In the first quarter of 2022, shoemakers' stock prices fell sharply, following the decline in global stock markets. However, the Indian and Brazilian companies monitored quarterly by ShoeIntelligence had very positive performances.
he opening three months of 2022 represented the worst quarter for global equity markets since the first quarter of 2020 when the Covid-19 pandemic started spreading worldwide, leading to travel restrictions and lockdowns and prompting stock markets to collapse in March.
According to a note released by Deutsche Bank, the first quarter was “a dramatic time in financial markets” due to Russia’s invasion of Ukraine, accelerating inflation, the start of another hiking cycle from the U.S. Federal Reserve and the inversion of the two-year and ten-year yield curves of U.S. treasury notes. In a normally-priced market, long-term government bonds have higher yields than shorter-dated notes to compensate for the risk of holding longer maturity securities as inflation erodes returns. When the yield curve inverts and two-year notes have higher yields than 10-year bonds, it indicates that investors expect an economic recession.
During the first quarter, the U.S. equity market index S&P 500 declined by 4.6 percent, while the more technology weighted Nasdaq fell by 8.9 percent. In Europe, the Stoxx Europe 600 lost 5.9 percent and Russia’s MOEX index fell by 28.2 percent, according to Deutsche Bank. The Russian stock market was closed on Feb. 28, following the Russian invasion of Ukraine on Feb. 24 and a massive selloff of shares, especially by foreign investors. The market partially reopened on March 23 with only 33 stocks trading.
In the first three months of the year, the Brazilian and Indian equity markets outperformed, with São Paulo’s Bovespa’s index up by about 17.5 percent and Mumbai’s BSE Sensex index flat. In this context, the shares of the Brazilian footwear companies Grendene and Vulcabras rose by 15.5 percent and 9.2 percent, respectively. Brazilian shoemakers are benefiting from a sharp recovery in exports after the dip suffered due to the havoc wreaked by the pandemic. In the first two months of 2022, overall Brazilian footwear exports rose by 40 percent in volume to 27.57 million pairs and by 70.8 percent in value to $209.23 million. According to the local footwear association Abicalçados, it was the best performance over the two-month period since 2011.
Meanwhile, the shares of the Indian footwear retailers Bata India and Metro Brands grew by 4.8 percent and 35.4 percent, respectively, during the first quarter. According to a CRISIL research released by Metro Brands in a presentation to financial analysts, the Indian footwear market offers strong growth potential. By the fiscal year ending in March 2025, the market is expected to increase by about 50 percent to 1,380-1,450 billion rupees (€16.5-17.3bn-$18.3-19.3bn) from an expected 920-950 billion rupees (€11.0-11.3bn-$12.2-12.6bn) for the fiscal year ending in March 2022 thanks to higher volumes and an increase in the average selling price.
With a closing price of 612.2 rupees on March 31, Metro Brands was 24.1 percent above the closing price of 493.35 rupees on its first trading day on Dec. 22, 2021, unlike Western newcomers that were all below their debut prices after falling sharply during the first quarter. Allbirds’ share price lost 60.2 percent of its value in the first quarter. It ended the quarter at $6.00 compared with an initial public offering price of $15 a share and closing price of $28.64 on its first trading day on Nov. 3, 2021. Like other stocks, Allbirds had benefited from the hefty valuations of last year’s overpriced stock market. The release of a guidance indicating that it will continue to be loss-making in 2022 did not help shore up the stock. The Californian brand known for its Wool Runner merino shoes and other eco-friendly sneakers and apparel, expects to post a negative adjusted Ebitda of between $9 million and $13 million this year.
Among other newly listed companies, Dr. Martens fell by 44.4 percent in the first quarter, Nice Footwear dropped by 24.1 percent and Spartoo declined by 44.3 percent. The U.K. brand ended the quarter with a share price of 238 pence compared with the 450 pence reached on its first day of trading on Jan. 29, 2021 on the London Stock Exchange. Meanwhile, Nice Footwear finished the quarter at €9.9 a share against a debut price of €16.0 on Nov 18, 2021 and Spartoo at €2.2 against €6.49 on its first trading day on July 7, 2021.
E-commerce and luxury goods stocks sharply lower
After having been the market’s darlings due to Covid-19-related lockdowns, which boosted their sales as physical stores were closed, e-commerce companies have since seen their share prices correct sharply over the past months as economies re-opened worldwide. They were particularly hit during the first quarter of this year, with Asos down by 32.6 percent, Boohoo by 28.0 percent, Farfetch by 54.8 percent, MYT, which is the parent company of the Munich-based online retailer of luxury fashion Mytheresa, by 42.3 percent and Zalando by 35.3 percent. The Russian e-tailer Ozon traded in line with its peers during the quarter, falling by 38.6 percent. An observer noted that Russian online retailers are currently benefiting from the closure of stores by foreign brands, which have pulled out of Russia after harsh international sanctions were imposed on the country. The only digital retailer in our selection to have held its ground is Amazon, down by 2.2 percent in the first quarter. The U.S. e-commerce giant announced on March 9 a 20 for one stock split and a $10 billion stock buyback, which underpinned its flagging share price.
Luxury stocks were also under pressure during the quarter, with Aeffe down by 29.9 percent, Capri by 20.8 percent, Hermès by 15.9 percent, Kering by 18.6 percent, LVMH by 10.7 percent, Tapestry by 8.5 percent and Tod’s by 17.1 percent. The consultancy Bain & Company estimated that the conflict between Russia and Ukraine will impact by 2-3 percent, or at least €7 billion, global spending in personal luxury goods. Prada outperformed its peer thanks to an only 0.3 percent drop in the quarter. The Italian fashion house said that 2022 had started on strong note and that it was confident in achieving its medium-term targets.
On the other side of the spectrum, the share price of the British discount shoe retailer Shoe Zone grew by 20.5 percent, after several financial analysts pointed out that the stock was trading at interesting multiples. The stock achieved most of its gains early January, when the company announced that it had returned to a profit in the full year ended on Oct. 2 and that it could recommence modest dividend payments.
