Wedbush: Nike's Increased Mid-Market Focus Bodes Well For Shoe Carnival, Famous Footwear

Nike Inc NKE’s planned innovative product pipeline across the mid-market warrants a further look at Caleras Inc CAL and Shoe Carnival, Inc. SCVL, according to Wedbush.

The Analyst

Wedbush analyst Christopher Svezia maintains the following ratings: 

• Outperform on Caleres with a $36 price target.
• Outperform on Nike with a $96 price target.
• Outperform on Shoe Carnival with a $47 price target.

The Thesis

On Nike’s third-quarter earnings call, CEO Mark Parker said the company sees an opportunity to improve the price-to-value ratio of its core offerings of shoes under $100.

“Specifically, for next fiscal year, we’ve fast-tracked new collections under the $100 price point and we’re aligning the merchandising and marketing teams to support them throughout the marketplace,” Parker said.

Nike’s increased focus on the mid-tier channel bodes well for discount retailers Shoe Carnival and Caleres’ Famous Footwear, Svezia said in a Wednesday note. 

“Given Nike represented an estimated 20 percent and 27 percent of 2018 sales at Famous Footwear and Shoe Carnival, respectively, and our view on the companies' likely buys for the brand, Nike alone should provide comp support of 140 bps and 175 bps each for these retailers, all else being equal,” the analyst said. 

While much of the focus in footwear is on exclusive releases at higher price points, mid-market footwear dominated the top 10 shoes list last year, with the perennial mid-tier bestseller Nike Tanjun topping the list once again.

Doubling down in this segment puts even more pressure on the competition, Svezia said. 

"Nike's push into this segment may not only drive upside to its 2020, but it also represents a strategic offense against its competitors, including ADIDAS AG/S ADR ADDYY and Under Armour Inc UAA,” the analyst said.

The factors above likely support above-consensus comps in 2019 for Caleres and Shoe Carnival, and Nike should experience continued comp strength in 2020 on the basis of its product pipeline, according to Wedbush. 

Price Action

Nike shares were up 0.12 percent at $84.47 at the close Wednesday. Shoe Carnival shares were down 3.21 percent at $31.37, while Caleres was up 1.32 percent at $25.25. 

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Photo by M.O. Stevens/Wikimedia.