Footwear Sector Could Be Headed For Ugly Back-To-School Season

Back-to-school season could be an ugly one, according to an industry expert.

Many smaller activewear brands like Reebok, Fila and Puma have been performing, but for the industry to do well as a whole, NPD Group's Matt Powell said big brands need to be showing growth.

“We are going into the season without any real hot item. The small brands are doing well, but it is not enough to offset the overall declines. In the second quarter, Nike brand sales were up but Jordan and Converse were down,” Powell told Benzinga.

In addition to the absence of a must-have item in the market, the rhetoric of the industry continues to be one of forcing performance products down consumers throats when it has continually been demonstrated that sportswear is what they continue to favor, Powell said.

"We are now in our fourth year of not having a single performance item trend positively, yet the brands seem to think the consumer wants performance."

'The Culmination of The Athleisure Trend'

Why do brands keep putting out performance products when they're simply not in fashion?

Performance is the heritage of major brands Under Armour Inc UAA and Nike Inc NKE, and the companies are trying to force a comeback for the products, Powell said.

“I don’t think the story is going to change. This is the culmination of the athleisure trend: consumers want to dress in athletic-like product, but they don’t intend to use it for high-level performance attributes. We are dressing casually athletic, so why do we want to spend that kind of money for performance products that aren’t being used for their intended purpose?”

Converse Goes Stale, Vans On Fire

Converse’s Chuck Taylor is arguably the most popular shoe of all time, a style that has worked in every decade and a shoe that continually cracks the top 10 best-selling shoes list. The brand is beginning to lose some steam, however, after sales were down in the mid-teens in the second quarter. As Powell puts it, there's nothing fresh coming from Converse.

VF Corp VFC continues to be red-hot, with sales up over 50 percent in the second quarter due to slight tweaks and constant refreshing of their retro-style products. The company injected some creativity into its refresh of current styles, partnering with the Vincent Van Gogh Museum in an innovative collaboration.

“Vans have updated their assortments; the shoes that are selling today are not the shoes selling a year ago. They have kept it fresh while Converse keeps it with basically the same shoes.”

Brands Over Retailers: The Right Investment Strategy?

An Aug. 2 Morgan Stanley report indicated the bank was favoring brands over retailers, due to brands' increased emphasis on direct-to-consumer sales at the expense of retail stores. Morgan Stanley said it was favoring Nike over Foot Locker, Inc. FL.

“We also prefer to own the brands that drive innovation in the category and are experiencing a sales and margin lift from DTC growth vs. those who simply curate other people’s goods," analyst Lauren Cassel said in the note.

In Powell's view, this view is shortsighted, as he said Foot Locker remains a viable outlet for brands like Nike.

“I think that statement overlooks that Foot Locker has a very robust online business themselves," he said.

"There is no question the consumer is gravitating toward e-commerce, but Foot Locker is a formidable competitor. I don’t believe that all consumers are going to shop in mono-branded stores. There will always been a need for multibrand stores out there and Foot Locker is one of the best."

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Photo courtesy of Vans.