Skechers Shares Soar on Stellar Q1

Skechers Shares Soar on Stellar Q1
David Weinberg and Michael Greenberg

Shares of Skechers USA Inc. skyrocketed on Wednesday after the company posted a more than 20 percent sales increase from the prior corresponding period, prompting analysts to upgrade their estimates for the full year.

“The strong result goes back to what they did a couple of years ago, which is to go back to the drawing board in terms of product development,” said B. Riley & Co. analyst Jeff Van Sinderen, citing the firm’s robust growth across product categories and distribution channels in the quarter, despite the challenging retail environment in the U.S.

“They are getting great traction, and the consumer likes their product as it matches very well with the major athletic or functional apparel trends. They are executing extremely well and their booking shows that the retailers want their product,” he added. 

Van Sinderen lifted his full-year price target to $49 from $45 based on the result and reiterated his “buy” rating on the stock.

Sam Poser, an analyst at Sterne Agee, raised his earnings per share estimate for fiscal 2014 to $2.20 from $2.02, while simultaneously increasing his price target for the full year to $50 from $43.

Skechers shares were 5.8 percent higher at $39.01 in midday trading.

“The revenue beat was driven by a 26 percent increase in international wholesale revenue and a 21 percent increase in domestic wholesale revenue. We had forecast 12 percent and 7 percent increases in the domestic and international businesses,” Poser wrote in a note to clients.

“Skechers appears to be gaining share in the family footwear channel due to an increased amount of compelling product at key price points and because Nike’s offerings to that channel are not as compelling as they once were,” he added, noting that strong sales for new product offset the impact of the shift of Easter from the first to second quarter this year.

Van Sinderen noted that Skechers is well positioned to grow profits in 2014, driven by the strength of its product pipeline, improvement in worldwide backlog and positive trends in April.

“Management stated that it is comfortable with consensus numbers for the second quarter, which include sales of $493 million and earnings per share of 37 cents, prior to revisions,” he said.

“Skechers is one of few companies in the apparel/footwear space that is experiencing strong momentum and growth in its business, and this trend should be sustainable throughout at least the remainder of 2014,” Van Sinderen added.