A Stroll Through Shoe Retailers

 | Aug 25, 2012 | 12:30 PM EDT
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While a number of clothing retailers continue to perform well, shoe retailers are a standout subsector of apparel.

Brown Show (BWS), for instance, is working on its third month in a row of upside trade, and is perched at its best levels since March of last year. The St. Louis company's brand portfolio includes Famous Footwear, Naturalizer, Avia and Via Spaga, among others. It's slated to report its second quarter Tuesday before the open. Analysts expect it to kick out income of $0.03 per share on revenue of $603.31 million.

In the earnings column, that would represent a step up from the year-ago quarter, in which the company saw a loss of $0.06 per share. However, the expected revenue figure would mark a decline from a year earlier.

This is a small company, with market capitalization of just $636 million. It trades about 473,000 shares per day, on average. As you often see in small stocks like this, Brown has a high beta, 1.74. In recent months, upside risk has superseded downside -- but, with small cap names, it's always a good idea to be vigilant about pullbacks below key moving averages. Small stocks cycle in and out of leadership at faster rates than large caps do, so an extra level of vigilance is always a good idea.

Wall Street expects earnings of $0.88 per share in fiscal 2013, a year-over-year increase of 24%. 2014 earnings are seen growing by another 34% in 2014, to $1.18 per share.

So is this stock buyable at the moment? I see it as too extended in its recent run-up. The stock could use a pullback, if not to the 50-day moving average, then at least to the shorter-term 15-day exponential line. That kind of action can flush out weak holders and set up the stock for further gains.

Another shoe retailer that's been stomping all over its 50-day average is Foot Locker (FL). Most shoppers today probably wouldn't give it a thought, but the athletic shoe chain is a direct descendant of the old Woolworth's five-and-dime company.

This is a mid-cap that trades 2 million shares a day. The company reported its second quarter earlier this month, beating sales and earnings views. Analysts and institutional investors also liked the company's improved inventory management, and the stock leapt to a new high, but it quickly reversed lower.

It gradually drifted lower, and closed Friday at $34.02, below its five-day exponential line. It's currently not a good buy candidate, as the price performance needs to get a running start to the upside. I don't buy stocks as they are trending lower, so Foot Locker remains in the "watch" category for the moment.

The fundamental situation is one of a turnaround. In 2010, Foot Locker showed a year-over-year earnings decline. That's generally not a hallmark of a price leader.

Growth resumed in fiscal 2011 and 2012, and the pace is expected to be strong in the next two years. In fiscal 2013, Foot Locker is expected to grow earnings by 34%, and another 11% in 2014.

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