Blog: Footwear market remains grounded
Joe Ayling | 5 November 2007
It was judgement day for a number of leading footwear companies last week, as traders ascertained whether the negative retail environment would translate from head to toe.
Wheeled shoe firm Heelys started the week with a wobble when it reported that third quarter sales had fallen off-track at US$49m, and that earnings estimates were also below par.
Mike Staffaroni, president and chief executive officer of Heelys, said: "The difficult retail environment over the past several months resulted in higher than anticipated order cancellations, increased promotional activity and rescheduled shipments, all of which negatively impacted our net sales and earnings."
By Wednesday it was Halloween, but LaCrosse Footwear's results were more treat than trick-like, as it reported a 30% rise in third quarter profit and a 12% rise in net sales to $36.9m.
The big news came on Thursday though, when the shares of high-flying clog manufacturer Crocs plummeted as it too revised sales guidance, and growth fell below Wall Street forecasts. Crocs shares fell around 30% in heavy trading, even though in reality the Colorado-based footwear group had just posted a soaring 163% Q3 profit increase to US$56.5m, compared to $21.5m during the prior year period.
On the same day, Timberland's third quarter net income fell by 53%, partially attributed to poor sales of its signature boots. Its net income for the quarter tumbled to US$25.9m, from $55.6m in the same period last year, including the cost of closing some of its retail locations. The boot company, which has foreseen soft market trends, has vowed to continue to drive operational efficiencies and is closing approximately 50 retail stores by the end of the first quarter of 2008.
Perhaps Timberland has lost some market share to quirkier start-ups like Heelys and Crocs, which have grown rapidly in the past few years but could now be reaching a peak.
Furthermore, signs that Crocs' growth was finally slowing ricocheted throughout the market, with share prices also dropping at Weyco Group, Skechers US, K Swiss and Deckers Outdoor on the same day.
By Joe Ayling, news editor
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