Genesco Inc. (NYSE:GCO) Q3 2023 Earnings Call Transcript

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Tom George: Yes. I think, Mitch, I’ll just add to that. We did see the back half of November, including Black Friday. We saw some better — some improvement in our business, but with a good — roughly 2/3 of the business to go in the quarter, we think it’s still — we should be more cautious with that much business to go. So, we’ve been more cautious on the trend going forward. Mimi points out some of the differences relative to last year relative to pre-pandemic, and we feel that there’s opportunity there potentially to outperform that. But it’s early — there’s a lot of business to deliver here. So, we think it’s best to take a more cautious view on the balance of the quarter at this point in time.

Mtich Kummetz: Okay. That’s helpful. And then a question on the wage inflation, the pressure there, I’m just wondering if you see any potential light at the end of the tunnel there? I mean I don’t know that minimum wage rates are going to go down, but maybe if we end up in a slightly less competitive labor market, could that potentially help that situation? And then I have one last question.

Mimi Vaughn: On wages, we have been really — I think that the biggest pressure of late has been just competitive pressure. I think we all came out of the pandemic, and we’re looking to hire people because our businesses — to drive our business. And we have seen some good abatement in that overall pressure to bring talent on board in the last few months. And just given where the economy is right now, we think there should be less competitive pressure going forward. But I’ll turn that to Tom to add anything else.

Tom George: I think what I’d add is we see opportunities for further automation, both in the stores and in our distribution centers as well. So that can — obviously, that’s going to require some capital. But at the same time, we see that’s going to be able to improve some of our operating expense lines going forward. I mean it’s going to take a while to implement that. And I’ll give you some more details around that when we do the fourth quarter. But I think there’s some light at the end of the tunnel there.

Mtich Kummetz: Okay. And then last question, just on the gross margin. So hopefully, my math is correct, and Tom, correct me if it isn’t. But for Q4, I back into a gross margin rate of like 46.5% to 46.9%, which is down a couple of hundred bps year-over-year, but it’s actually pretty flattish on a three-year basis. And I’m wondering, just given how difficult the environment is, I totally get that you would expect more promotions year-over-year. Are you basically thinking that promotional levels are going to be similar to kind of pre-COVID? Or is there a reason to think it would be worse than that? And if so, why wouldn’t the kind of the implied Q4 gross margin not be worse?

Tom George: Yes. I think the way you’re looking at the gross margin for the implied gross margin for Q4 is consistent with what we’re thinking about. And we are assuming that the fourth quarter this year will be — from a promotional perspective, will be similar to the fourth quarter of our fiscal year-end ’20.

Operator: All right. Thanks, everybody, for joining. I think there are no more questions in the queue, and we look forward to talking with you on our next call.

Tom George: Thank you.

Operator: This will conclude today’s call. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.

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