Genesco Skates Higher On The Strength Of Journeys, Pivotal Research Says In Upgrade

Genesco Inc. GCO's Journeys is the preferred retailer for the Vans footwear consumer, according to Pivotal Research Group. 

The Analyst 

Pivotal analyst Mitch Kummetz upgraded Genesco from Hold to Buy and raised the price target from $44 to $54.

The Thesis

With peers beginning to post strong results, Genesco’s near term setup is too compelling to ignore, Kummetz said in a Thursday note. (See the analyst's track record here.)

In recent months, the analyst said he was hesitant to become too constructive on Genesco with Journeys facing a tough comparison in the fourth quarter.

“While this remains a consideration, it is trumped by what we believe was a strong Q2 and the continuation of favorable B2S trends into Q3,” the analyst said. 

Favorable back-to-school trends, particularly with VF Corp VFC’s ultra-hot Vans brand, have Kummetz modeling Journeys at a 6-percent comp, a figure he said could prove conservative. 

“We believe that Vans is Journeys’ largest brand and that Journeys is a go-to retailer for the Vans consumer."

Vans' strength is benefitting a host of footwear retailers, and Genesco appears to be next in line, the analyst said. 

Zumiez Inc. ZUMZ posted a 9.1-percent comp gain, likely driven by Vans, and Foot Locker, Inc. FL reported that casual footwear was up by double digits in its Q2 earnings report on the strength of Vans and Fila, Kummetz said.  

Shoe Carnival, Inc. SCVL posted a 6.7-percent comp, and Tillys reported a 4.3-percent Q2 comp gain on Wednesday that also appears to be driven by Vans, he said. 

The analyst is modeling for Genesco to post Q2 same-store sales growth of 2 percent. 

Price Action

Genesco shares were rallying by 8.25 percent to $50.20 at the time of publication Thursday.

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