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on tuesday, Genesco Co., Ltd. . (NYSE:) B. Riley's rating has been lowered from “buy” to “neutral” and the price target has been significantly adjusted to $31 from the previous $43. The revisions were made ahead of the company's fourth quarter earnings release, scheduled for this Friday, March 8, 2024. The downgrade reflects a reduction in the next 12 month (NTM) EBITDA forecast from $85 million to $61 million, which also impacted the discounted price. the goal. B.Riley maintains his NTM EBITDA valuation multiple of 4.5x that he used in his previous price target.
Analysts at the company cited several factors contributing to the revised outlook, including an expected delay in the realization of investment plans originally outlined on Dec. 14. The inflection point in Genesco's stock performance is expected to extend six to 12 months longer than originally expected. . Additionally, a deeper bottoming process than previously expected may occur within the next six months.
Prior to its participation in the ICR conference, Genesco had already lowered its fourth-quarter profit outlook on January 8, earlier this year. At the time, the company pointed to softer and more volatile demand trends and a more promotional environment in the footwear sector, including for brands that don't typically do extensive promotions.
The analyst also expressed concern about the challenges the journey sector may face in the first half of 2024, as footwear lead times limit retailers' ability to quickly adapt to market changes. Decisions made about six months in advance may not optimally match the product assortment for the spring season. These factors, combined with continued weak demand and promotional pressures, result in Genesco's trailing twelve month (TTM) EBITDA expected to bottom out at approximately $53 million, down from his previous estimate of $78 million. will be done.
Additionally, B. Riley wouldn't be surprised if Genesco announces additional store closures, which could be seen as a positive development in the long term. Despite the downgrade, the company still believes that Journeys' new leadership will ultimately have a beneficial impact, but its full impact will not become clear until the fourth quarter of 2024 or 2025. It might be in the first half.
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