Insiders Mixed on Holiday Footwear Prospects

NEW YORK — Many footwear players are increasingly cautious heading into the final lap of 2014, with global crises and instability weighing on the market.

But financial insiders said there’s still plenty of buzz around certain areas, including athletic and boots. Those trends should benefit players like Nike, Skechers, Timberland and Deckers, all of whom have seen big momentum this year. Plus, low gas prices and favorable interest rates could fuel additional consumer spending.

There is reason for heightened anxiety among companies. “The headlines right now are bolder and louder — pick your poison, whether it’s Ebola or ISIS or weak Europe or foreign exchange rates — people are running around like their hair is on fire. But it also creates opportunities,” said Steve Marotta, an analyst with CL King and Associates.

In a conference call to discuss Wolverine World Wide’s third quarter earnings, Chairman, CEO and President Blake Krueger was mixed about the current mood.

“It’s no surprise the world is cooling down a little bit. The U.S. had a lackluster, tepid, back-to-school season,” Krueger said on the call.

“We had one brand, Keds, that had a very strong back-to-school. We had some other brands, like Stride Rite, that was hurt by lower mall traffic for sure. But I think retailers’ inventories this fall are more in line than they were last fall,” he added.

Krueger predicts that retailers will be generally upbeat come holiday, but that the environment will be more promotional than last year. “Our mindset, at least with respect to the USA, is … cautiously optimistic, and we’re looking at just getting our new product out to the consumers,” Krueger said.

Christopher Svezia, an analyst at Susquehanna Financial Group, observed that the athleisure trend remains strong, which benefits the footwear market, he said.

In a more general observation, he said, “From the equity market perspective, it is what it is. Most people [take into consideration] things like petroleum costs, interest rates and weather. There are a lot of crosscurrents going on, and for the moment, it doesn’t change my thinking for the holiday selling season. It’s status quo.”

Marshal Cohen, chief industry analyst at The NPD Group, said the consumer continues to operate under the new normal: spending on the need vs. the want.

“[New economic developments] will certainly exaggerate [the distractions]. But I’m less concerned about how footwear will hold up during the fourth quarter as I am about the continued absence of newness that keeps people in replenishment mode,” Cohen said.

Mesirow Financial Chief Economist Diane Swonk was more guarded in her assessment.

“Fear of everything, from weakness in Europe to terrorism and ISIS to the spread of Ebola, has added to volatility and exacerbated the flight to safety,” Swonk wrote last week in a note.

“I would feel a lot better if lower prices at the pump and lower interest rates were spurring more spending, particularly on housing, which remains a weak spot for the economy. The Fed is justified in its caution,” she added.

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