Skechers’ Hot Streak Set to Continue

Skechers’ Hot Streak Set to Continue
David Weinberg and Michael Greenberg

 Skechers USA Inc. shows no signs of slowing down.

Market watchers expect the Manhattan Beach, Calif.-based firm to post robust sales through year-end, driven by the combination of hot product and attractive price points across all categories and geographies.
Sam Poser, an analyst at Sterne Agee, raised his fiscal 2014 earnings-per-share estimate on the back of the company’s quarterly earnings beat. He also lifted his full-year price target.

“The 37 percent increase in [Skechers’] second-quarter revenue and a high-20 percent increase in the [company’s] order backlog highlight how well Skechers is operating at this time,” Poser said. “The backlog increase was even more impressive given that $20 million to $25 million in orders were pulled forward to [the] second quarter from [the] third quarter,” he added.

Skechers shares closed at an all-time high of $52.30 last Thursday after the company released a better-than-expected result for the period, boosted by market watchers’ expectations that the company could beat the Street’s forecasts for the third quarter.

Poser said Skechers has benefited from raising its average selling prices, which helps to better position the company for long-term success and improves earnings.

“We expect Skechers revenue to increase in the teens and EPS to increase 30-plus percent on average through 2016. The growth will be driven by international wholesale and global retail expansion,” Poser said.
Jeff Van Sinderen, an analyst at B. Riley & Co., said the company benefited from ongoing product innovation and compelling marketing and public relations campaigns throughout the period.

“This company is a marketing powerhouse, and when you have great product combined with great marketing, you get the kind of results that Skechers has,” Van Sinderen said.

On a conference call with investors and analysts, David Weinberg, Skechers COO and CFO, attributed the company’s performance for the period to the continued worldwide demand for its lifestyle and kids’ footwear, which resulted in double-digit increases in its domestic and international wholesale businesses. Skechers’ company-owned retail stores also reported strong sales for the period, he said.
The shift of the back-to-school domestic and international subsidiary shipments for July into June additionally boosted earnings in the second quarter, Weinberg said.

“The growth [resulted] in double-digit increases in our men’s, women’s and kids’ footwear,” he added.
Skechers said it plans to open between 40 and 50 stores this year, while its international distributors, joint ventures and licensees will launch between 60 and 65 stores, taking the company’s total store count at year-end to approximately 1,050.

“Given our retail growth trajectory, accelerating backlogs and incoming orders for July, we believe we are well-positioned for growth, and we will continue to achieve new quarterly and annual sales records,” Weinberg said.

On the outlook for the second half, he noted, “While we have a tough comparison in the third quarter against last year, we will remain comfortable with current streak consensus estimates for sales and earnings in the third quarter.”

Van Sinderen expects the company will beat the Street’s forecasts in the third quarter, given that historically, Skechers’ earnings for the period are stronger than in the second quarter.
“Their business has a lot of 
momentum. They are in a sweet spot right now and are getting incredibly strong sell-through,” he said.

Poser said he also expects the company could outperform again in the current quarter.

“The current retail sales trends and very positive comments from retailers make us confident that the revenue guidance will prove very conservative,” he said.