Q2 Earnings Roundup: The Shoe Companies That Fell Short

While several shoe companies outperformed in the recent quarter, there were a handful of firms whose profits and revenues strongly felt the impact of macroeconomic and internal pressures.

The most recent earnings miss came from Finish Line Inc., which experienced declining profits, lower-than-expected revenues and elevated inventory in Q2.

While analysts had said they were confused about what exactly led to Finish Line’s miss — since brands such as Nike and Under Armour sold well at other retailers in Q2 — a recurring theme for shoe companies has been the negative impact of this year’s later Labor Day holiday and shifts in tax-free weekends in several states. Those factors, insiders said, negatively affected Q2 sales for many companies by moving back-to-school and other holiday-related store traffic into Q3.

In mid-August, Birmingham, Ala.-based sporting-goods retailer Hibbett Sports Inc. reported a mixed second quarter, during which both profits and comparative-store sales declined, while revenues gained close to 3 percent.

Hibbett CEO and President Jeff Rosenthal had said the firm tried to account for the shift in tax-free weekends, yet was still unable to avoid a 1.1 percent decline in comparable-store sales.

Shoe Carnival Inc. and Caleres’ Famous Footwear also shouldered similar burdens.

In Q2, Shoe Carnival beat profit expectations but missed Wall Street’s sales forecasts and had weaker-than-expected comp growth.

“While 2Q comp, up 0.5 percent, was affected by a late back-to-school and Labor Day, these shifts did meaningfully accelerate comp-to-date,” Susquehanna Financial analyst Christopher Svezia pointed out in a Sept. 2 note.

Despite Caleres’ softer-than-expected earnings, analysts remained bullish on the company and its historically top-performing Famous Footwear retail chain.

“Same-store sales at Famous Footwear have accelerated thus far in August, to mid-single digits, due to the shift in back-to-school, and the momentum will likely continue given the easy comparisons in October,” Sterne Agee CRT analyst Sam Poser wrote back in August. “The margin opportunity in the Brand Portfolio still exists, though the timing is uncertain.”

Iconix Brand Group has faced a slew of headline-making challenges this year. In addition to a series of abrupt executive departures, including the exits of its CFO, COO and CEO in a matter of months, the firm’s accounting practices are currently under investigation by the U.S. Securities & Exchange Commission. As many had predicted, Iconix’s earnings took a hit in Q2, with profits declining nearly 60 percent.

“We realize that we’ve issued a considerable amount of news recently about Iconix,” Interim CEO Peter Cuneo said during the firm’s Q2 earnings call. “So let me note for you up front that notwithstanding all of this news, I am very optimistic about the future of this company. And I believe that the issues disclosed by the company can and will be resolved.”

DSW Inc. also missed analysts’ comp and revenue expectations in Q2. Market watchers had set high expectations for the firm on the heels of the West Coast ports slowdown, predicting that the resulting inventory buildup would create a buying opportunity for the off-price retailer.

DSW’s comparable-store sales did gain 1.8 percent, but that was significantly below Wall Street’s forecasts of a 3.4 percent to 3.5 percent improvement. The chain’s revenues, though less than Wall Street’s bet, showed a 7 percent year-over-year improvement.

The revenues of larger department stores, in general, have been strained by lagging consumer demand as well as FX volatility and slowing tourism.

Macy’s Inc. has been a prime example of the department-store lull, with its second-quarter earnings, released Aug. 12, revealing continuing profit and sales declines: Its earnings fell 26 percent year-on-year.

Kohl’s Corp.’s results, reported on Aug. 13, mirrored Macy’s lackluster sales and revenues. Despite ramped-up strategic initiatives in its athletic, beauty and loyalty divisions, the company’s earnings per share (diluted) shed nearly 50 cents compared with the previous year.

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