Analyzing The Challenges Shoe Companies Faced In Q4

Stock-Exchange-Trader
Traders on the floor of the NYSE.
Getty Images

Now that we have made it through much of earnings season mayhem, as is usually the case, several trends have emerged across the reports of footwear-and-apparel companies.

Generally, Q4 was, at best, a softer quarter for most shoe companies. And, a few key issues were to blame.

The biggest story for the fourth quarter, lasting roughly from October through the end of December, has undoubtedly been the unseasonably warm winter. While day-to-day weather patterns are unpredictable, many shoe companies rely on basic expectations for each season in order to make critical inventory decisions. In other words, it is generally understood that winter months will be cold — meaning people will buy closed-toe shoes such as boots and will ditch their flip flops and sandals for about three to four months.

Simple enough.

But while a record warm winter — such as the one experienced this season — would have created issues for shoe companies during any given year, it was markedly worse this time around. The difference? This year’s mild winter followed an incredibly lengthy and brutally cold one last year. As a result, many shoe companies upward adjusted their levels of inventory for winter-weather product in preparation for a similar season and are now stuck with the consequences.

Currency woes also leaked into the fourth quarter, as most shoe companies with an international presence — Crocs Inc. and Wolverine World Wide Inc. are two examples — felt the pressure of a stronger greenback on their revenues. Although pricing concessions and hedging have been the go-to methods to buffer FX headwinds, shoe companies admit that such strategies do not completely offset the negative effects of currency swings.

Macroeconomic stressors aside, shoe firms and their designers must also take blame for some of the lackluster earnings we’ve seen in Q4. While apparel has faced in own barrage of criticism, consumers continue to complain about the lack of fresh product and new trends in the footwear space. And, many experts have found that even in dismal economic times, if product is compelling and innovative enough, consumers are willing to buy.

Finally, as evidenced by Black Friday sales data, ecommerce continues to challenge retailers in nearly every sector. By now, many brands and big-box shoe companies have created an online presence but fine-tuning their websites and omnichannel strategies has not been easy. With e-tailing behemoth Amazon continuing to dominate the space, more and more footwear firms are finding that they must do more than simply create a website in order to compete. Creating a complete and seamless omnichannel strategy and considering programs, such as buy online and pick up in store, are crucial.