Skechers (SKX) Efforts Place The Stock Favorably For 2018

A glimpse of Skechers U.S.A., Inc.’s (NYSE:SKX) share price movement reveals that it has surged roughly 52.4% in the past three months, outperforming the industry’s growth of 21.2%. Certainly, the company’s sound fundamentals, robust third-quarter 2017 results and a sturdy outlook have played a significant role behind this Zacks Rank #2 (Buy) stock’s bullish run in the bourses.

We believe greater emphasis on new line of products, store remodeling projects, cost containment efforts, inventory management, and global distribution platform are the primary catalysts. Skechers’ domestic e-commerce business has also been the driving factor. It currently operates e-commerce sites in Chile, Germany and UK, and has launched additional sites in Spain and Canada.

Skechers’ international business remains a considerable sales growth driver for the company with Europe and China being the significant market outside the United States. The company is poised to enhance global reach in the footwear market through distribution networks, subsidiaries and joint ventures (JVs).

The company’s international wholesale business revenues, which constituted 43.4% of total sales, advanced 25.7% on the back of a 31.4% rise in wholly-owned subsidiary and JV businesses along with 5.4% growth in distributor business during the third quarter of 2017. The company’s JV business registered growth of 51.5% buoyed by double-digit growth in China and India, and sales from South Korea. Management envisions double-digit growth at international wholesale business.

Wrapping Up

We believe management’s well-knitted efforts have helped Skechers to make a sharp come back in the third quarter and deliver a positive earnings surprise of 37.2%. Net sales also beat the estimate for the fourth quarter in row.

As a result, management now projects fourth-quarter 2017 net sales in the band of $860-$885 million compared with $764.3 million reported in the prior-year quarter. Additionally, the company anticipates earnings per share in the range of 9-14 cents compared with 4 cents delivered in the year-ago period.

Skechers continues to offer a diversified portfolio of brands that includes a wide range of fashion, athletic, non-athletic, and work footwear at compelling prices. We believe that this multi-brand strategy enables the company to roll out new products without cannibalizing existing brands and helps to expand the targeted demographic profile of customers.

Key Picks Apart From Skechers

G-III Apparel Group, Ltd. (NASDAQ:GIII) delivered an average positive earnings surprise of 6.1% in the trailing four quarters. It has a long-term earnings growth rate of 15% and a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Ross Stores, Inc. (NASDAQ:ROST) delivered an average positive earnings surprise of 5.5% in the trailing four quarters. It has a long-term earnings growth rate of 10% and a Zacks Rank #2.

Wal-Mart Stores, Inc. (NYSE:WMT) delivered an average positive earnings surprise of 2.2% in the trailing four quarters. It has a long-term earnings growth rate of 6.1% and a Zacks Rank #2.

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