Overheard On Wall Street: Analysts React To This Week’s Footwear Earnings

Analysts had a healthy serving of shoe-company earnings to decipher this week as three footwear heavy hitters unveiled their fourth quarter and full-year financial performance.

Here, we round up what analysts had to say about Wolverine World Wide Inc., Steve Madden Ltd. and Foot Locker Inc. following their earnings releases.

(For a recap of each company’s earnings release earlier in the week, click on company’s name above.)

Foot Locker Inc.

“Foot Locker reported solid Q4 results, underscoring the benefits of evolving its category mix to shift with demand trends …Taking it altogether, we see 2016 as a year in which Foot Locker is well positioned to capitalize on still robust athletic footwear trends whether they be in basketball, running or casual.” – Camilo Lyon, Canaccord Genuity Inc. analyst

“In his first full year as CEO, Dick Johnson has carried the Ken Hicks baton admirably, with Foot Locker’s vendor relationships, international growth and steady store improvement model as solid as ever. Management has their eye on all balls in the air, from pruning the domestic fleet to e-commerce growth, and developing new branded concepts like Under Armour’s The Armoury. While apparel and women’s SIX:02 remain works in progress, Foot Locker continues to deliver some of the best retail comps in the industry…” Kate McShane, Citi Research analyst

“Foot Locker continues doing a great job managing the current athletic cycle, that began with domestic and basketball strength and is now slowly building in running, casual and international. At the same time, inventory remains well-managed while ROIC keeps improving. Despite what some would consider a few blemishes (comp to-date, SIX:02, etc.), Foot Locker’s above average return profile remains intact while every quarter chips away at fears regarding an over-reliance on just a basketball cycle.” – Christopher Svezia, Susquehanna Financial Group LLLP analyst

Steve Madden Ltd.

“We maintain our neutral on Steve Madden. While the company is benefiting from a return of the fashion footwear cycle, a compelling product offering based off the company’s Test-and-React strategy and faster time to market versus peers, management introduced lackluster (albeit likely conservative) guidance for FY16 on continued retailer caution into the new year.” – Corinna Van der Ghinst, Citi Research analyst

“While Steve Madden styles in the fashion sneaker, dress and sandal categories, in particular, are outperforming peers in the wholesale channel, budgetary restrictions at the retail level are holding back growth. Consolidation of moderate price-point handbag vendors is an additional near-term complicating factor for the company.” – Steve Marotta, CL King & Associates analyst

“A mansion in the slums; reiterate buy. To no surprise, Q1 is expected to be soft … As demand trends normalize and channel inventories get worked down, retailers will come back to Madden for reorders in Q2 for two reasons: Madden is the only vendor that can turn product that quickly, and newness in its fashion assortment has been received well, particularly at its own retail stores.” – Lyon

Wolverine World Wide Inc.

“A decent quarter but guidance disappoints as sales growth continues proving elusive … While we applaud Wolverine for taking proactive measures to improve profitability (store and brand closures), at the end of the day, sales growth is the main lever to get earnings going again. Given the environment and a general lack of on-trend categories (athletic), we remain neutral…” – Svezia

“While there are macro challenges such as weather and currency, much of the product across the Merrell and Sperry brands is not as compelling it needs to be … Inventory levels at Wolverine are elevated and are likely to remain that way throughout 2016 … We remain on the sidelines until there is more clarity, which we do not expect to see until late spring at the earliest.” – Sam Poser, Sterne Agee CRT analyst

“Channel-wide inventory overhang, shaky consumer buying patterns and global macroeconomic issues compounded by negative foreign currency headwind are pressuring near-term earnings expectations … We believe in the merits of Wolverine’s individual brands, portfolio approach and international exposure, the current issues notwithstanding.” – Marotta

“Management is working through factors within their control, including the recent business reorganization, expanding key platforms, successful category extensions, improved segmentation and new partnerships such as Tough Mudder … Management remains confident that they can work down [inventory] to more normalized levels by year end.” – Van der Ghinst

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