Wolverine
Let’s get back to looking at stocks.
Maybe we should look at something exciting like NVIDIA, or Palo Alto Networks, or maybe the wholesaler of Hush Puppies, Wolverine World Wide - WWW - $16.
Why in the world should any rational human being start analyzing WWW?
Last week I looked at an interesting small conglomerate called TriMas - TRS. I noticed a large holder of TRS that I was not familiar with called Champlain Partners. That led me to Champlain’s small cap fund CIPNX. This is by no means a value fund. They own lots of software and medical technology stocks I could never understand, but they also own some sleepy stocks like TRS, John Wiley - JWN, John Bean - JBT, Lancaster Colony - LANC, and WWW.
When smart growth stock guys own a stock like WWW I get very excited. Yes, I lead a boring life, but that is what value investors do.
WWW is kind of a slow motion restructuring story. They own some above average brands that are doing well like Merrell, and Saucony, and some legacy brands that are doing poorly like Hush Puppies and Keds. WWW just did a quick sales of the Keds brand, and the balance sheets is better. The stocks was over $40, and is now just $16, and 10x earnings.
WWW has new guidance for 2023 of $1.40 to $1.60, and is hinting that 2024 could be much better. Selling at 10-11x with a decent turnaround in progress, the stock is kind ot interesting. EV/sales is still 95%, so let’s not get too excited.
Before we go any further, let’s consider the other shoe stocks, and maybe some apparel.
I certainly prefer WWW to Nike at a wild 30-40x earnings depending on how much China comes back. In 1994, Phil Knight broke a lamp in his office when our analyst would not remove our sell recommendation. Phil’s stock is up about 2000% since then, so Phil gets the last laugh.
I am not that interested in Deckers - DECK, or Skechers SKX at 15-20x. SKX was a great value story years ago, and is now a growth stock.
adidas AG - ADDYY - $72 (off a high of $180, pre-Covid earnings of $13.00) is certainly I stock I will have to get back to when I look at international stocks. There is an interesting SA story saying a new CEO has already “kitchen sinked” 2023. This could be very interesting, but I do not really know the history. Right now I will call this too complicated, but I want to learn more.
The real puzzler is Crocs - CROX. They were a huge pandemic beneficiary, but they also seem to have made a great acquisition of a brand called Hey Dude in early 2022. Even though the stocks is only 11x, I cannot chase it here. The question here is, how did I miss this a few years ago?
I had never looked at Rocky Brands - RCKY - $28 until yesterday, but I like what I see. The market cap is only $200 million, but the company is doing smart things. New management took over in 2017, and is making progress in hiking and work boots. If I did not fear that 2022 had some benefit from pandemic “pent-up demand”, then RCKY would be strong consideration for the model portfolio. The stock is only 75% EV/sales. This is a clear case of WWW leading me to RCKY.
Another shoe stock worthy of consideration is Steven Madden - SHOO - $35. There is a very good SA report on their unique business strategy. Lots of stuff on SA is poor work, but there some gems, and this is one. I cannot get real excited at 14x, but maybe a 12x I could get very interested. SHOO is a wholesaler to the big department stores that has done a masterful job of managing its supply chain. I hope I get a chance to own this stock some day.
Allbirds - BIRD - $2.7 is a busted 2021 IPO selling at only 77% of sales. I guess the brand concept is tied is some mysterious way to “sustainability”. I want to learn more, but I will pass for now.
We could stop here, but let’s look at the obvious shoe retailer Foot Locker - FL. There is plenty of hype in this name because new management has come in from outside the footwear industry. While this sounds exciting, I want to wait for their first mistake. FL reports in late March, let’s watch.
I also glanced at Designer Brands (DBI) - $10, and I am very intrigued. These are the guys that bought Keds from WWW. They are retailer that lost the right to sell Nike, and instead started buying their own brands. This is either desperation, or genius. The stock is near it’s low, and the balance sheet needs further investigation. There is also a search for a new CEO. There are lots of moving parts here, but it could be a big stock.
DBI lead me to Caleres - CAL - $25. In the olden days this was called Brown Shoe, a value stock from the 1980’s and 90’s. I thought Brown had been a bankruptcy, but it was just a name change. The stock sells for only 6x, so when I dig into DBI, I will have to peak at CAL too.
In a 20 stock portfolio I will probably not own a footwear stock and an apparel stock, so I want to did even deeper. Oxford Industries - OXM $25 - is a stock that has been haunting me for a few months. There is strong recommendation by another Substack author, I think it was from Yet Another Value Blog, but I cannot find it right now. My organization needs to get better. OXM only sells at 11x and is doing a great job with Tommy Bahama. I can’t chase OXM at a new high, but I hope for a miss in late March.
I have glanced through Koontor - KTB (a spin of Lee from VF Corp.), Levi’s - LEVI, Tapestry - TPR, Ralph Lauren - RL, Capri - CPRI (Michael Kors), Gildan - GIL, Columbia - COLM, PVH - PVH (Hilfiger and Klein), and Under Armour - UAA, but OXM was my favorite.
Of course VF Cor. - VFC needs more work after their dividend cut, and Hanesbrand - HBI was written about earlier.
Maybe the simplest way to play the whole bunch is to wait for Macy’s - M - $21 to report this Thursday. Maybe M has already warned so much, that there will be little bad news left. I am hoping for weak 2023 guidance. And Nordstrom - JWN, is certainly another possibility.
Cramer says we have the greatest apparel glut of all time happening right now. I want to own something to take advantage of the despair. The more I look, the more confused I get.
I wish I could draw you a straight line to the right answer, but the honest answer is I have too many choices. Right now let’s hope for a bad Macy’s report, and see what shakes out. I want to own something from this group.
Confusion is a constant emotion for an analyst that takes the time to consider multiple ideas. I wish I had a miracle cure, but I have never found one.
Having too many ideas is much better than having too few. Learn to live with confusion.