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Business Trends: Why Shoe Companies Are Cautious About the Year Ahead

Genesco Inc. and Brown Shoe Co. were noticeably cautious in year-ahead outlooks despite posting decent Q4 performances in early March. DSW Inc. followed suit when CEO Michael MacDonald announced a cautious outlook for 2015 following a solid finish to Q4.

DSW posted its strongest comparable-store sales in nearly three years and earnings that beat Wall Street’s forecasts for the quarter, which ended Jan. 31, 2015. Brown Shoe’s Famous Footwear dominated the family space and Genesco’s earnings were up by nearly $10 million from the year-ago quarter.

So why the restrained outlooks? FN breaks down the major reasons behind the industry-wide pessimism.

Currency Headwinds: As the dollar hit a nearly 12-year high, the consequences have become a hot topic among American footwear companies, including Nike, VF Corp., Deckers Outdoor, Wolverine World Wide and Genesco. The impact of increasingly bullish dollar bets are already being felt. Genesco CEO Robert Dennis cited FX pressure as a key factor in his company’s “disappointed earnings” in Q4, while analysts have lowered expectations for Nike and Deckers due to currency woes.

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Port Woes: Companies have withheld a collective sigh of relief after the West Coast port operators and the dockworkers’ union reached a tentative five-year contract following a dispute that had dragged on for nine months. While the workers forge ahead in unwinding the resulting backlog, companies like Brown Shoe and Genesco say they expect the delays to affect their performance through the first half of the year at least.

The Weather: With Easter scheduled to make an early appearance this year on April 5 (last year it was April 20), companies are concerned that spring won’t have quite sprung enough to give consumers the boost they need for Easter shopping. Analysts say that when Easter coincides with a shift to warmer weather, people are more inclined to stop in at their favorite retailers to check out what’s new for spring. But if it’s still cold when Easter arrives, retailers don’t get that surge of new-season shopping momentum.

Better To Err on the Side of Caution: Analysts have also speculated that some companies provide conservative guidance because lower estimates are easier to beat. Experts agree — a press release always reads better when it says a company has “surpassed expectations.” Not to imply that companies are altogether insincere, but some are known to tweak guidance to ensure that they come up stronger at the end of the year than they’d predicted.

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