Footwear Insight

Columbia Sportswear CEO Tim Boyle recently told analysts that the Sorel brand will be the compa- ny's fastest-growing brand in 2022 with a sales increase approaching 30 percent as the label continues its pivot away from being a purely winter brand. In FY21, for example, only 15 percent of Sorel's $318.5 million in revenues were generated by insulated winter boots as the brand sold more fashion-forward styles. The brand's sales were up 9 percent for the year and 9 per- cent in the final period when they reached $164 million. In the broader picture, Columbia Sportswear reported impressive fourth quarter results on the strength of its Direct-To-Consumer and ecommerce businesses and a 160-basis-point improvement in gross margin to 52.2 percent despite persistent supply chain dis- ruptions that negatively impacted wholesale revenues. Footwear sales jumped 12 percent to $284 million and Apparel/Equipment/ Accessories revenues were 28 per- cent higher on a constant currency basis to $846 million. ASICS North America's fourth quar- ter of 2021 generated the region's first operating profit for the brand since 2017. The NA region also experienced a near double-digit quarterly sales increase year-over- year. Q4 was the fourth consecutive quarter of positive growth. ASICS' success was driven by the brand's performance running category, specifically the GEL- Kayano and GEL-Nimbus models and the introduction of the Blast Beyond Series and Meta Series. "Our industry has faced many obstacles these past two years and we are incredibly thankful to our partners and customers for their patience and understanding," said Richard Sullivan, president and CEO of ASICS North America. "Even in the face of these challenges, our product response has been tremendous and we were thrilled to see the return of in person races like the Falmouth Road Race and Los Angeles Marathon." Foot Locker execs told investors in February that its longtime cozy re- lationship with Nike (which is laser focused on its DTC/Digital strategy) is evolving, a factor that will force the international retailer to further diversify its assortment with more merchandise from other vendors. Nike is expected to account for approximately 60 percent of FL's overall assortment in 2022 (includ- ing 55 percent in Q4), down from 70 percent last year and 75 percent in 2022. No doubt, the reduced Swoosh penetration, including fewer units of key allocations, should create opportunities for other brands inside Foot Locker such as Adidas, Puma, New Balance, Reebok, Timberland and On. "We know that our consumer demands choice across a variety of brands and categories," Foot Locker Chairman and CEO Richard Johnson told investors. "So, we continue to work to broaden our selection, including leaning into brands where we are underpen- etrated, putting a bigger focus on apparel and introducing new third- party brands as well as our own private labels." Crocs intends to hit an annual sales target of $6 billion in 2026. More immediately, the company is forecasting more than 20 percent topline growth in 2022 to more than $2.75 billion. That total excludes the recently acquired Hey Dude brand, which is projected to contribute $620-670 million on a pro forma basis. The two brands together are projected to help Crocs reach $3.4 billion in reported revenues this year with an adjusted oper- ating margin of about 26 percent. "We're excited about the poten- tial of Hey Dude and incredibly confident in our ability to build a $1 billion brand by 2024," CEO Andrew Rees told investors in February. Direct-To-Consumer and whole- sale revenues were about equal for Crocs in 2021. On a two-year basis, digital penetration rose to 37 percent from 31 percent. The company sold over 100 million pairs of footwear in 2021, fueled by clogs that accounted for 80 percent of the topline versus 72 percent in 2020. Coming out of a record Q4 in terms of total sales, Skechers says it's continuing with a go-forward strat- egy that will help the 30-year-old company achieve $10 billion in annual revenues within the next four years. Planned initiatives in- clude a broader roster of comfort and technology-laden footwear, more multi-platform marketing efforts and additional ecommerce sites worldwide. The company, which is ex- panding its Southern California distribution center to 2.6 million sq. ft. by the end of 2022, is currently forecasting FY22 total revenues of $7.0-7.2 billion and EPS of $2.70-2.90. Skechers' senior executives expect logistics and supply chain issues to "create some downward pres- sure" on gross margin this year as the Direct-To-Consumer channel returns to a "more normalized level" of promotions in H2 but not as severe as seen in 2018 and 2019. In Q4 ended Dec. 31, total rev- enues rose 24 percent to $1.65 billion. The sales result was achieved despite a 130 percent increase in in-transit inventory to $325.1 million that negatively impacted the brand's DTC busi- ness and wholesale accounts. U.S. wholesale revenues increased 5 percent in Q4 as the company reported strong sellthrough rates for the segment and higher aver- age selling prices. Rocky Boots, the parent of the Durango, Rocky, Georgia Boot, XTRATUF and Muck Boot brands says its second U.S. distribution center in Reno, Nevada will be "fully functional" by the end of the first quarter, enabling the Nelsonville, Ohio company to better fulfill product orders for its various brands. Additionally, the company said Georgia Boot had a record Fall 2021 season with demand exceeding its distribu- tion center's output. Sales for the Durango brand were up low-dou- ble digits. The Rocky Western brand segment generated mid- teens wholesale growth in the U.S. during the fourth quarter as the label capitalized on some supply chain woes by rivals. Meanwhile, the company's Boston Group, consisting of Muck and XTRATUF, generated a 32 percent increase in final period sales. Muck had "large pent-up demand" in the first quarter and XTRATUF had a record backlog. CEO, chairman and president Jason Brooks said Rocky Brands "is in a good position to regain the market momentum that was lost during the second half of 2021" now that its distribution cen- ters are prepared to fill customer orders in a timely manner. n 8 • Footwear Insight ~ March/April 2022 footwearinsight.com THE FOOTWEAR EYE FAST FACTS Key takeaways from recent earnings calls across the industry.

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