Genesco Dashes Ahead

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Shoe retailer Genesco (NYS: GCO) managed to narrow its losses in the second quarter as its Journeys shoe stores and Lids hat stores recorded higher revenues. The estimate-topping numbers enabled the company to raise its annual outlook, and its shares popped 10%. What's driving the performance, and is there anything investors should be worried about?

A look at the numbers
Genesco's revenues rose to $470.6 million, up 29% from the year-ago period. Higher revenues for the quarter helped Genesco narrow its losses from a year ago. The company reported a loss of $0.4 million, compared with a loss of $3.2 million in the year-ago period.

The company saw big same-store sales gains from its Journey and Lids stores, and its June acquisition of Schuh added to overall revenues. The company paid $112.6 million for Schuh initially, with later payments amounting to millions more. The Schuh slice gives Genesco the ability to penetrate deeper into the U.K. and Ireland, where Schuh has 59 stores.

Genesco opened 11 new stores in its first quarter, with plans to open 83 new stores this year and shut another 76 that have lagged behind.

Footwear players have seen stronger sales growth recently as higher-end consumers have increased discretionary spending. Dick's Sporting Goods (NYS: DKS) and Timberland (NYS: TBL) , for instance, both posted strong quarterly results on the back of high sales growth. Foot Locker (NYS: FL) saw its profits rise sixfold as revenues soared in its most recent quarter.

The Foolish bottom line
Genesco raised its earnings-per-share outlook to a range of $3.35 to $3.42 from its earlier view of $2.90 to $2.97. It has already reported that its back-to-school range is performing well, with August same-store sales up 12%. Genesco should see more robust sales as next year's Olympics kick in, though the ongoing NBA lockout may weigh slightly on its margins. However, I think Genesco is well positioned to carry its strong performance forward.

To get a running update on all the news and analysis on Genesco, add it to your stock watchlist.

At the time this article was published Fool contributor Shubh Datta doesn't own any shares in the companies mentioned above.Motley Fool newsletter services have recommended buying shares of Timberland. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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