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<< Return to Part IV

As we enter into this Christmas season, that can only mean one thing: Shopping. This article is meant to give a personal perspective of how the retail sector is shaping up for this year and into the future. For this experiment and research I have used the closest mall in proximity to me, the Woodland Mall.

This mall, owned by Pennsylvania Real Estate Trust, has been open since 1968. Over 100 stores, restaurants, and kiosks operate in 1.1 million square feet. Many of the stores are privately owned or are small, local players and have been left out of this article. Let’s take a look at some of the stores entering their busiest time of the season.

All yields, share prices, and analysts’ estimates are taken from Yahoo Finance upon market close Friday, November 25. Current and next year's earnings are analysts estimates for the current fiscal year and the following one. Earnings are listed on a per-share basis.

This article focuses on shoe stores that are publicly trade in the United States.

Store: Finish Line (NASDAQ:FINL)

Finish Line sells sports apparel, mainly focusing on footwear, in its locations. Basketball shoes make up a large portion of the company’s sales.

  • Competitors: Foot Locker (NYSE:FL)
  • Share Price: $18.84
  • Current Earnings: $1.58
  • Next Year Earnings: $1.74
  • Dividend Yield: 1%
  • Number of Stores: 646 (as of 09/22/11)
  • Recommendation: Sell

This athletic and footwear mall-based store is a sell for me at this level. Finish Line has a market capitalization of under $1 billion. The company will likely see shoppers shift to online purchases and buying direct from retailers. The margin levels at athletic superstores like Finish Line are not strong enough for me to recommend or get behind.

Store: Foot Locker (FL)

Foot Locker is the largest sports shoe store in the country, with thousands of locations across the U.S.

  • Competitors: Finish Line (FINL)
  • Share Price: $21.12
  • Current Earnings: $1.77
  • Next Year Earnings: $2.01
  • Dividend Yield: 3%
  • Number of Stores: 3426 (as of 1/29/11)
  • Recommendation: Sell

The NBA lockout has ended, which could be good news for Foot Locker. The store sells shoes and athletic apparel and basketball is one of its primary industries. I think shares are overvalued at this level. The lockout may not have an immediate impact on shares. Strong sales from Nike (NYSE:NKE) and the rise of other shoe companies will cut into the store sales of Foot Locker as users buy directly from shoe companies and avoid this mall-based store.

Stores: Journeys, Johnston and Murphy, owned by Genesco (NYSE:GCO)

Genesco owns two large shoe brands in Journeys and Johnston and Murphy, which both are predominantly in shopping malls. The large retail brand company also owns Hat Worlds and Lids stores found in malls.

  • Competitors: Payless (NYSE:PSS)
  • Share Price: $54.32
  • Current Earnings: $3.71
  • Next Year Earnings: $4.29
  • Dividend Yield: 0
  • Number of Stores: 1017 Journeys, 156 Johnston and Murphy (as of 01/29/11)
  • Recommendation: Buy

Genesco owns many retail brands and has put together a nice portfolio. The ownership of Johnston and Murphy, Journeys, Hat World, and Lids, puts the large retail company inside almost every mall. The company raised guidance for the full year earnings last week. Look for shares to trade up in the coming holiday season.

Store: Payless Shoe Store, owned by Collective Brands (PSS)

Payless shoes focuses on selling discount shoes for all walks of life including work, casual, and dress. The shoes are sold for all ages and both genders. Payless stores can be found in malls and as part of strip malls. Outside of this mall location there is another Payless free standing store. The company relies heavily on discounting merchandise with clearance and buy one get one events.

  • Competitors: Brown Shoes (NYSE:BWS), Shoe Depot (Private)
  • Share Price: $12.52
  • Current Earnings: $0.61
  • Next Year Earnings: $1.08
  • Dividend Yield: 0
  • Number of Stores: over 4,800
  • Recommendation: Hold

Rumored to be a buyout candidate, shares of Payless parent Collective Brands saw a slight run up in price since they hit a low below $10. Shares have since moved down slightly but are well off of their fifty two week high of $23.96. The company has been downgraded by several analysts and has also warned of margins on products and a possible earnings miss. There are better options in the mall than these shares.

Store: Track and Trail, owned by Wolverine Worldwide (NYSE:WWW)

Wolverine Worldwide is a leader in shoes for workers in construction and factory jobs. The company licenses Cat footwear from Caterpillar (NYSE:CAT) and is a leader in the work boot market.

  • Competitors: Timberland (Private), Red Wing Shoes (Private)
  • Share Price: $33.41
  • Current Earnings: $2.53
  • Next Year Earnings: $2.82
  • Dividend Yield: 1.4%
  • Number of Stores: 92 Retail Stores (including CAT Footwear and Hush Puppies Brand)
  • Recommendation: Hold

Shares appear to be fully valued or overvalued as the industries it operates in have been hit hard with job losses. Shoes are another item that consumers are forced to cut out and make last longer.

Summary

  • Finish Line, $18.84, Sell
  • Foot Locker, $21.12, Sell
  • Journeys, Johnston and Murphy, $54.32, Buy
  • Payless Shoe Store, $12.52, Hold
  • Track and Trail, $33.41, Hold
Source: Hitting The Mall For The Holiday Season, Part V: Shoe Stores