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Skechers (SKX) Stock Gains 26% in Past Year: How to Play Ahead?
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Skechers U.S.A., Inc. (SKX - Free Report) has experienced a remarkable jump in its stock price over the past year. The stock has rallied 26.1%, comfortably outpacing the Zacks Shoes and Retail Apparel industry’s sharp decline of 16.6%. The company adapts to evolving consumer preferences by investing in omnichannel capabilities, infrastructure and global market penetration, resulting in significant gains in both wholesale and direct-to-consumer (DTC) segments.
This approach, along with SKX’s commitment to innovation in product development and a keen focus on international market expansion, has helped it outperform the broader Consumer Discretionary sector’s growth of 5.2% in the past year. Closing at $64.84 as of Aug 16, Sketchers’ stock is currently trading 13.7% below its 52-week high of $75.09 attained on Jun 12, 2024.
From a valuation perspective, Skechers’ shares present an attractive opportunity, trading at a discount relative to historical and industry benchmarks. With a forward 12-month price-to-earnings ratio of 14.15, below the five-year median of 14.41 and the industry’s average of 22.82, the stock offers compelling value for investors seeking exposure to the sector. Additionally, SKX’s current Value Score of A reinforces its attractiveness.
Image Source: Zacks Investment Research
Decoding the Tailwinds
Skechers is solidifying its position in the footwear industry with a diverse brand portfolio that includes fashion, athletic, non-athletic and work footwear. This multi-brand strategy allows for product introductions without impacting existing lines, catering to a wide customer base. The company has shifted its focus toward comfort-based footwear and apparel to meet the growing demand for relaxed styles.
To enhance its omnichannel capabilities and expand its DTC business, Skechers is investing in global infrastructure, including retail stores, e-commerce platforms and distribution centers. Key digital initiatives include improved website features, mobile apps, loyalty programs and upgraded point-of-sale systems to boost customer engagement.
Skechers is optimistic about continued growth of its wholesale segment throughout fiscal 2024, supported by consistent product demand, and strategic investments in logistics and retailer relationships. In the second quarter, Skechers reported a 5.5% year-over-year increase in wholesale sales, reaching $1.13 billion, driven by a 14% increase in domestic wholesale sales on double-digit growth in men’s and kids’ footwear, as well as gains in women’s footwear.
The DTC segment also showcased a strong performance, with sales climbing 9.2% year over year to $1.03 billion in the second quarter. This growth underscores the effectiveness of Skechers' strategies to enhance direct consumer engagement and improve the retail experience. International DTC sales rose 15.2% year over year, while domestic sales saw a modest 1.4% increase.
Strong International Business
Skechers' international operations are crucial to its overall growth. The company's success in global markets underscores its ability to adapt to diverse consumer preferences, capitalize on emerging trends, and implement effective distribution strategies tailored to each region's unique characteristics.
In the second quarter, international sales grew 6.9% year over year, accounting for 60% of the company's total revenues, highlighting the significance of its global presence. The EMEA region excelled with a notable 13.7% year-over-year sales increase. The APAC region and China also showed strong performances, with growth rates of 2.2% and 3.4%, respectively.
Growth Prospects Ahead
For fiscal 2024, Skechers forecasts sales between $8.88 billion and $8.98 billion, up from the earlier mentioned $8.73-$8.88 billion, which indicates a rise from $8 billion reported in fiscal 2023. The company predicts earnings per share between $4.08 and $4.18 compared with the previously stated $3.95-$4.10, implying growth from $3.49 reported last year.
Skechers plans to allocate between $325 million and $375 million for capital expenditure. This investment will support key strategic initiatives, including store openings, omnichannel capability expansion and distribution infrastructure enhancements. The company is on track to achieve its ambitious goal of $10 billion in annual sales by 2026.
Estimate Revision Favoring the Stock
Analysts have responded positively to Sketcher’s prospects, reflected in upward revisions to the Zacks Consensus Estimate for earnings per share. In the past 30 days, analysts have increased their estimates for the current quarter by 4 cents. The consensus estimate for earnings is pegged at $1.15 per share. The estimate for the next quarter has also been raised by 7 cents to 76 cents per share.
Wrapping Up
Despite the positive factors, the upward trend in operating expenses could erode margins and profitability if not effectively managed, especially in the face of revenue challenges in certain segments and regions. Notably, in the second quarter of 2024, total operating expenses grew 16% year over year to $977.9 million.
Additionally, Skechers faces significant regulatory and market challenges in key regions like China and India, which could hurt its stock price. In China, economic instability and weakened consumer demand pose ongoing risks. Similarly, India's new regulatory standards have negatively impacted sales, compounded by inventory constraints. These issues have already led to flat international wholesale growth and could pressure the company’s future performance, especially if these macroeconomic and regulatory challenges persist.
Nevertheless, SKX’s achievements in both DTC and wholesale channels underscore its robust operational performance and extensive market reach. Furthermore, positive market sentiment and upward earnings revisions indicate confidence in Sketchers’ ongoing success and growth potential. Current stakeholders should maintain their position in this Zacks Rank #3 (Hold) stock.
Key Picks
Some better-ranked stocks are The Gap, Inc. , Abercrombie & Fitch Co. (ANF - Free Report) and American Eagle Outfitters Inc. (AEO - Free Report) .
The Zacks Consensus Estimate for Gap’s fiscal 2024 earnings and sales indicates growth of 24.5% and 0.2%, respectively, from fiscal 2023 reported figures. GPS has a trailing four-quarter average earnings surprise of 202.7%.
Abercrombie is a specialty retailer of premium, high-quality casual apparel. It has a Zacks Rank of 2 at present. ANF delivered a 28.9% earnings surprise in the last reported quarter.
The consensus estimate for Abercrombie’s fiscal 2024 earnings and sales indicates growth of 51.1% and 11.5%, respectively, from the fiscal 2023 reported levels. ANF has a trailing four-quarter average earnings surprise of 210.3%.
American Eagle Outfitters is a specialty retailer of casual apparel, accessories and footwear. It currently has a Zacks Rank of 2.
The Zacks Consensus Estimate for American Eagle Outfitters’ fiscal 2024 earnings and sales indicates growth of 17.1% and 3.3%, respectively, from the year-ago actuals. AEO has a trailing four-quarter average earnings surprise of 28.1%.
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Skechers (SKX) Stock Gains 26% in Past Year: How to Play Ahead?
Skechers U.S.A., Inc. (SKX - Free Report) has experienced a remarkable jump in its stock price over the past year. The stock has rallied 26.1%, comfortably outpacing the Zacks Shoes and Retail Apparel industry’s sharp decline of 16.6%. The company adapts to evolving consumer preferences by investing in omnichannel capabilities, infrastructure and global market penetration, resulting in significant gains in both wholesale and direct-to-consumer (DTC) segments.
This approach, along with SKX’s commitment to innovation in product development and a keen focus on international market expansion, has helped it outperform the broader Consumer Discretionary sector’s growth of 5.2% in the past year. Closing at $64.84 as of Aug 16, Sketchers’ stock is currently trading 13.7% below its 52-week high of $75.09 attained on Jun 12, 2024.
From a valuation perspective, Skechers’ shares present an attractive opportunity, trading at a discount relative to historical and industry benchmarks. With a forward 12-month price-to-earnings ratio of 14.15, below the five-year median of 14.41 and the industry’s average of 22.82, the stock offers compelling value for investors seeking exposure to the sector. Additionally, SKX’s current Value Score of A reinforces its attractiveness.
Image Source: Zacks Investment Research
Decoding the Tailwinds
Skechers is solidifying its position in the footwear industry with a diverse brand portfolio that includes fashion, athletic, non-athletic and work footwear. This multi-brand strategy allows for product introductions without impacting existing lines, catering to a wide customer base. The company has shifted its focus toward comfort-based footwear and apparel to meet the growing demand for relaxed styles.
To enhance its omnichannel capabilities and expand its DTC business, Skechers is investing in global infrastructure, including retail stores, e-commerce platforms and distribution centers. Key digital initiatives include improved website features, mobile apps, loyalty programs and upgraded point-of-sale systems to boost customer engagement.
Skechers is optimistic about continued growth of its wholesale segment throughout fiscal 2024, supported by consistent product demand, and strategic investments in logistics and retailer relationships. In the second quarter, Skechers reported a 5.5% year-over-year increase in wholesale sales, reaching $1.13 billion, driven by a 14% increase in domestic wholesale sales on double-digit growth in men’s and kids’ footwear, as well as gains in women’s footwear.
The DTC segment also showcased a strong performance, with sales climbing 9.2% year over year to $1.03 billion in the second quarter. This growth underscores the effectiveness of Skechers' strategies to enhance direct consumer engagement and improve the retail experience. International DTC sales rose 15.2% year over year, while domestic sales saw a modest 1.4% increase.
Strong International Business
Skechers' international operations are crucial to its overall growth. The company's success in global markets underscores its ability to adapt to diverse consumer preferences, capitalize on emerging trends, and implement effective distribution strategies tailored to each region's unique characteristics.
In the second quarter, international sales grew 6.9% year over year, accounting for 60% of the company's total revenues, highlighting the significance of its global presence. The EMEA region excelled with a notable 13.7% year-over-year sales increase. The APAC region and China also showed strong performances, with growth rates of 2.2% and 3.4%, respectively.
Growth Prospects Ahead
For fiscal 2024, Skechers forecasts sales between $8.88 billion and $8.98 billion, up from the earlier mentioned $8.73-$8.88 billion, which indicates a rise from $8 billion reported in fiscal 2023. The company predicts earnings per share between $4.08 and $4.18 compared with the previously stated $3.95-$4.10, implying growth from $3.49 reported last year.
Skechers plans to allocate between $325 million and $375 million for capital expenditure. This investment will support key strategic initiatives, including store openings, omnichannel capability expansion and distribution infrastructure enhancements. The company is on track to achieve its ambitious goal of $10 billion in annual sales by 2026.
Estimate Revision Favoring the Stock
Analysts have responded positively to Sketcher’s prospects, reflected in upward revisions to the Zacks Consensus Estimate for earnings per share. In the past 30 days, analysts have increased their estimates for the current quarter by 4 cents. The consensus estimate for earnings is pegged at $1.15 per share. The estimate for the next quarter has also been raised by 7 cents to 76 cents per share.
Wrapping Up
Despite the positive factors, the upward trend in operating expenses could erode margins and profitability if not effectively managed, especially in the face of revenue challenges in certain segments and regions. Notably, in the second quarter of 2024, total operating expenses grew 16% year over year to $977.9 million.
Additionally, Skechers faces significant regulatory and market challenges in key regions like China and India, which could hurt its stock price. In China, economic instability and weakened consumer demand pose ongoing risks. Similarly, India's new regulatory standards have negatively impacted sales, compounded by inventory constraints. These issues have already led to flat international wholesale growth and could pressure the company’s future performance, especially if these macroeconomic and regulatory challenges persist.
Nevertheless, SKX’s achievements in both DTC and wholesale channels underscore its robust operational performance and extensive market reach. Furthermore, positive market sentiment and upward earnings revisions indicate confidence in Sketchers’ ongoing success and growth potential. Current stakeholders should maintain their position in this Zacks Rank #3 (Hold) stock.
Key Picks
Some better-ranked stocks are The Gap, Inc. , Abercrombie & Fitch Co. (ANF - Free Report) and American Eagle Outfitters Inc. (AEO - Free Report) .
Gap is a premier international specialty retailer that offers a diverse range of clothing, accessories and personal care products. It currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Gap’s fiscal 2024 earnings and sales indicates growth of 24.5% and 0.2%, respectively, from fiscal 2023 reported figures. GPS has a trailing four-quarter average earnings surprise of 202.7%.
Abercrombie is a specialty retailer of premium, high-quality casual apparel. It has a Zacks Rank of 2 at present. ANF delivered a 28.9% earnings surprise in the last reported quarter.
The consensus estimate for Abercrombie’s fiscal 2024 earnings and sales indicates growth of 51.1% and 11.5%, respectively, from the fiscal 2023 reported levels. ANF has a trailing four-quarter average earnings surprise of 210.3%.
American Eagle Outfitters is a specialty retailer of casual apparel, accessories and footwear. It currently has a Zacks Rank of 2.
The Zacks Consensus Estimate for American Eagle Outfitters’ fiscal 2024 earnings and sales indicates growth of 17.1% and 3.3%, respectively, from the year-ago actuals. AEO has a trailing four-quarter average earnings surprise of 28.1%.