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Tickers in this Article: WWW, DECK, TBL, SKX, CROX
Shares of specialty shoe makers have recently seen an uptick in their prices as investors appear to be betting that results for the back half of 2009 are now likely to be better than what has been realized so far this year. Shares of so-called "lifestyle" footwear makers like Deckers (Nasdaq:DECK), Skechers (NYSE:SKX), Timberland (NYSE:TBL) and Wolverine (NYSE:WWW) have all shown strength over the last few sessions. Let's take a look at where these shoe makers are headed.

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Brand Power Rules
It's not surprising that these four shoe companies have been singled out as the most likely beneficiaries of a revival in retail spending during the balance of this year, albeit at a more muted pace than in previous years. They all carry strong signature brands that target teens and young adults, representing the traditional retail sweet spot. Once a brand makes a connection with this trend-savvy set, the returns can be dramatic for the company.

The best example of this has to be the success of Decker's Uggs sheepskin boots. Once this brand achieved cult status with the younger set, thanks in part to its take-up by pop icons like Avril Lavigne, the stock soared. From a price of around $18 in 2005, the stock eventually hit $163 in 2007. Not a bad two-year run. So far this year, Uggs continue to sell well, and is up 67% over 2008.

Winning on Price at the Cost of Orders
Strong brand appeal has also helped these companies stand their ground against demands by hard-pressed retailers that they offer "markdown allowances", or guarantees that they make up the difference if the retailer is forced to sell the items at a discount.

However, the flip side of standing their ground on price in these tough markets has been a slump in advance orders. In its most recent quarterly result, Wolverine raised its earnings outlook but trimmed its revenue forecast as retailers cut their orders in an effort to buy closer to their needs. This has the effect of raising operating uncertainty for the company as order visibility is lowered going into the crucial back-to-school selling season.

Survey Suggests Youth Market Sales Could Be Up
Recent consumer survey data suggests that while overall spending on back-to-school merchandise is expected to be down 7.7% in 2009 relative to last year, spending by college students, a key market for lifestyle shoemakers, is expected to rise by 3%. If these spending expectations materialize, then Skeckers is likely to make good on its predicted return to profitability during the second half of 2009. Now trading at around $11.50 a share, the company boasts a strong balance sheet with more than $5 per share in cash.

Waiting for the Other Croc to Drop
A less likely beneficiary is Timberland. The company is currently preoccupied with redesigning its products, which, in the opinion of independent research outfit Standard & Poor's, is expected to dampen sales for the next two to three quarters. S&P rates the stock as a sell. And one-time hot stock Crocs (NASDAQ:CROX), whose shares soared on the popularity of its brightly-colored foam clogs, could also be another victim of changing tastes and trends. A recent article in the Washington Post suggest that the company's mounting debt problems could even put it out of business. Crocs is reported to be facing an end-of-September deadline to pay off its debt and it's scrambling to raise cash. Meanwhile, its shoes are falling out of favor with consumers.

The Bottom Line
Lifestyle footwear these days is about spotting emerging youth fashion trends at the right time. If done successfully, the ride up can result in spectacular profits. However, keep an eye out for signs that the mania for a particular item has crested - the ride down can be just as dramatic. (To learn more, check out Analyzing Retail Stocks.)

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