Earnings Preview: Under Armour, Skechers, Steve Madden

The Skechers Twinkle Toes style shoe.
The Skechers Twinkle Toes shoe.
Skechers USA Inc.

Earnings season is set to pick up again this week with footwear heavy hitters Under Armour Inc., Skechers USA Inc., and Steve Madden Ltd. expected to release financial statements in the days ahead. As the industry preps to review the performance of some of its key players, FN brings you the need-to-know on what to expect.

Under Armour Inc.
For Q4, ending Dec. 31, Under Armour’s net income was $87.7 million — a 36.8-percent gain over the $64.1 million of the year-ago period. While apparel was the strongest category, footwear was the No. 2 top seller for the brand.

Since then, the company has acquired two fitness apps; opened its first digital headquarters in Austin, Texas; named Kip Fulks, previously chief operating officer, president of footwear and innovation; and gained significant traction in Europe.

Analysts say they will be watching to see how it all adds up when the UA reports Q1 results on April 21.

“We see no reason [Under Armour] couldn’t double market share over the next few years — every 1 percent of share adds 5 percent to [Under Armour’s] total [revenue],” said UBS Investment Bank analyst Michael Binetti in a note last week, adding that he forecasts 25 percent year-on-year revenue growth, with footwear leading the way.

Binetti said he is concerned, however, that Under Armour may struggle to monetize the recently acquired fitness apps and that the firm might have to lower EBIT margin guidance to fund a few more “statement” marketing investments to achieve its long-term revenue potential.

Skechers USA Inc.
Manhattan Beach, Calif.-based Skechers beat Wall Street’s sales expectations and hit its earnings estimates when it reported Q4 in mid-February. Market Watchers say when the firm reports Q1 financials on April 22, they are expecting an overall solid performance with slight impacts from the West Coast ports and currency woes.

“Despite FX pressure driven by the steady decline in the euro, we believe Skechers’ business model remains fully intact,” said Wunderlich Securities Inc. analyst Danielle McCoy in a note this morning.

McCoy said that while she has lowered 2015 and 2016 EPS forecasts to $4.06 from $4.33 and $5.18 from $5.45, respectively, she believes that strong product stories, powerful marketing and significant global expansion will make for a strong Q1 finish.

Citi Research analysts Corinna Van der Ghinst and Kate McShane say they will be listening for management’s feedback regarding several key issues on Wednesday.

Among them: an update on the backlogs report, changes to guidance on foreign exchange markets and shifting international mix, spring inventory positioning post-port disruptions and updates to new-store plans.

“Though [Skechers] shares are up 30 percent in the past 3 months and we believe expectations are high going into the quarter on 60 percent backlogs, we still view valuation as attractive,” said Van de Ghinst and McShane in today’s note.

Steve Madden Ltd.
“We continue to believe [Steve Madden] remains a well-oiled machine and that [West Coast] headwinds have been factored in,” said McCoy of the parent company of Betsey Johnson, Dolce Vita and Big Buddha, in a note. “Despite challenges, we believe [Steve Madden] should have an improved 1Q performance [versus last year].”

McCoy noted that the firm’s wholesale business rose 13.3 percent last year, driven by a 16.2 percent increase in footwear, adding that the ports backlog is still a minor cause for concern for the Long Island City, New York, company.

“What will the magnitude of cancellations be and how much product, if any, will [Steve Madden] have to close out?” McCoy wondered in a note today. “Inventories at wholesale appear extremely light, and, despite the lack of options for the consumer, [Steve Madden] is driving full-price sell-through and reducing promotional activity … the delay in shipments in 1Q will likely impact results.”

Sterne Agee analyst Sam Poser said last week that investors should look past the impact of port issues and acquisition integration in the first half of fiscal 2015 as he sees better days ahead for the company.

Steve Madden reports Q1 on April 24.