Footwear Stocks Poised for Strong Q2: BofA Analyst Sees Attractive Upside for Crocs and Skechers

BofA Securities analyst Christopher Nardone has previewed the expected performance of footwear companies in the upcoming earning season.

According to the analyst, footwear stocks like Crocs Inc CROX, Deckers Outdoor Corp DECK and Skechers U.S.A., Inc SKX have pulled back 11% off recent highs on average as a combination of tariff and freight related risks, and recent volatility in the higher multiple athletic sector are weighing on the group.

The analyst expects calendar second-quarter sales trends to remain strong and model revenues either beating or hitting the upper end of guidance for each company, with strength driven by international.

For the analyst, the risk/reward for CROX remains attractive with the stock trading just above 10x F25E P/E. 

The analyst forecasts second-quarter EPS of $3.57, at the upper end of the company’s $3.40-$3.55 outlook and note CROX has a strong track record of beating EPS guidance.

The analyst recently upgraded SKX to Buy on the basis that the wholesale environment is improving, broader footwear trends remain solid and implied 2H sales guidance could prove conservative.

The stock looks attractive at 14x P/E in a relatively growth anemic consumer discretionary sector and given double digit growers tend to trade at much higher multiples, noted the analyst.

The analyst expects DECK to report a strong fiscal first quarter based on better sales and a better-than-expected gross margin.

Beyond the first quarter, the analyst sees much more difficult comparisons for UGG, and the continued competitive dynamic in specialty run will temper the magnitude of beats needed to drive the multiple higher.

The analyst estimates DECK has much lower China sourcing exposure (<10%) compared to SKX (40% est) and CROX (30% est). 

Within the group, the analyst prefers Buy-rated CROX (trading at 10x F25E P/E) and SKX (14x F25E P/E) and see a more balanced risk/reward for DECK (26x F26E P/E).

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