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Analysts Say Skechers’ Full-Year Outlook Is ‘Conservative’ — Here’s Why the Brand Is Keeping Its Guard Up

Analysts are raising their price targets for Skechers USA Inc., whose blowout first quarter is also helping jolt its stock upward in Friday trading. But, as the pandemic exit plays out, the company is keeping its guard up.

The brand yesterday predicted full-year revenues in the range of $5.8 billion through $5.9 billion, while earnings per share were forecasted to be between $1.80 and $2.00. Multiple market watchers, however, noted that these projections could be on the safer side for the company, which continues to enjoy a boost from the push to casualization accelerated by the global health crisis.

As of 12 p.m. ET, SKX stock was up 17% to nearly $52.

“Skechers’ mission of delivering comfort, style and quality and innovation at a value resonated with consumers prior to the onset of the COVID-19 pandemic and the same is true now,” EVP and COO David Weinberg said in the company’s Q1 2021 conference call. “Consumers are returning to a new normalcy — one that involves more walking, more comfort on the job and a casual lifestyle mindset.”

In a distribution note, Cowen analyst John Kernan increased his price target for Skechers to $50 from $39, calling the company’s initial guidance for the 2021 fiscal year “conservative” based on its first-quarter results and performance so far this month.

“Skechers’ comfort, innovation and value proposition are gaining share with average selling prices rising,” he wrote. “Skechers’ brand strength and value prop has always been evident; if the financial model gains more consistency, valuation metrics have upside potential.”

B. Riley Securities analyst Susan Anderson also reiterated her “buy” rating on Skechers, while increasing its price target to $51 from $49. She also pointed out further growth for the company’s international business — which advanced 20.2% in the quarter, despite temporary closures and reduced operating hours in Spain and Italy, as well as the United Kingdom, where stores were closed for the entire three-month period.

“Even with the raised guidance, we believe EPS could prove conservative this year as guidance implies [operating] margin below 2019 levels despite higher sales,” Anderson said. “We also expect Skechers to benefit from casual/comfort/walk trends and there to be significant pent-up demand for new footwear as the economies reopen.”

Still, CFO John Vandemore expressed caution for the year ahead, pointing out a couple scenarios that led to its judicious guidance: the performance of the global retail market as well as a hike in the corporate tax rate from 21% to 28% as proposed by the Biden administration.

“It really depends on what happens relative to, for example, the international retail market,” he said. “I would just note broadly, we are seeing a higher tax rate this year, which I’d urge you all to incorporate because that’s something that we feel is durable for the remainder of the year. And we have had some exposure to foreign exchange to the downside, which we saw this quarter.”

He added, “Given the dynamics of the market, we felt this is a prudent way to give a range you could rely on.”

For the three months ended March 31, Skechers logged earnings of 63 cents per share, compared with the prior year’s earnings of 32 cents per share. Wall Street anticipated earnings of 46 cents per share. Revenues also improved 15% to $1.43 billion, compared with consensus bets of $1.34 billion.

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