Overheard On Wall Street: An Early Start To Q3 Earnings Buzz

With third-quarter results scheduled to begin rolling in soon, Wall Street is not wasting any time sounding off with expectations and anecdotes.

As footwear’s publicly traded heavy hitters prepare to unveil the results of their last three months of effort, here’s a look at what analysts have been saying.

Skechers USA Inc.

Although Skechers has seen accelerated growth quarter after quarter for the past year, this week has been a volatile one for the firm’s stock.

Nevertheless, analysts remain upbeat on Skechers ahead of Q3, chalking up the stock weakness to “misconstrued SportScanInfo data” released this week, which said Skechers’ sales increased 13 percent last week, versus 34 percent in the prior week.

Sterne Agee CRT analyst Sam Poser said the sales’ deceleration was likely due to last week’s flooding and rain in the Southeast.

Meanwhile, Susquehanna Financial LLLP analyst Christopher Svezia noted that “one week of SportScan data is not indicative of the brand losing momentum.”

“We have done our checks, and the response was very positive across retail regarding how the brand is performing and order commitment into FY16,” Svezia wrote on Oct. 8. “Q3 will reflect moderate upside, but we note that $20 million in high-margin sales moved out of Q3 and into Q2. … We believe owned-retail comps are strong, and the order book likely remains well into the double digits on a reported basis.”

Svezia’s other Q3 expectations, he said, include 30 percent sales growth — 25 percent in the U.S., 44 percent for international markets and 22 percent in direct-to-consumer — with earnings per share of $1.60.

“We believe international and direct-to-consumer could moderately outperform our expectations, given potential for high-single-digits comp and momentum in key international markets. That said, we believe it is unlikely that we will see the same type of upside that we saw in Q2,” Svezia wrote.

Foot Locker Inc.

While the specialty-athletic retailer isn’t expected to release earning until mid to late November, analysts have been chiming in with forecasts following the later Q2 earnings release from Foot Locker’s main competitor, Finish Line.

Bee Line x Timberland
Bee Line x Timberland Honeycomb boots.
CREDIT: Courtesy Photo

“Foot Locker’s strong same-store sales has and should continue to be broad-based, across multiple concepts, genders, geographies (Europe) and categories,” Poser wrote on Oct. 7. “Strong sales are coming from the turnaround in the women’s business and strength in kids, retro running and fashion boots such as Timberland. … We expect 3Q15 same-store sales to increase 7 percent on EPS of 99 cents.”

Further, Poser noted, the data also indicate that the “Nike, Jordan and Under Armour launch calendar favors 3Q15 over 3Q14.”

VF Corp.

Canaccord Genuity Inc. analyst Camilo Lyon is raising his expectations and price target, from $88 to $90, for the parent company of popular brands Vans, Timberland, The North Face and Wrangler.

While not a full-on earnings preview, Lyon encourages higher expectations for the firm in the quarters and year ahead. In the Oct. 8 note, he makes a case for viewing VF Corp.’s performance through the lens of organic growth versus the Street’s typical preoccupation with acquisitions.

“In analyzing the diversified nature of VF Corp.’s portfolio of brands across the spectrum of both channels and categories (mass to premium and athletic to fashion), we think it is appropriate to consider VF Corp. as a consumer-products company rather than just a consumer-discretionary one,” Lyon wrote. “When doing so, it becomes apparent that VF’s fundamentals (e.g., sales and EPS growth rates) are far superior to those of this peer set, yet with an inferior valuation.”

Lyon goes on to say that he views VF Corp.’s growth profile as comparable to that of athletic footwear-and-apparel giant Nike Inc.

“When looking at the consumer staples’ sales and EPS growth characteristics, coupled with their respective valuations, it is clear that VF Corp.’s fundamental profile is more comparable to that of Nike’s, yet VF trades at a discount to it,” Lyon said.

VF Corp. reports Q3 earnings on Oct. 23.

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