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Investing in One of These Companies Should Make You Rich

June 11, 2014 | About:
Suravi Thacker

Suravi Thacker

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Consumer spending in the U.S. surged 0.9% in March, higher than the growth of 0.3% in February. This has been a reason for merriment for most of the retailers since this shows that people are willing to open their wallets, which in turn should lead to higher sales. Hence, investing in the retail industry would be a prudent decision. Footwear retail is one of the industries which interest me a lot. However, it is important to understand which retailer is the best performer and would help in maximizing returns.

Some of the prominent players in the industry are Crocs (CROX), Deckers Outdoor Corporation (DECK) and Wolverine World Wide (WWW). Each of the players has adopted a variety of ways to attract customers and boost its revenue.

Growth in the Last Year

Let us take a look at the quarterly revenue growth of all the three players, in the last year. Deckers Outdoor is the best performer with revenue increase of 73% in the last one year. On the other hand, Wolverine witnessed a growth of 6.8% and Crocs registered a decline of 14.1% in total revenue.

This performance is reflected clearly in the stock price movement of each of these players during the same period. Revenue and share price have been moving in the same direction for all the players. Deckers Outdoor has been the best performer with stock price appreciation of 43.7%, helped by the top line growth of 73%. On the contrary, Crocs’ stock price has fallen 10.7% since its revenue has dropped 14.1% in the last year.

The Worst

In order to understand the current situation, let us take a look at the retailers’ results in the most recent quarter. Crocs’ first quarter results, reported recently, were dismal as it missed on the Street’s expectations. Revenue stood at $312.4 million, almost flat over last year. The top line was affected by severe winter weather which kept customers away from stores. Even online sales declined to $19.6 million as compared to $20.3 million in the prior year.

Other factors, such as changes in the product mix and unfavorable currency movements also impacted the top line. For instance, the shoemaker has brought in new products such as Busy Day and Stretch Sole which has led to a drop in the percentage of clog sales. Due to the growing popularity of new products, the clog segment now makes 42% of total revenue, lower than 47% in the previous year’s quarter. Earnings for the quarter dropped drastically to $0.06 per share as compared to $0.33 per share last year. Therefore, the company is indeed going through a difficult phase wherein its colorful and attractive shoes fail to resonate with customers, forcing it to bring in new products.

The Better

Wolverine World Wide’s first quarter results were mixed with a small drop in revenue and a significant increase in earnings. Revenue decreased 2.8% to $627.6 million, over last year. This decline was mainly due to unfavorable weather conditions and lower store traffic during the holiday season. Its Performance and Lifestyle unit performance was mixed wherein growth in the Performance segment was compensated by weakness in the Lifestyle segment.

However, the company registered earnings of $0.36 per share as compared to $0.30 per share, a year earlier. Also, gross margin expanded 20 basis points mainly due to efficient cost management techniques. Moreover, the shoemaker reaffirmed its guidance for the year, which further delighted its investors. Wolverine is expected to do better since weather conditions have improved and people are expected to spend more as spring sets in.

The Best

Deckers Outdoor has been a great performer with blockbuster results in the most recent quarter. The numbers beat analysts’ expectations as both the top line and the bottom line grew. Revenue surged 11.7% over last year, clocking in at $294.7 million, driven by increased revenue from all the segments. Deckers’ largest segment, the UGG brand, performed well as revenue jumped 15.8% over the prior year. Also, e-commerce and the retail segment grew 45% and 26%, respectively. Hence, this company is firing on all cylinders.

The retailer’s marketing efforts and new product introductions have been the key drivers of revenue. In fact, new products such as HOKA running shoes have become quite popular, luring customers to its stores. Additionally, it plans to expand its presence by opening another 30 to 35 new stores during this year.

Bottom Line

Deckers Outdoor has been able to outperform other players in the industry in the past and continues to do so, as evident from its recent quarter numbers. Also, its efforts into new products and promotions have been quite fruitful. Its recent launches and expansionary measures should continue to drive sales higher. Therefore, if the footwear retail industry is what you are looking for, Deckers Outdoor is the best pick so far.


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