Shoe retailers to benefit from tight inventory control

Stock Market Predictions

(Global Markets) - The warmest U.S. winter in years fueled higher sales at footwear retailers Brown Shoe Inc (BWS.N) and Foot Locker Inc (FL.N), and the companies are expected to benefit from tight inventory management in the next few quarters.

The warmer weather helped drive sales at many retailers of footwear and sporting goods, including Hibbett Sports Inc (HIBB.O) and Dick's Sporting Goods Inc (DKS.N), which posted better-than-expected quarterly results earlier this week.

Shares of Brown Shoe were up 19 percent at $10.44, while those of Foot Locker were up 10 percent at $30.84. The stocks were among the top percentage gainers on Friday afternoon on the New York Stock Exchange.

Strong demand for athletic footwear is likely to spur sales at Foot Locker, Canaccord Genuity analyst Camilo Lyon said.

Brown Shoe also said sales of running shoes and sandals were strong in the first quarter.

"The whole light weight running product category is just terrific," Brown Shoe Chief Executive Diane Sullivan told Global Markets.

Brown Shoe, which has introduced several new styles and brands in recent years to attract younger shoppers, said sales of its contemporary fashion brands rose about 21 percent during the quarter.

Sullivan expects sales of fashion footwear to remain strong for at least another 12-18 months.

"I am either in my athletic shoes, or a great pair of heels or a wedge," Sullivan said.

Foot Locker and Brown Shoe have also kept lean inventories, which could boost margins.

"(Inventory management) bodes well for product margins in the second and third quarter," CL King analyst Steven Marotta said about Brown Shoe.

Inventory at Brown Shoe was down 4.1 percent compared to last year.

Foot Locker, which sells branded shoes of Nike (NKE.N), Reebok and Adidas (ADSGn.DE), posted first-quarter net income of 83 cents per share, handily beating analysts' expectations of 74 cents per share, according to Thomson Global Markets I/B/E/S.

Brown Shoe, which owns the Naturalizer brands, posted an adjusted net income of 23 cents per share, while analysts had expected 9 cents per share.

(Reporting by Meenakshi Iyer and Arpita Mukherjee in Bangalore; Editing by Viraj Nair)