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4 Shoes & Retail Apparel Stocks to Watch Amid Mixed Industry Trends
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Companies in the Zacks Shoes and Retail Apparel industry have been benefiting from the continued demand for activewear and footwear, given the increasing adoption of a healthy lifestyle. The industry players, focused on product innovation, store expansion, digital investments and omni-channel growth, are poised to gain. This has compelled their activewear segments to resort to innovations to make their assortments more comfortable and fashionable. However, elevated costs related to supply-chain headwinds, brand campaigns and digital investments have been deterrents.
The industry participants have been investing in product innovation to gain market share. Investments in products and e-commerce portals bode well for players like NIKE Inc. (NKE - Free Report) , Deckers Outdoor (DECK - Free Report) , Steven Madden (SHOO - Free Report) and Caleres (CAL - Free Report) .
About the Industry
The Zacks Shoes and Retail Apparel industry comprises companies that design, source and market clothing, footwear and accessories for men, women and children under various brand names. Product offerings of the companies mostly include athletic and casual footwear, fashion apparel and activewear, sports equipment, bags, balls, and other sports and fashion accessories. The companies showcase their products through their branded outlets and websites. Some companies distribute products via other retail stores such as national chains, online retailers, sporting goods stores, department stores, mass merchandisers, independent retailers and catalogs.
A Look at What's Shaping Shoes and Retail Apparel Industry's Future
Cost Headwinds: Companies in the industry are witnessing elevated costs due to factors like commodity cost inflation, increased freight costs, reinvestments and other impacts. Ongoing supply-chain constraints, extended transit times, and elevated ocean freight and logistics costs have been acting as deterrents. A number of companies expect increased freight and logistics costs to hurt margins in the near term. Elevated marketing expenses, higher operating overhead and demand-creating expenses, and increased investments to enhance store and digital operations have been raising SG&A costs. Also, the companies are witnessing higher costs to support brand campaigns and digital investments. The exit from the Russia business due to the Ukraine-Russia conflict and COVID-related disruptions in some parts of Greater China are likely to be the key concerns for some players. A tough and competitive labor market remains another concern. The factors pose a threat to the industry players’ margins.
Consumer Demand Trends: Players in the industry have been benefiting from strong consumer demand for activewear/athleisure products which is expected to accelerate in 2022 and beyond. Rising health consciousness and the willingness to live an active lifestyle and look fit have led consumers to incorporate sports and fitness routines into their daily lives. Athletic goods and apparel companies offer products from sweatshirts, leggings, pants, jackets and tops to yoga wear and running clothes for men and women. People are clubbing athleisure styles like tops with blazers to give them a formal look at office meetings. The industry participants have been focused on product innovations, store expansion and enhancing e-commerce capabilities to gain market share. The companies continue to innovate styles, materials and colors, and incorporate functional designs to grab a large share of the fast-growing market. The increased participation of women in sports and outdoor activities in recent years has been a boon for the industry.
E-Commerce Investments: E-commerce has been playing a crucial role in the athleisure market’s growth. The companies in the segment are looking to build a customer base through websites, social media and other digital channels. As consumers continue to show interest in shopping from home, growth of athletic-inspired apparel and digital sales are likely to continue. Companies focused on expanding their athletic-based apparel lines and building on e-commerce capabilities are expected to witness growth in 2022 and beyond. Efforts to accelerate deliveries through investments in supply chains and order fulfillment avenues are likely to provide an edge to the industry players. Simultaneously, companies are investing in renovations and improved checkouts, as well as mobile point-of-sale capabilities, to make stores attractive. The efforts to enhance experiences through multiple channels are likely to contribute significantly to improving traffic and transactions both in stores and online.
Zacks Industry Rank Indicates Bleak Prospects
The Zacks Shoes and Retail Apparel Industry is an 11-stock group within the broader Zacks Consumer Discretionary sector. The industry currently carries a Zacks Industry Rank #192, which places it in the bottom 17% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bleak prospects for the near term. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
The industry’s positioning in the bottom 50% of the Zacks-ranked industries is a result of a negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are losing confidence in this group’s earnings growth potential. In the past year, the industry’s earnings estimates for 2022 have declined 11%.
Before we present a few stocks that you may want to consider for your portfolio, let’s look at the industry’s recent stock-market performance and the valuation picture.
Industry Vs. Sector
The Zacks Shoes and Retail Apparel industry has outperformed its sector but underperformed the S&P 500 in the past year.
While stocks in the industry have collectively declined 31.8%, the Zacks S&P 500 composite has dropped 13.4%. Meanwhile, the Zacks Consumer Discretionary sector has declined 39.5%.
One-Year Price Performance
Shoes and Retail Apparel Industry's Valuation
On the basis of forward 12-month price-to-earnings (P/E), commonly used for valuing Consumer Discretionary stocks, the industry is currently trading at 22.4X compared with the S&P 500’s 16.91X and the sector’s 16.99X.
Over the last five years, the industry has traded as high as 36.79X and as low as 19.87X, with the median of 25.81X, as the chart below shows.
Price-to-Earnings Ratio (Past 5 Years)
4 Shoes & Retail Apparel Stocks to Watch
Caleres: Caleres is a leading footwear retailer and wholesaler in the United States, China, Canada, China, and Guam. The company operates through Famous Footwear and Brand Portfolio segments. The Saint Louis, MO-based company has been benefiting from the positive consumer demand trends and accelerated recovery in the footwear marketplace, aiding its sales. The momentum in the Famous Footwear brand is expected to contribute meaningfully to sales growth. Strong performances of CAL’s emerging brands, including Vionic, Sam Edelman, Allen Edmonds and Blowfish Malibu, are expected to be drivers.
Management anticipates strong performance at the Famous Footwear brand and gains in the Brand Portfolio segments, leveraging a diversified brand model, and the continued execution of strategic priorities to aid CAL’s performance. Caleres's focus on consumers' evolving preferences and efforts to drive growth across its omni-channel ecosystem bodes well. The Zacks Consensus Estimate for CAL’s fiscal 2022 sales and earnings indicate growth of 5.6% and 0.9%, respectively, from the year-ago quarter’s reported figures. The consensus estimate for CAL’s fiscal 2022 EPS has moved up by a penny in the past 30 days. The company has a trailing four-quarter earnings surprise of 34.9%, on average. Shares of this Zacks Rank #2 (Buy) company have risen 10.3% in the past year. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Price and Consensus: CAL
NIKE: NIKE, a global leader in athletic footwear, apparel, equipment and sports-related accessories, is poised to gain from its Consumer Direct Acceleration strategy, along with strong demand, compelling products, and robust performance in its digital and DTC businesses. NKE has been benefiting from its efficient digital ecosystem, which comprises its online site as well as commercial and activity apps. With consumers’ increasing digital focus, NIKE is on track with its digital revenue growth target for fiscal 2025. NKE expects revenue growth in fiscal 2025 to be led by NIKE Direct, which is anticipated to represent 60% of the total revenues on strong digital growth. The company expects NIKE-owned and partnered Digital to reach a 50% business mix in fiscal 2025, with NIKE-owned Digital accounting for 40% of the business.
As part of the Consumer Direct Acceleration, the company’s immediate priorities include improving personalization and creating a consistent end-to-end technology platform. The company remains confident of its performance in fiscal 2023, driven by brand strength, consumer connections, product pipeline and the normalization of inventory supply in North America, EMEA and APLA. The Zacks Consensus Estimate for NKE’s fiscal 2023 sales and earnings indicate growth of 7.8% and 0.8%, respectively, from the year-ago quarter’s reported figures. The consensus estimate for NKE’s fiscal 2023 earnings has moved down by a penny in the past 30 days. NIKE has reported an earnings surprise of 16.4%, on average, in the trailing four quarters. The Zacks Rank #3 (Hold) stock has declined 32.2% in the past year.
Price and Consensus: NKE
Deckers: The Goleta, CA-based company is a leading designer, producer and brand manager of innovative, niche footwear and accessories developed for outdoor sports, and other lifestyle-related activities. Strength in HOKA ONE ONE and UGG brands, as well as growth in direct-to-consumer and wholesale channels, has been aiding DECK’s performance. Deckers is targeting profitable and underpenetrated markets. The company remains focused on product innovations, store expansion and enhancing e-commerce capabilities. DECK’s focus on expanding its brand assortments, bringing a more innovative product line, targeting consumers digitally and optimizing omni-channel distribution bodes well.
Deckers has been developing its e-commerce portal to capture incremental sales. DECK has made substantial investments to strengthen its online presence and improve the shopping experience for its customers. The company’s focus on opening smaller-concept omni-channel outlets and expanding programs — including Retail Inventory Online; Infinite UGG; Buy Online, Return In Store; and Click and Collect — to enhance customers’ shopping experiences is likely to boost the top line in the quarters ahead. DECK has a trailing four-quarter earnings surprise of 27.8%, on average. Shares of the Zacks Rank #3 company have declined 24% in the past year. The Zacks Consensus Estimate for DECK’s fiscal 2023 sales and earnings indicate growth of 10.8% and 11.3%, respectively, from the year-ago quarter’s reported figures. The consensus estimate for its fiscal 2023 EPS has been unchanged in the past 30 days.
Price and Consensus: DECK
Steven Madden: Steven Madden designs, sources, markets and sells fashion-forward name brand and private-label footwear for women, men and children, and private-label fashion handbags and accessories globally. SHOO has been gaining from a robust e-commerce momentum, product assortments and accelerated business recovery. The company’s focus on creating trend-right merchandise assortment, deepening customer relations via marketing, enhancing the digital commerce agenda, expanding international markets and efficiently controlling expenses bodes well. This has been boosting consumer demand, contributing to the overall performance for a while now.
Strength in SHOO’s digital and brick-and-mortar channels bodes well. Management is on track to expand the international business. The company’s e-commerce wing continues to gain from prudent investments in digital marketing, as well as efforts to optimize the features and functionality of its website. Steven Madden has been significantly accelerating its digital commerce initiatives with respect to distribution. SHOO has a trailing four-quarter earnings surprise of 30.7%, on average. The Zacks Consensus Estimate for the company’s fiscal 2023 sales and earnings indicate growth of 15.4% and 18.8%, respectively, from the year-ago quarter’s reported figures. The consensus estimate for SHOO’s 2022 EPS has been unchanged in the past 30 days. Shares of the Zacks Rank #3 footwear company have declined 24.9% in the past year.
Price and Consensus: SHOO
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4 Shoes & Retail Apparel Stocks to Watch Amid Mixed Industry Trends
Companies in the Zacks Shoes and Retail Apparel industry have been benefiting from the continued demand for activewear and footwear, given the increasing adoption of a healthy lifestyle. The industry players, focused on product innovation, store expansion, digital investments and omni-channel growth, are poised to gain. This has compelled their activewear segments to resort to innovations to make their assortments more comfortable and fashionable. However, elevated costs related to supply-chain headwinds, brand campaigns and digital investments have been deterrents.
The industry participants have been investing in product innovation to gain market share. Investments in products and e-commerce portals bode well for players like NIKE Inc. (NKE - Free Report) , Deckers Outdoor (DECK - Free Report) , Steven Madden (SHOO - Free Report) and Caleres (CAL - Free Report) .
About the Industry
The Zacks Shoes and Retail Apparel industry comprises companies that design, source and market clothing, footwear and accessories for men, women and children under various brand names. Product offerings of the companies mostly include athletic and casual footwear, fashion apparel and activewear, sports equipment, bags, balls, and other sports and fashion accessories. The companies showcase their products through their branded outlets and websites. Some companies distribute products via other retail stores such as national chains, online retailers, sporting goods stores, department stores, mass merchandisers, independent retailers and catalogs.
A Look at What's Shaping Shoes and Retail Apparel Industry's Future
Cost Headwinds: Companies in the industry are witnessing elevated costs due to factors like commodity cost inflation, increased freight costs, reinvestments and other impacts. Ongoing supply-chain constraints, extended transit times, and elevated ocean freight and logistics costs have been acting as deterrents. A number of companies expect increased freight and logistics costs to hurt margins in the near term. Elevated marketing expenses, higher operating overhead and demand-creating expenses, and increased investments to enhance store and digital operations have been raising SG&A costs. Also, the companies are witnessing higher costs to support brand campaigns and digital investments. The exit from the Russia business due to the Ukraine-Russia conflict and COVID-related disruptions in some parts of Greater China are likely to be the key concerns for some players. A tough and competitive labor market remains another concern. The factors pose a threat to the industry players’ margins.
Consumer Demand Trends: Players in the industry have been benefiting from strong consumer demand for activewear/athleisure products which is expected to accelerate in 2022 and beyond. Rising health consciousness and the willingness to live an active lifestyle and look fit have led consumers to incorporate sports and fitness routines into their daily lives. Athletic goods and apparel companies offer products from sweatshirts, leggings, pants, jackets and tops to yoga wear and running clothes for men and women. People are clubbing athleisure styles like tops with blazers to give them a formal look at office meetings. The industry participants have been focused on product innovations, store expansion and enhancing e-commerce capabilities to gain market share. The companies continue to innovate styles, materials and colors, and incorporate functional designs to grab a large share of the fast-growing market. The increased participation of women in sports and outdoor activities in recent years has been a boon for the industry.
E-Commerce Investments: E-commerce has been playing a crucial role in the athleisure market’s growth. The companies in the segment are looking to build a customer base through websites, social media and other digital channels. As consumers continue to show interest in shopping from home, growth of athletic-inspired apparel and digital sales are likely to continue. Companies focused on expanding their athletic-based apparel lines and building on e-commerce capabilities are expected to witness growth in 2022 and beyond. Efforts to accelerate deliveries through investments in supply chains and order fulfillment avenues are likely to provide an edge to the industry players. Simultaneously, companies are investing in renovations and improved checkouts, as well as mobile point-of-sale capabilities, to make stores attractive. The efforts to enhance experiences through multiple channels are likely to contribute significantly to improving traffic and transactions both in stores and online.
Zacks Industry Rank Indicates Bleak Prospects
The Zacks Shoes and Retail Apparel Industry is an 11-stock group within the broader Zacks Consumer Discretionary sector. The industry currently carries a Zacks Industry Rank #192, which places it in the bottom 17% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bleak prospects for the near term. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
The industry’s positioning in the bottom 50% of the Zacks-ranked industries is a result of a negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are losing confidence in this group’s earnings growth potential. In the past year, the industry’s earnings estimates for 2022 have declined 11%.
Before we present a few stocks that you may want to consider for your portfolio, let’s look at the industry’s recent stock-market performance and the valuation picture.
Industry Vs. Sector
The Zacks Shoes and Retail Apparel industry has outperformed its sector but underperformed the S&P 500 in the past year.
While stocks in the industry have collectively declined 31.8%, the Zacks S&P 500 composite has dropped 13.4%. Meanwhile, the Zacks Consumer Discretionary sector has declined 39.5%.
One-Year Price Performance
Shoes and Retail Apparel Industry's Valuation
On the basis of forward 12-month price-to-earnings (P/E), commonly used for valuing Consumer Discretionary stocks, the industry is currently trading at 22.4X compared with the S&P 500’s 16.91X and the sector’s 16.99X.
Over the last five years, the industry has traded as high as 36.79X and as low as 19.87X, with the median of 25.81X, as the chart below shows.
Price-to-Earnings Ratio (Past 5 Years)
4 Shoes & Retail Apparel Stocks to Watch
Caleres: Caleres is a leading footwear retailer and wholesaler in the United States, China, Canada, China, and Guam. The company operates through Famous Footwear and Brand Portfolio segments. The Saint Louis, MO-based company has been benefiting from the positive consumer demand trends and accelerated recovery in the footwear marketplace, aiding its sales. The momentum in the Famous Footwear brand is expected to contribute meaningfully to sales growth. Strong performances of CAL’s emerging brands, including Vionic, Sam Edelman, Allen Edmonds and Blowfish Malibu, are expected to be drivers.
Management anticipates strong performance at the Famous Footwear brand and gains in the Brand Portfolio segments, leveraging a diversified brand model, and the continued execution of strategic priorities to aid CAL’s performance. Caleres's focus on consumers' evolving preferences and efforts to drive growth across its omni-channel ecosystem bodes well. The Zacks Consensus Estimate for CAL’s fiscal 2022 sales and earnings indicate growth of 5.6% and 0.9%, respectively, from the year-ago quarter’s reported figures. The consensus estimate for CAL’s fiscal 2022 EPS has moved up by a penny in the past 30 days. The company has a trailing four-quarter earnings surprise of 34.9%, on average. Shares of this Zacks Rank #2 (Buy) company have risen 10.3% in the past year. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Price and Consensus: CAL
NIKE: NIKE, a global leader in athletic footwear, apparel, equipment and sports-related accessories, is poised to gain from its Consumer Direct Acceleration strategy, along with strong demand, compelling products, and robust performance in its digital and DTC businesses. NKE has been benefiting from its efficient digital ecosystem, which comprises its online site as well as commercial and activity apps. With consumers’ increasing digital focus, NIKE is on track with its digital revenue growth target for fiscal 2025. NKE expects revenue growth in fiscal 2025 to be led by NIKE Direct, which is anticipated to represent 60% of the total revenues on strong digital growth. The company expects NIKE-owned and partnered Digital to reach a 50% business mix in fiscal 2025, with NIKE-owned Digital accounting for 40% of the business.
As part of the Consumer Direct Acceleration, the company’s immediate priorities include improving personalization and creating a consistent end-to-end technology platform. The company remains confident of its performance in fiscal 2023, driven by brand strength, consumer connections, product pipeline and the normalization of inventory supply in North America, EMEA and APLA. The Zacks Consensus Estimate for NKE’s fiscal 2023 sales and earnings indicate growth of 7.8% and 0.8%, respectively, from the year-ago quarter’s reported figures. The consensus estimate for NKE’s fiscal 2023 earnings has moved down by a penny in the past 30 days. NIKE has reported an earnings surprise of 16.4%, on average, in the trailing four quarters. The Zacks Rank #3 (Hold) stock has declined 32.2% in the past year.
Price and Consensus: NKE
Deckers: The Goleta, CA-based company is a leading designer, producer and brand manager of innovative, niche footwear and accessories developed for outdoor sports, and other lifestyle-related activities. Strength in HOKA ONE ONE and UGG brands, as well as growth in direct-to-consumer and wholesale channels, has been aiding DECK’s performance. Deckers is targeting profitable and underpenetrated markets. The company remains focused on product innovations, store expansion and enhancing e-commerce capabilities. DECK’s focus on expanding its brand assortments, bringing a more innovative product line, targeting consumers digitally and optimizing omni-channel distribution bodes well.
Deckers has been developing its e-commerce portal to capture incremental sales. DECK has made substantial investments to strengthen its online presence and improve the shopping experience for its customers. The company’s focus on opening smaller-concept omni-channel outlets and expanding programs — including Retail Inventory Online; Infinite UGG; Buy Online, Return In Store; and Click and Collect — to enhance customers’ shopping experiences is likely to boost the top line in the quarters ahead. DECK has a trailing four-quarter earnings surprise of 27.8%, on average. Shares of the Zacks Rank #3 company have declined 24% in the past year. The Zacks Consensus Estimate for DECK’s fiscal 2023 sales and earnings indicate growth of 10.8% and 11.3%, respectively, from the year-ago quarter’s reported figures. The consensus estimate for its fiscal 2023 EPS has been unchanged in the past 30 days.
Price and Consensus: DECK
Steven Madden: Steven Madden designs, sources, markets and sells fashion-forward name brand and private-label footwear for women, men and children, and private-label fashion handbags and accessories globally. SHOO has been gaining from a robust e-commerce momentum, product assortments and accelerated business recovery. The company’s focus on creating trend-right merchandise assortment, deepening customer relations via marketing, enhancing the digital commerce agenda, expanding international markets and efficiently controlling expenses bodes well. This has been boosting consumer demand, contributing to the overall performance for a while now.
Strength in SHOO’s digital and brick-and-mortar channels bodes well. Management is on track to expand the international business. The company’s e-commerce wing continues to gain from prudent investments in digital marketing, as well as efforts to optimize the features and functionality of its website. Steven Madden has been significantly accelerating its digital commerce initiatives with respect to distribution. SHOO has a trailing four-quarter earnings surprise of 30.7%, on average. The Zacks Consensus Estimate for the company’s fiscal 2023 sales and earnings indicate growth of 15.4% and 18.8%, respectively, from the year-ago quarter’s reported figures. The consensus estimate for SHOO’s 2022 EPS has been unchanged in the past 30 days. Shares of the Zacks Rank #3 footwear company have declined 24.9% in the past year.
Price and Consensus: SHOO