Market Watch: Jones Sets Deadline … Athletic Players in Spotlight

The Week Ahead

Monday, March 3:
Ascena Retail Group Inc. Q4 and full-year fiscal 2013 results
U.S. consumer spending for Jan.
U.S. personal income for Jan.

Wednesday, March 5:
Adidas AG Q4 and full-year fiscal 2013 results

Thursday, March 6:
Quiksilver Inc. Q4 and full-year fiscal 2013 results
U.S. factory orders for Jan.
U.S. initial jobless claims
U.S. continuing jobless claims

Friday, March 7:
Foot Locker Inc. Q4 and full-year fiscal 2013 results
U.S. unemployment rate for Feb.
U.S. nonfarm payrolls for Feb.
U.S. consumer credit for Feb.

Stock Watch

After a tough start to the year for many footwear brands due to the protracted cold winter, analysts are upbeat about the outlook for spring amid emerging signs of a retail recovery in the U.S.

“Given the numerous retail [earnings] reports that have come out the past few weeks, we believe the cat is essentially out of the bag that the fourth quarter was tough and ended on a soft note,” Sterne Agee analyst Ike Boruchow wrote in a report, adding that the impact of adverse weather conditions on retailers abated towards the end of February.

“[We also believe that] trends may have bottomed post-Valentine’s Day once the weather warmed and shoppers had a reason to shop,” Boruchow said.

As the earnings calendar ticks on, all eyes will be on Foot Locker Inc. this Friday when the company delivers its results for the fourth quarter and fiscal 2013. Analysts are expecting the company to report diluted earnings per share of 76 cents for the quarter.

While athletic trends were softer in recent months versus the third quarter, Baird Equity Research analyst Mitch Kummetz believes Foot Locker’s results will be positive, driven by strength in basketball shoe sales and the women’s fitness category, noting that he expects management to provide an update on the company’s long-term opportunities in Europe.

“The [better start to the fiscal year], led by continued strong basketball sales, suggests that Foot Locker is off to a good start in 2014,” he said in a note to clients.

“The stock remains inexpensive, in our view — trading on an earnings before interest, tax, depreciation and amortization multiple of 5.1 times for 2015 — and we continue to like the company’s exposure to a European recovery and longer-term opportunity in women’s fitness,” Kummetz added.

While shoppers continue to encounter economic headwinds that have curtailed spending across the board, over the winter period sales of athletic shoes have remained strong.

According to data from Sports Scan Info, athletic footwear sales improved 13.3 percent for the week ended Feb. 22, driven by performance of basketball and running shoes and the recent launch of the Jordan Retro 10.

In other athletic-related news, Adidas AG is slated to report on Wednesday after providing guidance for an improvement in business in the fourth quarter. The company reported a third-quarter result that missed analysts’ expectations, largely due to problems with its operations in Russia, currency effects and poor sales of golfing products.

Meanwhile, after months of anticipation, The Jones Group Inc. announced it has scheduled a special meeting of shareholders to vote on the proposed merger with Sycamore Partners for April 7.

Subject to the vote being approved, the private equity firm will acquire Jones for $15 a share in cash. The deal is expected to close in the second quarter of 2014.

As reported, Sycamore is preparing for the potential sale of some of Jones’ brands by carving out divisions and raising debt at the company’s separate businesses, which include Nine West Holdings, Stuart Weitzman, Kurt Geiger and Jones Apparel.

Nine West Holdings, which includes Nine West Co. and Jeanswear Co., will represent the surviving corporation after the buyout and carve-outs are completed. The company’s shares were one cent lower at $14.93 in midday trading on Monday.

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