From athletic powerhouses to family footwear favorites, FN rounds up three shoe stocks that market watchers are buzzing about right now.
The specialty athletic retailer — doing business under eight distinct banners including Foot Locker, Champs and Eastbay — has been in Wall Street’s good graces for several years even amid a brief shortfall in 2017.
The firm, which revealed its five-year growth plan during an investor day last month, boasts a “buy,” “positive” or “outperform” rating from Wells Fargo, Pivotal Research, Wedbush and Susquehanna.
“We believe investments in data analytics, new store formats, digital and omnichannel capabilities, and a new loyalty program, will create improved customer engagement,” Susquehanna Financial LLLP’s Sam Poser said on March 31, providing his thoughts on the company’s investor meeting. “Additionally, the realignment of the internal merchandising organizational structure to complement Foot Locker’s investments are creating a more customer-centric organization that we believe will lead to a more nimble and dynamic company able to adapt to the continued increasing pace of change in consumer preferences.”
Foot Locker said it expects to produce top-line compound annual growth rates in the mid-single digits over the next five years. From 2019 to 2023, EVP and CFO Lauren Peters said the company expects to see sales per square foot in the range of $525 to $575 with high-single-digit net income margin rates and earnings before interest up low double digits.
Foot Locker shares are currently trading at about $61 after reaching $64 last week.
As Vans’ popularity among teens and young adults continues to rise, Wall Street is taking notice and responding with favorable ratings for parent company VF Corp. Multiple investment advisory firms — including Wedbush Securities, Cowen & Co. and Canaccord Genuity — have bestowed “buy” or “outperform” ratings on the company’s shares in recent months. (VF is parent to Vans, The North Face and Timberland, as well as other brands in the outdoor and active space.)
“While macro uncertainty persists, VFC is prudently managing the things it can control,” wrote Canaccord Genuity’s Camilo Lyon in February. “To that end, Vans continues to show no signs of slowing, yet changing families of styles and innovation are helping maintain brand heat. North Face is also upturning now and should continue on this trajectory as innovation ramps up and distribution is managed tightly.”
Meanwhile, in his investment thesis, Cowen & Co.’s John Kernan noted he sees global expansion of The North Face, Vans and Timberland creating “a sustainable trajectory of improving gross margin and ROIC.
“VFC will likely make another acquisition in the coming years to add to its portfolio of brands,” Kernan added. “VFC has significant competitive advantages that include manufacturing nearly 33 percent of its product in its owned factories and owning significant expertise in the supply chain, as well as management’s focus on outdoor and active sports brands and ability to reinvest significant amounts of cash flow to innovate product and acquire a deep knowledge of their core consumer.”
VF’s share price has been hovering in the mid- to high-$80 range since late January.
Analysts have been widely upbeat on the family footwear retailer in recent months — particularly since it kicked off a streak of earnings wins last year. In August, for example, the company put up impressive back-to-school sales that included a comp gain of 7.6 percent, a number that has been hard to come by in retail of late.
Wedbush Securities analyst Christopher, who has an “outperform” rating on the firm’s shares, said he sees Shoe Carnival reaping the benefits of ongoing athletic footwear momentum as well as its own efforts to adjust its store fleet numbers in tandem with the rising importance of digital.
“Shareholder returns continue to be favorable for investors, having returned $90 million to shareholders, or 30 percent of its market cap over the last two years,” Svezia indicated in his investment thesis. “While the external environment remains difficult, Shoe Carnival is increasing its focus on key aspects of its business —product access, inventory management and [customer relationship management] — that should generate more stable sales and earnings performance going forward.
Susquehanna also has a “positive” rating on Shoe Carnival stock, while Sidoti & Co. and Pivotal Research both rate the shares a “buy.”
For the year, Shoe Carnival’s share price has hovered around the low- to mid-$30 range since peaking at $41 in January.