Avondale cuts Genesco estimates on mall traffic slump

Analyst Mark Montagna at Avondale Partners says Genesco's fourth-quarter earnings report next week could bring with it some bad news as it relates to profit projections for the coming year. Traffic at malls took a big dive in January — Montagna says Genesco's execs may have underestimated the drop six weeks ago — which will hurt sales. On top of that, teens appear to be reining in their spending for the spring, the new payroll tax hike is hurting many other consumers and there isn't a fashion trend emerging to lure back consumers.

As a result, Montagna has lowered his full-year fiscal 2014 forecast to $5.50 per share from $5.60 and trimmed his same-store sales forecast for several of Genesco's divisions by one to two percentage points.

Comps will see less benefit from average selling price gains of flat to 3% vs. FY13 +5%-6%. A bigger issue is the lack of a trend to alter the decelerating comp trend at Lids.

The main reason Montagna says he's keeping his 'outperform' rating on Genesco's stock: Its low valuation, which is just 10 times the consensus forward earnings estimate. Also helping, he says, is his expectation that 30 percent of the coming year's EPS growth will come from stock buybacks.

Shares of the company (Ticker: GCO) are down slightly today to about $58.50. Year to date, it's up about 6 percent.