Hot Stocks: DSW, Foot Locker, Shoe Carnival

What footwear stocks have Wall Street’s shoe business experts been raving about lately? Here, we round up three buy-rated stocks and the reasons market watchers give each the thumbs up.

DSW Inc.

The Columbus, Ohio-based footwear retailer has been getting its share of Wall Street praise over the past few weeks as insiders continue to highlight their expectations that the firm’s discount pricing model will benefit tremendously from the West Coast ports backlog.

While there’s been some volatility in the stock price lately, market watchers have chalked it up to miscommunication between management and investors.

“We are confident that the new assortment planning, order routing, price optimization, and store engagement initiatives will drive sales and margin improvements over time. Also, following store checks and a meeting [with DSW’s management], we came away confident that 2Q15 [same-store sales] will not disappoint.” —Sam Poser, Sterne Agee CRT analyst on July 22

“From a product perspective, we feel the company continues to execute across several categories in casual, athletic and dress while being well positioned to capitalize on another strong boot performance in the second half of 2015.” — Christopher Svezia, Susquehanna Financial LLLP analyst on June 15

Foot Locker Inc.

The New York-based athletic footwear and apparel retailer finished its first quarter, in May, with gains in profits, revenues and comparable-store sales. Since then, the company has continued firing on all cylinders, analysts say.

“While Foot Locker’s stock has been solid recently, we still see upside for the stock … We believe Foot Locker will see an outsized boost from a positive [back-to-school] for the basketball category and are raising our 3Q and 4Q [same-store-sales] estimates to 6 percent and 5 percent from 5 percent and 4 percent previously.” —Michael Binetti, UBS Investment Bank analyst on July 22

“After hosting meetings with CEO Richard Johnson and VP/treasurer John Maurer, we are increasing our estimates and price target to $78 from $73. While the business continues to operate at a high level and the fruit is further up on the tree, management seemed confident that the initiatives they are executing against should continue generating sales and margin growth for the company. Importantly, we believe there is a very high probability Foot Locker has room to execute and deliver results beyond its FY15 outlook and toward several FY20 operating goals, possibly ahead of schedule.”—Svezia on June 29

“As one of Nike’s most important retail partners in the U.S. with disciplined inventory management, a strong relationship with young male consumers and relevant brand presentation—including five exclusive Nike/Jordan shopin-shop concepts—we see significant opportunities for Foot Locker to expand its presence as a pan-European athletic specialty chain.” —Kate McShane, Citi Research analyst on June 11

Shoe Carnival Inc.

While Evansville Ind.-based family footwear retailer Shoe Carnival missed Wall Street’s estimates for revenues in Q1, back in May, the firm showed gains in profits, earnings per diluted share and net sales, boosting investor sentiment.

“Management continues to make progress with initiatives such as omnichannel, better brands and real estate, among others. Overall, as the aforementioned make way, we remain confident with Shoe Carnival’s long-term goals on store growth, sales per square foot and margin improvement.” —Svezia on July 20

“We came away from investor meetings with Shoe Carnical’s CFO Kerry Jackson in Dallas on [July 8], confident that the company is positioned well to harvest a great deal of low hanging fruit now and in the foreseeable future.” —Poser on July 13

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