Skip to main content
Publish date:

Nine West's Stubbed Toe Not Healing

Nine West



NIN) has lost its footing.

Trouble in shoe town started last spring, when the White Plains-based retailer disclosed that the

Securities and Exchange Commission

was looking at Nine West's revenue recognition policies in its

U.S. Shoe

subsidiary. At the same time, sales of Nine West's core shoe brands stumbled as consumers sidestepped the fashion-forward styles that veered from the company's more traditional look.

This Mall Rat, visiting stores recently, can't uncover any shift in style that would indicate Nine West has found its way back to the coveted professional heels that would improve business. Indeed, since last spring, shares of Nine West, which also sells shoes under the

9 & Co.




Easy Spirit

brand names, have spiraled downward. Last Thursday, the company warned that its fourth-quarter earnings, which will be reported Tuesday after the market closes, will range between break-even and 5 cents per share, excluding a charge of $6.3 million related to job cuts.

TheStreet Recommends

First Call

analysts were expecting the company to earn 35 cents per share. A year ago, Nine West earned 52 cents per share. The stock closed Monday at 24 1/2, just above its 52-week low of 23 1/8.

"Nine West has been engaged in growth for growth's sake for a long time," says Faye Landes, an analyst with

Salomon Smith Barney

. "They need to do some serious thinking about retrenching." Landes rates Nine West a neutral, and her firm hasn't led underwriting for the company. Nine West already has cut jobs and expenses, but those moves may not be drastic enough. Landes says Nine West should consider shutting stores and eliminating some brands. She says the 9 & Co. division, a more downscale and funky version of Nine West, is having particular problems.

But Nine West's management, which has been missing a president and chief operating officer since

Noel Hord

abruptly resigned in January, seems intent on maintaining its drive for growth. Plans call for the licensing of Nine West products, ranging from sunglasses to pocketbooks to leather jackets.

Meanwhile, Nine West's flagship shoe brands are struggling to maintain dominance. The company boasts that its shoes sit in one of every three women's closets. The Mall Rat does own a pair of tall chocolate boots bought last fall, but that's down from the three or four pairs that used to line her closet. And there are still customers like Theresa Howard, a writer in New York, who recently bought five pairs of Nine West shoes. "They wear very well, they're stylish and comfortable," she says.

But women are increasingly courted by up-and-coming brands like

David Aaron

. Owned by

Steve Madden

, the shoe brand is aimed at a similar customer as Nine West -- the woman who wants comfortable, affordable shoes that she can wear to the office and out in the evening. And Nine West appears to be losing its dominance with department stores, which are more willing to give floor space to lesser-known brands.

"Nine West has lost its way," says Jonas Gerstl, portfolio manager with

Egs Partners

in New York, a former Nine West shareholder. "Even if the SEC investigation is cleared up, I'd stay away." The pending investigation has widened to include a probe by the

U.S. Customs Office

into Nine West's imports from



The merchandise stumbles appear to be continuing this spring. Stiletto strappy sandals and funky platform shoes stand out in store displays. "Sandals are tough," Landes says. "They're hard to fit."

A Nine West store in the Stamford Mall in Connecticut was heavily stocked with fashion-forward styles -- like the suede platform shoes with a waved sole in lime green and sky blue, or the cork-soled platforms with a crocheted band. While more basic low-heeled brown sandals were interspersed in the mix, the emphasis was on the wild styles. The Mall Rat wonders whether these shoes will appeal to a broad enough range of customers needed to drive Nine West's same-store sales.

Across the store, rows of spring shoes were on sale, from sandals to pumps in iridescent pastels. "Those are new arrivals. We just got them in," said a sales clerk. "We just put shoes on sale when the company tells us to."

While Nine West is known for running sporadic sales, even on newly arrived merchandise, it may not be the smartest strategy. "It's a strong incentive to never buy anything full price," Landes says.

Three phone calls to Nine West's Chief Financial Officer

Robert Galvin

weren't returned.

Also unsettling was the plentiful array of winter boots sitting in a back corner. Most retailers try to clear out their winter goods in February. The sales clerk said Nine West is purposely keeping winter shoes in stores later in the season to satisfy customers still shopping for boots in March. He said that last year the company shipped winter shoes to its outlet stores too early in the season and missed out on late-winter demand.

On this particular Friday, there wasn't much demand for any type of shoe. One woman tried on a pair of pumps, while her boyfriend waited, half sleeping in a chair.

The Mall Rat, who used to be a voracious purchaser of Nine West shoes, left the store equally uninspired.