Overheard On Wall Street: Skechers, Genesco & Under Armour

Curry Two Iron Sharpen Iron
The Curry Two Iron Sharpen Iron.
Courtesy of brand.

Cheers to the conclusion of another busy week in the world of footwear.

Read on for your weekly dose of The Street’s shoe-industry chatter.

Skechers USA Inc.

Analysts say the firm — whose three-for-one stock split kicked in before market open today — is off to a solid start as it enters Q4.

“Skechers is [the number two] brand in the U.S. – Skechers’ U.S. [point-of-sale] sales rebounded to a robust 27 percent [increase] year-on-year in the [first week of October],” wrote Citi Research analyst Kate McShane. “The Skechers brand continued to take market share, making it the third largest brand by sales in the U.S. (behind Nike and Nike’s Jordan) and the second largest brand by units behind Nike.”

Sterne Agee CRT analyst Sam Poser reinforced his expectations, on Friday, for a solid Q3 showing from the firm — which confirmed that it will release third quarter results on Oct. 22.

Reflecting today’s three-for-one stock split, Poser now forecasts Q3 earnings per share of 58 cents and adjusted his price target to $62 from $185.

“Skechers is managing inventory and expenses well. Management’s focus on leveraging expenses has become standard operating procedure. We expect ongoing efficient expense and inventory management. We remain hopeful management will return cash to shareholders,” Poser wrote.

Genesco Inc.

Following meetings with management last week, Poser said he’s “confident that the momentum at Journeys will continue,” while he believes the once-faltering Lids Sports Group division has hit its bottom.

Poser upgraded the firm’s stock to a buy rating and sees some near-term margin opportunities resulting from the Major League Baseball playoffs.

Regarding Journeys, Poser said current trends appear to bode well for the chain.

“Retro comfort trends are helping to drive strong same-store sales and margins at Journeys,” Poser wrote on Oct. 13. “Journeys is benefiting from their teen consumers’ ongoing engagement with brands such as Converse, Ugg, and Vans as well as the re-engagement with brands such as Dr. Marten’s and Timberland. Brands such as Birkenstock are beginning to make inroads…”

Poser is forecasting same-store sales to increase 5.5 percent and 4 percent respectively, in Q3 and Q4.

CL King & Associates analyst Steve Marotta also upgraded the firm to a “strong buy” on Oct. 8 “as both valuation and light-at-the-end-of-the-tunnel margin expansion offer a highly attractive entry point,” the analyst wrote.

“A number of missteps over the last two years or so caused an inventory dislocation and sub-standard gross margins in the Lids Sports Group, in particular,” Marotta said. “We now believe the company is on track to end the current fiscal year with inventory in-line with the “up 1 percent” guidance, which, combined with new merchandising programs, will act to support improved margins in FY17 and beyond.”

Genesco is projected to release Q3 earnings in late November.

Under Armour Inc.

Canaccord Genuity Inc. analyst Camilo Lyon reinforced a buy rating for Under Armour’s stock and raised his price target ahead of the firm’s Q3 earnings release slated for Oct. 22.

“Not only do we believe Under Armour experienced solid demand across key categories (men’s/women’s apparel, footwear and accessories) and regions (domestic and international), more importantly we believe it improved its sell-in execution,” Lyon wrote.

Last year, Lyon said, the firm’s on-time delivery rates during back-to-school were “sub-par,” which “exacerbated a weak presentation” in a few key retail sporting goods partners.

“While more work remains, discussions with our industry contacts suggest Under Armour’s supply chain improvements this year have been yielding better on-time delivery rates and product flow, thus helping to improve the floor sets at retail,” Lyon explained in an Oct. 14 note.

Lyon increased his Q3 EPS estimates to 45 cents from 42 cents; raised his price target to $130 from $105; and forecasts 25 percent apparel growth in Q3.

This week Under Armour announced that its CFO and COO Brad Dickerson will step down in February 2016. Dickerson will join recipe-delivery service Blue Apron.

“We view Dickerson’s decision to join Blue Apron as move to a very dynamic young company, not a move away from Under Armour,” Poser wrote on Oct. 15. “Based on our checks and industry data, the Under Armour business continues to be very robust, with growth across multiple categories and geographies”