The Zacks Shoes and Retail Apparel industry continues to witness positive demand trends on increased consumer awareness about leading a healthy lifestyle, which has been aiding the demand for activewear and athletic shoes. New and innovative designs have been the key drivers for the industry participants. Players focused on product innovation, store expansion, digital investments and omni-channel growth are expected to gain. Investments in products and e-commerce portals bode well for players like Rocky Brands, NIKE Inc., Adidas AG and Skechers.
However, the industry has been dealing with hardships from elevated costs, disrupted supply chains, reduced spending trends on discretionary items and increased marketing investments. These traits have been the key burdens on the participating companies’ profits. Additionally, adverse currency movements threaten industry players due to their worldwide presence.
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. 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. Some companies distribute products via other retail stores, such as national chains, online retailers, sporting goods stores, department stores, mass merchandisers, independent retailers and catalogs.
A Look at What's Shaping Shoes and Retail Apparel Industry's Future
Consumer Demand Trends: Players in the industry have been benefiting from strong consumer demand for activewear/athleisure products and footwear, and the trend is expected to continue in 2023. Athletic goods and apparel companies offer products from footwear, sweatshirts, leggings, pants, jackets and tops to yoga wear and running clothes for men and women. The increasing focus on fashion is boosting the demand for innovative clothes and footwear in the United States.
Industry participants have been focused on product innovations, active promotions, store expansion and enhancing e-commerce capabilities to gain market share. Favorable health and wellness trends have been the key to inspiring footwear manufacturers to expand their product portfolios. The companies continue to innovate styles, materials and colors, and incorporate functional designs to grab a large share of the fast-growing market. Multi-functional shoes, which cater to casual and formal looks, have been gaining popularity.
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 shop from home, growth of athletic-inspired apparel and digital sales are likely to continue. Companies focused on expanding their athletic-based apparel lines and building on e-commerce capabilities are expected to witness growth in the long run.
Efforts to accelerate deliveries through investments in supply chains and order fulfillment avenues are likely to provide an edge to industry players. Simultaneously, companies are investing in renovations and improved checkouts, as well as mobile point-of-sale capabilities, to make stores attractive. Efforts to enhance experiences through multiple channels are likely to contribute significantly to improving traffic and transactions in stores and online.
Cost Headwinds: Companies in the industry are witnessing elevated costs due to factors like commodity cost inflation and reinvestments. Supply-chain constraints and elevated logistic costs have been acting as deterrents. Many companies expect increased logistic costs to hurt margins in the near term. Elevated marketing expenses, higher operating overhead and demand-creating expenses, and increased investments to enhance store and digital operations have been raising SG&A costs.
Also, industry participants are witnessing rising costs to support brand campaigns and digital investments. The exit from the Russia business due to the Ukraine-Russia conflict is likely to be the key concern for some players. A tough and competitive labor market is another concern. These factors pose a threat to industry players’ 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 #38, which places it in the top 15% 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 bright prospects for the near term. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
The industry’s positioning in the top 50% 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.
Before we present a few stocks that you may want to consider for your portfolio, let’s look at the industry’s recent stock-market performance and the valuation picture.
Industry vs. Sector
The Zacks Shoes and Retail Apparel industry has underperformed the sector and the S&P 500 in the past year.
Stocks in the industry have collectively gained 0.1%. The Zacks Consumer Discretionary sector and the Zacks S&P 500 composite have rallied 6.7% and 15.6%, respectively.
Shoes and Retail Apparel Industry's Valuation
On the basis of forward 12-month price-to-earnings (P/E), commonly used for valuing Consumer Discretionary stocks, the industry is currently trading at 25.96X compared with the S&P 500’s 19.17X and the sector’s 16.92X.
Over the last five years, the industry has traded as high as 37.75X and as low as 20.15X, with a median of 26.76X.
4 Shoes & Retail Apparel Stocks to Add
Rocky Brands: The company 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 brand 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 business size. The company has been witnessing robust demand for its portfolio of leading brands, which has been aiding its performance.
RCKY is making strong progress on enhancing its distribution and fulfillment capabilities, along with lower expense levels, including reduced freight rates. This is likely to position the company well in the near term. The Zacks Consensus Estimate for the company’s 2023 sales and earnings indicates declines of 24.5% and 46.8%, respectively, from the year-ago quarter’s reported figure.
The Zacks Consensus Estimate for its 2023 earnings has been unchanged in the past 30 days. It has a trailing four-quarter earnings surprise of 17.2%, on average. This Zacks Rank #1 (Strong Buy) stock has rallied 24.4% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
NIKE: The global leader in athletic footwear, apparel, equipment and sports-related accessories is poised to gain from its Consumer Direct Acceleration strategy, along with strong demand, compelling products, and robust performance in its digital and DTC businesses. NKE has been benefiting from its efficient digital ecosystem, which comprises its website, as well as commercial and activity apps.
With consumers’ increasing digital focus, NIKE is on track with its digital revenue growth target for fiscal 2025. NKE expects revenue growth in fiscal 2025 to be led by NIKE Direct, which is anticipated to represent 60% of the total revenues on strong digital growth. The company expects NIKE-owned and partnered Digital to reach a 50% business mix in fiscal 2025, with NIKE-owned Digital accounting for 40% of the business.
As part of the Consumer Direct Acceleration, the company’s immediate priorities include improving personalization and creating a consistent end-to-end technology platform. The Zacks Consensus Estimate for NKE’s fiscal 2024 sales and earnings indicates growth of 3.7% and 15.8%, respectively, from the year-ago quarter’s reported figures. The consensus estimate for NKE’s fiscal 2024 earnings has been unchanged in the past 30 days. NIKE delivered an earnings surprise of 27.1%, on average, in the trailing four quarters. This Zacks Rank #2 (Buy) stock has risen 4.3% in the past year.
Adidas: The leading manufacturer and seller of athletic and sports lifestyle products in Europe, the Middle East, Africa, North America, Greater China, the Asia Pacific and Latin America is poised to gain from strong demand, compelling products and robust performance in its online business. Adidas has been benefiting from improved sell-through of all Adidas products in the market. Moreover, the company has been witnessing improved margins, driven by the recently implemented price increases and an improved channel mix.
The Zacks Consensus Estimate for ADDYY’s 2023 top and bottom lines indicates declines of 3.2% and 124.2%, respectively, from the year-ago quarter’s reported figures. The consensus estimate for ADDYY’s 2023 loss has widened by 3 cents in the past 30 days. Adidas delivered an earnings surprise of 71.9%, on average, in the trailing four quarters. This Zacks Rank #2 stock has rallied 70.5% in the past year.
Skechers: This Manhattan Beach, CA-based company designs, develops, markets and distributes footwear for men, women and children in the United States and overseas under the SKECHERS name, as well as several unique brand names. The company’s emphasis on new product lines, store remodeling projects, cost-containment efforts, inventory management and global distribution platform bodes well. SKX is focused on executing its long-term growth strategy, with a diverse assortment of innovative and comfortable products. This is expected to drive its top line in the near and long terms.
Skechers is making strategic investments to improve infrastructure worldwide, primarily e-commerce platforms and distribution centers. The company’s international business is a significant sales growth driver. SKX has a trailing four-quarter earnings surprise of 50.3%, on average.
The Zacks Consensus Estimate for the company’s 2023 sales and earnings indicates growth of 8.2% and 44.5%, respectively, from the year-ago quarter’s reported figures. The consensus estimate for SKX’s 2023 EPS has moved up by a penny in the past 30 days. Shares of the Zacks Rank #2 footwear company have gained 36.8% in the past year.
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Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Media Contact
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800-767-3771 ext. 9339
support@zacks.com
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Zacks Industry Outlook Highlights Rocky Brands, NIKE, Adidas and Skechers
For Immediate Release
Chicago, IL – December 8, 2023 – Today, Zacks Equity Research discusses Rocky Brands (RCKY - Free Report) , NIKE Inc. (NKE - Free Report) , Adidas AG (ADDYY - Free Report) and Skechers (SKX - Free Report) .
Industry: Shoes & Retail Apparel
Link: https://www.zacks.com/commentary/2194634/4-shoes-retail-apparel-stocks-to-thrive-as-healthy-living-rules
The Zacks Shoes and Retail Apparel industry continues to witness positive demand trends on increased consumer awareness about leading a healthy lifestyle, which has been aiding the demand for activewear and athletic shoes. New and innovative designs have been the key drivers for the industry participants. Players focused on product innovation, store expansion, digital investments and omni-channel growth are expected to gain. Investments in products and e-commerce portals bode well for players like Rocky Brands, NIKE Inc., Adidas AG and Skechers.
However, the industry has been dealing with hardships from elevated costs, disrupted supply chains, reduced spending trends on discretionary items and increased marketing investments. These traits have been the key burdens on the participating companies’ profits. Additionally, adverse currency movements threaten industry players due to their worldwide presence.
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. 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. Some companies distribute products via other retail stores, such as national chains, online retailers, sporting goods stores, department stores, mass merchandisers, independent retailers and catalogs.
A Look at What's Shaping Shoes and Retail Apparel Industry's Future
Consumer Demand Trends: Players in the industry have been benefiting from strong consumer demand for activewear/athleisure products and footwear, and the trend is expected to continue in 2023. Athletic goods and apparel companies offer products from footwear, sweatshirts, leggings, pants, jackets and tops to yoga wear and running clothes for men and women. The increasing focus on fashion is boosting the demand for innovative clothes and footwear in the United States.
Industry participants have been focused on product innovations, active promotions, store expansion and enhancing e-commerce capabilities to gain market share. Favorable health and wellness trends have been the key to inspiring footwear manufacturers to expand their product portfolios. The companies continue to innovate styles, materials and colors, and incorporate functional designs to grab a large share of the fast-growing market. Multi-functional shoes, which cater to casual and formal looks, have been gaining popularity.
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 shop from home, growth of athletic-inspired apparel and digital sales are likely to continue. Companies focused on expanding their athletic-based apparel lines and building on e-commerce capabilities are expected to witness growth in the long run.
Efforts to accelerate deliveries through investments in supply chains and order fulfillment avenues are likely to provide an edge to industry players. Simultaneously, companies are investing in renovations and improved checkouts, as well as mobile point-of-sale capabilities, to make stores attractive. Efforts to enhance experiences through multiple channels are likely to contribute significantly to improving traffic and transactions in stores and online.
Cost Headwinds: Companies in the industry are witnessing elevated costs due to factors like commodity cost inflation and reinvestments. Supply-chain constraints and elevated logistic costs have been acting as deterrents. Many companies expect increased logistic costs to hurt margins in the near term. Elevated marketing expenses, higher operating overhead and demand-creating expenses, and increased investments to enhance store and digital operations have been raising SG&A costs.
Also, industry participants are witnessing rising costs to support brand campaigns and digital investments. The exit from the Russia business due to the Ukraine-Russia conflict is likely to be the key concern for some players. A tough and competitive labor market is another concern. These factors pose a threat to industry players’ 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 #38, which places it in the top 15% 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 bright prospects for the near term. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
The industry’s positioning in the top 50% 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.
Before we present a few stocks that you may want to consider for your portfolio, let’s look at the industry’s recent stock-market performance and the valuation picture.
Industry vs. Sector
The Zacks Shoes and Retail Apparel industry has underperformed the sector and the S&P 500 in the past year.
Stocks in the industry have collectively gained 0.1%. The Zacks Consumer Discretionary sector and the Zacks S&P 500 composite have rallied 6.7% and 15.6%, respectively.
Shoes and Retail Apparel Industry's Valuation
On the basis of forward 12-month price-to-earnings (P/E), commonly used for valuing Consumer Discretionary stocks, the industry is currently trading at 25.96X compared with the S&P 500’s 19.17X and the sector’s 16.92X.
Over the last five years, the industry has traded as high as 37.75X and as low as 20.15X, with a median of 26.76X.
4 Shoes & Retail Apparel Stocks to Add
Rocky Brands: The company 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 brand 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 business size. The company has been witnessing robust demand for its portfolio of leading brands, which has been aiding its performance.
RCKY is making strong progress on enhancing its distribution and fulfillment capabilities, along with lower expense levels, including reduced freight rates. This is likely to position the company well in the near term. The Zacks Consensus Estimate for the company’s 2023 sales and earnings indicates declines of 24.5% and 46.8%, respectively, from the year-ago quarter’s reported figure.
The Zacks Consensus Estimate for its 2023 earnings has been unchanged in the past 30 days. It has a trailing four-quarter earnings surprise of 17.2%, on average. This Zacks Rank #1 (Strong Buy) stock has rallied 24.4% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
NIKE: The global leader in athletic footwear, apparel, equipment and sports-related accessories is poised to gain from its Consumer Direct Acceleration strategy, along with strong demand, compelling products, and robust performance in its digital and DTC businesses. NKE has been benefiting from its efficient digital ecosystem, which comprises its website, as well as commercial and activity apps.
With consumers’ increasing digital focus, NIKE is on track with its digital revenue growth target for fiscal 2025. NKE expects revenue growth in fiscal 2025 to be led by NIKE Direct, which is anticipated to represent 60% of the total revenues on strong digital growth. The company expects NIKE-owned and partnered Digital to reach a 50% business mix in fiscal 2025, with NIKE-owned Digital accounting for 40% of the business.
As part of the Consumer Direct Acceleration, the company’s immediate priorities include improving personalization and creating a consistent end-to-end technology platform. The Zacks Consensus Estimate for NKE’s fiscal 2024 sales and earnings indicates growth of 3.7% and 15.8%, respectively, from the year-ago quarter’s reported figures. The consensus estimate for NKE’s fiscal 2024 earnings has been unchanged in the past 30 days. NIKE delivered an earnings surprise of 27.1%, on average, in the trailing four quarters. This Zacks Rank #2 (Buy) stock has risen 4.3% in the past year.
Adidas: The leading manufacturer and seller of athletic and sports lifestyle products in Europe, the Middle East, Africa, North America, Greater China, the Asia Pacific and Latin America is poised to gain from strong demand, compelling products and robust performance in its online business. Adidas has been benefiting from improved sell-through of all Adidas products in the market. Moreover, the company has been witnessing improved margins, driven by the recently implemented price increases and an improved channel mix.
The Zacks Consensus Estimate for ADDYY’s 2023 top and bottom lines indicates declines of 3.2% and 124.2%, respectively, from the year-ago quarter’s reported figures. The consensus estimate for ADDYY’s 2023 loss has widened by 3 cents in the past 30 days. Adidas delivered an earnings surprise of 71.9%, on average, in the trailing four quarters. This Zacks Rank #2 stock has rallied 70.5% in the past year.
Skechers: This Manhattan Beach, CA-based company designs, develops, markets and distributes footwear for men, women and children in the United States and overseas under the SKECHERS name, as well as several unique brand names. The company’s emphasis on new product lines, store remodeling projects, cost-containment efforts, inventory management and global distribution platform bodes well. SKX is focused on executing its long-term growth strategy, with a diverse assortment of innovative and comfortable products. This is expected to drive its top line in the near and long terms.
Skechers is making strategic investments to improve infrastructure worldwide, primarily e-commerce platforms and distribution centers. The company’s international business is a significant sales growth driver. SKX has a trailing four-quarter earnings surprise of 50.3%, on average.
The Zacks Consensus Estimate for the company’s 2023 sales and earnings indicates growth of 8.2% and 44.5%, respectively, from the year-ago quarter’s reported figures. The consensus estimate for SKX’s 2023 EPS has moved up by a penny in the past 30 days. Shares of the Zacks Rank #2 footwear company have gained 36.8% in the past year.
Why Haven’t You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +6.2 average gain per year. Amazingly, they soared with average gains of +46.4%, +49.5% and +55.2% per year. Today you can access their live picks without cost or obligation.
See Stocks Free >>
Join us on Facebook: https://www.facebook.com/ZacksInvestmentResearch/
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
support@zacks.com
https://www.zacks.com
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.