Analysts: Skechers’ Turnaround Has Legs

Skechers USA Inc. is on an upward path, even after the firm missed third-quarter income expectations by 3 cents last week.

Both analysts and management were upbeat on improvements that will continue into 2013.

“We’ve got to admit there’s light at the end of the tunnel,” said Christopher Svezia, analyst at Susquehanna Financial. “While Europe remains weak, it appears the bottom has been reached and a return to growth could materialize moving through fiscal 2013 as comparisons ease. Surprisingly, expenses remain in check, lending optimism that this development could be a trend and not an aberration.”

Jeff Van Sinderen, analyst at B. Riley & Co., agreed: “They are getting momentum in the domestic business. [The company has] improved substantially for two quarters now, both in comps and owned retail stores. The biggest takeaway is that their domestic business is the biggest part of the business and it’s doing better.”

Scott Krasik, analyst at BB&T Capital Markets, suggested that sales could grow nearly 20 percent next year, but warned that lower gross margins could impact the bottom line.

David Weinberg, COO and CFO at Skechers, said in a call with analysts last week, “Improved backlogs and the positive response we are seeing from our retail partners to our product lines are key indicators to the significantly positive trend of our business and the strength of our brand in the fourth quarter and into 2013.”

Weinberg added, “Based on our key indicators and early sell-through rates, we have confidence that all operating divisions — domestic wholesale, international and retail — will be up low- to mid-double digits in the fourth quarter.”

For the period ended Sept. 30, the Manhattan Beach, Calif.-based firm earned a net income of $11 million, or 22 cents a share, an increase from $8.3 million, or 17 cents, a year ago.

Net sales advanced 4.2 percent to $429.4 million.

Domestically, third-quarter sales gained 7.2 percent year-over-year, thanks to strong sales in the children’s and performance divisions, and in many women’s and men’s lifestyle lines.

International distributor sales increased by 10.9 percent, but international subsidiary sales decreased by 14.6 percent, hit by challenging economic environments in Europe, the euro exchange rate and the restructuring of the Brazilian business. Revenue also was lost as the average selling price of toning product was lower compared with last year.

Comparable-store sales in the U.S. grew 6.3 percent and international comp sales were basically flat.

At the end of the period, Skechers’ cash balance stood at $308 million, while long-term debt totaled $70.2 million.

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