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GENESCO: WHY THE SHOE FITSAs the market soars ever higher, investors are bidding up the prices of ''fallen angels''--former highfliers that suddenly fell from grace. One is Genesco (GCO), which makes and sells such shoe brands as Dockers, Johnston & Murphy, and Nautica, along with Laredo and Larry Mahan boots. The company hit the skids in 1994 because of cheap foreign rivals. The shares tumbled to 1 5/8 in December of that year. Now, Genesco is making a comeback after a two-year restructuring. A big part of the strategy is to rely on global outsourcing to cut costs and meet foreign competition. ''There are several things going for Genesco,'' says a California investment manager who has been buying shares. ''The company is back in the black, the stock is cheap, and it's a potential takeover target for the likes of Nine West Group and Stride Rite.'' Genesco stock started picking up steam last summer and closed at 9 on Jan. 7. This money manager figures Genesco is worth 18 in a buyout. Analyst Steve Marotta of Auerbach Pollak & Richardson in Stamford, Conn., rates it a buy on fundamentals. But he doesn't think investors who see Genesco as buyout bait are barking up the wrong tree. Marotta thinks Genesco would be an ideal fit for Nine West, if Nine West wanted to widen its reach from women's to men's shoes. Genesco sells 85% of its output wholesale and the rest through its 475 retail stores. Nine West sells shoes through department stores and its own 943 shops. Genesco's turnaround started in April, says Marotta, and evidence that the process was complete came when third-quarter earnings outran analysts' projections: 23 cents a share vs. 17 cents of a year ago. Based on the third quarter's strength, he raised his 1997 estimate to 69 cents, from 63 cents, and his 1998 numbers to 80 cents, from 75 cents. Genesco Chairman David Chamberlain wouldn't comment on whether he has had talks with suitors, but he insists that Genesco isn't for sale.
By GENE G. MARCIAL
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Updated June 15, 1997 by bwwebmaster
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