Analysts Upbeat On Skechers After Q4, Some Backlog Concerns Weigh

Skechers USA Inc. impressed market watchers with yet another solid quarter, reporting double-digit revenue and profit growth in Q4, posted after market close Wednesday.

“Skechers remains a top pick,” Sterne Agee CRT analyst Sam Poser wrote Thursday. “Business remains robust, which is evident by the ongoing improvements in [average selling prices], margins (despite FX headwinds), same-store sales, the 67 percent increase in 4Q15 international wholesale revenue and a very strong start to [FY16].”

In Q4, ending Dec. 31, 2015, the company said its net income climbed 34.3 percent, to $29.4 million, or 19 cents per diluted share, while revenue rose 27 percent, to $722.7 million. Regarding the current quarter, according to Skechers CFO and COO David Weinberg, January sales were also up 35 percent, while February had a “strong first week.”

“Skechers delivered a solid Q4, despite traffic and inventory challenges for the broader industry this holiday, and we believe is poised to make good on the 38 percent inventory growth that got the bears so worked up last fall,” Citi Research analyst Corinna Van der Ghinst wrote Wednesday. “Contrary to fears, higher inventory levels are in fact supporting a continuation of significant demand for the Skechers brand both at home and abroad … with Q4’s least beatable quarter of the year now behind us, today’s results underscore our view that there is still stronger upside to Skechers’ spring ’16 season and beyond.”

While analysts were bullish overall, the firm’s decelerating backlog orders, up 9.5 percent at the end of Q4, caused concern for some.

“Skechers backlog deceleration was a disappointment (from up 28 percent to up 9.5 percent), although with some puts and takes…,” Susquehanna Financial LLLP analyst Christopher Svezia wrote, adding that a sales shift from January to December and retailers buying closer to need contributed to the slowdown.

“While backlog appears to have improved in January, we don’t get the sense that it will catch up with inventory growth (up 37 percent) for at least the next two quarters — increasing some risk, in our view,” Svezia said.

Although international sales continued to be a bright spot for Skechers, domestic wholesale sales continued to decelerate, increasing 8 percent in the quarter. Q4 (company-owned) retail sales increased 20.2 percent, and same store sales gained 9.1 percent.

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