5 Shoes & Retail Apparel Stocks to Own Amid Positive Industry Trends
Skechers U.S.A., Inc.
SKX
Steven Madden
SHOO
Wolverine World Wide, Inc.
WWW
Caleres
CAL
Rocky Brands
RCKY
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. The 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. However, some companies also distribute products via other retail stores such as national chains, online retailers, sporting goods stores, department stores, mass merchandisers, independent retailers and catalogs.
Here’s What Shapes Shoes and Retail Apparel Industry’s Future
Fitness Trends Aid Industry: With increased stay-at-home trends for the past two years, customers continue to look for comfortable attire to spend the days at home and shift to exercising more than ever. 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. The demand for activewear/athleisure products has increased significantly over time, which is expected to accelerate in 2022. Apart from being comfortable, customers have been looking for fashionable activewear clothes that can be worn to the gym as well as the workplace without being uncomfortable. Athletic goods and apparel companies now offer everything from sweatshirts, leggings, pants, jackets and tops to yoga wear and running clothes for both men and women. People are clubbing athleisure styles like tops with blazers to give them a formal look at office meetings. 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 despite the lifting of the pandemic-led bans, growth of athletic-inspired apparel and digital sales are likely to stay. Companies focused on expanding their athletic-based apparel lines and building on e-commerce capabilities are expected to witness growth in 2022. Efforts to accelerate deliveries through investments in supply chain and order fulfillment avenues are likely to provide an edge in the market. 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 the guest experience through multiple channels are likely to contribute significantly to improve traffic and transactions both in stores and online.
Cost Headwinds: Companies are witnessing elevated costs due to factors like commodity cost inflation, increase in freight costs and reinvestments and other impacts. Several firms are encountering supply-chain disruptions stemming from pandemic-led factory closures, congestion at ports and reduced airfreight capacity. A number of companies project 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 toward enhancing store and digital operations have been pushing up SG&A costs. The normalization of spending at brand campaigns due to the return of sporting activities and events has resulted in higher costs compared with the last year’s COVID-related closures. Additionally, a tough and competitive labor market remains a concern. These factors pose a threat to companies’ margins.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Shoes and Retail Apparel Industry is a 12-stock group within the broader Zacks Consumer Discretionary sector. The industry currently carries a Zacks Industry Rank #35, which places it in the top 14{a0ae49ae04129c4068d784f4a35ae39a7b56de88307d03cceed9a41caec42547} 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 continued outperformance in the near term. Our research shows that the top 50{a0ae49ae04129c4068d784f4a35ae39a7b56de88307d03cceed9a41caec42547} of the Zacks-ranked industries outperforms the bottom 50{a0ae49ae04129c4068d784f4a35ae39a7b56de88307d03cceed9a41caec42547} by a factor of more than 2 to 1.
The industry’s positioning in the top 50{a0ae49ae04129c4068d784f4a35ae39a7b56de88307d03cceed9a41caec42547} of the Zacks-ranked industries is a result of a positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gaining confidence in this group’s earnings growth potential. In the past year, the industry’s earnings estimates for the current and next year have increased 5.4{a0ae49ae04129c4068d784f4a35ae39a7b56de88307d03cceed9a41caec42547} and 9.8{a0ae49ae04129c4068d784f4a35ae39a7b56de88307d03cceed9a41caec42547}, respectively.
Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and the valuation picture.
Industry Outperforms the 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 gained 4.7{a0ae49ae04129c4068d784f4a35ae39a7b56de88307d03cceed9a41caec42547}, the Zacks S&P 500 composite has risen 16{a0ae49ae04129c4068d784f4a35ae39a7b56de88307d03cceed9a41caec42547}. Meanwhile, the Zacks Consumer Discretionary sector has declined by 20.8{a0ae49ae04129c4068d784f4a35ae39a7b56de88307d03cceed9a41caec42547}.
One-Year Price Performance
Shoes and Retail Apparel Industry’s Valuation
On the basis of forward 12-month price-to-earnings (P/E), which is commonly used for valuing Consumer Discretionary stocks, the industry is currently trading at 28.75X compared with the S&P 500’s 20.03X and the sector’s 21.12X.
Over the last five years, the industry has traded as high as 36.79X and as low as 19.53X, with the median being at 25.68X, as the chart below shows.
Price-to-Earnings Ratio (Past 5 Years)
5 Shoes & Retail Apparel Stocks to Bank on
Rocky Brands: Rocky Brands is a leading footwear and accessories company that designs, manufactures and markets premium quality footwear and apparel under a portfolio of well-recognized brand names. The company’s notable brands portfolio includes Rocky, Georgia Boot, Durango, Lehigh, The Original Muck Boot Company, XTRATUF, Servus, NEOS and Ranger. RCKY is benefiting from the flexibility and ability to innovate quickly, given its small size of business.
Rocky Brands has been witnessing robust demand for its portfolio of leading brands, which has been aiding performance. The company is making strong progress in regaining the full efficiency of its Ohio distribution center, which along with the new distribution center in Reno, NV, is likely to have improved shipping capacity during the holiday season. The Zacks Consensus Estimate for its 2021 earnings has moved down 10{a0ae49ae04129c4068d784f4a35ae39a7b56de88307d03cceed9a41caec42547} in the past 30 days. It has a trailing four-quarter earnings surprise of 19.6{a0ae49ae04129c4068d784f4a35ae39a7b56de88307d03cceed9a41caec42547}, on average. The Zacks Rank #1 (Strong Buy) stock has gained 21.4{a0ae49ae04129c4068d784f4a35ae39a7b56de88307d03cceed9a41caec42547} in the past year.
Price and Consensus: RCKY
Skechers: Skechers is a leading manufacturer and seller of footwear for men, women and children in the United States and overseas. SKX has been gaining from the continued demand for comfort products and momentum in the direct-to-consumer business. Skechers remains focused on developing comfort footwear, expanding apparel offerings, advancing e-commerce capabilities and tapping opportunities to drive overall sales. Growth across the domestic and international channels, driven by wholesale and direct-to-consumer sales, bodes well. The company remains committed to directing resources to enhance its digital capabilities, which include augmenting website features, mobile applications and loyalty programs. Investments made to integrate store and digital ecosystems for developing a seamless omnichannel experience are likely to drive greater sales.
Skechers’ investments in long-term growth strategies, including brands and infrastructural capabilities, have been yielding results. Management is optimistic regarding the strength of its brands and the relevance of its products in the forthcoming periods. Shares of the Manhattan Beach, CA-based company have surged 21{a0ae49ae04129c4068d784f4a35ae39a7b56de88307d03cceed9a41caec42547} in the past year. The company has a trailing four-quarter earnings surprise of 18.7{a0ae49ae04129c4068d784f4a35ae39a7b56de88307d03cceed9a41caec42547}, on average. SKX’s consensus estimate for 2021 EPS has been unchanged in the past 30 days. It currently sports a Zacks Rank #2 (Buy).
Price and Consensus: SKX
Steven Madden: The Zacks Rank #2 footwear company has risen 21.7{a0ae49ae04129c4068d784f4a35ae39a7b56de88307d03cceed9a41caec42547} in the past year. 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 relations with customers via marketing, enhancing digital commerce agenda, expanding international markets and efficiently controlling expenses bodes well. This has been boosting consumer demand, thereby 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 also been significantly accelerating its digital commerce initiatives with respect to distribution. SHOO has a trailing four-quarter earnings surprise of 41.9{a0ae49ae04129c4068d784f4a35ae39a7b56de88307d03cceed9a41caec42547}, on average. The consensus estimate for the company’s 2021 EPS has moved up by a penny in the past seven days.
Price and Consensus: SHOO
Wolverine: This Rockford, MI-based company designs, manufactures and distributes a wide variety of casual and active apparel and footwear. Wolverine has been progressing well with its growth strategies, including a focus on brand empowerment, e-commerce enhancement and international expansion. Among Wolverine’s sales channels, e-commerce has been the fastest growing and acting as a key growth driver. It has been utilizing its digital capabilities to enhance the speed of information and product flow. WWW’s major brands, namely Merrell and Saucony, are performing quite well.
Wolverine focuses on developing brands that suit consumer needs aptly on the back of advanced technologies and accurate market insights. It emphasizes launches across different brand banners and brings a robust pipeline of products. As part of its long-term business growth strategies, the company has been striving to develop an efficient sourcing structure and diversify the global business. WWW has a trailing four-quarter earnings surprise of 18.3{a0ae49ae04129c4068d784f4a35ae39a7b56de88307d03cceed9a41caec42547}, on average. Shares of the Zacks Rank #2 company have declined 11.4{a0ae49ae04129c4068d784f4a35ae39a7b56de88307d03cceed9a41caec42547} in the past year. The consensus estimate for its 2021 EPS has been unchanged in the past 30 days.
Price and Consensus: WWW
Caleres: Caleres is a leading footwear retailer and wholesaler in the United States, China, Canada, China, and Guam. It operates through Famous Footwear and Brand Portfolio segments. The stock of this Saint Louis, MO-based company has been benefiting from positive consumer demand trends and accelerated recovery in the footwear marketplace, which has been 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 Brand Portfolio, leveraging of diversified brand model and the continued execution of ongoing strategic priorities to aid CAL’s performance. Caleres’s focus on the consumer’s evolving preferences and efforts to drive growth across its omni-channel ecosystem bode well. The consensus estimate for CAL’s 2021 EPS has moved up 4.6{a0ae49ae04129c4068d784f4a35ae39a7b56de88307d03cceed9a41caec42547} in the past 30 days. The company has a trailing four-quarter earnings surprise of 796.2{a0ae49ae04129c4068d784f4a35ae39a7b56de88307d03cceed9a41caec42547}, on average. Shares of the Zacks Rank #2 company rallied 58.4{a0ae49ae04129c4068d784f4a35ae39a7b56de88307d03cceed9a41caec42547} in the past year.
Price and Consensus: CAL
7 Best Stocks for the Next 30 Days
Just released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers “Most Likely for Early Price Pops.”
Since 1988, the full list has beaten the market more than 2X over with an average gain of +25.3{a0ae49ae04129c4068d784f4a35ae39a7b56de88307d03cceed9a41caec42547} per year. So be sure to give these hand-picked 7 your immediate attention.
Skechers U.S.A., Inc. (SKX): Free Stock Analysis Report
Wolverine World Wide, Inc. (WWW): Free Stock Analysis Report
Steven Madden, Ltd. (SHOO): Free Stock Analysis Report
Rocky Brands, Inc. (RCKY): Free Stock Analysis Report
Caleres, Inc. (CAL): Free Stock Analysis Report
To read this article on Zacks.com click here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.