Market Watch: Jones Reports Q4… Skechers on Tap

The Week Ahead

Wednesday, Feb. 12:
Skechers USA Inc. Q4 and full-year fiscal 2013 results

Thursday, Feb. 13:
U.S. initial jobless claims
U.S. continuing jobless claims
U.S. retail sales for January

Friday, Feb. 14:
VF Corp. Q4 and full-year fiscal 2013 results
U.S. export prices ex-agriculture
U.S. import prices ex-oil
The University of Michigan Consumer Sentiment Index for February

Jones Beats Street

Market watchers lauded The Jones Group Inc. for its ability to trim costs while facing margin pressure over the holiday selling season.

Additionally, the improved operating performance of its footwear and accessories businesses helped Jones beat analysts’ forecasts for the fourth quarter, despite reporting a net loss of $44.6 million, or 61 cents a diluted share, for the period, compared with $78.1 million, or $1.06, year-on-year.

Excluding the impact of a write-down of $57 million and $75 million in 2012 and 2013, respectively (due to a decline in the goodwill of its sportswear business and trademarks used in its wholesale footwear, accessories and jeanswear), Jones reported adjusted earnings per share of 27 cents for the fourth quarter, compared with 14 cents year-on-year, beating analysts’ estimates of 12 cents by 125 percent.

Adjusted EPS for the full year was 91 cents, compared with $1.24 a year earlier, and higher than analysts’ estimates of 76 cents.

Revenues for the fourth quarter were $889 million, versus $972 million in the prior corresponding period, missing the consensus forecast among analysts of $915.9 million.

Jones is currently in the process of closing a deal to sell itself to private equity firm Sycamore Partners for $15 a share, or $12 billion.

Wesley Card, CEO of Jones Group, said in a statement, “Our domestic retail, domestic wholesale footwear and accessories, and international retail businesses achieved the largest operating improvements. Our sportswear business remained more challenging and promotional, although we are encouraged with our overall turnaround efforts in this business.”

CFO John McClain added, “Our financial position remains strong. We ended the year with $116 million in cash and our revolver undrawn. We are continuing to focus on inventory management, expense control and operational efficiencies, and believe we will continue to improve margins and maintain a strong balance sheet.”

Stock Watch

Following the S&P 500’s first weekly gain in a month, market watchers will be looking for stronger earnings from Skechers USA Inc. and VF Corp. this week.

Analysts are predicting that Skechers, which reports its fourth-quarter results on Wednesday, will post $500.3 million in revenue for the period, on diluted EPS of 31 cents. Investors expect the company to provide an update on the success of its GoRun fitness shoe in the fourth quarter, given mixed feedback from analysts about sales through domestic channels in the U.S.

In a note to clients citing Skechers as one of the top stocks to own in 2014, Christopher Svezia, an analyst at Susquehanna Financial Group, said, “While earlier in the year we had some concerns over management’s ability to outperform in the fourth quarter, our subsequent checks have since indicated a somewhat stronger performance, particularly on the margin.” Skechers shares rose 0.3 percent to $28.89 last week.

 All eyes will be on VF Corp. on Friday, when the company releases its earnings results for the fourth quarter. Analysts expect the firm — whose shares rose 0.5 percent to $58.45 last week — will benefit from the recent favorable winter weather conditions, which have boosted demand for outdoor apparel and footwear. The Street is forecasting VF will post diluted EPS of 84 cents for the period, citing its Timberland and The North Face brands as key drivers behind the quarter’s result.

Mitch Kummetz, analyst with Robert W. Baird & Associates, raised his full-year price target for the stock to $66, from $59, ahead of the result, due in part to room for improvement in margins and more robust full-price sales because of the country’s deep freeze.