Core Performance - Kingdom Capital Advisors achieved a strong recovery in Q3 2025, with a return of 20.78% (net of fees), outperforming the Russell 2000 TR (12.39%), S&P 500 TR (8.12%), and NASDAQ 100 TR (9.01%) [2] - Year-to-date returns through September 30, 2025, show KCA at 8.68%, compared to 7.87% for Russell 2000 TR, 10.39% for S&P 500 TR, and 14.83% for NASDAQ 100 TR [3] Portfolio Contributors and Detractors - Top contributors in Q3 included United Natural Foods (UNFI) and Genesco (GCO), while WW International (WW) was the largest detractor [4][17] Investment Strategy - The portfolio is balanced approximately 50/50 between "special situation" investments and traditional growth positions [6] - Special situation investments are expected to sell undervalued assets within the next twelve months, with potential upsides ranging from 25% to over 100% of current stock prices [7] - Traditional holdings are trading at about 10 times estimated earnings for the coming year, compared to nearly 30 times trailing twelve-month earnings, indicating a focus on undervalued companies [8] Notable Investments - United Natural Foods (UNFI) demonstrated strong performance despite a cyberattack, with management exceeding sales guidance and expecting $300 million in free cash flow for FY26 [13] - Genesco (GCO) saw significant gains after a brief ownership period, benefiting from a tax refund and growth in sales through a revised concept [14] - Apartment Investment and Management Company (AIV) was initiated during Q3, with expectations of cash returns from asset sales [12] Challenges and Outlook - WW International (WW) has faced challenges post-bankruptcy, but there is potential for growth in their clinical business despite market concerns [17] - Magnera Corporation (MAGN) is experiencing stagnant stock prices despite stable business operations, with management taking proactive measures to improve performance [17] - a.k.a. Brands (AKA) continues to show strong sales growth, but stock prices remain low despite management's strong execution [17]

Group 1: Kingdom Capital Advisors Performance - Kingdom Capital Advisors reported a portfolio recovery in Q3 2025, achieving a composite return of 20.78% (net of fees), outperforming the Russell 2000 TR (12.39%), S&P 500 TR (8.12%), and NASDAQ 100 TR (9.01%) [1] - Since inception, the portfolio compounded at 21.06% (net of fees), significantly higher than the Russell 2000 TR (4.60%), S&P 500 TR (11.46%), and NASDAQ 100 TR (13.48%) [1] Group 2: Genesco Inc. Overview - Genesco Inc. (NYSE:GCO) is a retailer and wholesaler of footwear, apparel, and accessories, with a one-month return of -22.01% and a 52-week loss of 7.10% [2] - As of October 10, 2025, Genesco Inc. shares closed at $26.15, with a market capitalization of $282.3 million [2] Group 3: Genesco Inc. Investment Insights - Kingdom Capital Advisors expressed gratitude for their brief ownership of Genesco Inc., noting a disappointing May earnings report that led to a stock price drop below $20, trading at less than 5x expected EBITDA [3] - Despite challenges in the tariff environment, Genesco Inc. is growing sales through its revised Journey's concept and received a $59 million tax refund in Q2, enhancing its financial position [3] - The market recognized Genesco Inc.'s value proposition, allowing Kingdom Capital Advisors to sell their position for over a 50% gain after a few months [3] Group 4: Hedge Fund Interest and Revenue - Genesco Inc. is not among the 30 Most Popular Stocks Among Hedge Funds, with 11 hedge fund portfolios holding the stock at the end of Q2 2025, down from 12 in the previous quarter [4] - The company reported total revenue of $546 million in the fiscal second quarter of 2026, reflecting a 4% increase compared to the previous year [4] - While acknowledging Genesco Inc.'s potential, Kingdom Capital Advisors believes certain AI stocks present greater upside potential and lower downside risk [4]

Industry Overview - The Retail - Apparel and Shoes industry shows resilience amid macroeconomic challenges, driven by evolving consumer preferences and strong brand adaptability [1] - Key factors influencing the industry include fashion trends, consumer spending habits, economic dynamics, and seasonal variations [3] - The industry faces opportunities and challenges, requiring continuous product innovation and effective marketing while contending with fierce competition and price sensitivity [3] Key Trends - Consumer spending remains strong, with U.S. retail sales increasing by 0.6% in August, and clothing store sales rising by 1% month-over-month [4] - The Federal Reserve's interest rate cuts have lowered borrowing costs, enhancing consumer flexibility for discretionary spending [4] - Retailers are expected to see increased demand during the holiday season, creating opportunities for stronger sales and revenue growth [4] Company Highlights - Deckers Outdoor Corporation, Boot Barn Holdings, Zumiez Inc., and Genesco Inc. are identified as attractive investment opportunities due to their disciplined execution and digital strength [2] - Genesco is experiencing growth driven by a refreshed product mix and strategic investments, with a projected sales growth of 3.7% and EPS growth of 71.3% [17][18] - Zumiez shows resilience with consistent comparable sales growth and a projected sales growth of 3.4% and EPS growth of 566.7% [21][22] - Boot Barn is expanding its store base and leveraging AI-powered retail innovation, with projected sales growth of 13.3% and EPS growth of 12.2% [25][26] - Deckers is performing well with its brands HOKA and UGG, projecting a sales growth of 9% [29][31] Financial Performance - The Zacks Retail - Apparel and Shoes industry ranks 80, placing it in the top 33% of over 250 Zacks industries, indicating positive near-term prospects [8][9] - The industry has underperformed the broader Zacks Retail-Wholesale sector and the S&P 500 over the past year, declining by 2.9% compared to the S&P 500's growth of 18.9% [11] - The industry is currently trading at a forward P/E of 17.9X, lower than the S&P 500's 23.36X and the sector's 24.82X [14]

Group 1 - Genesco Inc. announced the formation of the Journeys Global Retail Group to unite the Journeys, schuh, and Little Burgundy brands [2] - The alignment of these brands is expected to create a powerful opportunity across the retail landscape [2]

Core Point - Johnston & Murphy has appointed Peyton Manning as its brand ambassador, aiming to enhance brand visibility and connect with consumers through Manning's influence [1] Company Summary - The appointment of Peyton Manning is expected to leverage his popularity and reputation to strengthen Johnston & Murphy's market presence [1] - This strategic move aligns with the company's efforts to appeal to a broader audience and enhance its brand image [1] Industry Summary - The footwear and apparel industry is increasingly utilizing celebrity endorsements to drive brand engagement and consumer loyalty [1] - The trend of partnering with well-known figures like Manning reflects a broader strategy within the industry to differentiate brands in a competitive market [1]

Core Insights - Genesco has established the Journeys Global Retail Group to consolidate its Journeys, schuh, and Little Burgundy brands, focusing on the youth footwear market, particularly female customers [1] - The restructuring aims to enhance the company's global presence, unlock growth potential for brand partners, and elevate talent management [1] Company Overview - Genesco operates over 1,250 retail outlets across North America, the UK, and the Republic of Ireland, managing a diverse portfolio of owned and licensed brands [2] - Key leadership appointments have been made to support the new strategy, with Andy Gray appointed as CEO of the Journeys Global Retail Group [2] Leadership Background - Andy Gray has over 20 years of experience at Foot Locker in various senior roles, including global president and chief merchandising officer [3] - Chris Santaella has been appointed as chief merchandising officer of the Journeys Global Retail Group, bringing over 30 years of experience from Foot Locker [4] Strategic Vision - Genesco's leadership emphasizes the potential for growth in the youth market, aiming to strengthen brand awareness and enhance consumer experiences [5] - The unified global leadership structure is expected to maximize opportunities and improve market positioning [5]

Core Insights - Genesco has established the Journeys Global Retail Group, consolidating its Journeys, Schuh, and Little Burgundy brands to enhance its position as a leading youth footwear retailer focused on female customers [1] Leadership Changes - Andy Gray has been appointed CEO of the Journeys Global Retail Group, while Chris Santaella has been named Chief Merchandising Officer, overseeing product strategies across the new organization [2][4] - The existing leadership teams at Schuh and Little Burgundy will continue in their roles, reporting to the new group [2] Strategic Vision - Genesco's leadership emphasizes growth opportunities in various markets by enhancing brand awareness and consumer experiences, aiming for stronger market positioning and growth with brand partners [3] - The leadership of Gray and Santaella is seen as pivotal due to their successful track record in repositioning Journeys and their extensive experience in the footwear industry [3] Recent Performance - Genesco reported a 1% increase in net sales to $746 million in the fourth quarter, with Journeys contributing a 5% increase in sales [6] - In the first quarter of fiscal 2026, total net sales rose 3.6% to $474 million, again driven by a 5% increase at Journeys [6] - The second quarter saw total net sales increase by 4% to $546 million, with Journeys' net sales rising by 6% [6] Market Response - The target teen demographic is responding positively to new product categories, including lifestyle running, and the introduction of new brands like Hoka [7] - Customers at Journeys are willing to pay higher prices for desirable products, indicating a strong market demand despite economic uncertainties [7]

Core Insights - Genesco is focusing on consolidating its teen brands, particularly enhancing the performance of Journeys, which has seen a 9% comp growth in Q2 [2][5] - The company aims to tap into a significantly larger teen market, which is estimated to be six to seven times bigger than Journeys' historical reach [2] - Leadership changes have been made, with Andy Gray appointed as CEO of the Journeys Global Retail Group and Chris Santaella as chief merchant [5] Company Strategy - Genesco has initiated a revamp at Journeys, including store renovations, product elevation, and marketing efforts to improve brand awareness and consumer reach [2][4] - The company views Journeys, Schuh, and Little Burgundy as key retailers for young, style-led females and sees opportunities for growth in all markets [4] Market Performance - The footwear category is facing challenges, with U.S. footwear dollar sales down 1% and units sold down 2% in the first half of the year, although the average selling price increased by 2% [6] - Despite market challenges, analysts from Jefferies indicate a favorable setup for the holiday season, with Journeys expected to drive top-line growth [6][7]

Core Insights - Genesco Inc. has established the Journeys Global Retail Group to enhance consumer focus and drive growth by uniting its brands Journeys, schuh, and Little Burgundy [1][2][4] Group Structure and Leadership - Andy Gray has been promoted to Chief Executive Officer of the Journeys Global Retail Group, while Chris Santaella has been appointed as Global Chief Merchandising Officer [3][5] - Leadership from schuh and Little Burgundy will continue in their roles under the new organization [3] Market Positioning and Strategy - The new organization aims to position Genesco as a leading style-led, youth footwear retail group with a strong emphasis on the female consumer [2][4] - The unified leadership is expected to maximize opportunities, strengthen market positioning, and enhance collaboration with brand partners [4] Brand Focus - Journeys, schuh, and Little Burgundy are identified as key retailers targeting young, style-conscious females in their respective markets [4]

Core Insights - U.S. retail sales increased by 0.6% in August 2025, matching the revised growth from July and exceeding expectations of 0.2% [1] - Sales excluding certain categories rose by 0.7%, surpassing the anticipated 0.4% [1] Winning Areas - **Online Retailers**: Nonstore retailers experienced a 2% sequential increase and a 10.1% year-over-year gain [3] - ProShares Online Retail ETF (ONLN) tracks online retailers and charges 58 bps in fees [3] - Amazon.com (AMZN) is a major player in e-commerce with a Zacks Rank 3 (Hold) [4] - **Clothing Stores**: Sales rose by 1% sequentially and 8.3% year over year in August 2025 [5] - SPDR S&P Retail ETF (XRT) provides exposure to U.S. retail stocks, with apparel retail comprising about 21% of the fund and a fee of 35 bps [5] - Genesco (GCO) is a specialty retail company with a Zacks Rank 1 (Strong Buy) [5] - **Sporting Goods, Hobby, Musical Instrument, & Books**: This segment saw a 0.8% sequential gain and a 4.7% year-over-year increase [6] - Consumer Discretionary Select Sector SPDR ETF (XLY) and VanEck Retail ETF (RTH) are suitable for investment in this sector [6] - DICK'S Sporting Goods (DKS) operates as a sporting goods retailer with a Zacks Rank 3 [7] - **Food Services & Drinking Places**: Sales increased by 0.7% sequentially and 6.5% year over year [8] - AdvisorShares Restaurant ETF (EATZ) invests primarily in restaurant-related companies and charges 99 bps in fees [8] - BJ's Restaurants (BJRI) operates high-end casual dining restaurants and holds a Zacks Rank 1 [9]