Citi’s ‘International Insights On Apparel & Footwear’: 3 Takeaways

Citi’s 'International Insights On Apparel &
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On nearly every quarterly conference call and in press releases and executive statements year-round, many shoe companies seem to unanimously harp on one thing — international growth.

With good reason, said Citi Research analyst Kate McShane’s latest report on international expansion and its importance to footwear and apparel companies.

The report, “International Insights in Apparel & Footwear,” details several growth drivers that are directly linked to international exposure.

Here, FN shares thereof the report’s key points:

The Tie Between Revenues & International Exposure

There’s a direct relationship between international revenue, overall revenue growth and stock-price appreciation, according to the Citi report.

Over the past 10 years, McShane’s report notescompanies with substantial revenue from international markets have posted “greater total-company revenue growth and greater stock price growth, on average, relative to those with lower amounts of revenue from non-U.S. markets.”

She added that companies that have posted the greatest increase in the proportion of total revenue derived from international markets have generated “superior total-company revenue growth and greater stock price appreciation, on average, relative to companies with lower rates of international revenue exposure increases.”

Ranking Shoe Companies by Global Presence

In her analysis, McShane divided the footwear and apparel businesses in her coverage area based on the change in proportion of total revenue derived from international markets from 2005 to 2014.

Companies with high exposure — those with at least 25 percent of total revenues from international markets — include Nike Inc., Columbia Sportswear, VF Corp., Iconix Brands Group, Deckers Brands, Skechers USA Inc., Foot Locker Inc. and Wolverine World Wide Inc.

Meanwhile, Under Armour Inc. and Steve Madden Ltd. are ranked “mid-exposure companies” by Citi’s standards.

Companies with no current international exposure: Dick’s Sporting Goods, DSW Inc. and Finish Line Inc., according to McShane.

Potential Obstacles to Expansion

As attractive as growing a company to a global scale may sound, international expansion is not without potentially major obstacles. Among them are the U.S. dollar’s strength and the volatility of other currencies (e.g., the Russian ruble and the Chinese yuan), as well as geopolitical issues (the South China Sea dispute  and Greece’s economic uncertainty).

McShane adds another possible obstacle to this well-known list: “the gap between the strong gross domestic product (GDP) growth in emerging markets and the more moderate growth seen in developed markets.”