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Record inflation and a drop in consumer confidence sent retail sales plummeting last December. Now with The invasion of Russia Ukraine, stock market volatility has more than doubled since the start of the year. However, with the continued economic recovery, consumer demand for various commodities, including footwear and accessories, is expected to increase soon.
Because remote lifestyles are here to stay, the sheer convenience of e-commerce apps is also accelerating sales in footwear and accessories. With fitness awareness also gaining momentum, the demand for athletic shoes has also seen an upsurge. According to Research and Markets, the global footwear market is expected to see growth 4% CAGR 2022 – 2027.
Against this backdrop, we think it might make sense to bet on fundamentally healthy footwear and accessories stocks, Skechers USA, Inc. (SKX) and Foot Locker, Inc. (Florida). These stocks have outperformed the benchmark S&P 500’s 3.7% decline over the past month and have a buy rating in our own POWR Rankings system.
Skechers USA, Inc. (SKX)
SKX in Manhattan Beach, California, designs, develops, markets and distributes footwear for men, women and children; and men’s and women’s performance footwear under the Skechers brand worldwide. It operates through three segments: Domestic Wholesale; International wholesale trade; and Direct-to-Consumer.
On February 3, 2022, Robert Greenberg, CEO of SKX said, “In 2022, we will introduce more innovative and comfortable technology products, develop cross-platform marketing campaigns with our growing list of ambassadors, including the recently announced Amanda Kloots, and roll out more Skechers e-commerce sites globally. We are finalizing plans to enter the metaverse, creating a whole 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 income was $402.40 million, up 655% year-over-year, while its adjusted EPS was $0.43. , up 79.2% year-on-year.
Analysts expect SKX’s revenue to grow 13.9% year-over-year to $7.16 billion in its fiscal year 2022. Its EPS is expected to rise 72.3% per year over the next five years. Additionally, it has exceeded consensus EPS estimates in three of the last four quarters. Over the past month, the stock price has gained 10.8% to close yesterday’s trading session at $45.64.
SKX’s strong fundamentals are reflected in its POWR ratings. The stock has an overall rating of B, indicating a buy in our proprietary rating system. POWR ratings rate stocks on 118 different factors, each with its own weighting.
SKX has an A rating for Sentiment and a B rating for Value. In category B Athletics and recreation industry, it is ranked #10 out of 36 stocks. Click on here to see SKX’s ratings for Growth, Momentum, Stability, and Quality.
Foot Locker, Inc. (Florida)
FL, through its subsidiaries, operates as a sports footwear and apparel retailer. The New York-based company retails athletic shoes, apparel, accessories, equipment and team-licensed merchandise. It operates through 2,998 retail stores in 27 countries.
On November 2, 2021, FL announced the full acquisition of atmos, a Japan-based digital premium global retailer. Richard Johnson, President and CEO of FL, said, “We are thrilled to officially welcome iconic atmos founder, Hidefumi Hommyo, and the entire atmos team to the Foot Locker family.
For its third fiscal 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 non-GAAP adjusted 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 increase. Additionally, its EPS is expected to grow 35.9% annually over the next five years. Additionally, it has exceeded consensus EPS estimates in each of the past four quarters. The stock closed yesterday’s session at $39.87.
It’s no surprise that FL has a B rating for Value and Momentum. The title is ranked #15 in the Athletics and recreation industry. Click on here to see additional POWR ratings for FL (Growth, Stability, Sentiment, and Quality).
Click here to view our 2022 Retail Industry Report
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 over 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 commentary. Continued…
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