The coronavirus pandemic has pummeled shoe retailers across the board, but experts have pointed out one of the brighter spots in the sector: the performance footwear market.
During the second quarter, state and local government lockdown restrictions forced the widespread closures of stores from coast to coast. Stay-at-home orders led consumers to not only shop online to prevent the spread of COVID-19, but also trade their heels and oxfords for slippers and sneakers.
Among the retailers that stand to benefit from that migration, according to Susquehanna Financial Group analyst Sam Poser, are Dick’s Sporting Goods, Foot Locker and Hibbett Sports. The trading firm raised its price targets for all three companies — from $51 to $55, $34 to $35 and $30 to $35, respectively.
“The shift to athletic, coupled with a plethora of new product and the permanent closures of some competitors in the marketplace should offset tailwinds from the end of stimulus checks, pent-up demand and temporary store closures of certain competitors,” Poser explained in a distribution note. “We are confident that sales momentum will continue into the third quarter, albeit at a more moderate pace than in the second quarter.”
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Just yesterday, Hibbett saw its stock rise more than 20% following the release of a blowout sales forecast: The Birmingham, Ala.-based company announced predictions for second-quarter comps to increase in excess of 70% compared with the prior year period. While brick-and-mortar same-store sales are forecasted to improve about 60%, it estimates those of its digital channels to spike roughly 200%. (Its Q2 2020 period ends on Aug. 1.)
According to Hibbett, sales have been positively impacted by several factors, including stimulus payments doled out by the federal government as well as demand from deferred spending in March and April, when the outbreak took hold in the United States. It also attributed revenue growth to the temporary and permanent closures of rival chains, plus shoppers’ accelerated adoption of e-commerce.
Experts anticipate similar performances from Dick’s and Foot Locker — both of which will announce second-quarter earnings results in late August.
“Even if the back-to-school selling season is delayed or weak, our checks indicate that the shift to athletic footwear and apparel will help Dick’s, Foot Locker and Hibbett sustain momentum for at least the next few months,” Poser added. “We expect sales of fashion athletic footwear and apparel to remain strong for the foreseeable future.”
According to The NPD Group, April marked the worst performing month on record for athletic footwear sales, which dropped 16% to $1.6 billion through June. However, June began to see an uptick in sneaker sales, which senior industry advisor of sports Matt Powell attributed to pent-up demand after consumers had been cooped up for two months. He also cited significant markdowns in prices as retailers sought to clear out products that had been sitting in darkened storefronts for weeks.
“What’s clearly working are increased allocations on limited-edition shoes. The return of running shoes late in the quarter was another positive sign,” he said. “We are seeing a renewed interest in and commitment to health and fitness take hold, and I expect performance running will be a real beneficiary in today’s COVID-19 world.”