Earnings Season Is Back: Inventory Management, Robust E-Commerce Key to Q2 Wins

As the summer wears on, unresolved pandemic-related shipping woes and associated inflation are two trends the footwear market is still digesting — but it’s clear that consumers are back and spending briskly.

Retailers and brands who have figured out how to compensate for international shipping headaches and who have robust online selling platforms are poised to win this upcoming earnings season, analysts said. In next few weeks, a spate of footwear firms will release their results for the spring/summer quarter ended June 30, including Crocs and Skechers, which will report Q2 earnings on Thursday. Steve Madden, Wolverine Worldwide and Deckers are on tap for next week.

If June’s strong retail sales are any indication, consumers have a renewed enthusiasm to spend even despite the rising footwear and apparel prices. The comfort, outdoor and return to office categories are benefitting, said Jessica Ramirez, an analyst at Jane Hali & Associates, as consumers replace basics like running shoes and many prepare to return to work in person.

Comfort brand Crocs, which reports tomorrow morning, is expected to have had another round of significant top-and bottom-line increases.

When it comes to inflation, coupled with demand for back-to-school shopping — which begins in earnest this month — the outlook also remains positive. Yes, shoe prices are up, but consumers are showing that they now have no choice but to purchase what they need. And they are willing to snap up items at full price, said Ramirez.

“If retailers are learning the lessons from COVID-19 and they have right-sized inventories, we should see less promotions, which is a positive for them,” she said.

Retailers also may sell out quickly, though. “Consumers who are aware of inflation risks [may] decide to buy footwear and other back-to-school items sooner rather than later, before prices rise. That’s exacerbating the out-of-stock issue,” said Nikki Baird, VP of retail innovation at Aptos, a technology solutions provider that has worked footwear brands and retailers, such as Skechers, New Balance and Crocs.

Baird noted that many parents are flush with stimulus checks and the advance child tax credit, which has added to demand for back-to-school items.

Finally, companies with robust e-commerce platforms that support capabilities like “buy online, pickup in store,” mobile shopping, and seamless, low cost returns stand to win in the second quarter. Multiple consumer surveys have shown that consumers are now increasingly comfortable making purchases online, largely because of the pandemic, and it’s clear consumers plan to continue purchasing online even if they also plan to shop in person more as pandemic-related restrictions have lifted.

As a result, the bar for omnichannel retailing has been set high, Ramirez noted. Retail companies are behind, she said, if they haven’t beefed up their selling channels to best serve evolving consumer shopping habits.

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