Overheard On Wall Street: The Buzz On Adidas & Crocs’ Q3

Adidas Vanguard Collection Extra Butter
Adidas ZX Flux Chief Diver.
Courtesy of brand.

It’s been quite the week in shoe-company earnings, and analysts have weighed in.

Footwear News wraps up the earnings buzz:

Adidas

Adidas Group boosted investor sentiment Thursday with earnings that signaled the brand’s turnaround efforts are making a difference. After several quarters of slipping sales and slowing momentum, particularly at Reebok, the company posted double-digit growth in profits and revenues.

Meanwhile, sales at both Reebok and the struggling TaylorMade Golf division accelerated, by 3.4 percent and 6.5 percent, respectively. The gains were even higher in currency-neutral terms: 6.6 percent and 15.4 percent, respectively.

While the stock climbed on the heels of the release, some analysts chose to stay on the sidelines as comparisons with athletic giant Nike temper their excitement.

While we acknowledge improvements in the business and are impressed by the company’s ability to offset strong margin headwinds next year, we remain neutral as the bar has increased, in our view, with shares near all-time highs,” wrote Susquehanna Financial LLLP analyst Christopher Svezia. “In order for us to get constructive, Adidas would have to trade at an 26x multiple or similar to Nike.”

However, in a Nov. 6 note, Sterne Agee CRT analyst Sam Poser said checks in the national-accounts channel for Q3 indicate that Adidas is among the brands — along with Nike and Jordan — that continue to show improved offerings in basketball, running and athletic casual footwear.

Crocs Inc.

In addition to posting its Q3 earnings this week, Crocs continued to shake up its C-suite. The firm, which is knee-deep in a turnaround initiative, reported a net loss, while revenues slid more than 9 percent.

We are staying neutral-rated,” wrote Sterne Agee CRT analyst Sam Poser. “The turnaround is in motion, but earnings growth is taking longer to take shape than anticipated. The response to the spring ’16 product has been positive from retailers. However, those retailers remain unwilling to step up orders until Crocs proves it can deliver the shoes in a timely manner.”

Poser noted that Crocs’ supply-chain investments — as the company highlighted during its investor day in September — are a positive step, adding that China continues to be a “work in progress,” but that “the worst may be behind the company.”

CL King & Associates analyst Steve Marotta, like Poser, found some upside in Crocs’ slipping numbers.

“The period’s earnings results were well below expectations due to aggressive inventory liquidation of aged product in an effort to clear the decks for spring/summer 2016 shipments,” Marotta wrote. “We note, however, that on a constant currency basis and adjusting for discontinued product lines, Q3 revenue increased 3.7 percent. This low-to-mid-single-digit result was impressive, in our opinion, considering it was aged product and there were supply-chain and delivery issues, as well as channel inventory drags.”

In September, Crocs announced that Jeff Lasher, its SVP and CFO since 2011, had resigned to accept the CFO role at West Marine Inc. The company said Thursday that it will replace Lasher with veteran retail executive Carrie Teffner.