Skechers U.S.A., Inc. (NYSE:SKX) , one of the leading retailers of footwear in the United States and overseas, is well on track with its growth efforts through the launch of new products and establishing a strong global distribution platform. Let’s now delve into the stock’s performance and look into the aspects impacting the company’s growth trajectory.
We observed that Skechers has outperformed the Zacks categorized Shoe & Retail Apparel industry in the past month by gaining 12.1% compared to the industry’s growth of 0.4%. In that time frame, the company’s shares performed better than the broader Consumer Discretionary sector growth of 1.3%.
Strategic Endeavors
Skechers’ international business remains a considerable sales growth driver with Europe being the significant market outside the U.S. In order to boost international sales and profitability, the company has undertaken stringent efforts towards additional store openings and increasing distribution channels by entering into international agreements.
Skechers’ multi-brand strategy provides the required impetus for rolling out new products at compelling prices. A strong diversified portfolio of brands aids Skechers’ to expand the targeted demographic profile of customers.
Such growth initiatives have helped Skechers’ to make a sharp come back in the first quarter of 2017, after posting negative earnings surprises in three previous quarters. Net sales of the company have beaten estimates for two straight quarters now, owing to the strong performance at the international wholesale business, company-owned global retail operations and the domestic eCommerce business.
The sturdy sales related strategies and growth plans have led management to project second-quarter 2017 net sales in the band of $950–$975 million compared with $877.8 million reported in the prior-year quarter.
Concerns to Overcome
Although Skechers top-line performance has been satisfactory, the bottom-line has been an aspect of worry since it witnessed a decline of 4.8% in the first quarter from the year ago period. Negative impacts emerging out of higher operating expenses and foreign currency translation upon gross margins were the primary cause of lower reported earnings. Moreover earnings per share have declined year over year in the last four quarters.
The soft second-quarter 2017 earnings per share projection also raise concerns. Management now anticipates earnings per share in the range of 42–47 cents compared with 48 cents delivered in the year-ago period. The dismal earnings performance has made investors a little concerned.
Bottom Line
Given the pros and cons embedded, Skechers currently carries a Zacks Rank #3 (Hold). We remain hopeful that the company’s cost containment and improved inventory management strategies can perk up its performance in the following quarters. Until then investors need to patiently wait and watch if the company’s ongoing policies yield better results.
Other Key Picks
Investors may consider better-ranked stocks such as Best Buy Co., Inc. (NYSE:BBY) , Burlington Stores, Inc. (NYSE:BURL) and The Children's Place, Inc. (NASDAQ:PLCE) all flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Best Buy delivered an average positive earnings surprise of 33.8% in the trailing four quarters and has a long-term earnings growth rate of 11.8%.
Burlington Stores delivered an average positive earnings surprise of 22.6% in the trailing four quarters and has a long-term earnings growth rate of 15.9%.
Children's Place delivered an average positive earnings surprise of 36.6% in the trailing four quarters and has a long-term earnings growth rate of 8%.
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Skechers U.S.A., Inc. (SKX): Free Stock Analysis Report
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