• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing
  3. / Consumer Discretionary

High-Step Into Footwear

Adding these footwear makers to your holiday shopping list will put a spring in your step.
By JOHN REESE
Nov 18, 2011 | 11:30 AM EST
Stocks quotes in this article: DECK, SHOO, SKX

The holidays are upon us, so it is natural to think of shopping -- which means paying attention to retailers. And the outlook for retailers is promising.

The U.S. Commerce Department just released a report that said retail sales rose 0.5% from the previous month, the fifth consecutive monthly increase. Excluding strong auto sales, retail sales jumped 0.6%, and if you deduct gasoline sales too, the increase was even better at 0.7%.

The National Retail Federation says sales for the holiday season should increase 2.8% over 2010. That's lower than the 5.2% increase last year (which came off a weak 2009 retail environment), but still a bit higher than the average holiday sales increase of 2.6% over the past decade.

With consumers seemingly poised to open their wallets, I found one not-so-obvious industry that could benefit: footwear. In fact, footwear makers should do well beyond the current holiday season, which is one reason you should pay attention to them. Another reason is my guru strategies (based on how great Wall Street investors like to invest) give three footwear makers very strong endorsements.

First up is Deckers Outdoor (DECK), a high-stepping seller of athletic and high-end casual shoes under such brand names as Teva, Mozo and Tsubo, among others. But its best-selling brand is Ugg, the unisex sheepskin boots popular with celebrities. Today, Deckers' annual revenue exceeds $1 billion and its market cap is about $4 billion.

Deckers is a snug fit with a strategy based on the writings of Peter Lynch. In particular, Deckers price-to-earnings-growth ratio is a strong 0.62. The PEG is a measure of how much the investor is paying for growth, and combines PE ratio with the company's growth rate. The maximum PEG allowed is 1.0. Deckers' PE is 24.91, based on its three-, four- and five-year historical EPS growth rates and the company's growth is powering along at a 40.5% clip. Another plus for Deckers is its debt level, which is quite low.

Benjamin Graham, Warren Buffett's mentor, is considered the godfather of investment strategists, and the strategy I created from Graham's writings is kicking up its heels over Skechers (SKX). The company markets both "lifestyle footwear," which include casual shoes and fitness footwear, such as running shoes.

The Graham strategy likes Skechers' sizable sales of $1.8 billion, plentiful liquidity with a current ratio of 3.66:1 (nearly double the strategy's minimum of 2.0:1), very small debt load and moderate PE of 7.2. The strategy also multiplies the company's price-to-book ratio by the PE and places a maximum on this of 22. Skechers' PB is 0.68 and its PE is 7.2, providing a low 4.9 result.

Steven Madden (SHOO) sells shoes under the Steven Madden, David Aaron and Steven's brands. Madden himself is a well-known shoe designer who, in the early 1990s, introduced a women's shoe with a thick, chunky heel that became a bestseller. Revenue now run in excess of $600 million and the company's market cap is $1.4 billion. Like Deckers, Steven Madden gets the nod from my Lynch strategy. The company's PEG is a desirable 0.58, while debt is very, very low.

All these footwear companies are doing well and are well positioned in coming quarters for any uptick in consumer demand. If you want to step up your investing and get a foot in the door of a solid industry, any of these companies should be a great fit.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Reese and his clients were long SKX and DECK, although positions may change at any time.

TAGS: Investing | U.S. Equity | Consumer Discretionary

More from Consumer Discretionary

There's No Clear Sailing Ahead for Carnival: Here's How to Play It

Stephen Guilfoyle
Jun 24, 2022 11:32 AM EDT

CCL did lose a lot of money, much more than anticipated, but there are positives.

Bearish Bets: 3 Well-Known Stocks You Should Consider Shorting This Week

Bob Lang
Jun 19, 2022 10:30 AM EDT

These recently downgraded names are displaying both quantitative and technical deterioration.

Beyond Meat Gives Investors Something to Chew On

Bruce Kamich
Jun 15, 2022 1:50 PM EDT

This veggie name is rallying sharply after a summer promotion announcement, but here's my beef with the charts.

Tapestry's 50% Correction Makes the Stock More Stylish

Bruce Kamich
Jun 15, 2022 10:16 AM EDT

Let's check the charts of TPR.

Will Apple Prove to Be Hardy Stock or Just Low-Hanging Fruit?

Bruce Kamich
Jun 13, 2022 12:29 PM EDT

A look at shares of the market and tech bellwether as the broader averages comes are under selling pressure.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 12:04 AM EDT PAUL PRICE

    Two Good Signs -- Especially for Small-Cap Investors

  • 12:10 AM EDT PAUL PRICE

    More Insider Buying in American Woodmark (AMWD)

    American Woodmark , which I've discussed here fr...
  • 08:55 AM EDT JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    The 10 personality traits of successful traders an...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2022 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login