow the Company to realize greater earnings power next year and beyond."
Genesco Inc., a Nashville-based specialty retailer, sells footwear, headwear, sports apparel and accessories in more than 2,800 retail stores and leased departments throughout the U.S., Canada, the United Kingdom, the Republic of Ireland and Germany, principally under the names Journeys, Journeys Kidz, Shi by Journeys, Schuh, Schuh Kids, Lids, Locker Room by Lids, Lids Clubhouse, Johnston & Murphy.
Best Buy Got the Most For Its Money This Black Friday
For many years, Black Friday sales promotions have defined the retail environment during the long Thanksgiving weekend. Despite evidence that Black Friday has lost some of its luster, it remains a very large shopping event and is actively contested by major retailers.
Indeed, according to the NRF, close to 102 million consumers shopped in brick-and-mortar stores over the Black Friday holiday weekend.
Merchants spent over a billion dollars on advertising in the run-up to the big holiday shopping weekend to pull in their share of these shoppers. Which retail advertisers got a strong ROI this year in the form of in-store traffic and which ones lagged?
To answer this question, Kantar Media and location insights specialist Placed Inc. merged their respective data on advertising expenditures and in-store visits to evaluate the amount of incremental store visits per dollar of advertising. The measure provides a way to compare the results achieved by top national retail chains over the four-day Thanksgiving weekend.
Analysis: The analysis, Kantar Media used its syndicated monitoring data and developed preliminary estimates of retailers' multimedia ad spending for the period of November 2-25 (the day before Thanksgiving). Placed used its opt-in location panel and tracked visits to retail stores, comparing the four-day Thanksgiving weekend (November 26-29) to a benchmark period four weeks earlier (October 29-November 1) and calculating the lift in store visits for each retailer.
Best Buy, J.C. Penney gain the most
To understand the relationship between a retailer’s ad spending and the lift in store visits we calculated the ‘lift visits per ad dollar’, which is a measure of efficiency. To compare relative performance across retailers, we converted this measure to an index scale. The highest lift visits per ad dollar was assigned an index of 100 and all other values were scaled against it.
In the aggressive competition among department stores and mass merchandisers, J.C. Penney topped its primary rivals with an efficiency index of 75. It spent $25.3 million on advertising and received 132% more store visits compared to the benchmark period, also the best performance of the retailers we analyzed.
However, the big lift in J.C. Penney store traffic is a mixed signal. It comes off a baseline rate in the lower half of its competitive set but also indicates that customers still give consideration to the store as a shopping destination.
Walmart had an efficiency index of 65 and Target was close behind at 63. Walmart’s big advantage in spending ($80.9 million versus $47.7 million for Target) was offset by a smaller lift rate in store visits.
Compared to 2014, Target nearly tripled its lift rate while Walmart’s only rose a few points. This may be partially due to Walmart’s greater focus on driving sales throughout the entire month of November by releasing offers earlier and also promoting online deals.
Walmart is also top-ranked in store traffic, and with consumers already going there so frequently for everyday needs it’s expected that they would have less room to grow over the holiday weekend.
At the other end of the rankings, Macy’s had an efficiency index of 33 which was the lowest of all twelve retailers in the analysis. Like J.C. Penney, Macy’s more than doubled the foot traffic into its stores from a low benchmark level but spent much more heavily on advertising (nearly $50 million) to help accomplish it, affecting the efficiency index.
Among the big-box home improvement stores, Lowes and Home Depot battled to a draw. They had nearly identical efficiency index scores (45 and 44, respectively) and similar visit lift rates (34% and 36%, respectively). A significant proportion of the pre-Thanksgiving ad spend from each retailer was for holiday decorations.
Consumer electronics are a popular item on consumer’s shopping lists for Black Friday deals and Best Buy stood up to the retail challenge posed by mass merchandisers. Leveraging $24.2 million of ad expenditures, Best Buy had a 125% lift in store visits. It produced the best ratio of lift visits per ad dollar among all retailers analyzed, thus earning an efficiency index of 100.
Black Friday messaging comes into focus later
Leading up to the big retail sales weekend, Kantar Media also examined the TV ad messages from our select group of retailers. Specifically, we identified ads with a direct mention of Black Friday in their messaging. Compared to last year, a majority of retailers reduced their emphasis on Black Friday messaging in TV advertising.
When we examined the timing of Black Friday messaging by these retailers, a subtle shift in tactics became apparent. Not much has changed in the message mix during the last three days of the analyzed time period, which is the Monday thru Wednesday of Black Friday week. It was still dominated by announcements promoting the Black Friday sales event and special deals. It was during the previous week that merchants cut back on Black Friday themed ads and instead devoted a larger share of budget to generic ‘on sale’ messages that weren’t tied to Black Friday.
While there have been numerous reports that Black Friday is backfiring on retailers and consumers are more resistant to its appeal, it still seems to play an important role in retailers’ promotional plans. However, it’s increasingly part of a broader combination of holiday promotions and discounting that starts earlier in November and continues throughout the shopping season. At each point, retailers are tactically supporting today’s deal with today’s advertising to try and capture today’s purchases. When Black Friday is 3-4 days away, timing dictates that ad messaging start providing support, not because it’s Black Friday but because it’s the next event on the marketing calendar.
Ultimately, the holiday shopping season is a marathon, not a sprint – and winning Black Friday is just the beginning. Kantar Media will continue to release research throughout the season to keep you informed, so please visit kantarmedia.us or follow us on Twitter at @kantar_media to see our latest updates and stay ahead this holiday.
Kantar Media is a global leader in media intelligence, providing clients with the data they need to make informed decisions on all aspects of media measurement, monitoring and selection. It is part of Kantar, the data investment management arm of WPP.
Five Below still on top in Q3
Fast-growing teen retailer Five Below grew even faster in the third quarter, as the company reported an increase in same-store sales and raised its outlook.
For the period ended Oct. 31, same store sales increased 4.8%. Net sales increased by 23% to $169.7 million from $138 million in the third quarter of fiscal 2014. Net income was $4.3 million, compared to $3.3 million. Diluted income per common share was 8 cents, compared to 6 cents per share in the third quarter of fiscal 2014.
"We are very pleased to report third quarter financial results that came in ahead of our expectations," said Joel Anderson, CEO. "Continued strength in the performance of our new stores and above-plan comp results were driven by our compelling assortment of trend-right products at a great value that resonated with customers."
The company opened 17 new stores and ended the quarter with 434 stores in 27 states. This represents an increase in stores of 18.9% from the end of the third quarter of fiscal 2014.
According to Bloomberg, Five Below's current growth trajectory puts it on the same path of Dollar Tree, growing at the same pace as Dollar Tree did back in the mid-1990s, back when Dollar Tree produced near equal revenue to Five Below right now.
"We have been in preparation mode for the fourth quarter all year and believe we are well-positioned for the peak holiday weeks that lie ahead. Our teams have planned exciting marketing campaigns to highlight a great holiday product assortment, which we believe will deliver ample newness and 'wow' for our customers and reinforce our position as a destination for holiday shopping," Anderson said.
Five Below also announced that it has appointed Daniel Kaufman to its board of directors. Kaufman serves as SVP, general counsel and corporate secretary of GameStop.