The Mother of All Shoe Stats!

I've been covering this industry for about 10 years. The shift towards 'low performance' footwear (i.e. the kind of sneaker/shoe hybrid that you can wear with designer jeans) has been the big trend for more than half that time. The category just posted its 1st negative month -- ever. Is athletic back?? I won't call it a trend until I see another 2 months. But if this sticks then there are wide reaching implications for this industry. It also suggests that Matt Serra's comments on Foot Locker's conference call about a revival in the mall-based business might actually be true.

Some considerations if this holds...

1) Near-term, industry inventories are clean, which is a positive margin event. But as '09 approaches I am convinced that the world at large is underestimating the negative margin impact from 'everything Asia' (rising inflation and slowing growth). A couple points in share gain of the total footwear market could give the athletic space a well needed shot in the arm to keep margin pressure at bay -- at least to some degree.

2) Foot Locker would be the big winner. By no means could a simple cyclical boost elevate FL's status from the 'bottom quartile' list of virtually every mall REIT. But at 1x tangible book with $2 in net cash on the balance sheet, and margins having gone from 7% to 1% over the past 2 years - even the slightest tweak in top line could be meaningful.

3) Nike risk?? How could Nike possibly be at risk in the event of a strengthening US athletic cycle? Well, it's probably not - if nothing else due to the global portfolio diversification. But in a backward kind of way, we should keep in mind that Nike absolutely dominates US footwear retailers when times are tough. When the environment picks up, the retailers become less risk averse, and are usually willing to push back and try smaller brands.

The exhibit below shows year/year change in low profile footwear units. Courtesy of NPD Fashionworld.

SECTOR SPOTLIGHT | Live Q&A with Healthcare Analyst Tom Tobin Today at 2:30PM ET

Join us for this edition of Sector Spotlight with Healthcare analyst Tom Tobin and Healthcare Policy analyst Emily Evans.

read more

Cartoon of the Day: Bulls Leading the People

Investors rejoiced as centrist Emmanuel Macron edged out far-right Marine Le Pen in France's election day voting. European equities were up as much as 4.7% on the news.

read more

McCullough: ‘This Crazy Stat Drives Stock Market Bears Nuts’

If you’re short the stock market today, and your boss asks why is the Nasdaq at an all-time high, here’s the only honest answer: So far, Nasdaq company earnings are up 46% year-over-year.

read more

Who's Right? The Stock Market or the Bond Market?

"As I see it, bonds look like they have further to fall, while stocks look tenuous at these levels," writes Peter Atwater, founder of Financial Insyghts.

read more

Poll of the Day: If You Could Have Lunch with One Fed Chair...

What do you think? Cast your vote. Let us know.

read more

Are Millennials Actually Lazy, Narcissists? An Interview with Neil Howe (Part 2)

An interview with Neil Howe on why Boomers and Xers get it all wrong.

read more

6 Charts: The French Election, Nasdaq All-Time Highs & An Earnings Scorecard

We've been telling investors for some time that global growth is picking up, get long stocks.

read more

Another French Revolution?

"Don't be complacent," writes Hedgeye Managing Director Neil Howe. "Tectonic shifts are underway in France. Is there the prospect of the new Sixth Republic? C'est vraiment possible."

read more

Cartoon of the Day: The Trend is Your Friend

"All of the key trending macro data suggests the U.S. economy is accelerating," Hedgeye CEO Keith McCullough says.

read more

A Sneak Peek At Hedgeye's 2017 GDP Estimates

Here's an inside look at our GDP estimates versus Wall Street consensus.

read more

Cartoon of the Day: Green Thumb

So far, 64 of 498 companies in the S&P 500 have reported aggregate sales and earnings growth of 6.1% and 16.8% respectively.

read more