Genesco Inc. (NYSE:GCO) Stock Plummets 25% on Drastic Full-Year Guidance Cut

Genesco Inc. (NYSE:GCO) reported financial results for its fiscal 2026 third quarter, delivering a mixed performance that met sales expectations but fell short on profitability. The market's reaction was sharply negative, with the stock plummeting approximately 25% in pre-market trading, indicating deep investor concern over the company's revised outlook for the remainder of the fiscal year.

Third Quarter Performance vs. Estimates

The footwear and apparel retailer posted net sales of $616.2 million for the quarter ended November 1, 2025. This represented a 3% year-over-year increase and was essentially in line with Wall Street's revenue expectations. However, the bottom-line results and forward guidance were the primary drivers of the market's negative reaction.

• Revenue: $616.2 million reported vs. approximately $624.8 million estimated. Result: Slight Miss.
• Adjusted EPS (Non-GAAP): $0.79 reported vs. $0.89 estimated. Result: Miss by approximately 11%.

While the company highlighted its fifth consecutive quarter of positive comparable sales, the earnings per share fell short of analyst forecasts. On a GAAP basis, the comparison was favorable, with EPS of $0.51 compared to a loss of $1.76 in the prior-year quarter, which was heavily impacted by a large tax-related valuation allowance.

Market Reaction and Revised Outlook

The severe pre-market stock decline is less about the modest third-quarter EPS miss and more directly tied to a significant reduction in full-year guidance. Management cited a deteriorating outlook, particularly for its U.K.-based Schuh business and softer consumer spending patterns outside of peak shopping events.

The company provided a starkly lower forecast for fiscal 2026:

• Revised Full-Year Adjusted EPS Guidance: Approximately $0.95.
• Previous Guidance Range: $1.30 to $1.70.
• Analyst Consensus Estimate (for full year 2026): Approximately $1.59 (based on provided context).

This guidance cut of roughly 30-44% from the prior range, landing well below the analyst consensus, explains the market's punitive response. The company also lowered its full-year sales growth expectation to about 2%, down from a prior forecast of 3% to 4% growth.

Key Takeaways from the Earnings Report

Beyond the headline numbers, the press release revealed a bifurcated performance across the company's segments and several underlying pressures.

Segment Performance Highlights:

• Journeys Group: The standout performer, delivering a 6% comparable sales increase and a significant expansion in operating margin to 5.5% from 3.6% a year ago. CEO Mimi Vaughn credited strong back-to-school results and successful strategic initiatives.
• Schuh Group: A clear area of weakness, with comparable sales declining 2% and operating margin compressing to 0.5% from 2.6%. The company pointed to a "difficult U.K. market" and increased promotions.
• E-commerce Shift: Overall comparable sales rose 3%, driven entirely by a 5% increase in physical store sales. Comparable e-commerce sales declined by 3%, a notable reversal from 15% growth in the same quarter last year.

Financial Health and Operations:

• Gross margin declined by 100 basis points to 46.8%, pressured by tariffs, license exits, and promotions at Schuh.
• Selling and administrative expenses were well-controlled, leveraging 140 basis points due to cost-saving initiatives.
• Inventory levels were up 7% year-over-year, and the company continued to optimize its store footprint, ending the quarter with 4% fewer stores.

Conclusion

Genesco's third-quarter results paint a picture of a company navigating a challenging retail environment with mixed success. While its core Journeys brand demonstrates momentum and operational improvement, significant headwinds in the U.K. and a cautious view on consumer spending have forced a dramatic reset of expectations for the full year. The market's violent reaction underscores the weight given to the lowered guidance, as investors reassess the near-term profitability trajectory of the business. The company's ability to stabilize Schuh and maintain Journeys' growth will be critical in the coming quarters.

For a detailed look at historical earnings and future analyst estimates for Genesco, you can review the data here.

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