On the heels of the better-than-expected quarterly report, shares of the Manhattan Beach, Calif.-based footwear firm jumped 14 percent in trading last Thursday to close at $24.72.
Though Skechers was nonspecific by way of guidance, COO David Weinberg said on a conference call held last Wednesday that domestic sales are expected to increase in the fourth quarter and that international business will be flat to slightly positive.
“Based on our record sales and key performance indicators, which include a healthy backlog, positive retail comps and strong sell-throughs, we believe we’re on track for positive results for the fourth quarter and 2010,” he said. Domestic and international backlogs were up in the double digits at quarter’s end.
“If you do the math, the numbers could be much higher for next year than what they’re saying,” Sterne Agee analyst Sam Poser told Footwear News. Poser, who last week raised his target price on the firm’s shares to $27 from $21, noted that the Skechers Shape-Up brand could have a bigger-than-anticipated positive impact on the new year. The analyst estimated that Shape-Up could bring in at least $90 million to $109 million in revenues for 2010.
“We continue to anticipate 9 percent top-line growth in 2010, but see room for more growth as the core women’s and men’s businesses strengthen and international growth accelerates,” Poser wrote in a report.
Susquehanna Financial Group analyst Christopher Svezia is also optimistic about Skechers’ fate, stating in a report that he expects double-digit revenue growth in the first half of 2010. “With a strong sales outlook, the company should be able to leverage its overhead and significantly grow first-half earnings,” wrote Svezia, who also upped his target price on the shares to $26 from $20.
Skechers reported last Wednesday that third-quarter earnings totaled $24.5 million, or 52 cents a diluted share compared with a profit of $28.3 million, or 60 cents, a year ago. Analysts had predicted EPS of 35 cents.
Revenues rose to $405.4 million — also surpassing analysts’ estimates for $384.8 million — from $403.2 million the prior year. Combined domestic and international retail sales rose 20 percent, while same-store sales increased 7 percent. U.S. wholesale revenues, however, fell 10 percent.
“While our third-quarter sales are not as high as last year, we had more in-line full-priced product and increases in average price per pair from the third quarter 2008 and fewer closeouts, which resulted in much-improved profitability and positively impacted margins. The growth came across key men’s, women’s and kids’ lines, which we believe is the result of continued positive reaction to our core styles and new lines supported by concentrated marketing efforts, strong execution and attractive and affordable product,” Weinberg said on the call.
Inventories as of Sept. 30 totaled $191.8 million, a decrease of $58.3 million from a year ago. “Our inventory is now clean and well positioned for both the remainder of the year and into 2010,” said Weinberg.