For Shoemakers, a New Foothold in Earnings
After six years of plodding sales, the footwear industry may be gaining some traction.
The latest evidence came Tuesday when Skechers USA Inc. of Manhattan Beach said that it expected first-quarter sales and earnings to surpass expectations.
Two weeks ago, skate-shoe maker Vans Inc., based in Santa Fe Springs, reported a profit of $7.1 million for its fiscal third quarter, reversing a loss of $9.2 million a year before, as both wholesale and retail sales improved.
A few days earlier, Nike Inc. said its third-quarter profit rose 60% because of strong demand for its athletic shoes. And K-Swiss Inc. of Westlake Village saw its fourth-quarter per-share earnings skyrocket 92% as its footwear sales jumped 51%.
“It’s reflective of the turnaround in the industry,” said Bill Boettge, president of the National Shoe Retailers Assn., which represents 2,500 independent shoe sellers.
For the last six years, footwear sales growth has lumbered along at about 3% per year, according to retailers, barely keeping pace with population growth and making it hard for merchants to raise their prices. In fact, the government’s consumer price index for footwear has edged lower each year since 1998.
The reason: In lean times, new shoes are among the first things people forgo because with footwear, it’s easy to say, “ ‘You know, I can get another season out of this,’ ” said retail analyst Marshall Cohen of NPD Group. As the economy picks up, people gravitate to the shoe racks because “they’ve gone for so long that their shoes really are kind of shabby and shot.”
So it makes sense that consumers seem primed to snap up new duds for their feet. Although sales numbers aren’t yet available to confirm an industrywide upturn, the feedback Boettge is getting from his group’s members has been largely positive so far this year.
Not only are some athletic-shoe sellers seeing improvements, he said, but retailers of women’s shoes are seeing an uptick in demand thanks to spring fashions that emphasize bright colors.
And merchants are trying hard to make sure shoppers have a full array of choices, from pointy-toed high heels in orange patent leather to walking shoes with cushioned insoles.
That “makes it more difficult for the retailer because he or she has to have a large inventory,” Boettge said, “but it also gives the consumer a lot of product.”
Skechers, which makes shoes for men, women and children, said it had received good response to its spring lines and that the early read on its fall offerings had been promising. Business picked up in late 2003 and the momentum continued into the first quarter of this year as demand increased domestically and internationally, Chief Financial Officer David Weinberg said in a statement.
As a result, Skechers now projects that first-quarter earnings, which it will report later this month, will exceed the 10 cents a share that analysts were expecting. And the company said sales should rise above the $190 million to $200 million range that it had predicted earlier.
Vans, which decided last year to exit the skate park business, reported better-than-expected sales in its wholesale, retail and international divisions and a “substantial increase” in orders for the back-to-school season.
The company now expects a per-share loss of 11 cents to 13 cents, instead of the 17 cents projected by a consensus of analysts polled by Thomson First Call.
Both Skechers and Vans stocks’ tapped 52-week highs during the trading day on Tuesday.
Skechers closed at $14.06, up 29 cents, on the New York Stock Exchange. The stock has gained 73% since the start of 2004. Vans shares closed at $14.79, down 21 cents, on Nasdaq. Its shares have advanced 30% this year.
