Genesco's Strong Same Store Sales Growth Should Lead To All Time Highs For 2012

| About: Genesco Inc. (GCO)
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Retailer Genesco (NYSE:GCO) reported second-quarter earnings last week and saw its shares approach a new all time high. The owner of Johnston and Murphy, Journey's, Hat World, and Lids saw same store sales increase across all brands and easily beat analysts' estimated guidance for the quarter. Genesco is a small $1.7 billion retailer that I recommended back in November as part of an investor's guide to the shopping mall. Since the time of that article, shares are up 20% and now have plenty of room to run to close out 2012.

In the second quarter, the retailer earned $10.6 million, representing $0.44 in earnings per share. Adjusted for one-time items, the company earned $12.1 million, good for $0.50 in earnings per share. Last year, the company posted earnings per share of $0.22 in the second quarter. Genesco saw net sales increase 15% to $543.5 million.

Comparable same store sales saw growth across all areas. Broken down by retailer, the first quarter results were:

· Lids Sports Group: +2%

· Journeys: +6%

· J&M Retail: +2%

· Schuh: +9% (only includes July)

Here is a look at second quarter sales by business segment including the company's licensed brands, which includes Dockers and Sure Grip footwear brands. Last year's second-quarter sales are in parenthesis:

· Journeys: $209.4 million ($194.7 million)

· Lids: $181.9 million ($177.5 million)

· Schuh: $81.1 million ($34.0 million)

· Johnston & Murphy: $48.3 million ($45.6 million)

· Licensed: $22.3 million ($18.5 million)

· Other: $0.5 million ($0.3 million)

The company continues to expand its presence in shopping malls and as tenants of strip malls. In the second quarter, Genesco opened 21 new stores under its retail brands, while also closing 15 underperforming stores in the process. The company had over 2,400 stores at the end of the second quarter broken down as:

· Journeys: 1147

· Schuh: 83

· Lids: 1021

· Johnston & Murphy: 153

Genesco also raised their full-year guidance during their second quarter report. The company now sees adjusted earnings per share of $4.88-$5.00 for the fiscal year. Previously, the company had forecasted $4.70-$4.82 in earnings per share. Last fiscal year, Genesco put up $4.09 in earnings per share. Analysts are forecasting earnings per share of $4.81 on $2.6 billion in revenue. The following year, analysts see the company posting earnings per share of $5.44.

Another bright spot of the earnings call was Genesco's increased share buyback plan. The company has created a new buyback deal that will see $75 million worth of its shares retired. Prior to this announcement, the company had a $35 million share repurchase plan.

Genesco is widely held by several mutual fund families. Eagle Asset Management owns around 14% of the company's shares. Vanguard owns 5.5% of the company as well. The stock is a favorite of small cap funds and has performed nicely over the last several years. Shares of Genesco sit at $70.65, only 10% below their all-time high of $78.97. The company has seen its shares trade up 20% on the calendar year. Shares are also up 20% since the last time I recommended buying shares of the company. With shares trading for 14 times this year's guidance, the company is beginning to look like a bargain.

Look for the company to beat analysts in the third and fourth quarter. This high flying stock could carry its strong sales growth into record high share prices for the 2012 holiday season.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.