UPDATE: Genesco (GCO) Expectations Still Appear Optimistic, Goldman Sachs Downgrades to Sell

Goldman Sachs downgraded Genesco (NYSE: GCO) from Neutral to Sell with a price target of $57 (from $69). Analyst Taposh Bari thinks consensus expectations that call for a bottom in Q1 may prove too optimistic in light of tough comparisons and delayed recovery.

Bari explained, "Our thesis reflects: 1) a lack of confidence in a quick profit recovery at Lids as growing pains persist, 2) unappreciated risks at Journeys, where margins are at a historical peak and SSS comps become more difficult, and 3) valuation, which we believe does not reflect the aforementioned risks. Moreover, while shares are down ~25% from last summer’s peak and EPS estimates are down 14% versus a year ago, we see further downside to shares as results come in short of expectations and estimates are revised to our below consensus forecast."

The analyst added, "Lids began facing challenges a year ago following an aggressive multi-year period of store expansion and acquisition. Management has since put the brakes on growth with a priority on better execution. We believe this is the correct course of action. However, we believe a profit recovery may take longer than expected given 1) dynamic competitive challenges, 2) a lack of a compelling fashion trend in licensed hats/apparel and 3) the risk of prolonged growing pains."

For an analyst ratings summary and ratings history on Genesco click here. For more ratings news on Genesco click here.

Shares of Genesco closed at $66.50 yesterday.

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