As they emerge from a pandemic-plagued year, shoe companies are wading into unfamiliar territory and preparing to confront a number of big issues ahead.
According to the Footwear Distributors and Retailers of America, which released its second-quarter Shoe Business Outlook survey today, close to half (or 49%) of industry executives reported production or supply chain costs as their greatest concern over the next six months — up from 35% in the prior quarter.
Driving this problem are protracted and steep import tariffs implemented by the Trump administration, as well as the ongoing congestion at the ports of Los Angeles and Long Beach in California, which account for nearly half of total United States imports from Asia. For some companies, such as Steven Madden Ltd. and Wolverine World Wide Inc., the situation at the docks has not only extended shipping lead times for weeks, but also impacted quarterly revenues.
Rounding out the top three issues facing footwear companies this year are the shifts in consumer behavior, as well as labor costs, quality and shortages. In addition, executives have expressed concerns over inventory and retail pricing; access to capital; and government taxes and regulations.
Over the last six months, the majority of respondents (61%) said that they have seen an increase in operating costs. An even larger share (73%) projected that operating costs will continue to rise during the back half of the year. However, this problem, according to FDRA, could be mitigated by a surge in retail footwear prices, which 59% of executives said they expect to occur in the months ahead.
Notably, brands and retailers also appear to be less distressed by COVID-19-related uncertainties as they come off of a massive stimulus boost and welcome back shoppers to stores, coupled with the benefits of a rapid vaccination rollout and pent-up consumer demand. In its survey, the FDRA reported that companies anticipate a rebound in sales in the wake of the health crisis, with almost half (46%) of businesses indicating that their sales are now at or have exceeded pre-pandemic levels. Less than a quarter, on the other hand, project a full sales recovery to be more than 12 months away.
What’s more, in addition to forecasting revenues, the hiring outlook appeared to be more bullish compared to the prior quarter. According to the trade group, the share predicting to boost hiring over the next six months nearly doubled from 41% to 81%. It also noted improving prospects over the balance of the year for the broader U.S. economy.