3 Big Takeaways From a Packed Earnings Week in Footwear & Fashion — From More North American Worries to New Restructuring Efforts

It was a mixed bag for many companies this week as earnings season kicks into full swing.

Adidas, Allbirds, Steve Madden, Wolverine Worldwide, Under Armour, Tapestry, Capri Holdings, Tod’s and Ralph Lauren all reported earnings results this week. In some cases, these companies posted a positive outlook on the year, but most are dealing with several headwinds and internal challenges as the state of where the U.S. economy is heading remains top of mind.

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As we look back on the week, here are top three takeaways from the most recent round of earnings reports.

More Trouble in North America

Under Armour, Adidas and Tapestry were among the companies this week reporting softening demand in the U.S. and North America as the market continues to cause anxiety.

For Adidas, the German sports brand said this week that the North American region was “problematic” in the third quarter, with sales there falling 8.8 percent to 1.48 billion euros.

Adidas said it’s dealing with higher inventory levels, and therefore increased discounting, in North America and is trying to reduce the level of goods it has there, the company explained. There was also consecutive improvement here: in the second quarter, sales in North America had fallen 16 percent.

As for Under Armour, president and CEO Stephanie Linnartz said on a conference call with analysts on Wednesday morning that driving U.S. sales is a priority for the company going forward. In fact, the company’s poor performance in the region led to Under Armour to revise its full year outlook – citing “several pressures” impacting its North American business like continued inflation, mixed consumer confidence and the effects of wholesale channel destocking having led to softness in future orders.

Capri Holdings is also feeling the sting from American consumers. The company took a big hit in the second quarter as softening consumer demand and a hitch with a new e-commerce system hurt sales ahead of the company’s planned takeover by Tapestry Inc. next year.

Every owned brand at Capri saw a dip in sales, each citing softening consumer demand in North America. Revenue in the Americas at Capri’s Versace label saw a 20 percent decline in the quarter, Jimmy Choo saw revenue drop 11.6 percent in the region — and Michael Kors declined 13.5 percent.

Wholesale Confusion

Under Armour, which once pulled back its wholesale distribution, is now revisiting the channel as it looks to grow its business.

CEO Stephanie Linnartz, who took over the helm of the company in February, said that the expected downturn in the second half is being driven by continued “pressures in our wholesale business,” due in part to inflation and lower consumer confidence, which have led to promotions and an “overall softness in our future wholesale order book.” In the third quarter, Under Armour’s wholesale revenue decreased 1 percent to $840 million.

To counteract these challenges, Linnartz said, the company is leaning into a more premium wholesale distribution strategy. As reported, Under Armour had made plans to exit 2,000 to 3,000 doors in North America to focus on more productive partnerships such as those with Dick’s Sporting Goods and Macy’s.

Steve Madden also reported declines in its wholesale channel. In the third quarter, the company said wholesale revenue declined 0.3 percent to $433.5 million. Wholesale footwear revenue decreased 7.5 percent, while accessories and apparel revenue in the segment increased 22.7 percent.

On a call with analysts this week, Steve Madden chairman and CEO Edward Rosenfeld said that strengthening the company’s core U.S. wholesale footwear business is a key priority.

“This business has been under significant pressure this year as our wholesale customers pulled back on orders across the board as they prioritize inventory control,” Rosenfeld said. “But while we are still not all the way back to where we’d like to be, we saw a significant improvement in the third quarter. U.S. wholesale footwear revenue decreased 6 percent in the quarter, and we expect to see sequential improvement again in the fourth quarter.”

The Era of Transformation Plans

Amid the economic uncertainty the industry is facing, several companies are forging ahead with transformation plans.

At Wolverine Worldwide on Thursday, the Rockford, Mich.-based footwear company revealed a new round of layoffs as it looks to streamline the company. While Wolverine did not disclosed the number of employees affected by this move, the company said in a press release that these reductions are part of a group of initiatives that are expected to deliver $215 million in annualized savings.

At the same time, newly appointed president and CEO Chris Hufnagel said the company would continue to pursue the sale of other non-core assets in the fourth quarter. This follows the company’s recent sale of Keds as well as the Hush Puppies intellectual property in China, Hong Kong, and Macau, and the sale of its North American Wolverine Leathers business to New Balance.

At Allbirds, which is in the middle of executing its own transformation plan, co-founder and CEO Joey Zwillinger said the company’s third quarter results represented progress with a new strategy meant to jumpstart growth and improve capital efficiency and profitability.

After some product missteps in 2022, Allbirds’ transformation plan has largely hinged on doubling down on core products, like the Wool Runner, and shifting away from newer styles that have not resonated as strongly with consumers. This strategy most recently came to life with the launch of the Wool Runner 2 earlier this month.

“When we enter 2024, we’ll have that recalibrated product assortment, less discounted product driving higher full price sell through and we’ll put marketing in a more prominent position to then enjoy the benefits of all the cost reduction that we did in 2023,” Zwillinger said.

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