Record high inflation and declining consumer confidence caused retail sales to plummet last December. Now, with Russia’s invasion of Ukraine, stock market volatility has more than doubled year-to-date. However, with an economic rebound continuing to unfold, consumer demand for various commodities, including footwear and accessories, is expected to increase soon.
Because remote lifestyles are here to stay, the pure convenience of e-commerce applications is also accelerating sales in the footwear and accessories sector. With fitness awareness also gaining traction, sports footwear demand has also witnessed an upsurge. According to Research and Markets, the global footwear market is slated to grow a 4% CAGR 2022 – 2027.
Against this backdrop, we think it could be wise to bet on fundamentally sound footwear and accessories stocks, Skechers U.S.A., Inc. (SKX) and Foot Locker, Inc. (FL). These stocks have outperformed the benchmark S&P 500 index’s 3.7% decline in the past month and have a Buy rating in our proprietary POWR Ratings system.
Skechers U.S.A., Inc. (SKX)
SKX in Manhattan Beach, Calif., designs, develops, markets, and distributes footwear for men, women, and children; and performance footwear for men and women under the Skechers brand worldwide. It operates through three segments: Domestic Wholesale; International Wholesale; and Direct-to-Consumer.
On Feb. 3, 2022, Robert Greenberg, SKX CEO, said “In 2022, we’ll be introducing more innovative and comfort technology products, developing multi-platform marketing campaigns with our growing roster of ambassadors, including recently announced Amanda Kloots, and rolling out more Skechers e-commerce sites around the world. We are finalizing plans to enter the metaverse, creating an entirely new opportunity for the Skechers brand.”
SKX’s sales increased 24.4% year-over-year to $1.65 billion for its fiscal fourth quarter, ended Dec. 31, 2021. Its net earnings came in at $402.40 million, up 655% year-over-year, while its adjusted EPS was $0.43, up 79.2% year-over-year.
Analysts expect SKX’s revenue to increase 13.9% year-over-year to $7.16 billion in its fiscal 2022. Its EPS is expected to increase 72.3% per annum for the next five years. In addition, it has surpassed the consensus EPS estimates in three of the trailing four quarters. Over the past month, the stock has gained 10.8% in price to close yesterday’s trading session at $45.64.
SKX’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which indicates a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
SKX has an A grade for Sentiment and a B grade for Value. Within the B-Rated Athletics & Recreation industry, it is ranked #10 of 36 stocks. Click here to see SKX’s ratings for Growth, Momentum, Stability, and Quality as well.
Foot Locker, Inc. (FL)
FL, through its subsidiaries, operates as an athletic footwear and apparel retailer. The New York City-based company retails athletic footwear, apparel, accessories, equipment, and team-licensed merchandise. It operates through 2,998 retail stores in 27 countries.
On Nov. 2, 2021, FL announced the complete acquisition of atmos, a digitally-led, premium, global retailer based in Japan. Richard Johnson, Chairman, and CEO, FL, said, “We are delighted to officially welcome atmos’ iconic founder, Hidefumi Hommyo, and the entire atmos team to the Foot Locker family.”
For its fiscal third quarter, ended Oct. 30, 2021, FL’s sales increased 3.9% year-over-year to $2.19 billion. The company’s adjusted non-GAAP net income was $201 million, up 57% year-over-year. Its adjusted non-GAAP EPS was$1.93, up 59.5% year-over-year.
FL’s revenue is expected to be $8.95 billion in its fiscal year 2022, representing an 18.6% year-over-year rise. Furthermore, its EPS is expected to grow 35.9% per annum over the next five years. In addition, it has surpassed the consensus EPS estimates in each of the trailing four quarters. The stock closed yesterday’s session at $39.87.
It’s no surprise that FL has a B grade for Value and Momentum. The stock is ranked #15 in the Athletics & Recreation industry. Click here to see the additional POWR Ratings for FL (Growth, Stability, Sentiment, and Quality).
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SKX shares were trading at $45.13 per share on Thursday afternoon, down $0.51 (-1.12%). Year-to-date, SKX has gained 3.99%, versus a -12.22% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...
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