Goody Two-Shoes, or a Bad Fit?

When you're trying on shoe stocks for size, it's always tempting to wonder whether the other shoe's going to drop. Let's take a look at the recent quarterly earnings reports of several high-profile footwear companies.

Shoe stocks on parade

Company

Quarterly Net Income

Quarterly Revenue Growth

Trailing Price-to-Earnings Ratio

Crocs (Nasdaq: CROX  ) $25 million 30% 28
Skechers (NYSE: SKX  ) $36.4 million 36.8% 7
Timberland (NYSE: TBL  ) $52.2 million 2.5% 22

*All data from company press releases and Yahoo! Finance as of Nov. 9, 2010.

Crocs continues to prove that it's off the endangered species list, following its precarious phase about two years ago. The company's currently back to posting quarterly profits and revenue growth. That's a big improvement from the third quarter of 2008, when Crocs reported a staggering $148 million loss.

Crocs' turbulent journey from fiery fad to flameout seemed echoed in the recent craze for toning shoes. Skechers' stock tumbled following its quarterly results, amid news that a 70% inventory surge in its supply of the fitness footwear far outpaced revenue growth. (Crocs' own first warning sign in late 2007 was an inventory buildup.) If toning shoes are poised to fade fast, Skechers may want to accelerate its search for the next hot shoe trend.

Sketchers may look sketchier, but Timberland caused a big ruckus with its third-quarter earnings last week; the stock popped about 20% on Nov. 4. Investors celebrated its 38% increase in net income, as well as signs of growing sales in Europe and Asia. The results also beat Wall Street's expectations.

Timberland happens to be my inaugural recommendation for my Rising Stars Portfolio, which focuses on socially responsible investing philosophy. Timberland's much more than conventional shoe company, since it also specializes in environmentally friendly products and initiatives. However, while I really like the company and its long-term prospects, I think the wild euphoria of a 20% share-price was a tad overheated.

Shoe stocks: shined or scuffed?
In a lousy economy with crimped consumer spending, the aforementioned companies compete with many formidable rivals, including Nike (NYSE: NKE  ) , Steve Madden (Nasdaq: SHOO  ) , Deckers Outdoor (Nasdaq: DECK  ) , and many more. Skechers looks like the very cheapest of the three stocks I've examined here, but it could face short-term pain if the toning-shoes craze skids to a halt. My own favorite is Timberland, for the reasons I outlined above. As for Crocs, I'm still not sold on the idea that its footwear will stand the test of time with fickle consumers, and it sports the priciest multiple of the three.

What's your pick? Let your fingers do the walking in the comments box below.

Nike and Timberland are Motley Fool Stock Advisor selections. The Fool owns shares of Timberland. Try any of our Foolish newsletter services free for 30 days.

Alyce Lomax does not own shares of any of the companies mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool has a disclosure policy.


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