What Happened:

Shares of footwear, apparel, and accessories retailer Genesco (NYSE:GCO) fell 17% in the morning session after the company reported second-quarter earnings results. Citing macro uncertainties and a tough operating environment, management provided guidance that was below expectations and calls for a revenue decline in the coming year, which is never a good sign for any business. 

On the other hand, Genesco beat analysts' revenue and EPS expectations this quarter. Overall, the quarter was fine, but that is the past. The future, as indicated by guidance, is uncertain and challenging, and this dynamic is weighing on shares.

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Genesco? Access our full analysis report here, it’s free.

What is the market telling us:

Genesco’s shares are very volatile and over the last year have had 37 moves greater than 5%. But moves this big are very rare even for Genesco and that is indicating to us that this news had a significant impact on the market’s perception of the business. 

The biggest move we wrote about over the last year was 9 months ago, when the stock dropped 12.2% on the news that the company reported third quarter results with same-store sales, revenue, and EPS all falling below Wall Street's expectations. Management blamed "a challenging operating environment" and a delayed ERP system implementation internally for the weakness. Consumer demand remains "choppy" and Genesco plans to increase promotions to bring in shoppers, which will likely lead to weaker gross margins. The most worrisome aspect of the quarter was that the company's full-year earnings forecast was lowered drastically and underwhelmed. Overall, this was a mediocre quarter for Genesco.

Genesco is down 22.9% since the beginning of the year, and at $26.58 per share it is trading 28.9% below its 52-week high of $37.37 from November 2023. Investors who bought $1,000 worth of Genesco’s shares 5 years ago would now be looking at an investment worth $735.48.

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