After years of weakness, analysts are cautiously predicting improving results in the U.S. athletic footwear sector, in time for the back-to-school season, although they stress the overall environment remains difficult.
Recently, athletic footwear retailers and makers have suffered as fashion trends moved away from higher-priced technical footwear toward more casual, and lower-priced, athletic offerings exemplified by Skechers Inc. low-profile shoes. During the 12-month period ended April 30, total athletic footwear sales fell 5 percent to $19.1 billion from $20.08 billion the prior year, according to the NPD Group, a consumer and retail research firm.
However, analysts say the sector is cyclical, and fashion trends appear to be shifting back toward higher-priced shoes.
During a conference call on May 23 after Foot Locker Inc.'s first-quarter earnings report, for example, company Chief Executive Matthew Serra said marquee, or $100-plus, basketball and running shoes are selling well.
"We are encouraged with the recent fashion trends that are shifting back toward higher-priced technical footwear," he said.
Wedbush Morgan securities analyst Jeff Mintz said athletic shoes are becoming a stronger footwear trend overall.
"Athletic-type styles are doing better and getting more interest from retailers," Mintz said.
Even Skechers, based in Manhattan Beach, Calif., is deemphasizing its low-profile silhouette and focusing on athletic looks with thicker soles, said Susquehanna Financial Group analyst Christopher Svezia in a client note on Thursday.
"We were pleased to see the evolution of new product for fall 2008 away from the low-profile silhouette, which seems to be maturing in certain domestic channels," Svezia wrote.
Another positive trend for the sector is a renewed focus on cross trainers. In May, Under Armour Inc., a Baltimore-based niche footwear and athletic apparel retailer which is growing quickly, launched its New Prototype cross-trainer. The shoe competes with Nike Inc.'s Sparq cross-training line.
Marshal Cohen, chief retail analyst at NPD Group, said that different categories in the athletic sector _ such as basketball and running categories _ become popular at different times.
"This is the year cross-trainers really step back into vogue," Cohen predicted. "Under Armour kicked it into gear and the competition will follow suit."
One new popular product will likely not turn the sector around, however, Cohen said, amid a difficult retail environment.
Consumers are cutting back discretionary spending amid rising food and gas prices, declining home values and tightening credit.
"Because of the economic downturn I don't really see the market coming to life because of this one particular product," Cohen said. "There are more challenges than benefits facing the athletic footwear category."
Analysts say the athletic footwear sector could get a boost from tax rebate checks during the back-to-school season, but the effect is likely to be modest at best.
"It could have a small impact," said Morningstar analyst Brady Lemos. "Many people are saying the check is intended for things like gas and food rather than discretionary things like $150 basketball shoes, but some people will probably use it for that."
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