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Supply Chain Issues Will Weigh on Earnings for VF. Corp, Skechers, Deckers and Under Armour

A slew of retailers and brands are gearing up to report earnings in the coming weeks.

Some brands like Crocs, Caleres, Genesco, Boot Barn, and Lululemon already announced preliminary Q4 results ahead of their virtual presentations at the 24th annual ICR conference, which took place earlier this month. In some cases, these brands posted better than expected results, despite supply chain slowdowns and impacts from the Omicron variant.

In the next few weeks, VF Corp., Skechers, Deckers, and Under Armour will report earnings for the most recent quarter. As in quarters’ past, many of these results will likely be colored with talk of supply chain headwinds and improvements.

Supply chain slowdowns impacted many quarterly results in 2021. Despite the issues, some companies have positioned themselves to come out stronger this time around, especially as regions in China go back into lockdown.

VF. Corp, the parent company for The North Face, Vans, Supreme and Timberland brands, has not been immune to the problem. According to a recent note from Jane Hali & Associates (JHA), Vietnam’s southern region is responsible for about 10% of VFC’s sourcing mix, which could become an issues if pandemic shutdowns occur there once again.

Other analysts also expressed hesitancy ahead of VFC’s Q3 earnings report on Friday for supply chain reasons. Williams Trading analyst Sam Poser downgraded VFC from a Buy to Hold rating last week, citing clouded visibility from the pandemic, despite strong demand and management.

“The revenue shortfall, based on our checks, will likely come from shipment delays, and pandemic related temporary factory shutdowns in Asia,” Poser wrote.

For Skechers, the story is more upbeat. According to Poser, Skechers has “the best supply chain” in his coverage and will likely see strong results in Q4 and beyond.

“Demand remained high and product flow was not as bad as expected,” he wrote. “Skechers will be well on its way to hitting $10 billion in annual revenue.”

Skechers, which also partly relies on Vietnam and China for manufacturing, has invested in distribution centers for retail and digital channels in Peru, the UK, and Japan and is looking to expand its American distribution center. Skechers is also focusing on growing its DTC and digital channels, JHA analysts noted.

Deckers, which owns Ugg, Hoka One One, Teva, and Sanuk, is also poised for growth. Poser pointed out that delayed orders from Q3 could actually help the company achieve inventory targets in Q4, as a lot of inventory is already in transit.

“The Ugg and Hoka brands continue to be well managed, and their DTC businesses continue to gain momentum,” Poser wrote. “As such, merchandise margins should continue to improve, but the cost of airfreight will remain a headwind through 4Q22, and perhaps leak into 1Q23.”

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