Footwear Insight

6 • Footwear Insight ~ November/December 2022 footwearinsight.com By Bob McGee M any footwear companies, large and small, are facing similar challenges in the current marketplace. And several are finding success despite the challenges. A look at recent statements from public companies gives some insight into challenges, bright spots and strategies being used. CROCS, which recently raised its annual guidance aer another strong quarter, is facing a bit of a dilemma in North America, par- ticularly the U.S. market. Elevated footwear inventory levels at retail are pressuring margins. Still, Crocs is continuing to gain share. In the third quarter, North American revenues inched up 1.8 percent to $445.3 million as Direct-to- Consumer sales increased 13 percent against 70 percent comparable growth in the year-ago period. While wholesale sell-in was down 15 percent, the sell-through rate improved at a high-single digit rate as the company worked with its largest wholesale partners to manage inventory levels. D-T-C accounted for 45 percent of Crocs' topline as digital penetration reached 37 percent, a figure that the company wants to take to 50 percent or more. e company also want to double sales of its Jibbitz business. HOKA, which Deckers Brands is aiming to transition into a head-to-toe brand serving running, trail, and hiking consumers world- wide, is forecast to grow its annual sales by 50 percent. Meanwhile, annual sales for Deckers' UGG brand, impacted by currency headwinds, were down in the recent quarter, but the brand is well positioned with inventory heading into the cold-weather season. For Hoka, wholesale accounted for two- thirds of brand sales and most of the gain was attributed to higher market shares in existing accounts. Direct-To-Consumer sales rose 26 percent in H1. SKECHERS, with a new 2.6-million-sq.-. distribution center in Southern California in its final stage of integration into the company's existing system, is expected to be able to deliver improved processes and volume for its products through 2023. Additional ongoing DC investments for the company, slated to come online in the first half of next year, include a 427,000-sq.-. facility in Vancouver that will help improve Skechers' delivery times across Canada and a 1.1-million-sq.-. DC near Mumbai, India scheduled to open around June 2023. During the third quarter, Skechers delivered a 14.9 percent increase in U.S. sales to $745.8 million that include a 14.7 percent improve- ment in wholesale revenues to $406.6 million and 15 percent jump in Direct-To-Consumer sales to $339.2 million. On Running saw revenues rise by 57 percent in the most recent quarter despite temporary constraints on its business in mid-August due to problems in its warehouse that prevented the company from fulling all demand, particularly in the Direct-To-Consumer channel. Although the issue has since been rectified, On intends to open a new, automated distribution center in Atlanta to replace its existing facility there by 2025. Also, following recent store openings in China and the Los Angeles market, On is preparing for store openings in Miami and London early next year. On senior executives also say the company remains committed to a circular future. To that end, the brand's new Clear Cloud model, in development for five years, is the first athletic shoe with a midsole made from carbon emissions. VF CORP.'s outdoor emerging brands, led by e North Face, had strong sales growth in the third quarter for VFC at 14 percent. e North Face saw double-digit growth across all regions and channels. Fellow VFC brand Vans, meanwhile, continued to struggle, posting an 8% constant-currency sales decline for the period ended Sept. 30 on a disappointing Back-To-School season in the Americas and record low store traffic. VFC is vowing to prioritize efforts to drive store traffic in the second half. Overall, VFC has lowered some key met- rics due to currency headwinds, higher inventory levels and a more promotional retail environment. e annual adjusted op- erating margin outlook has been decreased to 11 percent from 12 percent due to higher inefficiencies in the supply chain, store costs for excess inventory and the emerging promotional environment in North America. WOLVERINE, the parent of Merrell, Saucony, and 10 other brands, wants to establish $150 million worth of initiatives through a new office of profit improvement with an objective of recognizing at least $65 million worth of savings. Wolverine's operations group has hired Alix Partners to assist it with a raw material procurement cost savings project that will streamline the group's factory and supply base, Key Issues Impacting Major Footwear Vendors ANALYSIS THE FOOTWEAR EYE

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