We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
SHOE shares have lost two-thirds of their value amid steadily contracting sales growth.
Despite declining business growth, Shoe Station Group shares still trade at a relatively rich valuation.
Shoe Station Group Inc. ((SHOE - Free Report) ), formerly known as Shoe Carnival, is one of the largest family footwear retailers in the United States, operating more than 420 stores across its Shoe Carnival and Shoe Station banners.
The company sells a broad assortment of athletic, casual and dress shoes, catering primarily to value-conscious consumers. However, the business has struggled with declining sales, weakening profitability and intense competition across the footwear retail industry.
What makes the situation particularly concerning is the persistence of these challenges. Shoe Station has struggled to generate sustainable organic growth for several years, with declining sales at its legacy Shoe Carnival stores and increasing pressure on profit margins. Even its Shoe Station banner, which management has positioned as the company's primary growth opportunity, has recently experienced falling comparable-store sales.
The latest quarterly results underscore these difficulties. Revenue declined 7.2% year over year, while comparable store sales fell 7.1%. Both retail banners reported declining sales, and gross margins contracted sharply as increased promotional activity and inventory liquidation weighed on profitability.
These disappointing operating trends have been compounded by a weakening earnings outlook, putting additional pressure on investor sentiment. Although shares have already suffered a steep selloff, a low stock price does not necessarily translate into an attractive valuation when earnings are deteriorating.
The technical picture offers little encouragement either. SHOE shares have lost roughly two-thirds of their value over the last two years, dramatically underperforming the broader market and reflecting persistent selling pressure.
With little evidence of a sustained business turnaround, negative earnings momentum and a deeply bearish stock chart, Shoe Station appears to face additional downside risk despite its already substantial decline.
Image Source: Zacks Investment Research
SHOE Shares Get Downgraded
The deterioration in Shoe Station's business is becoming increasingly apparent in Wall Street's earnings forecasts. Following another disappointing quarter and a reduced outlook from management, analysts have aggressively cut their expectations for the coming quarters and years.
Over the last 60 days, the current year earnings estimates have plunged 43.3%, from $1.50 to just $0.85 per share. Next year estimates have also been reduced by 18.8%, while forecasts for the next two quarters have collapsed by 51% and 65.9%, respectively.
These are substantial downward revisions, particularly for an established retailer, and highlight just how quickly the company's profitability is deteriorating. The negative revisions have pushed SHOE to a Zacks Rank #5 (Strong Sell).
Of course, with shares already down roughly 66% over the last two years, investors might assume much of the bad news is priced in. However, that may not be the case.
SHOE still trades at 15.4x forward earnings, hardly a bargain for a retailer struggling with declining sales and shrinking profit margins. Moreover, with earnings estimates falling so rapidly, even that valuation could prove misleading if the company's financial performance continues to disappoint.
Until there is evidence that sales are stabilizing and earnings expectations have stopped falling, it is difficult to make a compelling case for a turnaround in SHOE shares.
Image Source: Zacks Investment Research
Should Investors Avoid SHOE Stock?
Shoe Station faces a difficult road ahead. Years of sluggish sales, mounting competitive pressures and deteriorating profitability suggest the company's challenges may be more structural than cyclical.
While a turnaround is certainly possible, there is little in the current operating trends or earnings outlook to suggest one is imminent. Moreover, the stock's persistent downward momentum and relatively uninspiring valuation leave investors with little margin for error.
Until the company demonstrates meaningful improvement in its fundamentals, investors may be better served looking elsewhere in the market.
View the Zacks #1 Rank List
Bear of the Day: Shoe Station Group Inc. (SHOE)
Key Takeaways
Shoe Station Group Inc. ((SHOE - Free Report) ), formerly known as Shoe Carnival, is one of the largest family footwear retailers in the United States, operating more than 420 stores across its Shoe Carnival and Shoe Station banners.
The company sells a broad assortment of athletic, casual and dress shoes, catering primarily to value-conscious consumers. However, the business has struggled with declining sales, weakening profitability and intense competition across the footwear retail industry.
What makes the situation particularly concerning is the persistence of these challenges. Shoe Station has struggled to generate sustainable organic growth for several years, with declining sales at its legacy Shoe Carnival stores and increasing pressure on profit margins. Even its Shoe Station banner, which management has positioned as the company's primary growth opportunity, has recently experienced falling comparable-store sales.
The latest quarterly results underscore these difficulties. Revenue declined 7.2% year over year, while comparable store sales fell 7.1%. Both retail banners reported declining sales, and gross margins contracted sharply as increased promotional activity and inventory liquidation weighed on profitability.
These disappointing operating trends have been compounded by a weakening earnings outlook, putting additional pressure on investor sentiment. Although shares have already suffered a steep selloff, a low stock price does not necessarily translate into an attractive valuation when earnings are deteriorating.
The technical picture offers little encouragement either. SHOE shares have lost roughly two-thirds of their value over the last two years, dramatically underperforming the broader market and reflecting persistent selling pressure.
With little evidence of a sustained business turnaround, negative earnings momentum and a deeply bearish stock chart, Shoe Station appears to face additional downside risk despite its already substantial decline.
Image Source: Zacks Investment Research
SHOE Shares Get Downgraded
The deterioration in Shoe Station's business is becoming increasingly apparent in Wall Street's earnings forecasts. Following another disappointing quarter and a reduced outlook from management, analysts have aggressively cut their expectations for the coming quarters and years.
Over the last 60 days, the current year earnings estimates have plunged 43.3%, from $1.50 to just $0.85 per share. Next year estimates have also been reduced by 18.8%, while forecasts for the next two quarters have collapsed by 51% and 65.9%, respectively.
These are substantial downward revisions, particularly for an established retailer, and highlight just how quickly the company's profitability is deteriorating. The negative revisions have pushed SHOE to a Zacks Rank #5 (Strong Sell).
Of course, with shares already down roughly 66% over the last two years, investors might assume much of the bad news is priced in. However, that may not be the case.
SHOE still trades at 15.4x forward earnings, hardly a bargain for a retailer struggling with declining sales and shrinking profit margins. Moreover, with earnings estimates falling so rapidly, even that valuation could prove misleading if the company's financial performance continues to disappoint.
Until there is evidence that sales are stabilizing and earnings expectations have stopped falling, it is difficult to make a compelling case for a turnaround in SHOE shares.
Image Source: Zacks Investment Research
Should Investors Avoid SHOE Stock?
Shoe Station faces a difficult road ahead. Years of sluggish sales, mounting competitive pressures and deteriorating profitability suggest the company's challenges may be more structural than cyclical.
While a turnaround is certainly possible, there is little in the current operating trends or earnings outlook to suggest one is imminent. Moreover, the stock's persistent downward momentum and relatively uninspiring valuation leave investors with little margin for error.
Until the company demonstrates meaningful improvement in its fundamentals, investors may be better served looking elsewhere in the market.