It was not a good week for family footwear retailers. Every shoe company reporting this week — Shoe Carnival, DSW, Famous Footwear at Caleres Inc. and Genseco Inc.’s Journeys and Schuh — reported tough comps, lackluster sales and a slow start to back-to-school.
While some retailers missed in bigger ways than others, bottom line, say experts, retailers continued to struggle finding the mix shoppers would pay full price for.
Election jitters, global market events such as Brexit and shifting trends likely contributed to the tough summer, but a bad Q2 could make the back half chase for trends a big challenge.
“Overall we’ve had more promotional activity, especially for brands not resonating as well. When you start looking at holiday, it probably means that some orders are going to be canceled and there is going to be some carryover because it’s not that far away,” said Jeff Van Sinderen, an analyst with B. Riley & Co. “They can only sell so many pairs of shoes and even at a discount.”
In the case of DSW, the brand just came in at Street predictions, but comps were down 1.2 percent, and the company had a tough time persuading shoppers to buy nonathletic product. The brand even said that in test stores where it stocked more fashion athletic and athletic styles, it did double the athletic business.
“Specifically, we fear the mounting competitive pressure (from department stores, online retailers and off-pricers) coupled with DSW’s own strategic initiatives (increasing mix of kids, private label, athletic and closeouts) will continue to pressure AUR over the long run,” wrote Cannacord Genuity analyst Camilo Lyon in a note to investors this week.
Lyon was also skeptical that a $25 million plan to reduce costs across the board at DSW “doesn’t solve the fundamental problem” of driving healthy comps and margins.
Similarly, over at Caleres’ Famous Footwear and Shoe Carnival, both stores said a slow kickoff to back-to-school was remarkably more pronounced than years past. Families headed to stores just a day before or weekend after school started. Tax free holidays were a nonstarter for shoppers.
“The bottom-line miss was due to a combination of the negative comp and lower-than-expected gross margin, partially offset by lower-than-anticipated SG&A expenses,” wrote analyst Steve Marotta on Famous Footwear. Marotta noted that even though Famous took a few weeks to get going for back-to-school, he was still confident in the retailer as comps for the store were up in the latter part of August.
In the case of Genesco’s Journeys and Schuh, consumer desire for retro, athletic styles a la Puma and Adidas hit the stores extremely hard. The firm hit a 52-week low Thursday with shares dropping from $72.64 to $48.79.
Van Sinderen said that stores continue to talk about the chase, but he’s not sure it will solve the problem, arguing that as stores buy less product to gauge what resonates with shoppers, brands are making less product to fill orders mid-season.
“What you have is a shift in who is bearing the burden of the inventory. Can retailers push that burden back on vendors? I’m not sure it’s going to work that way. It’s a challenging environment and it’s narrow what is resonating,” Van Sinderen said. “The hottest brand right now is Adidas. And it’s not just footwear, but apparel. We’ve seen a return to classics and that’s part of why they’re so hot.”