The trend in higher priced sneakers remains abysmal. 4Q is gonna be tough. But the setup into 2010 is something else entirely.
When sifting through sales results tomorrow, you should keep an eye on any anecdotes around athletic footwear – and specifically, why consumers are avoiding the category on the margin in the midst of an otherwise solid overall retail comp trajectory. Is it because of the strong boot cycle (ie dollars shift to dept stores)? Nah… Not much overlap as it relates to customer/purchase intent. My sense is that it remains the downshift we’re seeing. I’m not referring to a simple shift to lower price point product within like-for-like retailers, but rather the complete downshift into different channels – most notably the Family Channel (one of the reasons why we’ve liked PSS so much).
Maybe Mickey Newsome said it best on Hibbett’s Q2 09 Call: “Our most difficult business was footwear, off mid to high teens with all genders off. I really don’t remember [a quarter] being down this low. We have gone through some down cycles in footwear but not to the extent that this one is.”
Allow me to inject my opinion… This is a space that is almost entirely product-driven. If the consumer is trading down, it is because there is no reason for them to pay up for something pricey. There are some unique products in the market right now – like Nike’s Lunar Glide. But aside from that, there’s not a whole lot. Something to consider is that come Spring/Summer I think Nike’s pipeline will open up (i.e. things that will be ordered over the next few months and show up at retail six months later), and this is the same time that UA’s new footwear org under new leadership will start humming.
While that’s good for the whole industry, the particularly levered play is FL, FINL, and to a lesser extent HIBB. Timing is key, as we still have an ugly quarter ahead. We particularly like FL, as all of this will coincide with the start of Hicks’ (new CEO) plan to turn around this perennial dog.