FINL

PLG Brands Continues to Drive Wolverine Worldwide

by

Shoe seller Wolverine Worldwide (click ticker for report: ) posted strong third-quarter results driven largely by former Best Ideas Newsletter portfolio holding Collective Brands’ PLG brands. Revenue surged 9% year-over-year on a pro forma basis and more than doubled on a year-over-year reported basis, to $717 million (modestly exceeding consensus estimates). Earnings per share were even stronger, rising 61% year-over-year to $1.16 (excluding acquisition costs) and coming in handily above consensus expectations. Year-to-date, the company has generated $96.2 million in free cash flow, equal to 5% of total revenue. Image Source: Wolverine Worldwide Wolverine’s ‘Lifestyle’ and ‘Performance’ groups were the drivers behind revenue expansion during the quarter as the company continues to capitalize on the success of recently-acquired Sperry Top-Sider … Read more

Nike Marks a Strong Start to Earnings Season

by

After becoming the newest member of the Dow Jones Industrial Average, athletic apparel giant Nike (click ticker for report: ) posted a fantastic start to its 2014 fiscal year. First quarter revenue jumped 8% year-over-year to $7 billion, roughly in-line with consensus estimates. Earnings per share, on the other hand, soared past consensus expectations, growing 37% year-over-year to $0.86. Free cash flow totaled $379 million, equal to 5.4% of net revenue. Product Demand Remains Robust The primary reason behind Nike’s continued strength in the athletic apparel space is the robust demand for its products. The firm continues to innovate, particularly in the running and basketball spaces, and the innovations helped demand remain strong across all geographies. Revenue in North America, … Read more

Strength in Footwear Persists

by

Shoe retailers DSW (click ticker for report: ) and Brown Shoe Company (BWS) posted better-than-expected second-quarter results. DSW On Tuesday, DSW’s second-quarter release revealed that its sales surged 9.7% year-over-year to $562 million, easily exceeding consensus expectations. Earnings per share adjusted for luxury testing and the termination of Retail Venture Inc’s pension plan increased 47% year-over-year, to $0.97. Image Source: Valuentum, Company Filings After same-store sales slipped 2.4% during the first quarter, DSW returned to growth in the second quarter, with same-store sales 4.4% higher than the same period a year ago, re-accelerating the two-year comp trend (8.6%). Not only has DSW added some new merchandise to stores with necklaces and other small accessories, but management pointed to strength in … Read more

Foot Locker’s Revenue Growth Slows; Will Hicks Leave?

by

Athletic footwear retailer Foot Locker (click ticker for report: ) posted second quarter results Friday that were largely in-line with expectations. Revenue increased 6.4% year-over-year to $1.5 billion, in-line with consensus estimates. Earnings per share excluding the integration of Runners Point Group increased 21% year-over-year to $0.46, a penny below consensus expectations but not much of a disappointment. Same-store Sales Growth Decelerating… Source: Valuentum, Company Filings Foot Locker’s same-store sales increased only 1.8% year-over-year, down dramatically from the growth in excess of 5% we’ve seen from the retailer since the first quarter of fiscal year 2011. Revenue growth at existing stores becomes more difficult since comp sales growth has been so strong during the past few years. We don’t think Foot … Read more

Why Finish Line Is Running After a Weak Fourth Quarter

by

Shares of athletic footwear retailer Finish Line (click ticker for report: ) are soaring today after the firm announced lackluster fourth quarter results. Revenue fell slightly on a reported basis, though when adjusted to reflect a comparable selling period, revenue ticked up 4% compared to a year ago—still slightly below expectations. Earnings per share fell 6% year-over-year to $0.76, but were up about 3% when excluding the extra week of fiscal year 2012’s fourth quarter. Same-store sales increased just 0.7% year-over-year, driven by a 21% increase in digital sales. We were disappointed in the huge divergence between Finish Line and rival Footlocker (click ticker for report: ), which posted same-store sales growth of 7.9% in its fourth quarter. Footlocker’s superior … Read more

Nike’s Fundamental Momentum Accelerates

by

Athletic apparel giant Nike (click ticker for report: ) announced fantastic third quarter results Thursday afternoon. Revenue from continuing operations grew 9% year-over-year to $6.2 billion, just a touch short of consensus expectations. Earnings from continuing operations jumped 20% year-over-year to $0.73 per share, easily exceeding consensus estimates as the company rid itself of the less-profitable Umbro and Cole Haan units. On the cost side, Nike’s gross margins grew 30 basis points year-over-year to 44.2%, as the firm lapped higher input costs and benefitted from higher pricing. Gross margins would have been even stronger if it weren’t for high discounting in China and continued weakness in Europe. SG&A remained relatively flat year-over-year at 30.1% of sales as increases in operating … Read more

DSW’s Fall Doesn’t Provide an Entry Point

by

Footwear and accessories discounter DSW (click ticker for report: ) announced solid fourth quarter results Tuesday morning. Revenue jumped 16% year-over-year to $594 million, just a touch shy of consensus estimates. Earnings also fell short of consensus estimates, growing 35% year-over-year to $0.69 per share. Like we’ve seen from other retailers during the fourth quarter, guidance stole the show. For the first 6 weeks of its 2013 fiscal year, DSW’s same-store sales have declined 5% with weakness spread equally across geographies and categories. Naturally, weather took some of the blame, since the 2013 winter has been substantially colder than 2012. Management tried to avoid blaming the weather, but failed, saying on the conference call: “…we haven’t had enough good weather … Read more

Foot Locker Posts a Strong Fourth Quarter; Mr. Market Questions Guidance

by

Athletic footwear retailer Foot Locker (click ticker for report: ) announced fantastic fourth quarter results Friday morning, finishing off a tepid 2012. Revenue jumped 14% year-over-year to $1.7 billion thanks to an extra selling week, which was slightly better than consensus estimates. Earnings per share, adjusted for one-time impairment charges, jumped 33% year-over-year to $0.73 per share, slightly above consensus estimates. This did, however, include a $0.09 benefit from the extra week during the quarter. Same-store sales, one of our favorite metrics to measure the performance of retailers, were fantastic, growing 7.9% year-over-year. The winter quarter is notoriously strong as several of the companies partners, including Nike (click ticker for report: ) and adidas, release extremely popular basketball models; this winter … Read more

Lululemon “Disappoints”; Under Armour Looks Worse

by

Athletic retailer lululemon (click ticker for report: ) raised its fourth quarter guidance yesterday, but not as much as the Street had hoped for, as shares have been tumbling since. The firm announced its revenue is likely to be $475 million to $480 million, the high end of its guidance range, but below the consensus estimate of $489 million. Same-store sales guidance of high-single-digit growth was reiterated (consensus was at 10%), driving earnings per share of $0.74—above the firm’s prior guidance of $0.71-$0.73 and equal with consensus. In our view, the stock’s move to the downside was an overreaction, but understandable. Given the company’s lofty valuation, we think market participants are looking for any weakness to close a long position … Read more

Finish Line: A Turnaround?

by

Athletic footwear and apparel retailer Finish Line (click ticker for report: ) reported highly disappointing third-quarter results Friday morning. Revenue grew 5.2% year-over-year to $296 million, in-line with consensus estimates. Earnings were incredibly weak, as the company was roughly break-even for the quarter, well below the consensus estimate of $0.10 per share and down from earnings of $0.11 per share in the same period a year ago. We were not expecting such weak quarter, particularly given the company’s increased focus on basketball shoes, as well as the blockbuster lineup of basketball shoe releases from the likes of Nike (click ticker for report: ) and adidas in the third quarter. Basketball wasn’t the problem, as management noted that basketball shoe sales … Read more