From Department Store Struggles to Bankruptcy Pressures — How Shoe Companies Fared in Q4

Even as retail evolves and more firms find effective strategies to thrive in a disruption-prone landscape, evidence continues to suggest that many of the sector’s challenges won’t diminish overnight.

Fourth-quarter earnings reports over the past two months have revealed industrywide struggles — with companies like Steven Madden Ltd. and Iconix Brands Group shouldering Chapter 11 filings of partners Payless ShoeSource and Sears Holdings, respectively. At the same, shortfalls at firms such as JCPenney, which has grappled with relevance and sluggish trends for years, were indicative of both company-specific struggles as well as the drawn-out battle for beleaguered department stores amid unprecedented digital competition.

Department Store Dilemmas 

Perhaps unsurprisingly, JCPenney announced in February its plans to close 27 more stores in conjunction with another round of slumping sales and earnings. Its Q4 sales were down 10 percent to $3.67 billion, missing the $3.79 billion analysts had predicted. Adjusted profits also took a tumble, sinking more than 60 percent over the comparable period to $57 million, or 18 cents per share, but were better than the 11 cents per share market watchers projected.

Its peers Macy’s and Nordstrom — which had both fared better than JCPenney at the height of the so-called retail apocalypse (especially Nordstrom) — each saw mixed finishes to the fourth-quarter after holiday sales across the space had largely missed lofty expectations.

Seattle-based Nordstrom said its earnings for the three months ended Feb. 2 were $1.48 per share, ahead of the consensus estimate of $1.42 per share. Comparable sales were mostly flat, growing 0.1 percent over the same period last year. While sales at Nordstrom’s off-price Rack stores grew 4 percent, full-price comparable sales declined 1.6 percent for the quarter, which the company said was due to slower traffic in stores.

Macy’s, meanwhile, saw its fourth-quarter profits come in above analysts’ forecasts at $2.73 per share, but this still represented a 4 percent dip over last year, and CEO Jeff Gennette said the retailer’s holiday sales didn’t meet its expectations.

Investors appeared more pleased with Kohl’s this month — sending its shares climbing after it posted Q4 revenues of $6.82 billion, a 3 percent dip over the prior year’s same period but higher than the $6.58 billion market watchers projected. The company also said its Q4 adjusted profits advanced 17 percent year over year to $366 million, or $2.24 per diluted share, besting the $2.18 per share analysts forecasted.

The Brand Component

Elsewhere, Steve Madden continued its steady momentum, announcing Q4 sales and profits that were well ahead of forecasts — despite an expected loss of business stemming from the demise of Payless ShoeSource, for which the company produced private-label footwear. Brand management firm Iconix, however, lamented vendor partner Sears’ bankruptcy when it reported lackluster Q4 results this week, with its sales down 18 percent to $42.7 million and a net loss of $69.1 million, or $9.75 per share, compared with profits of $24.1 million, or $3.97, in the year-ago period.

Meanwhile, Caleres Inc. uncharacteristically fell short of Wall Street’s forecasts for the fourth quarter — despite seeing double-digit sales gains in its newly expanded brand portfolio. The St. Louis-based company — which owns shoe brands such as Sam Edelman and Naturalizer and in 2018 acquired labels Vionic and Blowfish Malibu — reported adjusted diluted EPS of 38 cents for the period, which included costs related to the Vionic buy. Analysts had expected earnings of 45 cents per share.

Overall revenues for the quarter were $720.3 million, a 2.5 percent increase over last year but short of the consensus estimate of $738.1 million. Same-store sales at Famous Footwear — which accounts for more than half of the firm’s revenues — edged up 1.1 percent.

Athletic-Industry Players

In the sporting goods space, shares for Hibbett Sports exploded this month when it announced Q4 sales and profit that blew past market watchers’ bets. The company said its sales rose nearly 15 percent to $306 million, topping analysts’ expectations for sales of $283 million. Comparable sales also advanced 3.8 percent, besting market watchers’ forecasts for flat comps over the year-earlier period.

Rival Dick’s Sporting Goods, however, saw investors ditch its stock this month after it reported a better-than-expected finish to the fourth-quarter but offered an outlook that may have missed the mark. It said its Q4 revenues fell 6.5 percent to $2.49 billion, with same-store sales also dipping 2.2 percent. Those figures were slightly better than forecasts of $2.48 billion and a decline of 3.3 percent, respectively. Looking ahead, the company said it expects to return to positive same-store sales in the second quarter of 2019. Overall, however, full-year 2019 consolidated same-store sales are projected to be flat to up 2 percent. Earnings per share are forecast in the range of $3.15 to $3.35.

Athletic trends continued to bode well for Nike and Adidas in recent months — although the former’s share price was dented this month after its third-quarter earnings report failed to show the level of momentum in North America that market watchers had predicted.

The Swoosh said its sales in the region grew 7 percent in Q3 to $3.8 billion, just shy of the $3.9 billion analysts had expected. (Nike had experienced a decline in North America during the same period last year.) Overall, the company reversed its year-ago losses to post Q3 profits of $1.1 billion, or 68 cents per share, besting the 65 cents per share analysts had predicted. Revenues also gained 7 percent year over year to hit $9.6 billion, in line with what market watchers had expected.

Adidas, meanwhile, posted Q4 sales of 5.23 billion euros ($5.87 billion), a gain of 3.5 percent over the same year-ago period, with profits up 29 percent to 93 million euros ($105 million).

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