Besides the obvious, shoe companies have a lot in common these days.
As the second quarter of the fiscal year unfolds and publicly traded footwear companies give investors and the public a peek into their finances, a range of similarities have emerged.
In addition to their primary task of creating fresh product, shoe companies often find themselves strategizing to counter similar macroeconomic and consumer-related issues on a regular basis.
Here are four business factors influencing the performance of shoe companies right now.
Consumer Spending
Or should we say lack thereof?
The economic crisis that was the Great Recession, which lasted from 2007-2009, continues to weigh on consumer sentiment six years after its supposed demise as consumers remain noticeably skittish about non-necessity spending.
Yet amidst declines in most industries, including apparel, footwear is seeing gains.
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But even with its modest revenue increases compared to apparel and other commodities, footwear is not immune to the impact of more frugal consumers.
In fact, as earnings releases file in for second quarter, companies have already reported lower-than-expected revenues due to decreased consumer momentum during what used to be a major spending period — back to school.
Consumer-spending lulls have also been attributed to lack of freshness in trends and a growing affinity toward “buy now, wear now” items.
Currency Woes
Although chatter about the U.S. dollar’s strength against other major currencies has abated a bit this quarter, a new concern regarding the foreign-exchange market is its consequences for U.S. tourism.
Companies such as Deckers Brands and Macy’s Inc. have been feeling the impact of declining U.S. tourism in key destinations like New York, Las Vegas and Hawaii, while VF Corp. and Wolverine World Wide Inc. reported continued currency hits to earnings in the most recent quarter.
Volatility in Global Economies
One day it’s China’s declining equity market and the devaluation of the yuan, the next it’s Greece and its economic crisis. The past several weeks have been rife with threatening global economic issues. And the U.S. stock market, and footwear stocks by extension, have often moved in tandem with these global financial debacles — at least temporarily.
B. Riley & Co. LLC analyst Jeff Van Sinderen told FN in July that, for the most part, the bulk of the volatility in global economies are due “predominantly to international business factors — the domestic [U.S.] consumer is relatively healthy financially.”
So while there is often a sense of panic — which tends to briefly drive down investor sentiment — when these sorts of economic crises occur, for the most part, a robust economic backdrop remains in place for the U.S.
Nevertheless, shoe companies should keep these ongoing issues on their radar.
Managing Omnichannel
Omnichannel is more than a buzzword. Companies that can connect with and sell to their customers across a variety of channels with seamless integration are winning.
The proof is everywhere.
On Aug. 18, Dick’s Sporting Goods reported a solid second quarter, with robust sales and earnings improvement driven primarily by its e-commerce initiatives. Meanwhile, Finish Line Inc., Foot Locker Inc., Macy’s and others continue to drive their ramped-up omnichannel efforts.
J.C. Penney Co. Inc. pulled off a decent Q2 finish, in which the firm narrowed its net losses by 20 percent from the year-ago quarter and improved its comps more than 4 percent. But management named one major culprit inhibiting further growth — lack of adequate omnichannel development.
J.C. Penney CEO Marvin Ellison said the company is “admittedly behind the retail industry” when it comes to omnichannel. But he noted that the company has hired Mike Amend, former VP of online, mobile and omnichannel for Home Depot, as VP of omnichannel, and Mike Robbins, former SVP of global supply chain for Target Corp.’s U.S. stores, as SVP of supply chain.
