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Why This Retail Analyst Named Crocs, Boot Barn and Kontoor Brands as His Top Picks

As supply chain constraints persist, one retail analyst has outlined his top retail and footwear stock picks going into the new year.

“Most of the Covid ‘winners’ won because they dramatically improved upon the way they engaged and retained customers, and evolved throughout the pandemic,” wrote Williams Trading analyst Sam Poser in an in-depth note to clients that detailed his forecast for top shoe brands and retailers. “Many other companies suffered from the problem of ‘if you keep doing what you’re doing, you ain’t going to get what you already got.'”

In his analysis, Poser called out the 16 top brands that could continue to see success in 2022. He noted that the recent stock dips for some pandemic winners have been “beyond overdone,” though supply chain issues will likely persist through the spring.

Here were his top three picks:

Boot Barn (BOOT)

Boot Barn store
Inside a Boot Barn store
CREDIT: Boot Barn

In a January note, Poser called Boot Barn the “best growth story in our coverage, and perhaps in all retail,” citing the company’s expanding store count, exclusive brands and a surge in women’s Western boots. The analyst named the boot and outdoor retailer his number one pick of his coverage.

Over the last four quarters, Boot Barn has consistently posted stellar results. In its most recent earnings for Q3, total sales vaulted 71% to $486 million, with a consolidated same-store sales increase of 61%.

According to Jim Conroy, the CEO of the boot and outdoor retailer, half of the company’s explosive growth over the last year can be attributed to reaching new customers. This was achieved via a broader product assortment, targeting marketing campaigns and a shift in brand aesthetic.

Poser expressed confidence in the retailer’s ability to expand to 500 stores up from its current 289. The analyst also called out the retailer’s strong selection of exclusive product and diverse manufacturing system that hardly relies on the Vietnam region for production.

Crocs (CROX)

Crocs sale
CREDIT: Courtesy of Crocs
“Crocs, in our view continues to prove that it is one of the best managed companies in our coverage universe,” wrote Poser, calling out the brand’s evolving product innovation, consumer engagement and digital strength.

While Crocs’ comfort appeal made it a pandemic winner, the brand’s widespread popularity — especially among celebrities — will make it a long-term winner, he said.

The footwear giant recently reported revenues in the fourth quarter of $586.6 million, an increase of 42.6% from the same period last year. Revenues for the full fiscal year of 2021 were $2.3 billion, an increase of 66.9%, or 65.2% on a constant currency basis over 2020.

Additionally, Crocs Inc. this month completed a deal to acquire the privately owned footwear brand Hey Dude. The deal is valued at $2.5 billion and marks Crocs’ largest acquisition to date.

Like Crocs, Hey Dude is a comfort-focused footwear brand that has what Crocs executive see as a strong potential for growth. According to Crocs’ investor presentation regarding the deal, the Hey Dude acquisition will help Crocs diversify its portfolio and build upon Crocs’ already strong digital penetration. It also turns Crocs into a multi-brand company for the first time.

“We remain confident that Crocs management will take the product innovation and brand control it applied to Crocs, and successfully apply them to Hey Dude,” Poser wrote. “The addressable market for Hey Dude is vast, and we are comfortable that Hey Dude compliments Crocs while it appeals to a similar customer base.”

Kontoor Brands (KTB)

Wrangler Footwear with Twisted X
CREDIT: Courtesy of Twisted X

Kontoor Brands Inc., which owns the Wrangler, Lee and Rock & Republic brands, was Poser’s number three stock pick. In his analysis, Poser called out the company’s diverse sourcing structure which ensures that the brand is less impacted from global supply chain challenges.

The company has also implemented a global Enterprise Resource Planning (ERP) platform, which is meant to eliminate unnecessary spending and identify ways to fuel efficient and profitable growth in various regions such as China and the U.S.

“On the back of a global ERP that’s gaining traction, and improving positioning of the Wrangler and Lee brand, and a diverse sourcing structure, Kontoor is well positioned for both short term and long term results,” Poser wrote.

The company has also grown its e-commerce and digital wholesale revenues since it spun off from from VF Corp. in 2019, which Poser noted has driven brand awareness.

In Q3, Kontoor’s revenue increased to $652 million, up 12% from 2020. Poser expects earnings per share for the full-year to increase by 11.2% to $4.27.

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