Industry in Focus:

 INDUSTRY BRIEF: Footwear is part of the consumer cyclical category of stocks. Footwear sales have a close correlation to consumer spending patterns and, as such, the current downturn in the economy is not good for the shoe business. Even so, many U.S. footwear companies sell to diverse end-markets that smooth things out and strong international sales that are helping these stocks outperform the broader market.

Industry-leader Nike is a great example of this sort of diversification and relatively steady performance. Not only does it sell athletic shoes around the globe under the brands of Nike, Converse, and Umbro, but also fashion/casual shoes through its Cole-Haan subsidiary. NKE is up 7% over the past year, compared to a 29% drop in the S&P 500. Others like Steven Madden stay at the leading edge of fashion to keep sales humming along even in tough times, and its stock performance reflects that. SHOO is up 21% in the last year. Still others such as Deckers Outdoor (best-known for Uggs and Tevas) and Crocs are subject to the hot and cold streaks of fashion, and cold is the shoulder given by investors to these stocks lately.

 Bottom Line: This is a challenging environment for consumer cyclical stocks, and there's nothing like a good storm to separate the wheat from the chaff. Since the stock market is a forward looking beast, investors can use this time to sift for the best companies and expect them to emerge on the other side of this economic cycle in stronger market positions.  

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