Greetings, and welcome to the Genesco Inc. Q2 Fiscal Year 2026 Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to your host, [ Jason Ware ], Vice President, FP&A and Investor Relations. Jason, please go ahead.

Good morning, everyone, and thank you for joining us to discuss our second quarter fiscal 2026 results. Participants on the call expect to make forward-looking statements reflecting our expectations as of today, but actual results could be different. Genesco refers you to this morning's earnings release and the company's SEC filings, including its most recent 10-K and 10-Q filings, for some of the factors that could cause differences from the expectations reflected in the forward-looking statements made today. Participants also expect to refer to certain adjusted financial measures during the call. All non-GAAP financial measures are reconciled to their GAAP counterparts in the attachments to this morning's press release and in schedules available on the company's website in the Quarterly Results section. We have also posted a presentation summarizing our results here as well. With me on the call today is Mimi Vaughn, Board Chair, President and Chief Executive Officer; and Sandra Harris, Senior Vice President, Finance, and Chief Financial Officer. Now I'd like to turn the call over to Mimi.

Thanks, Jason. Good morning, everyone, and thank you for joining us. The strong comp momentum from the second half last year has carried into the first half this year with positive comps fueling both top and bottom line results above expectations again in Q2. Our sales growth continues to outpace the industry driven by a high single-digit comp increase at Journeys. Overall comps grew 4%, marking our fourth consecutive quarter of positive comps for the company and for Journeys, reinforcing the meaningful progress we're making in our strategic plan to accelerate growth. Journeys' comps for the trailing 12 months are now up just over 10% as Journeys continues to gain market share. While the second quarter in general is a lower volume quarter for us as consumers pursue summer activities and devote less time to shopping, we're further encouraged by the strong performance of the back-to-school and tax-free shopping period that began at the end of the quarter in July and accelerated into August. Notably, Journeys' comps are up double digits third quarter to date on top of double-digit comps for the same period last year, which marked the inflection of Journeys' comps as the next wave of Journeys' transformational initiatives gain considerable traction. The consumer environment remains much the same with customer shopping when there's a reason and retreating when there's not. We saw this choppiness overall again in the quarter. However, our exceptional and experienced merchant teams were more than ready for our back-to-school team and youth customer with newness and freshness and just the right brands and styles to satisfy exactly what this choosy customer is looking for. Importantly, when you have what our customer wants, they're willing to pay for what they want, driving increased ASPs and higher average transaction size. While we expected the bottom…

Thanks, Mimi. In the second quarter, we were pleased to deliver our fourth consecutive quarter of positive comparable sales growth with top and bottom line results exceeding our expectations. Both total revenue and comparable sales grew in the mid-single digits, resulting in operating leverage in SG&A. And we delivered better-than-expected operating results even with more margin pressure from the promotional U.K. market. Turning now to revenue. Total revenue for the quarter was $546 million, up 4% compared to last year, driven by overall comparable sales growth of 4%, reflecting 9% comps at Journeys, 1% comp growth at J&M, partially offset by 4% lower comps at Schuh. Store comps increased 5%, while direct comps improved 1% on top of high single-digit comp last year. A favorable exchange rate in the U.K. helped offset an overall smaller store base. Gross margin for the quarter was 45.8%, down 100 basis points compared to last year. A more promotional environment at Schuh and the impact of higher tariffs and product liquidations at Genesco Brands Group in connection with the exit of the licenses were partially offset by margin expansion at J&M and Journeys. Overall SG&A expense was 48.4% of sales, leveraging 20 basis points year-over-year. Journeys delivered significant SG&A leverage of about 200 basis points on the strong comp results and our store fleet optimization efforts, showing the powerful leverage that is created in our operating model. The favorable leverage at Journeys was partially offset by Schuh's deleverage on their store comp decrease as well as an increase in brand awareness marketing across all of our banners. Adjusted operating loss for the quarter was $14.3 million. As we highlighted in our first quarter call, we expected our operating loss for the second quarter to be more than last year's loss of $9.3 million, primarily…

[Operator Instructions] Our first question today is coming from Mitch Kummetz from Seaport Global Securities.

I've got maybe a handful. Mimi, I want to start by asking you about the product pivot at Journeys. That's something that really kind of got going in earnest a year ago for back-to-school. And it sounds like you guys are performing very well for back-to-school this year. And I'm just kind of curious, how would you assess the assortment today versus kind of where it stood for back-to-school last year, just in terms of maybe kind of your access and allocations? And sort of any kind of color there would be helpful.

Mitch, thanks for your question, and thanks for joining us this morning. And you're right that we have been spending a lot of time on product for Journeys. And what we've seen is that our teen is embracing just more diversified fashion and more styles. And so we have been leaning into that. There's more in their closets these days and Journeys is well positioned to take advantage of this. And so we have been working on the assortment. The way I've described it is that we've got 3 legs of the stool. We've got casual, we've got canvas and we also have athletic. Last year, when there was a shift in fashion into this more diversified assortment, our merchants did a truly incredible job of chasing products quickly for back-to-school and holiday. Lead times, as you know, are 6-plus months. And this year we've had more time to build on the strength that we saw last year. The results for us have been good. Six brands are up double digits. We are broader and deeper in the assortment that's really selling. We've been elevating price points. We've got a lot to pick from. It's not just 1 or 2 brands. And so it is -- this year, the opportunity was to just lean into the things that were working and to build on the strength.

And then you also mentioned in your prepared remarks that you're now targeting a wider audience at Journeys. I think you said that maybe the TAM there is sort of like 6 to 7x where Journeys kind of was historically. You ran through some of the initiatives there. But I'm curious, like where are you in the process of kind of rolling those things out? And how do you see that kind of impacting the business over the balance of the year, particularly for holiday?

When we were looking at Journeys and the repositioning of Journeys overall, we conducted quite a battery of market research. And this is where we found that we could serve not only the customer that Journeys traditionally has been good at surveying, but also that wider audience that is interested in style, some who are faster style adopters and some who really want to be on trend but wait a while to lean into the trend. And so the excitement we have about this broader market has informed the strategy and how we're going at putting Journeys' initiatives together. And so while we did have product to serve this customer, I think this customer didn't really understand that we had that product. And so we are in very early days. The first push around Journeys was to go after better product and a better assortment. And beyond that, we are -- we have developed much broader marketing strategies that speak to this wider group of audience. I spoke about our Life on Loud campaign that's going to launch in a couple of weeks. And that's to let the customer know what's new in Journeys and to reach this broader audience. We've got store remodels, which are the most visible sign of what's happening within Journeys and speaks to this customer as well. So in terms of where are we, we're in very early days of broadening the customer opportunity. We have been attracting a broader set of customers into our 4.0 remodels, but we've started this initiative less than a year ago. So early days and much more to come.

Great. And then if I heard you correctly, I believe you said that Journeys is running double-digit comp through early 3Q. Is that -- did I hear you correctly, first of all? And then can you kind of remind us what that business was doing around the same period last year? I guess what I'm really ultimately trying to understand is if maybe like the 2-year stack on Journeys in early 3Q has got sort of a 2 handle on it.

I'm excited to say you did hear me correctly, Mitch. Journeys is running double-digit comps through early Q3, which is really the heart of back-to-school, big volume times for us. And if you remember, last year, we started working on the assortment in -- at the beginning of the year. It takes about 6 months. We started to see comps turn in July. But when we hit the third quarter, we were running double-digit comps through back-to-school. So it's a double-digit comp on top of the double-digit comp. Really just tremendous work on the part of our merchant team. And the execution in the stores on back-to-school has really led to this great result.

And then maybe lastly for me, on Schuh. So again, I just wanted to get a confirmation. It sounds like, even though Schuh was negative comp in the quarter, it sounds like July was positive and that's continued into August. I know you're expecting continued gross margin pressure on Schuh in the third quarter, but have you seen any uptick in like the merch margin at Schuh on better comps as well?

Yes. So we were coming off of a couple of positive quarters of Schuh comps really as a result of our strategic efforts to target a customer very similar to the Journeys customer, with a range of initiatives that we've been implementing. We were surprised at how much traffic fell off. The U.K. customer just really stopped shopping in May and June for footwear. And so that was demonstrated by much lower traffic into our stores. And so our team at Schuh responded quickly, and we are in a moment in time when the customer, when there's a need to come out and shop or a reason, that they come out and shop. And so we took advantage of that in July and then into August. So comps have improved. But some of that has been through attracting the customer through more promotional activity, certainly, in the second quarter. In the third quarter, we have lifted off on that, but the market itself is quite promotional. And so when the market was flat in May and June, competition responded pretty quickly, and that created the dynamic in the market. We did a lot to clean up inventory, but we are just still looking to see whether or not -- what competition does for the back part of the year. We do expect, Mitch, that it's just going to continue to be volatile in the U.K. market through the back part of the year.

Our next question today is coming from Joseph Civello from Truist Securities.

Congrats on a great quarter. Now you guys mentioned some new brand introductions and reintroductions that we talked about last time. Just wanted to see if we could get some more color on how those are scaling and performing.

Sure. So I was speaking a bit about our product strategy, and the newness is definitely a part of this overall strategy. The new brands have been really impactful in terms of our customers' reaction and validating Journeys in categories that we have not had historical strength. So it's really important part of this. Lifestyle running is a great example of a category that's important to our teen customer. And our portfolio of brands really just shows our commitment to this category and trend development. So that's part of what we are doing with this new brand introduction, is that we've got to have the complement of brands that our teen is looking for. In terms of comps, they don't start out as major revenue plays. We introduced these brands and they start by just really checking the relevancy box for us. And they do become revenue over time. We're pleased with our assortment from our new partners. I'm just going to -- one brand, we don't usually talk about brands, but I did talk about us introducing Hoka, and we introduced them into a handful of our Journeys stores. and then are building upon that for the back part of the year and into next year. It's just an important part of the product development process. We have an incredible testing ground for product. Our brands want to fit on the shelf next to their competition and really see how they will perform with our really attractive teen customer and that teen girl, especially. And so new products, the opportunity to be able to bring them right to the consumer is what our brands and we are interested in doing.

Got it. Yes, makes sense. And then just one more for me. Now the better product access seems to be driving a meaningful lift for ASPs, but also does open up the opportunity for you guys to serve a much larger customer base. So just thinking about that, like how should we be looking at longer-term ticket and transaction dynamics?

It's a great question, Joe. And product elevation has been important for us. And the elevated environment that we are creating is helping to reinforce that. And I think traditionally, Journeys has been really strong on the casual side, and we continue to drive strength on casual across sandals, across boots, across just footwear in general, and are elevating price points there for sure. What we always thought is that: could we be as successful with elevated price points on the athletic side? And so our Journeys team, in particular, has strength on the athletic side. And so we've been doing a lot to enhance and increase the assortment and to bring into the assortment athletic product at the same level where our casual assortment has been. And so we saw some of the increases last year. We're actually comping on top of the ASP increases. And we'll keep going until we get to the right level. Interestingly, the consumer in this environment is stretching to reach price points for must-have product. In prior times when consumers have been stretched, they've gravitated to lower price point products. And that's just not the case this time.

Next question today is coming from Mantero Moreno-Cheek from Jefferies.

I'm happy to hear that the 4.0 stores are performing well. I'd just like to know, was there anything else we should know about the remodel stores and the 4.0 performance?

Mantero, thanks for joining us. So we started with the 4.0s in October of last year, and so it has been a relatively short time frame in terms of the time that we've been implementing this initiative. However, we've been very pleased with the success of the 4.0s. We are up to 55 stores. Our team has done a phenomenal job of rolling out the 4.0s. We've been opening a handful of new stores as well. These 4.0s are a really nice design aesthetic. If you haven't seen one, you should definitely go and check it out. But it is an environment that advances where Journeys has been, but it retains the Journeys DNA. And so it's a good combination. We've been able to hang on to customers that we have traditionally served, but we are attracting more new customers into the 4.0 design. And so our plans are to have more than 80 stores open by the end of the year. And that's a substantial part of our fleet. We've been concentrating on the top 250 locations which have the highest volume. And so it's a real needle mover if you think about it, that it's going to be at 10% of our Journeys base. And I said they were comping at 25%-plus levels. We don't yet know how we'll anniversary beyond that, but we see some additional growth with the additional customer base. And then from there, we could certainly do 100 stores a year over the next couple of years and effect a large portion of the overall fleet. So we're excited to see where we are and see that there's good opportunity over the next few years to continue to drive comps as a result of these remodels. The last thing I would say is that 4.0s also opened up an opportunity for us to think about much larger store locations. Because of the strength of these stores, we're thinking about, do we take a store that's -- a $1.5 million store and move it to a $3 million store? Do we take a $2 million store and move it to a $4 million store? And so it's just opened up a lot of avenues. We can showcase our brands within these locations. We can tell better product stories. There's just a lot of good that's coming out of these 4.0s and a lot to build on.

And then I guess -- I know you noted that Schuh will be volatile in the second half. Was there anything else to add on the outlook for the U.K. market for this holiday season?

Yes. So I did talk about that and I did talk about how we were surprised at the traffic over the early part of the summer. That does seem to have stabilized over the course of back-to-school. But what we anticipate will happen is that between back-to-school and holiday, there's usually a trough where the consumer is more quiet. And so we are -- absolutely have moved into action to address the back part of the year for Schuh. We are working on bringing in even a stronger assortment for the back part of the year. We've placed a lot of our buys, but the Schuh market works -- the U.K. market works a little bit differently where we can pick up product. And so we'll be working with our vendor partners to ensure that we can pick up product. We are a full-price retailer. We don't -- we really don't want to discount product. We want to have must-have product that we can sell. And so we do our all to make sure that we don't have to get dragged into the promotional activity that our competitors trigger off. And so we will be focused on finishing the execution through back-to-school. We'll be focused on the product assortment, which is going to be the best antidote to what's happening in the market for the back part of the year. We're focused on store execution. We are really eliminating any discounting that is not accretive. And so I think that's really the outlook for the market. We expect it to continue to be choppy.

And I guess one more for me. I'm happy to hear about the growth potential for the Wrangler partnership. Are you looking to add more partnerships and do more licensing? Is there anything else I need to know about the opportunity there?

Sure. The Genesco Brands Group business, this year we've been talking about that we decided to focus on fewer licenses and drive the profitability of the remaining ones. And adding Wrangler, we are just thrilled with this overall partnership with Kontoor Brands. It's a legendary denim and lifestyle brand. I can't think of a more exciting brand opportunity. We've got men's, women's and children's. Wrangler's signature rugged look will be part of our assortment. There's so much breadth in terms of what we can do with this brand with footwear. It's going to -- where our initial collection is going to be a blend of the classic Wrangler inspired designs and also some more trend-driven styles, we can deliver Western-inspired silhouettes, workwear, casual lifestyle footwear. There's just so many different vectors of growth for Wrangler and this product. We've got a strong team at Genesco Brands Group. We've been looking for more things for them to do. We think we will have our hands full in the near term just getting Wrangler off the ground. There's not much footwear presence at all for Wrangler today. And as large as the Wrangler apparel brand is, we think that there will be a great complement for footwear. So stay tuned. Certainly, we've got a portfolio. We've got great capabilities. We're looking to put in place larger opportunities rather than the smaller ones that we've had before.

Thank you. We reached the end of our question-and-answer session. I'd like to turn the floor back over for any further or closing comments.

Great. Thanks for joining today. I hope everybody has a great holiday. And look forward to speaking to you on our next quarterly call.

Thank you. That does conclude today's teleconference. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation today.