Genesco Inc (NYSE:GCO) Reports Q2 Revenue Beat but Profitability Challenges Persist

Genesco Inc (NYSE:GCO) reported fiscal second-quarter results that demonstrated notable top-line strength while grappling with persistent profitability challenges. The footwear retailer posted net sales of $546 million for the quarter ended August 2, 2025, representing a 4% increase compared to the same period last year. This performance notably exceeded analyst expectations of approximately $537.7 million in revenue.

Key Financial Performance Metrics

The company's comparable sales increased 4%, marking its fourth consecutive quarter of positive comparable sales growth. This was driven by a 5% increase in same-store sales, though e-commerce comparable sales grew at a more modest 1%. By segment, Journeys Group delivered particularly strong results with a 9% comparable sales increase, while Schuh Group continued to struggle with a 4% decline. Johnston & Murphy showed improvement with a 1% comparable sales increase after posting a 5% decline in the prior year period.

Despite the revenue beat, profitability remained under pressure. The company reported a non-GAAP loss per share of $1.14, which was better than analyst expectations of a $1.26 loss per share. On a GAAP basis, the loss per share was $1.79 compared to a loss of $0.91 in the prior year quarter. Gross margin declined 100 basis points to 45.8%, primarily due to increased promotional activity at Schuh and margin pressure from tariffs affecting the Genesco Brands segment.

Market Reaction and Strategic Positioning

The market reaction to these results has been notably negative, with the stock declining approximately 11% in pre-market trading following the earnings release. This reaction appears to reflect investor concerns about the company's ongoing profitability challenges despite the revenue growth. The decline in gross margins and the wider operating loss compared to the prior year period suggest that operational efficiencies and cost management remain significant challenges.

Chair, President, and CEO Mimi E. Vaughn emphasized the company's strategic progress, noting that "our focus on product elevation, enhanced customer experience, and strengthened brand positioning is resonating with our broader target teen customer base." The strong performance at Journeys, which saw high-single digit comparable sales growth, indicates that the company's strategic initiatives are gaining traction in its largest segment.

Updated Guidance and Future Outlook

Management raised its full-year revenue outlook, now expecting total sales to increase 3% to 4% compared to fiscal 2025, up from previous guidance of 1% to 2% growth. Comparable sales are now projected to increase 4% to 5%, compared to prior guidance of 2% to 3% growth. The company maintained its adjusted EPS guidance range of $1.30 to $1.70 for the full year.

This updated revenue guidance suggests confidence in the company's continued top-line momentum, particularly heading into the important back-to-school and holiday seasons. Vaughn noted that "back to school is off to a very good start in the third quarter with Journeys comping nicely positive on the positive comps for the same period last year."

Balance Sheet and Operational Metrics

The company's inventory position increased 11% year-over-year, reflecting increased inventory across most segments to support the sales growth. Cash position decreased to $41.0 million from $45.9 million in the prior year, while total debt decreased to $71.0 million from $77.8 million. The company ended the quarter with 1,253 stores, a decrease of 5% from the prior year, reflecting ongoing optimization of its physical footprint.

For more detailed earnings information and analyst estimates, readers can view the complete earnings and estimates data.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Readers should conduct their own research and consult with a qualified financial advisor before making any investment decisions.