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Genesco(GCO +0.84%) reported Q2 fiscal 2026 results on August 28, 2025, with total revenue rising 4% year-over-year to $546 million, driven by 4% comparable sales growth and standout 9% comp gains at Journeys. Management raised its full-year revenue and comparable sales outlook for fiscal 2026 (ending Jan. 31, 2026), while maintaining adjusted EPS guidance despite persistent U.K. market challenges, tariff-driven margin pressure, and elevated promotional activity. The following insights highlight key strategic drivers, operational milestones, and risks from the earnings call.
Journeys powers Genesco comp growth
Journeys delivered 9% comparable sales growth year-over-year in Q2, and management confirmed that double-digit comp momentum has continued into Q3, building on last year's double-digit gains for the same period. In contrast, Schuh, the U.K. footwear business, saw comps decline 4% year-over-year, reflecting regional headwinds and increased promotional activity.
"Journeys is running double-digit comps through early Q3, which is really the heart of back-to-school, big volume times for us. And if you remember, last year, we started working on the assortment in -- at the beginning of the year. It takes about 6 months. We started to see comps turn in July. But when we hit the third quarter, we were running double-digit comps through back-to-school. So it's a double-digit comp on top of the double-digit comp. Really just tremendous work on the part of our merchant team. And the execution in the stores on back-to-school has really led to this great result."
-- Mimi Eckel Vaughn, Board Chair, President and Chief Executive Officer
This sustained compounding growth at Journeys demonstrates the effectiveness of Genesco's product and merchandising strategy, positioning the segment as a key driver of overall revenue acceleration and margin leverage during high-volume periods.
Store remodels drive outsized sales at Genesco
As of quarter-end, 57 Journeys stores had been remodeled to the 4.0 format, with these locations comping at over 25%, far outpacing the broader store fleet. Management plans to expand the initiative to more than 80 stores by year-end, focusing on the top 250 high-volume locations.
"We've been able to hang on to customers that we have traditionally served, but we are attracting more new customers into the 4.0 design. And so our plans are to have more than 80 stores open by the end of the year. And that's a substantial part of our fleet. We've been concentrating on the top 250 locations which have the highest volume. And so it's a real needle mover if you think about it, that it's going to be at 10% of our Journeys base. And I said they were comping at 25%-plus levels. We don't yet know how we'll anniversary beyond that, but we see some additional growth with the additional customer base. And then from there, we could certainly do 100 stores a year over the next couple of years and effect a large portion of the overall fleet."
-- Mimi Eckel Vaughn, Board Chair, President and Chief Executive Officer
The outperformance of remodeled stores highlights the scalability of the 4.0 initiative as a lever for sustained comp growth, customer acquisition, and improved store-level profitability in Genesco's most productive locations.
Tariffs and U.K. promotions pressure Genesco margins
Gross margin declined 100 basis points year-over-year to 45.8%, primarily due to increased promotional activity at Schuh and elevated tariffs, while SG&A expense leveraged 20 basis points to 48.4% of sales. Despite 200 basis points of SG&A leverage at Journeys, the company reported an adjusted operating loss of $14.3 million, wider than last year's $9.3 million loss.
"Gross margin for the quarter was 45.8%, down 100 basis points compared to last year. A more promotional environment at Schuh and the impact of higher tariffs and product liquidations at Genesco Brands Group in connection with the exit of the licenses were partially offset by margin expansion at J&M and Journeys. Overall SG&A expense was 48.4% of sales, leveraging 20 basis points year-over-year. Journeys delivered significant SG&A leverage of about 200 basis points on the strong comp results and our store fleet optimization efforts, showing the powerful leverage that is created in our operating model. The favorable leverage at Journeys was partially offset by Schuh's deleverage on their store comp decrease as well as an increase in brand awareness marketing across all of our banners. Adjusted operating loss for the quarter was $14.3 million. As we highlighted in our first quarter call, we expected our operating loss for the second quarter to be more than last year's loss of $9.3 million, primarily due to the early impact of tariffs ahead of mitigation efforts and the pull forward of strategic marketing investments to support the critical back half selling period."
-- Cassandra E. Harris, Senior Vice President, Finance, and Chief Financial Officer
Persistent U.K. market volatility and tariff-driven cost increases continue to weigh on Genesco's near-term profitability, underscoring the importance of ongoing cost mitigation and strategic marketing investments to offset macroeconomic risks.
Looking Ahead
Management reiterated full-year adjusted EPS guidance of $1.30 to $1.70 for fiscal 2026 (ending Jan. 31, 2026), maintained total revenue growth expectations at 3% to 4%, and raised comp sales growth outlook to 4% to 5%. Gross margin is now expected to decline 50% to 60% basis points year-over-year, while SG&A expense is projected to leverage 80% to 100% basis points. Capital expenditures are anticipated at $55 million to $65 million, with a focus on expanding 4.0 remodels, new store openings, and digital investments.
