China’s Economic Woes Continue To Weigh On Shoe Stocks

China Shanghai Composite Index
An investor watching the Chinese Shanghai Composite Index.
Getty

China’s devaluation of the yuan and yo-yoing stock market continue to weigh on investor sentiment, with U.S. stocks opening markedly lower on Wednesday.

Couple the China problems with increasing concerns over an impending Federal Reserve interest rate hike and the result is across-the-board share declines on Wall Street — and footwear stocks are no exception.

At 10:04 a.m. EDT, Wolverine World Wide Inc.’s share price was down 1 percent, to $28.73; Skechers USA Inc. had lost 0.59 percent, to land at $153.50; Nike Inc. was down 0.42 percent, to a share price of $114.33; Under Armour Inc. declined 0.37 percent, to $99.99; and DSW Inc. had lost 0.61 percent, to land at $32.77.

The Dow, Nasdaq and S&P 500 opened much lower and stayed in the red at the start of midday trading.

At 10:04 a.m. EDT, the S&P 500 was down 13.64 points, or 0.65 percent, to 2,083.28; the Dow had lost 132.78 points, or 0.76 percent, to 17,378.56; and the Nasdaq had lost 29.07 points, or 0.57 percent, to 5,030.28.

Regarding China’s currency, Cowen & Co. analyst Oliver Chen said there are several footwear and apparel companies for which he expects some level of impact should the yuan continue to lose value against the dollar.

“Large-cap retailers Nike, VF Corp., Ralph Lauren and PVH Corp. all have varying degrees of exposure to China and the recent yuan devaluation, which puts both transactional and translational pressure on each company’s high-margin Asia-Pacific business,” Chen wrote in an Aug. 13 note. “All four of these companies, however, commented during their most recent earnings conference calls that their China businesses were positive.”

Chen also predicts slowing demand for luxury offerings from companies such as Coach Inc. and Tiffany & Co. due to FX pressures.

The minutes from the latest Federal Open Market Committee (FOMC) meeting, held July 28-29, are expected to be released today, and market watchers are anxiously anticipating hints on a time frame for an interest rate hike.

The Fed will host its next meeting on Sept. 1 at 10 a.m. EDT to discuss foreign-exchange rates for the world’s leading industrial countries — the U.S., the U.K., Germany, France and Japan. A final verdict on the interest rate hike is expected at the next FOMC meeting, a two-day event on Sept. 16-17.