Genesco (GCO) Reports Second Quarter Loss, Skip Revenue Estimates

Genesco (GCO) came out with a quarterly loss of $1.23 per share compared to the Zacks Consensus Estimate of a loss of $1.26. For comparison, a year earlier earnings per share were $0.15. These numbers have been adjusted for one-off items.

This quarterly report presented an earnings surprise of 2.38%. A quarter ago, it was expected that this retailer of shoes, hats, clothing and accessories would post a loss of $1.78 per share when it actually produced a loss of $3.65, delivering a surprise of -105.06%.

The company has topped consensus EPS estimates three times over the last four quarters.

Genesco, which belongs to the Zacks Retail – Apparel & Footwear industry, posted revenues of $391.22 million for the quarter ended July 2020, missing the Zacks Consensus Estimate by 0.37%. For comparison, revenues from a year ago amounted to $486.57 million. The company has failed to beat consensus revenue estimates over the last four quarters.

The sustainability of the immediate share price movement based on the recently-released numbers and future earnings expectations will mostly depend on management’s commentary on the earnings call.

Genesco shares have lost approximately 54.4% since the beginning of the year compared to the S&P 500’s gain of 10.8%.

What’s next for Genesco?

While Genesco has underperformed the market so far this year, the question that comes to investors’ minds is: what’s next for the stock?

There are no simple answers to this key question, but one reliable measure that can help investors address this issue is the company’s earnings prospects. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately.

Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions.

Prior to the earnings release, Genesco’s estimate revision trend was unfavorable. While the magnitude and direction of estimate revisions may change following the company’s just-released earnings report, the current status translates into the stock’s Zacks Rank #4 (Sell). Therefore, it can be expected that the company’s shares will underperform the market in the near future. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

It will be interesting to see how estimates for the next quarters and the current fiscal year change in the coming days. The current consensus EPS estimate is $1.12 on revenue of $517.45 million for the coming quarter and -$0.15 on revenue of $1.89 billion for the current fiscal year.

Investors should be aware that the outlook for the industry may also have a significant impact on share prices. In terms of the Zacks Industry Rank, the Retail – Apparel & Footwear industry is currently in the bottom 10% of the 250+ Zacks industries. Our research shows that the top 50% of Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

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