Athletic Styles are Tops Among Footwear Retailers

The fall back to school season traditionally means new shoes for kids. We take a look at the footwear sector of the retail market to spot the winners.

An overall survey shows that retailers that sell predominantly athletic styles are the strongest performers. The top same store sales (SSS) estimates in the footwear group include:

• Footlocker has a 4.4% SSS estimate for Q3 2016, on top of a difficult comparison from a year-ago at 8.7%.
• Finish Line Inc. has a 2.6% SSS estimate, above last year’s 1.5% SSS.

Exhibit 1. Q3 2016 Same Store Sales Estimates – Footwear

Source: I/B/E/S data

Competitive trends

Athleisure is a strong trend, which is boosting these footwear retailers. Millennials really have embraced this trend, even in the workforce. Companies such as Google and tech startups offer a more relaxed work environment, where employees can wear sports shoes to work.

Check out Lululemon’s Lab concept, a brand designed for work clothing, which is paired/styled with athletic shoes, encouraging the relaxed trend at work.

Additionally, some specialty athletic shoes (such as Adidas Yeezy) have a big following, boosting sales at footwear stores.

DSW’s play

DSW introduced a kids’ collection in July, just in time for back-to-school. Parents will be shopping for back-to-school items in August, so a boost for DSW will be to convert those parents into loyal customers. That would translate into stronger future sales.

Currently, DSW has a -2.8% SSS estimate for Q2 2016, but is expected to improve in Q3 2016 at 0.4% SSS (Exhibit 2). This year’s estimate of 0.4% is also an improvement from last year’s -3.9% SSS result.

Exhibit 2. DSW Same Store Sales Actuals and Estimates

Source: I/B/E/S data

Watch back to school

Looking at the estimates, it is clear that introducing the kids’ brands for back-to-school will boost Q3 2016 earnings. The retailer is on track to post its fourth consecutive quarter of negative earnings growth (exhibit 3). However, back-to-school sales are poised to help the retailer come back and post positive earnings growth in Q3 2016.

Exhibit 3. DSW Earnings Growth

Source: Eikon