Genesco Inc.’s Lids Sports Group swung to a $388,000 operating loss in Q3 ended Nov. 3 from a $1.9 million operating profit a year earlier as its mall-based headwear retail business continued to “struggle with a lack of store traffic,” Genesco CEO Bob Dennis said in releasing earnings. Lids’ revenue declined 4.5% to $173 million.

Lids’ same-store sales decreased 2% as the “overall line-up” of teams involved in the Major League Baseball playoffs and World Series weren’t “as beneficial” as a year ago when the Houston Astros were World Series champions, Dennis said.

Sales of NFL gear were “up a little bit” in Q3 and “accelerated” as the season progressed, led by headwear and the NFL Logo Element series, Dennis said. In the NBA, LeBron James’ move to the Los Angeles Lakers has made the team “one of our strongest” in terms of jersey sales, he said.

“All-in-All, Lids’ business remains challenging,” Dennis said. “Headwear is currently between trends” and that is “the major driver of the lower (customer) traffic.”

The challenging sales come as Genesco continues “to work diligently” to sell the Lids business, a process that has taken “longer than expected” when the company announced the effort in February amid shareholder pressure. Lids Sports Group, which operates 1,115 stores and leased departments, posted $779.4 million in revenue in the year ended Feb. 3.

“We do remain convinced of the potential of the core of the Lids business” and if it isn’t sold, Genesco will focus on a “plan to realize that potential and significantly enhance profitability” of it, Dennis said.

Meanwhile, Genesco renewed its licensing agreement with Levi Strauss & Co. for Dockers men’s and women’s footwear. The pact, first signed in 1991 and which was set to expire on Nov. 30, generated $70 million in sales in the year ended Feb. 3, 2018. At the same time, Genesco terminated a licensing agreement with G-III Apparel Group for G.H. Bass footwear. The pact, signed in 2015, had $19 million in annual sales.

In Q3 ended Nov. 3, Genesco’s license-related business swung to a $189,000 operating loss from a $1.1 million operating profit a year ago as revenue declined to $18.7 million from $26.2 million due partly to the lack of the G.H. Bass brand.

Overall, Genesco moved to a $12 million profit in Q3 from a $164.8 million loss a year earlier when it took a $182.2 million goodwill impairment charge tied to its 2004 acquisition of Hat World. Revenue declined 1% to $713 million despite a 4% gain in same-store sales driven largely by its Journeys and Johnson & Murphy businesses.

Contact:

Genesco, Mimi Vaughn, CFO, 615-367-7386, mvaughn@genesco.com