Baird sees share buyback potential for footwear and apparel firms

Investing.com -- Baird analysts identified share repurchase capacity as a potential driver for earnings per share growth in the footwear and apparel sector, with Crocs (NASDAQ: CROX) and Wolverine World Wide (NYSE: WWW) highlighted as possible beneficiaries.

The firm said companies in its coverage could execute approximately $30 billion in incremental share buybacks, representing nearly 20% of median market capitalization, under a moderate leverage scenario. This could result in double-digit EPS growth for several names in the sector.

Baird maintains Outperform ratings on both CROX and WWW based on their potential to benefit from increased buyback activity.

The analysis comes as valuations remain low while fundamentals stay solid across the sector. The firm noted that companies could fund additional buybacks through steady cash flow generation and available debt capacity.

Baird examined three theoretical scenarios for accelerated share repurchases. The moderate leverage scenario, which the firm emphasized, assumes companies would add 1.0 times incremental leverage without being bound by current authorizations.

Under this scenario, the approximately $30 billion in potential buybacks would be funded through next-twelve-month free cash flow of about $8 billion, $2 billion to $3 billion from tariff and other one-time proceeds, with the remainder coming from incremental debt.

The firm's global brand and retail coverage has historically returned cash through buybacks at an average annual rate of approximately 2.5% of start-of-year market capitalization since 2007. Leading companies in this group have reduced share counts by 30% to 40% from peak levels, including CROX at negative 40%, Deckers Outdoor (NYSE: DECK) at negative 39%, and Dick's Sporting Goods (NYSE: DKS), Nike (NYSE: NKE), and Columbia Sportswear (NASDAQ: COLM) by more than 20%.

Baird pointed to 2026 accelerated share repurchase announcements from Birkenstock (NYSE: BIRK) at $250 million and Levi Strauss at $200 million as examples that have supported their respective stock prices.

Canada Goose (NYSE: GOOS), WWW, and CROX could drive the strongest EPS growth in the moderate leverage scenario based on internal cash generation and current valuations, according to the firm's estimates.

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