Some footwear brands are seeing major sales gains in their wholesale channels — despite an industry-wide shift towards DTC.
In the last week, Skechers, Steve Madden and Puma have all posted quarterly wholesale revenue growth. While their DTC channels also performed well, the results suggest that brand owned stores and websites are not the only channels necessary to drive business.
Earlier this week, Steve Madden reported that wholesale revenues increased 54.1% year over year to $449 million, with wholesale footwear revenues up 59.9% to $346.7 million. Management attributed these numbers, in part, to wholesale customers electing to order earlier than usual to contend with longer-than-usual transit times. As such, the brand expects this wholesale revenue surge to slow in Q2 to around 30%.
DTC channels grew over 60% in the quarter as well, but the company expects this growth to flatten in Q2 as the results become juxtaposed with 2021’s Q2 stimulus impact.
For Steve Madden, a push for retailers to place orders earlier than usual helped spur wholesale momentum. In the case of certain athletic brands, such as Puma and Skechers, another factor is likely at play. As major brands turn away from retail partnerships in favor of a robust direct-to-consumer model, other brands are being rewarded with large stakes in these wholesale channels.
For example, Nike has terminated wholesale accounts with retailers like Zappos, Dillard’s, DSW, Urban Outfitters, Shoe Show and more, leaving many retailers without the ability to sell one of the most popular brands in stores. Nike has also cut back on the amount of product it is offering in existing vendors, like Foot Locker, in order consolidate distribution. As a result, brands like Skechers and Puma are picking up wins in these retail channels while maintaining their own DTC growth at the same time.
At the same time, sales at retail for Nike, the Jordan brand and Adidas have softened in Q1 versus last year and are underperforming compared to the rest of the market, data from the NPD Group’s retail tracking service showed.
“With big brands struggling at retail, due to discontinued retail and other factors, shelf space and open to buy has opened up for smaller brands,” said to Matt Powell, NDP’s VP and senior industry advisor for sports. “Brands that seized this opportunity will likely be able to hold onto this increased market share.”
In Q1, Puma’s wholesale business grew by 23.3% to €1.5 billion ($1.6 billion) compared to 2021. Puma’s wholesale revenue now accounts for almost 80% of its total sales.
At Skechers wholesale revenue in Q1 grew 32.7%, to $1.25 billion, led by a 23% increase in unit sales, and an 8.6% increase in average selling price. Wholesale revenue grew 40% in the Americas and EMEA. DTC channels, on the other hand, grew 15.7%.
This wholesale success story is grounded in industry research, which suggests that shifting entirely into DTC could limit profitability in the long run. A September report from BMO Capital Markets analyst Simeon Siegel showed that DTC channels can offer retailers lower profit margins than wholesale channels before taxes and interest.