Overheard On Wall Street: Skechers’ Stock Split; Shoe Industry Gains

Although the distressed state of the global economy and geopolitical issues attracted the bulk of Wall Street’s attention this week, as usual, the Street’s chatter included some footwear talk too.

Here’s what FN’s business editor overheard this week.

Skechers USA Inc.

After nearly tripling its share price in the past year and hitting a high of $163.50 earlier this month, Skechers announced today that its board of directors approved a three-for-one split of the company’s Class A and Class B common stock, to be paid in the form of a stock dividend on Oct. 15.

“Our decision to adopt this stock split is another indication of our confidence in our business model worldwide, which we believe will continue to generate profitable growth and strong cash flows,” Robert Greenberg, Skechers CEO, said in a release. “We are looking forward to continuing to deliver our broad-based collection of men’s, women’s and kids’ footwear to the global market.”

The stock split is subject to stockholder approval of an amendment to the company’s Certificate of Incorporation to increase the authorized number of Class A and Class B shares. The stockholder vote is expected to take place at a special meeting of stockholders scheduled for Sept. 24, 2015.

Sterne Agee CRT analyst Sam Poser said he views the move as yet another positive step for the company — which has bloomed into a Wall Street darling in recent months — and its shareholders.

“We like this move because it will increase the liquidity of the stock and make the stock more attractive to larger investors,” Poser wrote in an Aug. 21 note. “We remain hopeful that there are more shareholder-friendly moves to come including possible share repurchases and/or returning cash dividends.”

If the company’s stockholders approve the authorization of additional shares, the stock dividend will be paid to the stockholders of record as of the close of business on Oct. 2, 2015, Skechers said in a release.

Poser maintained his “buy” rating on the stock with $185 price target.

Footwear’s Momentum Continues

Between the earnings reports and weekly traffic/sales numbers, it’s hard to ignore footwear’s strength against apparel and other product categories. This week, in addition to Foot Locker Inc. and Hibbett Sports calling out the shoe category for driving the bulk of their second-quarter sales, reports indicate continued growth in the athletic footwear space.

Total U.S. athletic footwear point-of-sales were up 4 percent year-over-year, for the week ending Aug. 15, following the prior week’s 4.4 percent rise, according to Citi Research analyst Kate McShane who referenced SportScan data in an Aug. 19 note.

“Results were driven by an 8.3 percent increase in unit sales and a 4 percent decrease in average selling price — the largest ASP decline seen since March 2015,” McShane said in the note.

The casual athletic category — led by Skechers and Nike Inc. — also extended its gains into the second week of August, up nearly 20 percent year-over-year. Sales in running improved 8 percent year-over-year, while sales in the basketball category were down 6 percent year-over-year as the prior year’s results were driven by “strong sales of the premium-priced Sport Blue” edition of the Air Jordan 3 Retro, McShane said.

Brand Nike, Jordan, Under Armour, Skechers and Adidas were the top five selling shoe brands, according to the report.

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