Overheard on Wall Street: Nike, Target, VF and Steve Madden

Nike 2015 Black History Month Collection
Nike's Kobe 9 Elite.
Courtesy image

In a matter of days, earnings season will be in full swing. As analysts prepare to dissect the quarterly performance of footwear heavy hitters, they have been offering general commentary and key expectations.

In addition to this week’s earnings chatter, Target Corp. announced a settlement with MasterCard over the retailer’s data breach, and Nike might have an NBA deal in the works.

Join FN for this week’s Wall Street wrap-up.

Nike Inc.
In a note today, Citi Research analyst Kate McShane said she suspects that an NBA apparel-rights deal is on the horizon for the athletic footwear behemoth. The NBA’s previous 10-year contract with Adidas will expire in 2017, McShane noted.

“The deal [with Nike] is likely to be at a significant premium from its previous $400 million contract [with Adidas], in our view,” said McShane. “One source also said the Nike and Jordan logos could appear on NBA jerseys for the first time as part of the deal. Currently, Adidas’ logo is only on NBA warm-ups. Other details for the potential contract have not been revealed.”

Steve Madden Ltd.
Steve Madden has been a hot topic on the Street over the last few months. The fast-growing footwear company’s acquisitions in the past year include Brian Atwood, Dolce Vita and bootmaker Blondo’s intellectual-property assets. Analysts say they expect improving market trends, along with the company’s strong execution, to be solid growth drivers.

“Management has done a good job of navigating through economic and fashion issues. Investors should look through [the first half of 2015], as it is beleaguered by port issues and acquisition integration,” said Sterne Agee analyst Sam Poser in a note this week. “The fashion drought has bottomed, and there are signs of improved new product on the horizon.”

Wunderlich Securities analyst Danielle McCoy told FN that she expects the company to continue to take advantage of current economic conditions.

“Steve Madden has been one of the biggest beneficiaries of M&A trends. When you have a brand that’s privately owned and highly focused on one category and demographic — like Dolce Vita — it can be really tough, especially when the trend shifts,” explained McCoy, adding that Steve Madden’s acquisition of the brand was a win-win. “Steve Madden has been able to make these acquisitions … and diversify its portfolio and widen its distribution.”

Steve Madden is expected to report Q1 on April 24.

VF Corp.
The parent company of Timberland and Vans has also been making waves on Wall Street this week, with analysts still eagerly watching for the “acquisition-minded” company’s next M&A move.

“VF is the master of acquiring distressed brands — but a willing buyer doesn’t guarantee a willing seller,” said Laurent Vasilescu, an analyst at Macquarie Capital, who named Billabong, Puma and Quiksilver as possible acquisition targets. “Right now, everything is expensive because the stock market is high and the economy is so strong.”

Vasilescu added that VF’s strategy has been to not pay premium prices when purchasing brands.

Susquehanna Financial analyst Christopher Svezia said in a note this week that in Q4, “management’s tone was clear that M&A was the No. 1 capital-allocation concern.”

“Recall that it’s been nearly two years since the analyst day that spoke to $1.3 billion in M&A sales by [fiscal year 2017] and nearly four since a major acquisition,” noted Svezia. “Since then, cash has been building against ample flexibility should an opportunity arise. In addition, while currencies are a pain on the [profit and loss], a strong dollar can only help when looking globally.”

Target Corp.
After months of negotiations stemming from 2013’s data breach, which compromised the data of more than 40 million customers during the holiday shopping season, Target announced Wednesday that it has settled with MasterCard International Inc. for $19 million.

“Target has agreed to fund up to $19 million pre-tax in alternative recovery payments, depending on the extent of eligible issuer acceptances,” the company said in a release. “The settlement is conditioned on issuers of at least 90 percent of the eligible MasterCard accounts accepting their alternative recovery offers, either directly or through their sponsoring issuers, by May 20, 2015.”

Target is negotiating separately with Visa Inc., The Wall Street Journal reported on Tuesday.