Shoe Love: The Little Girls Understand
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“The men don’t know but the little girls understand,” wrote bluesman Willie Davis. He must have been talking about why women love shoes (and handbags, too). Carrie Bradshaw of Sex and the City (who realized she had so much money tied up in shoes she could have paid her NYC co-op downpayment) and Cinderella aside, shoes are hot. And shoe stocks are hot. Imelda Marcos impoverished a nation with her love for shoes.
What is it about Shoes?
When you buy shoe-related stocks, a consumer discretionary item, you have to understand why for most women it’s not really discretionary. Your shoe size doesn’t change like your weight. It is the one thing that really accessorizes an outfit, the right shoe can make you look taller, slimmer, richer. It’s a piece of wearable art and other women can size each other up at a glance by their shoes. It’s so Darwinian it’s frightening. Not to mention the variety. But all that makes designers who can create a beautiful shoe very much in demand. The best ones have their finger on the ankle pulse of the female shoe shopper.
Who Knows what Women Want
Take Steven Madden, Ltd (NASDAQ: SHOO) for example. The stock just shot up over 20% on July 27 when it actually missed (0.61 vs. 0.63 analyst expectations) but guidance going forward was better than expected as they raised 2012 EPS from analysts’ estimates of $2.67 to a range up to $2.77. They also said margins would be better in the latter half of this year. Sales were up 38% in Q2 to $288.7 million, beating estimates by $7 million. It has 91.1% institutional support, 6.91% held by insiders and a 7.00 short float. And while men may think the shoes look clunky, women think it makes their legs look better and they loooove the boots.
Steven Madden also bought two private label shoe brands, Cejon and Topline, and they are also improving margins. Steven Madden operates 84 retail stores and has a web shopping site as well as licensing for their brands and the very popular Betsey Johnson designer line. Steven Madden has a P/E of 17.20, PEG of 1.28 and a $1.78 billion market cap, with no debt.
Deckers Outdoor Corp. (NASDAQ: DECK) had once been an anointed stock and then was crushed underfoot (pun so totally intended) from its $118.90 high on Halloween 2011 to a recent low of $39.90. It’s often compared to Crocs and Skechers because of its TEVA sandals line, but it is more of a fashion shoe stock. The obvious UGGS remarks aside women like them -- they like them so much they’re willing to pony up $200 or more. What men don’t understand is they are not only comfortable, but in contrast to the sheepskin heft around the lower leg it makes your thighs look more slender. Deckers reported on July 26 with beats on both top and bottom line and a not-as-Uggly loss as last year. With cold weather coming soon sales should pick up even more. The quarterly revenue growth is 20.2% year over year and after the huge selloff this last year the P/E is 9.31. Institutions hold 112.4%, insiders 6.31% and it has a rather large short share of the float at 26.1%. Again, no debt here.
Then if you don’t want to back one shoe trend in particular, you can buy Designers Shoe Warehouse, DSW Inc. (NYSE: DSW). This one pretty much covers all the bases because as much as women love shopping for shoes, they love it even more at a discount. DSW is trading near its 52-week high of $59.36 and has a P/E of 10.32, a yield of 1.30%, and a market cap of $2.65 billion. This one still has room to expand with 336 stores in 41 states. There are at least nine states where women are unable to buy cheap designer shoes! The horror! This name has no debt and large institutional sponsorship of 87.50% and a high insider ownership of 14.63 %. Its quarterly revenue growth is a respectable 10.9% year over year. DSW will report on Aug. 27.
Coach, Inc. (NYSE: COH) is considered a big luxury name although there are many, many accessories companies that sell handbags and such at much higher price points. Coach just received a Morgan Stanley upgrade on July 26 based on its recent fall of 27% from its peak. This helped boost shares 3.85%. Coach has the largest yield of the group at 2.1% and a P/E of 18.52. It has a market cap of $17.81 billion, of which CEO Lew Frankfort holds 2,056,781 shares. Now there’s some insider conviction. The institutional hold is 90.70% and shares held short is at 4.90%. The company reports soon on July 31, but put activity is on the rise. It carries some debt of $23.45 million and has cash of $929.67 million. This name has had a tremendous run over the last few years because their bags, shoes and accessories have the advantage of being immediately recognizable to other women and as a status display purchase are very desirable.
What is the take away from all this beside all the subliminal Darwinian desire to aspire and display? Never underestimate the power of a woman’s craving for accessories. These retailers understand and have consistently made money for their shareholders.
leglamp has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Motley Fool newsletter services recommend Coach. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. If you have questions about this post or the Fool’s blog network, click here for information.