GENESCO INC (GCO)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

This section discusses management’s view of the financial condition, results of operations and cash flows of the Company. This section should be read in conjunction with the information contained in our Annual Report on Form 10-K for the fiscal year ended January 31, 2026, including the Risk Factors section, and information contained elsewhere in this Quarterly Report on Form 10-Q, including the Condensed Consolidated Financial Statements and Notes to those financial statements. The results of operations for any interim period may not necessarily be indicative of the results that may be expected for any future interim period or the entire fiscal year.

Summary of Results of Operations

Our net sales decreased 3.0% to $529.9 million in the second quarter of Fiscal 2027 compared to $546.0 million in the second quarter of Fiscal 2026. The net sales decrease compared to last year's second quarter reflects the impact of net store closings resulting from our ongoing footprint optimization, decreased sales in Genesco Brands Group as we exited licenses, a 6% decrease in e-commerce comparable sales reflecting our prioritization of full-price selling at Schuh Group and an unfavorable foreign exchange impact, partially offset by a 1% increase in same store sales and higher sales from enlarged stores. The Journeys Group business had a strong second quarter of Fiscal 2027 with comparable sales up 2% on top of a 5% comparable gain last year, driven by strength in the product assortment and other initiatives. Schuh Group comparable sales were down 9% for the second quarter of Fiscal 2027 reflecting our decision to prioritize full-price selling over discounts and promotions. Johnston & Murphy Group also had a strong second quarter of Fiscal 2027 with comparable sales up 4% in the second quarter of Fiscal 2027 driven by increased store sales due to new and improved product assortments, both in apparel and footwear, benefitting from brand awareness through marketing and social media campaigns. By segment, Journeys Group sales were flat, Schuh Group sales decreased 10%, Johnston & Murphy Group sales increased 5% and Genesco Brands Group sales decreased 21% or $6.7 million in the second quarter of Fiscal 2027 compared to the second quarter of Fiscal 2026. Schuh Group's sales decreased 10% on a local currency basis for the second quarter of Fiscal 2027.

Gross margin increased 8.9% to $272.1 million in the second quarter of Fiscal 2027 from $249.9 million in the second quarter of Fiscal 2026 and increased 560 basis points as a percentage of net sales from 45.8% in the second quarter of Fiscal 2026 to 51.4% in the second quarter of Fiscal 2027. The overall increase in gross margin as a percentage of net sales in the second quarter of Fiscal 2027 is due primarily to tariff refunds of $21.8 million, less promotional activity and higher full-price selling at Schuh Group, favorable changes in sales mix, the license exit benefit and tariff mitigation actions across our branded businesses.

Selling and administrative expenses in the second quarter of Fiscal 2027 decreased 1.8% to $259.6 million from $264.3 million compared to the second quarter of Fiscal 2026. Selling and administrative expenses increased 60 basis points as a percentage of net sales in the second quarter of Fiscal 2027 compared to the second quarter of Fiscal 2026 from 48.4% to 49.0% as a result of the sales decline. The increase as a percentage of net sales reflects increased occupancy and performance-based compensation expense, partially offset by decreased selling salaries, marketing expenses and other ongoing cost savings initiatives.

Operating margin was 0.7% in the second quarter of Fiscal 2027 compared to (2.6)% in the second quarter of Fiscal 2026. The overall improvement in operating margin for the second quarter of Fiscal 2027 compared to the second quarter of Fiscal 2026 primarily reflects increased gross margin as a percentage of net sales, partially offset by a net loss of $8.9 million in asset impairment and other charges and deleverage in expenses as a percentage of net sales.

Earnings from continuing operations before income taxes (“pretax earnings”) for the second quarter of Fiscal 2027 was $3.4 million compared to a loss from continuing operations before income taxes ("pretax loss") of $16.0 million for the second quarter of Fiscal 2026. Pretax earnings for the second quarter of Fiscal 2027 included an asset impairment and other charge of $8.9 million which included a $6.9 million charge for costs related to proxy contest, a $1.0 million charge for other legal matters, a $0.4 million charge for costs associated with information technology transformation, a $0.5 million charge for severance and other restructuring and a $0.1 million charge for store restructuring. The pretax loss for the second quarter of Fiscal 2026 included asset impairment and other charges of $0.1 million for severance.

We had an effective income tax rate of (2.5)% and (15.0)% in the second quarter of Fiscal 2027 and Fiscal 2026, respectively. The higher effective tax rate in the second quarter of Fiscal 2027 compared to the second quarter of Fiscal 2026 is primarily a result of the impact of the OBBBA in the second quarter of Fiscal 2026 which did not have a recurring impact in the second quarter of Fiscal 2027, as well as the impact of the valuation allowance in certain jurisdictions on our effective tax rate as a result of changes in the mix of earnings and losses among jurisdictions.

Net earnings in the second quarter of Fiscal 2027 were $3.5 million, or $0.32 diluted earnings per share, compared to a net loss of $18.5 million, or $1.79 diluted loss per share, in the second quarter of Fiscal 2026.

Critical Accounting Estimates

We discuss our critical accounting estimates in Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations", in our Annual Report on Form 10-K for the fiscal year ended January 31, 2026. We describe our significant accounting policies in Note 1, "Summary of Significant Accounting Policies", of the Notes to Consolidated Financial Statements included in our Annual Report on

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Form 10-K for the fiscal year ended January 31, 2026. There have been no significant changes in our definition of significant accounting policies or critical accounting estimates since the end of Fiscal 2026.

Key Performance Indicators

In assessing the performance of our business, we consider a variety of performance and financial measures. The key performance indicators we use to evaluate the financial condition and operating performance of our business are comparable sales, net sales, gross margin, operating income and operating margin. These key performance indicators should not be considered superior to, as a substitute for or as an alternative to, and should be considered in conjunction with, the U.S. GAAP financial measures presented herein. These measures may not be comparable to similarly titled performance indicators used by other companies.

Comparable Sales

We consider comparable sales to be an important indicator of our current performance, and investors may find it useful as such. Comparable sales results are important to achieve leveraging of our costs, including occupancy, selling salaries, depreciation, etc. Comparable sales also have a direct impact on our total net revenue, working capital and cash. We define "comparable sales" as sales from stores open longer than one year, beginning with the first day a store has comparable sales (which we refer to as "same store sales"), and sales from websites operated longer than one year and direct mail catalog sales (which we refer to in this report as "comparable e-commerce sales"). Temporarily closed stores are excluded from the comparable sales calculation if closed for more than seven days. Expanded stores are excluded from the comparable sales calculation until the first day an expanded store has comparable prior year sales. Current year foreign exchange rates are applied to both current year and prior year comparable sales to achieve a consistent basis for comparison.

Operating Margin

Operating margin is a ratio calculated by dividing operating income (loss) by net sales. We believe operating margin provides investors with useful information related to the profitability of our business after considering all of the selling, general and administrative expenses and other operating charges incurred. We use this measure in making financial, operating and planning decisions and in evaluating our overall performance.

Results of Operations – Second Quarter of Fiscal 2027 Compared to Second Quarter of Fiscal 2026

Journeys Group

Net sales from Journeys Group were essentially flat at $317.8 million in the second quarter of Fiscal 2027 compared to $318.2 million in the second quarter of Fiscal 2026. Journeys net sales for the second quarter of Fiscal 2027 reflects a 2% increase in comparable sales, with increases in both stores and e-commerce channels, and higher sales from enlarged stores, offset by a 5% decrease in the average number of stores in the second quarter of Fiscal 2027. The increased comparable sales in the second quarter of Fiscal 2027 was driven by the strong performance of our 4.0 store remodels and other initiatives as well as elevated product assortment across athletic and casual, achieving higher average transaction size and more full-price selling.

We closed 17 Journeys Group stores in the second quarter of Fiscal 2027. Journeys Group operated 924 stores at the end of the second quarter of Fiscal 2027, including 176 Journeys Kidz stores in the United States, 33 Journeys stores in Canada and 30 Little Burgundy stores in Canada, compared to 984 stores at the end of the second quarter of Fiscal 2026, including 200 Journeys Kidz stores in the United States, 33 Journeys stores in Canada and 30 Little Burgundy stores in Canada.

The 140 basis point improvement in operating margin for Journeys Group for the second quarter of Fiscal 2027 compared to the second quarter of Fiscal 2026 was primarily due to a 180 basis point decrease in selling and administrative expenses as a percentage of net sales. This

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improvement reflects leverage of expenses in the second quarter of Fiscal 2027, especially decreased selling salaries, marketing expense and other expenses and demonstrates the impact of our productivity efforts, cost savings initiatives and closing underperforming stores. The increase in operating margin was partially offset by a 40 basis point decrease in gross margin as a percentage of net sales, reflecting lower initial margins as a result of changes in brand mix, partially offset by lower markdowns.

Schuh Group

Net sales from Schuh Group decreased 10.1

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our Consolidated Financial Statements and related Notes and other financial information appearing elsewhere in this Annual Report on Form 10-K, and with Part II, Item 7 (“Management’s Discussion and Analysis of Financial Condition and Results of Operations”) of our Annual Report on Form 10-K for the fiscal year ended February 1, 2025, filed with the SEC on March 26, 2025, which provides a discussion of our financial condition and results of operations for Fiscal 2025 compared to our Fiscal 2024.

Summary of Results of Operations

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Net sales increased 4.8% to $2.4 billion in Fiscal 2026 compared to Fiscal 2025.

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Journeys Group sales increased 7% and Schuh Group sales increased 4%, partially offset by a sales decrease of 4% at Genesco Brands Group, while Johnston & Murphy Group sales were flat for Fiscal 2026 as compared to Fiscal 2025.

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Total comparable sales increased 6% for Fiscal 2026, including a 6% increase in same store sales and a 4% increase in comparable e-commerce sales.

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Gross margin decreased 90 basis points as a percentage of net sales from 47.2% in Fiscal 2025 to 46.3% in Fiscal 2026.

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Selling and administrative expenses decreased 120 basis points as a percentage of net sales from 46.4% in Fiscal 2025 to 45.2% in Fiscal 2026.

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Operating margin increased 10 basis points as a percentage of net sales from 0.6% in Fiscal 2025 to 0.7% in Fiscal 2026.

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The effective income tax rate decreased from 309.6% in Fiscal 2025 to (5.4)% in Fiscal 2026 as a result of the impact of the One Big Beautiful Bill Act ("OBBBA") in Fiscal 2026 and a $26.2 million valuation allowance in Fiscal 2025.

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Diluted earnings per share from continuing operations was $1.25 per share in Fiscal 2026 compared to a diluted loss per share from continuing operations of $1.80 per share in Fiscal 2025.

Key Performance Indicators

In assessing the performance of our business, we consider a variety of performance and financial measures. The key performance indicators we use to evaluate the financial condition and operating performance of our business are comparable sales, net sales, gross margin, operating income and operating margin. These key performance indicators should not be considered superior to, as a substitute for or as an alternative to, and should be considered in conjunction with, the U.S. GAAP financial measures presented herein. These measures may not be comparable to similarly-titled performance indicators used by other companies.

Comparable Sales

We consider comparable sales to be an important indicator of our current performance, and investors may find it useful as such. Comparable sales results are important to achieve leveraging of our costs, including occupancy, selling salaries, depreciation, etc. Comparable sales also have a direct impact on our total net revenue, working capital and cash. We define "comparable sales" as sales from stores open longer than one year, beginning with the first day a store has comparable sales (which we refer to in

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this report as "same store sales"), and sales from websites operated longer than one year and direct mail catalog sales (which we refer to in this report as "comparable e-commerce sales"). Temporarily closed stores are excluded from the comparable sales calculation if closed for more than seven days. Expanded stores are excluded from the comparable sales calculation until the first day an expanded store has comparable prior year sales. Current year foreign exchange rates are applied to both current year and prior year comparable sales to achieve a consistent basis for comparison.

Results of Operations—Fiscal 2026 Compared to Fiscal 2025

Our net sales for Fiscal 2026 increased 4.8% to $2.4 billion compared to $2.3 billion in Fiscal 2025. The net sales increase for Fiscal 2026 reflected a 6% increase in comparable sales, including a 6% increase in same store sales and a 4% increase in e-commerce comparable sales, and a favorable foreign exchange impact, partially offset by 42 net store closings and decreased wholesale sales. The consumer environment remains selective and intentional. Consumers tend to engage during key shopping moments and reduce discretionary spending outside of key shopping moments. Journeys Group had a strong year with comparable sales up 9%, fueled by strength in product assortment and other initiatives. Schuh Group comparable sales were flat for the year, reflecting the challenging retail environment in the U.K. Johnston & Murphy Group comparable sales were flat for the year reflecting lower store sales. Journeys Group sales increased 7% and Schuh Group sales increased 4%, partially offset by a sales decrease of 4% at Genesco Brands Group, reflecting the wind-down of Levis and other licenses, while Johnston & Murphy Group sales were flat for Fiscal 2026 compared to Fiscal 2025. Schuh Group's sales were flat on a local currency basis for Fiscal 2026.

Gross margin increased 2.7% to $1.127 billion in Fiscal 2026 from $1.097 billion in Fiscal 2025. Gross margin decreased 90 basis points as a percentage of net sales from 47.2% in Fiscal 2025 to 46.3% in Fiscal 2026, reflecting decreased gross margin as a percentage of net sales in Schuh Group and Genesco Brands Group, while gross margin as a percentage of net sales was flat in both Journeys Group and Johnston & Murphy Group. The overall decrease in gross margin as a percentage of net sales reflects increased promotional activity at Schuh Group and lower margins at Genesco Brands Group related to the exit of licenses and ongoing tariff pressure.

Selling and administrative expenses in Fiscal 2026 increased 2.0% to $1.101 billion compared to $1.080 billion in Fiscal 2025. Selling and administrative expenses decreased 120 basis points as a percentage of net sales from 46.4% in Fiscal 2025 to 45.2% in Fiscal 2026, reflecting decreased expenses as a percentage of net sales at Journeys Group and Genesco Brands Group, partially offset by increased expenses as a percentage of net sales at Schuh Group and Johnston & Murphy Group. The overall decrease in expenses as a percentage of net sales in Fiscal 2026 reflects a decrease in occupancy costs and selling salaries along with other expenses as part of our cost savings initiatives. Explanations of the changes in results of operations are provided by business segment in discussions following these introductory paragraphs.

Operating margin was 0.7% in Fiscal 2026 compared to 0.6% in Fiscal 2025 reflecting improved operating margin at Journeys Group, partially offset by decreased operating margin at Schuh Group, Johnston & Murphy Group and Genesco Brands Group. The overall improvement in operating margin in Fiscal 2026 primarily reflects decreased selling and administrative expenses as a percentage of net sales, partially offset by decreased gross margin as a percentage of net sales and higher asset impairment and other charges in Fiscal 2026 compared to Fiscal 2025.

Earnings from continuing operations before income taxes (“pretax earnings") for Fiscal 2026 were $12.6 million, compared to $9.3 million for Fiscal 2025. Pretax earnings for Fiscal 2026 included asset impairment and other charges of $8.1 million which included $3.9 million for store restructuring, $2.9 million for costs associated with information technology transformation, $0.7 million for asset impairments and $0.6 million for severance. Pretax earnings for Fiscal 2025 included asset impairment and other charges of $3.2 million which included $1.8 million for severance and $1.4 million for asset impairments.

The effective income tax rate was (5.4)% for Fiscal 2026 compared to 309.6% for Fiscal 2025. The lower effective tax rate for Fiscal 2026 compared to Fiscal 2025 reflects the impact of the enactment of income tax law changes under the OBBBA in Fiscal 2026 and their interaction with our valuation allowance in the U.S. jurisdiction coupled with a tax benefit associated with our

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losses generated in our U.K. tax jurisdiction. Conversely, the higher effective tax rate for Fiscal 2025 reflects a $26.2 million U.S. valuation allowance recorded in Fiscal 2025, reflecting the uncertainty regarding our ability to realize the benefit of our general tax attributes in the U.S. See Item 8, Note 11, "Income Taxes", to our Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information.

Net earnings for Fiscal 2026 were $13.3 million, or $1.25 diluted earnings per share compared to a net loss of $18.9 million, or $1.74 diluted loss per share for Fiscal 2025. The net loss for Fiscal 2025 includes a $1.2 million ($0.9 million, net of tax) gain from insurance proceeds related to legacy environmental matters.

Journeys Group

Net sales from Journeys Group increased 6.8% to $1.49 billion for Fiscal 2026 compared to $1.40 billion for Fiscal 2025. The increase in net sales was primarily due to a total comparable sales increase of 9% primarily reflecting increased store sales, partially offset by a 5% decrease in the average number of Journeys stores for Fiscal 2026 due to 41 net store closures. The increase in comparable sales in Fiscal 2026 was fueled by strength in Journeys Group's product assortment with brands across both casual and athletic posting gains. Journeys Group drove strong gains in conversion and transaction size. We continue to elevate the product assortment and invest in the Journeys brand to improve the customer experience.

The store count for Journeys Group was 965 stores at the end of Fiscal 2026, including 194 Journeys Kidz stores, 33 Journeys stores in Canada and 30 Little Burgundy stores in Canada, compared to 1,006 stores at the end of Fiscal 2025, including 211 Journeys Kidz stores, 35 Journeys stores in Canada and 30 Little Burgundy stores in Canada.

The 210 basis point improvement in operating margin for Journeys Group in Fiscal 2026 compared to Fiscal 2025 was primarily due to decreased selling and administrative expenses as a percentage of net sales reflecting leverage of expense as a result of increased revenue in Fiscal 2026, especially occupancy expense and selling salaries, and also reflecting our cost savings initiatives. The decrease in selling and administrative expense as a percentage of net sales demonstrates the impact of our cost savings initiatives and closing underperforming stores. Gross margin as a percentage of net sales was flat in Fiscal 2026 as changes in product mix were offset by lower markdowns and decreased shipping and warehouse expense.

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Schuh Group

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