In this article we present the list of 10 World-Class Shoe Stocks to Buy Now.
Skechers U.S.A., Inc. (NYSE:SKX), NIKE, Inc. (NYSE:NKE), and Crocs, Inc. (NASDAQ:CROX) are some of the world-class shoe stocks that the smart money is pouring its money into heading towards 2023.
Consumer discretionary companies and their stocks tend to get battered during recessionary periods, as cash-strapped consumers squirrel away their money to save for only the most essential of purchases. And shoes certainly wouldn’t make many people’s list of essential products (granted, we all need shoes, but not necessarily new shoes).
Yet shoe sales have proven to be fairly resilient through this economic downturn. In fact, they had their best sales month in the U.S. in five years during December 2021, with sales hitting $4.48 billion. After falling to less than $2.7 billion per month in January and February, which are traditionally the two slowest months of the year in terms of shoe purchasing, sales have since rebounded to top $3.2 billion per month through July, down slightly from last year’s comps but also comfortably ahead of pre-pandemic sales levels.
That said, footwear sales aren’t exactly a fast-growing industry regardless of economic conditions. The global market is projected to grow at a 4.3% CAGR between this year and 2030, growing from an estimated $388 billion this year to $544 billion in 2030.
Athletic footwear, which accounts for well over half of all footwear sales, are expected to continue leading the charge when it comes to global growth thanks to the growing focus on health and fitness levels. Comfort is also becoming more important to consumers, while fashion-focused footwear has been on the downswing and losing market share in recent years.
Despite their relatively solid performance in 2022, many shoe stocks have been absolutely crushed this year. Shoe stocks were recently dinged when Nike reported having record levels of inventory during the release of its fiscal Q1 earnings results. While that was due primarily to supply chain issues rather than a lack of consumer demand, the resulting glut is expected to lead to a surge in promotional activity that could pressure shoemakers’ margins in the coming quarters.
Nike shares are now down by 47% year-to-date, while many other top brands like Adidas have been similarly crushed. Given the market’s seeming disconnect between the actual performance of shoe companies and their share prices, we thought now would be a great time to look into which shoe stocks might be trading at tempting discounts for investors.
To compile that list, we gathered the latest shareholder data from a select group of the best money managers in the world to see which shoe stocks they believe are the strongest investments in the current economic environment.
Photo by Christian Wiediger on Unsplash
Our Methodology
The following shoe stocks are ranked based on hedge fund sentiment. We follow a select group of hedge funds because Insider Monkey’s research has uncovered that their consensus stock picks can deliver outstanding returns.
All hedge fund data is based on the exclusive group of 900+ funds tracked by Insider Monkey that filed 13Fs for the Q2 2022 reporting period.
10 World-Class Shoe Stocks to Buy Now
10. adidas AG (NYSE:ADDYY)
Number of Hedge Fund Shareholders: 1
Skechers U.S.A., Inc. (NYSE:SKX), NIKE, Inc. (NYSE:NKE), and Crocs, Inc. (NASDAQ:CROX) are some of the most well-known shoe brands in the world. Another is adidas AG (NYSE:ADDYY), though its shares don’t have nearly the same institutional support as those other brands given that they trade over-the-counter. Just one of the hedge funds tracked by Insider Monkey’s database was long ADDYY on June 30, that being Frederick Disanto’s Ancora Advisors, which owned just 109 shares.
adidas AG (NYSE:ADDYY) sells its Adidas and Reebok shoes and apparel through more than 2,000 of its own retail outlets, in addition to other sports and clothing stores around the world. Adidas shares have trended down all year, being down by 60% in 2022 due to discretionary spending on clothing and footwear expected to plummet over the short term. Adidas does about 37% of its business in Europe and the Middle East, with record low consumer confidence currently affecting the former region.
Oakmark International Fund is nonetheless bullish on adidas AG (NYSE:ADDYY)’s shift to a more vertical-based business model, as outlined in the fund’s Q1 2022 investor letter:
“adidas (NYSE:ADDYY) (Germany) is a global sportswear company. The business is a leader in athletic footwear and apparel with a brand quality that helps to drive superior sales and margins across multiple segments and geographies. In our view, adidas’ shift to a vertical-based model in the past several years led to superior innovations and more consistent product development. Moreover, we believe the improved product, brand perception, sales and profitability have positioned the company well. We think sustained investments in brand, product and distribution should support above-market growth rates and improved margins moving forward. We also appreciate that CEO Kasper Rorsted executed structural changes decided before his arrival, which should lead to improved growth, margins and capital management.”
9. Rocky Brands, Inc. (NASDAQ:RCKY)
Number of Hedge Fund Shareholders: 7
Rocky Brands, Inc. (NASDAQ:RCKY) sells footwear and apparel through various brands, including Rocky, Durango, Georgia Boot, and the licensed brand Michelin. Its heavy duty footwear is primarily marketed towards outdoor enthusiasts, as well as law enforcement and postal workers.
Like Adidas, RCKY shares have trended down all year and have lost over 50% in 2022. The company is actually coming off a solid Q2, as sales rose by 23%, though the company’s bottom line did take a hit due to various headwinds.
Hedge fund ownership of Rocky Brands, Inc. (NASDAQ:RCKY) peaked along with the company’s share price in the middle of 2021. More than half the stock’s former shareholders have since sold out of it. RCKY shares have cratered by 60% over the past year.
One of the fund’s that’s bullish on Rocky Brands is Ric Dillon’s Diamond Hill Capital, whose Small Cap Fund had this to say about Rocky Brands, Inc. (NASDAQ:RCKY) in its Q4 2021 investor letter:
“Rocky Brands is a footwear manufacturer and distributor focused on the work, Western, outdoor and military boot markets. Management has improved operations in recent years, but temporary fulfillment issues associated with the integration of its transformational acquisition of Honeywell’s footwear brands allowed us to initiate a position at a discount to our estimate of intrinsic value. We believe Rocky is well positioned to navigate industry supply chain headwinds and exit the disruptions as a leader in the relatively stable boot category.”
8. Wolverine World Wide, Inc. (NYSE:WWW)
Number of Hedge Fund Shareholders: 14
Wolverine World Wide, Inc. (NYSE:WWW) distributes a wide range of footwear and apparel brands, including Harley-Davidson Footwear, Saucony, Hush Puppies, Wolverine, and Chaco. It sells its products in more than 170 countries and territories worldwide.
Wolverine World Wide, Inc. (NYSE:WWW) grew revenue by 35% to $2.41 billion in 2021, while adjusted EPS more than doubled to $2.09. Saucony was one of the company’s strongest brands last year, growing revenue by 57%. In Q2 2022, Wolverine’s revenue grew by 13% year-over-year to $714 million, though margins took a hit due to some supply chain issues and foreign exchange headwinds.
Hedge funds have also been bailing on Wolverine World Wide, Inc. (NYSE:WWW) in recent quarters, as ownership of the stock among the smart money has slid by 36% over the past three quarters. Ric Dillon’s Diamond Hill Capital is a big fan of WWW, owning 3.46 million shares on June 30.
7. Caleres Inc (NYSE:CAL)
Number of Hedge Fund Shareholders: 18
Caleres Inc (NYSE:CAL) operates more than 1,000 retail stores through which it sells its own branded footwear, as well as other popular brands. The company’s own brands include Naturalizer, Dr. Scholl’s, and LifeStride in its Healthy Living category, while its Contemporary Fashion brands include Sam Edelman, Franco Sarto, Via Spiga, and Diane von Furstenberg.
Unlike many other stocks in this list, Caleres Inc (NYSE:CAL) shares have gained 5% this year thanks to strong financial results. Q2 revenue hit a record for the quarter of $738 million, topping consensus, while EPS of $1.38 also beat estimates. 72% of the company’s net sales were direct-to-consumer during the quarter, which helped drive gross profit higher. The company raised its FY22 revenue forecast following its Q2 results to 5% annual growth at the mid-range of its guidance, compared to a previous mid-range of 3.5%.
Hedge funds largely maintained their investments in Caleres Inc (NYSE:CAL) between early-2018 and mid-2020, during which time the stock tanked from over $30 to just $7. CAL shares have since rebounded to over $24. Dmitry Balyasny’s Balyasny Asset Management built a new position in Caleres during Q2, which totaled 482,005 shares worth $12.6 million on June 30.
6. Steven Madden, Ltd. (NASDAQ:SHOO)
Number of Hedge Fund Shareholders: 22
Closing out the first half of the list is Steven Madden, Ltd. (NASDAQ:SHOO), which designs and sells name brand and private label footwear, handbags, and other fashion accessories. The company has a variety of brands that target different gender-specific age groups, including the Madden brand for young men and the Steven brand for older women.
Steven Madden widely beat revenue estimates in Q2 on the strength of $535 million in sales, nearly $50 million ahead of expectations. The company also reaffirmed its FY22 revenue guidance of between 13% and 16% year-over-year growth. Adjusted EPS for Q2 came in at $0.63, also topping estimates. The company has a strong balance sheet and should be more than capable of weathering near-term headwinds without much difficulty.
Steven Madden, Ltd. (NASDAQ:SHOO) shares more than doubled between October 2020 and November 2021, and hedge fund ownership likewise doubled. Shares have since fallen by 46% however, and hedge funds are starting to look elsewhere for more promising investments, as smart money ownership of SHOO has dipped by 19% this year.
Wedgewood Partners has been impressed by Steven Madden, Ltd. (NASDAQ:SHOO)’s recent results and decided to build up its position during the second quarter, as noted in the fund’s Q2 2022 investor letter:
“Steven Madden, Ltd. (NASDAQ:SHOO) reaped the results of its competitively advantaged supply chain and generated a +55% increase in revenue while tripling earnings per share. Many retail vendors have been struggling to replenish their own stores let alone wholesale customers with inventory, but Steve Madden has done an excellent job fulfilling customer needs and is able to take ample pricing as a result. Many of the Company’s smaller competitors cannot meet demand as they were hobbled, if not completely wiped out, by COVID-19 induced shutdowns over the past few years. As economies continue to reopen, Steve Madden should continue to compound its market share gains at increasingly attractive returns, not unlike how the industry evolved in the aftermath of the 2008-2009 financial crisis. With the stock trading at a multi-decade low forward earnings multiple, we viewed the pullback in shares as an attractive opportunity and added to positions in the portfolios during the quarter.”
Skechers U.S.A., Inc. (NYSE:SKX), NIKE, Inc. (NYSE:NKE), and Crocs, Inc. (NASDAQ:CROX) are among the top world-class shoe stocks to buy now. See where they rank by clicking the link below.
5. Designer Brands Inc. (NYSE:DBI)
Number of Hedge Fund Shareholders: 30
Designer Brands Inc. (NYSE:DBI) is one of the largest footwear companies in North America, operating some 500 Designer Shoe Warehouse stores as well as the shoe departments in hundreds of other stores. The company also operates e-commerce websites for the U.S. and Canadian markets that include a loyalty rewards program.
Designer Brands Inc. (NYSE:DBI) performed well during the pandemic thanks to its flexible business model, as it shifted to the production of athletic-based footwear to meet the growing demand in the market for workout shoes. It has since shifted back to a heavier focus on fashion-oriented footwear. The company aims to double sales by 2026, with expectations that its The Warehouse Reimagined shop-in-shops concept will contribute 30% of its top-line growth by that time.
Hedge funds have rapidly grown more bullish on Designer Brands Inc. (NYSE:DBI) in recent quarters, as their ownership of the company has more than doubled since the end of September 2020. Lee Ainslie’s Maverick Capital and Michael Gelband’s ExodusPoint Capital were some of the funds to initiate new stakes in DBI during Q2.
4. Crocs, Inc. (NASDAQ:CROX)
Number of Hedge Fund Shareholders: 30
Crocs, Inc. (NASDAQ:CROX) is the developer and distributor of a popular line of casual footwear products and accessories, which are sold in more than 90 countries worldwide.
Crocs has had a rough year on the market, losing 45% in 2022 as investors worry about the various headwinds facing the company while it also works to integrate HEYDUDE following its $2.5 billion acquisition of the casual footwear company. Crocs grew net sales by 14.3% year-over-year in Q2 and anticipates similar growth for 2022 as a whole.
Hedge funds sold off Crocs, Inc. (NASDAQ:CROX) in droves during Q1, as there was a net 32% drop in ownership of the stock, which fell to a two-year low. Ownership remained flat during Q2. Bernard Horn’s Polaris Capital Management and Steven Boyd’s Armistice Capital each sold off large stakes in CROX during the first quarter.
Money manager Choice Equities believes the market is being overly pessimistic on Crocs, Inc. (NASDAQ:CROX) future growth, laying out its thesis on the company in its Q2 2022 investor letter:
“Crocs, Inc. (NASDAQ:CROX) trades at 5x this year’s earnings and 6x EBITDA. Like many of its peers in the consumer space, the valuation implies the market regards the company as a one-time pandemic beneficiary, and business prospects offer little growth beyond this year. While it would be ill-advised to suggest the company did not benefit from the pandemic’s effects on consumer spending on goods, I think this view is incomplete and neglects to incorporate the tremendous success the management team has achieved since they arrived five years ago.
Most recall Croc’s original success as having come from pretty much out of the blue, as the funny-looking but comfortable clogs sent the stock on a meteoric rise shortly after its IPO in 2006. Many also conflate the stock chart with a fad-driven boom and bust cycle, even though a closer look at clog volumes actually shows fairly consistent growth over the last twenty years. Even so, the company was not without its problems, primarily from management missteps as an overburdened cost structure created profit headwinds.
Accordingly, when Andrew Rees became CEO in 2017, he had his work cut out for him. Initially, he focused his efforts on taking costs out and making the operation more efficient. He shrunk the store count by more than a third and began optimizing their go-to market strategy by emphasizing sales through the direct-to-consumer digital channel and through wholesaler channel partners. This enabled the company to devote greater resources to product innovation and marketing, a smart reallocation of corporate resources that offered great payoffs for the branded consumer products company…” (Click here to read the full text)
3. Skechers U.S.A., Inc. (NYSE:SKX)
Number of Hedge Fund Shareholders: 33
Skechers U.S.A., Inc. (NYSE:SKX) sells lifestyle and performance footwear for all ages through hundreds of retail stores across the U.S. and internationally. The company’s brands include various riffs on the Skechers name, including Skechers Sport, Skechers Work, and Skechers Kids.
Skechers had a strong 2021, but growth has slowed considerably this year, which has pushed the stock down by 28% year-to-date. After growing sales by 37% year-over-year to $6.29 billion in 2021, Q2 sales grew by just 12% year-over-year. Direct-to-consumer sales slowed even more, dropping to just 4.3% in Q2 from a 38% clip in 2021. Gross margin also fell by 3 percentage points to 46.7% during the first half of this year, pushing free cash flow down to a five-year low.
There was a slight rebound in hedge fund ownership of Skechers U.S.A., Inc. (NYSE:SKX) during Q2 after a 22% drop during the prior two quarters, which coincided with the stock beginning to slide from its all-time highs. SKX shares have lost 40% of their value since July 2021. Dmitry Balyasny’s Balyasny Asset Management built a new stake of 1.5 million shares of Skechers during Q2.
Fiduciary Management Small Cap Equity dug into Skechers U.S.A., Inc. (NYSE:SKX)’s background and prospects in its Q1 2022 investor letter:
“Skechers is the third largest footwear brand in the world. The company designs, manufactures, and distributes footwear for men, women, and children in U.S. and international markets. Its products cover a wide range of footwear categories including casuals, dress casuals, sandals, boots, work boots, performance footwear, and kids footwear. The company operates in three business segments: Domestic Wholesale (23% of sales), International Wholesale (48% of sales), and Direct-to-Consumer (29% of sales). In total, international sales account for approximately 60% of revenue…” (Click here to see the full text)
2. Deckers Outdoor Corp (NYSE:DECK)
Number of Hedge Fund Shareholders: 36
Deckers Outdoor Corp (NYSE:DECK) owns several brands of footwear, including popular slippers and boots brand UGG, as well as Teva, Hoka, and Sanuk. Deckers also sells apparel, accessories, and handbags. The company has over 100 UGG retail stores, in addition to an e-commerce platform and various wholesale customers.
Deckers Outdoor Corp (NYSE:DECK) was recently added to Wedbush’s Best Ideas List, with analyst Tom Nikic recently upgrading the stock to ‘Outperform’ from ‘Neutral’ and raising his price target on it to $410 from $320. Nikic noted that the company was one of the few within his coverage that raised its earnings guidance this year, and believes the Hoka brand is one of the most compelling growth stories in the footwear space. He’s also bullish on the company’s top-line growth, strong balance sheet, and hefty margins.
There was a 22% drop in hedge fund ownership of Deckers Outdoor Corp (NYSE:DECK) during Q2 and there’s been a 33% decline since ownership of DECK peaked at the end of Q3 2020. Robert Pitts’ Steadfast Capital Management has the largest stake in Deckers Outdoor among the funds tracked by Insider Monkey, owning 1.27 million shares.
1. NIKE, Inc. (NYSE:NKE)
Number of Hedge Fund Shareholders: 73
Topping the list of shoe stocks to buy now is NIKE, Inc. (NYSE:NKE), one of the most recognizable footwear and apparel brands in the world. Nike also sells sports equipment and accessories, including golf clubs, baseball bats and gloves, and watches.
Nike is in the midst of transitioning away from retail outlets to online sales, with great success, as digital revenue topped $10 billion in FY22. Nike topped fiscal 2023 Q1 revenue estimates with $12.7 billion in sales, but investors have become worried about the company’s growing inventory backlog ahead of what’s expected to be a challenging period for consumer discretionary stocks. Nike’s falling margins have also raised concern, with management expecting FY23 Q2 gross margins to slide by 3.5 to 4 percentage points year-over-year.
Hedge fund ownership of NIKE, Inc. (NYSE:NKE) ticked up during Q2 as money managers looked to buy into the iconic brand at a discount. Nike shares fell by 38% during the first half of 2022. Jim Simons’ quant fund Renaissance Technologies initiated a large position in NKE during Q2, buying 2.08 million shares.
Madison Funds is bullish on NIKE, Inc. (NYSE:NKE)’s future growth, laying out some of the reasons why in its Q2 2022 investor letter:
“NIKE, Inc. (NYSE:NKE) is the largest seller of athletic footwear and apparel in the world. Started from humble beginnings as Phil Knight’s “crazy idea” in a Stanford entrepreneurship class, Nike marked its 50th anniversary this year. By remaining true to its innovative culture, the brand is as strong as ever and continues to generate attractive growth, soon to surpass $50 billion in annual revenue. In addition to the continuous investments in brand innovation and marketing, over the last few years Nike has invested heavily to lay the foundation for multi-channel commerce. Today, Nike generates approximately 40% of its revenues through its online channel and branded storefronts. Empowered by CEO John Donahoe’s “Nike Consumer Direct Offense,” Nike’s ongoing investments are expected to further drive their overall revenue mix towards the direct-to-consumer channel which we estimate will result in substantial margin improvement over the next three to five years.
While Nike’s business in China, which accounts for approximately 20% of revenue, is experiencing challenges today, our due diligence suggests that consumer preference for the Nike brand outside the U.S. remains incredibly strong. Overall, we expect Nike’s broader ecosystem, often referred to as the Nike Marketplace, to continue to leverage the company’s innovation and premier brand to build direct consumer relationships which deepen Nike’s competitive moat and enhance its financial profile. Turbulence in the Chinese market and concerns over consumer spending in the US and Europe enabled us to initiate a position in Nike at an attractive discount to our appraisal of the company’s long-term value.”
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Disclosure: None. 10 World-Class Shoe Stocks to Buy Now is originally published at Insider Monkey.
