Finance, Sneakers, Size 6.5
JD Sports, Target, Amer Sports, On, Wolverine, Puma, UA and VF Corp. NoteL This is a very wonky edition, if you don't care about finance you should skip this one.
August is a big month for earnings, so this post is entirely devoted to results. Rather than get too into the weeds on earnings details and stock movement, I decided to post each company’s year-to-date chart, so you can see for yourself what investors think of each name.
There’s another tranche of earnings coming next week—Foot Locker and Birkenstock are big ones—and quite frankly I’d like to get this published before then because these types of notes take forever to organize!
Company earnings are listed according to when they reported, so JD Sports reported the most recently and so on down the line.
Enable 3rd party cookies or use another browser
p.s. If you’re not clear on what the title of this missive is referencing, it’s a song titled “Finance, Trust Fund, Six-Five” (above) by TikTok content creator Megan Boni (whose handle is @girl_on_couch) that went viral in the spring. Boni created the video in response to single women she viewed as having an excessively long list of requirements for their ideal mate.
Now at 58M views, the 10-endlessly-remixed econd song lead to a deal with Capitol/Polydor/Virgin Germany that paid the New York-based Boni enough money to quit her job.
JD Sports
U.K.-based JD Sport’s Q225 like-for-like growth (meaning growth at the same stores and online stores as last year) was up 2.2%, sales were up 5.7% in North America and up 3% in Europe, while the United Kingdom improved materially quarter over quarter.
JD’s CEO Régis Schultz said he wouldn’t comment on individual brand trends but when he was asked about Nike, he responded, “Nike will be fine. They are doing the right things They are moving in the right direction. It’s just the time to get that [product] in the market, and we believe they’re on the right path.”
Schultz provided his views on athletic footwear trends in Europe where he said the consumer was “a little bit behind” compared to the United States. “Per capita in U.S. is double the one in Europe, the U.K. is in between,” he explained. “And we see this consumer catching up especially in South of Europe. We see a huge appetite and a huge move to sneaker and to athletic leisure, and I think we think we benefit from that. We see big growth coming from south of Europe.”
Commenting on promotional levels, Schultz said, “We are planning on the same level of promotions as last year. We’ll see what happens.”
Target
Same-store sales during Q224 at Target were up 2%, better than expectations. Traffic was up 3% yy with the company describing “all six core merchandising categories delivering traffic growth.”
In what will likely be a leading retail trend this year, the big box chain said it benefited from cutting back prices on key items, including bread, soda, paper towels and pet food. The chain also launched a private label basics line. Called Dealworthy, the line includes 400 items including iPhone chargers and toiletries priced below $10.
Crowing about the success of beauty and Blake Lively’s Blake Brown haircare line launch, chief commercial officer Rick Gomez on the earnings call explained, “When we offer on-trend, stylish product at a great price, the customer responds.”
Within the sporting goods category, the company also highlighted an effort with Authentic Brands Group with licensee Prince to create a pickleball collection.
Note: Target doesn’t really fit in with all the other names here, but I started thinking I would cover all the big economic indicator names like Walmart and TJ Maxx, but realized right away that was too ambitious.
Amer Sports
Just to catch everyone up before looking at earnings, Amer Sports is a portfolio of brands led by Arc’teryx and Salomon, along with Wilson plus half a dozen niche performance brands. Formerly listed on NASDAQ Helsinki, the company went public on the New York Stock Exchange earlier this year and is owned by a consortium consisting of Chinese sports equipment company Anta Sports, Chinese investment firm FountainVest Partners, loud mouth weirdo and ex-Lululemon founder Chip Wilson-led Anamered Investments and Tencent, a technology conglomerate and the world's largest video game vendor.
The company reported Q2 revenue of $993.8M, up 16%, which was better than expected by the investment community. CEO James Zheng highlighted Arc’teryx as the company’s highest-margin franchise. He also bragged about Arc’teryx and Salomon’s performance in China, stating, “While other consumer companies are having challenges in Greater China, we generated more than 50% growth there as we continue to well outperform the market,” noting that the brand is benefiting from a strong outdoor trend in the region.
Something I’m side-eyeing is that the group is lead by direct-to-consumer sales, driven mainly by Arc’teryx, which grew 40% yy. That would be fine except wholesale revenue grew a measly 2% yy. By region, China grew 54%, Asia Pacific was up 45%, but whoops EMEA was only up 1% and Americas “returned to slight growth” with sales up 1%.
Arc’teryx’s direct-to-consumer growth was fueled by the company opening 17 new stores during 1H24 with total locations now standing at 125 doors. Key locations opened during Q2 included one store in Toronto, two in Paris, three in China and one in Los Angeles. The brand also just opened a store in Manhattan’s SoHo neighborhood.
Meanwhile, Amer Sports has opened 27 Salomon stores in Q2, bringing the total count to 136. By the end of 2024, the brand is planning 200 owned and licensed Salomon stores in China with plans to open “several hundred” locations in tier 1 and 2 cities.
On Holding
On Holding’s Q224 revenues of CHF567.7M were better than expected and the company reiterated full year revenue growth of at least 30%. Footwear during the quarter grew 27%, driven by Cloudmonster, Cloudsurfer, and Cloudrunner. Company co-CEO Martin Hoffmann also described The Roger tennis division as “our fastest growing franchise.”
The company hit a warehouse-related bump in the road that mainly impacted direct sales in the United States. According to Hoffman, “We are building a fully automated warehouse in our Atlanta facility. And so as a result, we are temporarily operating out of a space that is simply not optimized. And so as a result, we experience capacity constraints in that warehouse. And this then leads into basicallyunreliable late deliveries, but also inventory shortages. We are able to shift some of that capacity to our very well performing warehouse on the West Coast, but only to the extent that we have inventory there.”
On is in the midst of expanding its own doors worldwide and over the past year, its doorcount grew to 12 stores outside of China and 25 stores in China.
Wolverine World Wide
Wolverine World Wide reported Q224 revenue and earnings that were not by any means stellar, and yet they still outpaced Wall Street estimates. Total revenue was down 18% yy with Merrell down 18% and Saucony down 28%.
While Saucony has benefited from the rise of performance and lifestyle run trends (shout out to the great work designer John “Jae Tips” Cotton is doing!) CEO Christopher Hufnagel said the company approach will be thoughtful. “We're not just going to jam sell in. We're going to focus on sell-through and we're going to have some level of selectivity on how fast we want to grow. We ultimately want to pivot to be able to drive long-term sustainable growth and returns for the shareholders and not just obsess about immediate sell-in to the detriment of how we manage our brands. So we will chase responsibly. We will open responsibly.”
While WWW’s numbers look challenged, in fairness the company for the past year has been in transition mode, which included shedding Sperry (sold to Authentic Brands Group) and Keds (sold to Designer Brands). Changes to approach have been spearheaded by Hufnagel, who took over the role in August 2023. Hufnagel has been with WWW for over nine years and before that he was vice president of retail at Under Armour.
Puma
Puma has the honor of having the worst performing chart of any company listed here. Q224 revenue of 2.21 euros, up 2.1%, just barely missed expectations, but the company took down guidance, which Wall Street viewed as the opposite of mindful.
Looking ahead the company noted it’s locked and loaded to address the low-profile shoe trend with its Speedcat silhouette. “Going into H2[24], we will shift the focus to igniting [the low-profile shoe trend] and have significantly higher quantities coming into the market, before we go at the end of the year into the maximising of the franchise,” said CEO Arne Freundt. “The lead model for us will be the Speedcat, which takes inspiration from our racing silhouette shoes. In the drops which we have just recently brought to market, they were significantly above our expectations.”
When asked why the brand didn’t perform better given the popularity of the Speedcat, Freundt basically said it’s early days. “We said that we are now in phase two, which is igniting to make sure we continue to fuel the excitement around the shoes with some exciting newness and some exciting ambassadors, but also more units in the market for the end of this year, starting end of November,” he explained. “We will then open up in terms of distribution to our normal sport style accounts around Footlocker, JD Sports, and also Snipes, just to name three examples.”
Providing a breakdown of total Speedcat pairs in the market place, Freundt said to expect a six-digit number of pairs in 2024, ramping up to a seven-digit number in 2025.
Adidas CEO Bjørn Gulden ended his tenure as CEO of Puma in late 2022 when he was replaced by Freundt. Are Puma’s current woes the result of leadership changes? Probably a little bit of that plus a whole bunch of other ongoing company culture issues that have been plagueing the brand for quite some time and aren’t easily fixed.
Under Armour
Under Armour reported Q125 revenues $1.18B, down 10% yy. Under Armour direct will be down around 10% while wholesale will be down “in that 10% to 12% range.” Numbers were better than expected, and as you can see from the chart above, the results provided the company with a very nice pop.
Stock reaction somewhat tied to the return of 52-year-old founder Kevin Plank as CEO back in March though granted there are some who like him back at the helm and others who thinks he needs to give it a rest. I will say this, earnings call are always eminently more entertaining with Plank, who treats every call like a pep rally. (For example, describing UA as one of five “brands that could be represented on this podium for sports globally.”)
On the call, Plank spoke about bringing on “30-year-veteren” Eric Liedtke, as Under Armour's executive vice president of brand strategy. Noting his 26 years at Adidas, Plank added, “Eric will oversee our brand marketing, corporate strategy, consumer insights, sports marketing, creative, and loyalty functions. In addition, Eric will be tasked with building out our marketing organization, including its go-forward leadership, that will report to him.”
During the call, Plank mentioned three actions that I thought were interesting:
25% SKU reduction, alongside a headcount reduction, which is completed
Increasing investment in media influencers, which includes signing University of Miami women's college basketball players and twins, Haley and Hanna Cavinder, to a multi-year partnership.
An uptick of sport lifestyle offerings landing in fall 2024 for “for the 16-to 24-year-old varsity team sport athlete.” (This one isn’t new, and an excessive focus on positioning the brand as performance only is part of why CEO Patrick Fisk was shown the door two years ago.)
In additional to highlighting “A+ talent” Liedtke, Plank highlighted some recent hires (links go to UA press releases), including sportswear brand and product creator Yassine Saidi, chief supply chain officer and 30-year Gap vet Shawn Curran, chief design officer John Varvatos, senior vice president sportswear and run basketball/Curry and collaborations and ex-Nike exec Yuron White, along with a few veterans: head of global apparel Dan Kerarus, senior vice president of innovation Kyle Blakely and vice president of product merchandising Jeanette Robertson.
VF Corp.
Praise the shoe gods—it finally happened, after years of tumbling down a seemingly endless hill, VF Corp. Q224 numbers were still plenty negative but not as negative as Wall Street thought they would be.
Following the call, CEO Bracken Darrell had a chat WWD about his rescue efforts. Since arriving at the company just over a year ago, the CEO has made changes in eight of his 11 direct reports, which include bringing on former Lululemon star Sun Choe as Vans global brand president and Caroline Brown, formerly CEO of Donna Karan, to head up The North Face.
Commenting on rumors the company might unload additional brands following its sale of Supreme, Darrell said, “I’m not in any rush to do it, nor do I see a burning piece of timber here that we need to quickly get out of here. We’ve got a lot of great brands here. I mean a lot of great jewels that are really a little tarnished that can be dusted off the ground.”