Spending Time With Some Of The Top Names In Shoes

Jeff Van Sinderen of B. Riley recently met with management teams from Cherokee, Steve Madden, Stage Strores and Zumiez to discuss key issues facing the companies moving forward.

has already informed Cherokee it will no longer carry its brand as of 2017 as part of the retailer's strategy to "regain its cheap chic" destination image. According to Van Sinderen, Cherokee has already been approached by potential licensees and it is reasonable to assume that other companies would like to do business with Cherokee as its brand perception goes "well beyond" Target. Shares remain Buy rated with an unchanged $27 price target.

Van Sinderen stated that he likes the "increasingly diverse" portfolio of brands while recognizing that the company is heading in the right direction over the longer-term while staying relevant in the immediate term. Van Sinderen noted that Steve Madden remains one of the few companies in the apparel/footwear sector with an "improving" business trajectory. Specifically, the company's upcoming third quarter print is likely to only be "a couple of pennies" higher than it was a year ago, but the fourth quarter "should inflect on most key metrics" while growth in the first half of 2016 should "accelerate further." Shares remain Buy rated with an unchanged $48 price target.

Van Sinderen noted that Stage Store's management told him that back-to-school sales was "just OK" but the company is working on initiatives to improve its fourth quarter performance, including more remodels, cosmetic counters and better overall merchandise content. However, Van Sinderen pointed out that Stage Stores will face tough comparisons as the oil-patch headwinds could likely persist for some time and get worse before getting better. At the same time, the company lags e-commerce penetration and a ramp to an acceptable level will take time. Van Sinderen concluded that while management is making an effort to improve what is under their control, near-term fundamentals are likely to remain challenging. Shares remain Neutral rated with an unchanged $14 price target.

Finally, Van Sinderen pointed out that Zumiez's domestic sales has its challenges but management is "giving a lot of attention" to testing new content to turn around the business. The analyst noted that a year ago the company benefited from a "case of fashion mania" that may have pulled non-core customers into Zumiez. Nevertheless, Zumiez is a "differentiated concept" with strong management. However, the analyst argued that it is likely the business could "deteriorate further before it recovers" given structural changes that plague other teen retailers. Finally, the analyst pointed out that the underlying business has the potential to improve with better merchandise content, but investors should wait for drivers to emerge before becoming constructive on the stock. Shares remain Neutral rated with an unchanged $19 price target.