We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Why Is Skechers (SKX) Down 3.2% Since the Last Earnings Report?
Read MoreHide Full Article
A month has gone by since the last earnings report for Skechers U.S.A., Inc. (SKX - Free Report) . Shares have lost about 3.2% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
After posting earnings beat in the first quarter of 2017, Skechers USA Inc. succumbed to a negative earnings surprise in the second quarter. The Manhattan Beach, CA-based company delivered quarterly earnings of $0.38 per share that missed the Zacks Consensus Estimate of $0.44. Although this footwear retailer witnessed improved top-line performance, it failed to act as a savior for the bottom line that fell 20.8% year over year due to increased operating expenses and higher effective tax rate.
The company reported net sales of $1,025.9 million that increased 16.9% from the year-ago quarter and also came ahead of the Zacks Consensus Estimate of $966 million, marking the third consecutive quarter of revenues beat. Sales for the quarter mainly gained from solid performances at the company’s domestic and international wholesale business and company-owned global retail operations. The company concluded the quarter under review with low-double digit jump in backlog on a global basis.
Further, Skechers’ domestic eCommerce business contributed to sales growth in the quarter, registering an increase of 27.9%. The company currently operates eCommerce sites in Chile, Germany and U.K., and has launched additional sites in Spain and Canada in the quarter under review.
Gross profit for the reported quarter grew 17.3% to $488.3 million, while gross margin expanded 20 basis points (bps) to 47.6%. Operating income came in at $86.3 million, down 14% from the prior-year quarter, while as a percentage of net sales it decreased 300 bps to 8.4%.
Management now projects third-quarter 2017 net sales in the band of $1.050–$1.075 billion compared with $942.4 million reported in the prior-year quarter. Additionally, the company anticipates earnings per share in the range of $0.42–$0.47 compared with $0.42 delivered in the year-ago period.
The company expects to deliver flat sales in the domestic wholesale business and envisions double-digit growth at its international business as well as company-owned retail stores.
Segmental Sales Synopsis
The domestic wholesale revenues rose 6.4% year over year. The company shipped 11.4% more pairs compared with the prior-year period. However, average price per pair declined 4.5%.
Skechers’ international wholesale business revenues, which constituted 35.1% of total sales, advanced 18.6% on the back of a 19.4% rise in wholly-owned subsidiary and joint venture (JV) businesses and 16.1% growth in distributor business. The company’s JV business registered growth of 62.4% for the quarter buoyed by double-digit growth in China and sales from South Korea.
The company’s JV business is gaining from the transition of distributors in Israel and South Korea. These along with the transition of Latin American and Central Eastern European distributors to subsidiaries are likely to benefit international sales.
On a combined basis, global company-owned retail business sales grew 28% driven by higher store count and comps growth of 7.1%. Domestic retail sales rose 14.5%, while International retail sales surged 67.4%. Comps increased 7.7% at domestic retail stores and 5.1% at international retail stores.
Store Update
Skechers operated 614 company-owned retail outlets globally, comprising 179 international locations at the end of the quarter. During the quarter, the company opened 31 stores. Looking ahead, the company anticipates opening 35–40 Skechers stores more in 2017. At the end of the quarter, Skechers also operated 1,691 branded stores internationally, owned and operated by JVs, franchisees and distributors.
During the quarter, 187 third-party owned stores were opened, including 107 stores in China, 14 in India, 10 in Indonesia, eight in Saudi Arabia, four in Spain, three each in Australia, Turkey, Qatar and Italy, two each in Angola, Netherlands, Philippines, Taiwan, Thailand and UAE, and one each in Botswana, Brunei, Bulgaria, Canada, Denmark, Egypt, England, Iceland, Japan, Kazakhstan, Kosovo, Lebanon, Malaysia, Mexico, Northern Ireland, Pakistan, Poland and Vietnam. Additionally, the company closed 14 third-party owned stores.
So far in the third quarter, Skechers has opened four third-party owned stores comprising two in India and one each in Algeria and Australia. The company plans to open a total of 240–260 third-party owned stores in the second half of 2017.
Other Financial Aspects
Skechers ended the quarter with cash and cash equivalents of $751.6 million, long-term borrowings (net of current installments) of $68.3 million, and shareholders’ equity of $1,779.1 million, excluding non-controlling interest of $104.2 million. Capital expenditures incurred during the quarter were $47.6 million on store openings, remodels, and land to be utilized for China distribution center. Management now envisions capital expenditures of about $35–$40 million for the remaining year, reflecting planned opening of an additional 35−40 company-owned retail outlets, corporate upgrades and store remodeling projects.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the last one month period as none of them issued any earnings estimate revisions.
At this time, Skechers' stock has a great Growth Score of A, though it is lagging a lot on the momentum front with a D. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for growth investors than value investors.
Outlook
Notably, the stock has a Zacks Rank #3 (Hold). We expect in-line returns from the stock in the next few months.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Why Is Skechers (SKX) Down 3.2% Since the Last Earnings Report?
A month has gone by since the last earnings report for Skechers U.S.A., Inc. (SKX - Free Report) . Shares have lost about 3.2% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Skechers Q2 Earnings Miss, Revenues Beat Estimates
After posting earnings beat in the first quarter of 2017, Skechers USA Inc. succumbed to a negative earnings surprise in the second quarter. The Manhattan Beach, CA-based company delivered quarterly earnings of $0.38 per share that missed the Zacks Consensus Estimate of $0.44. Although this footwear retailer witnessed improved top-line performance, it failed to act as a savior for the bottom line that fell 20.8% year over year due to increased operating expenses and higher effective tax rate.
The company reported net sales of $1,025.9 million that increased 16.9% from the year-ago quarter and also came ahead of the Zacks Consensus Estimate of $966 million, marking the third consecutive quarter of revenues beat. Sales for the quarter mainly gained from solid performances at the company’s domestic and international wholesale business and company-owned global retail operations. The company concluded the quarter under review with low-double digit jump in backlog on a global basis.
Further, Skechers’ domestic eCommerce business contributed to sales growth in the quarter, registering an increase of 27.9%. The company currently operates eCommerce sites in Chile, Germany and U.K., and has launched additional sites in Spain and Canada in the quarter under review.
Gross profit for the reported quarter grew 17.3% to $488.3 million, while gross margin expanded 20 basis points (bps) to 47.6%. Operating income came in at $86.3 million, down 14% from the prior-year quarter, while as a percentage of net sales it decreased 300 bps to 8.4%.
Management now projects third-quarter 2017 net sales in the band of $1.050–$1.075 billion compared with $942.4 million reported in the prior-year quarter. Additionally, the company anticipates earnings per share in the range of $0.42–$0.47 compared with $0.42 delivered in the year-ago period.
The company expects to deliver flat sales in the domestic wholesale business and envisions double-digit growth at its international business as well as company-owned retail stores.
Segmental Sales Synopsis
The domestic wholesale revenues rose 6.4% year over year. The company shipped 11.4% more pairs compared with the prior-year period. However, average price per pair declined 4.5%.
Skechers’ international wholesale business revenues, which constituted 35.1% of total sales, advanced 18.6% on the back of a 19.4% rise in wholly-owned subsidiary and joint venture (JV) businesses and 16.1% growth in distributor business. The company’s JV business registered growth of 62.4% for the quarter buoyed by double-digit growth in China and sales from South Korea.
The company’s JV business is gaining from the transition of distributors in Israel and South Korea. These along with the transition of Latin American and Central Eastern European distributors to subsidiaries are likely to benefit international sales.
On a combined basis, global company-owned retail business sales grew 28% driven by higher store count and comps growth of 7.1%. Domestic retail sales rose 14.5%, while International retail sales surged 67.4%. Comps increased 7.7% at domestic retail stores and 5.1% at international retail stores.
Store Update
Skechers operated 614 company-owned retail outlets globally, comprising 179 international locations at the end of the quarter. During the quarter, the company opened 31 stores. Looking ahead, the company anticipates opening 35–40 Skechers stores more in 2017. At the end of the quarter, Skechers also operated 1,691 branded stores internationally, owned and operated by JVs, franchisees and distributors.
During the quarter, 187 third-party owned stores were opened, including 107 stores in China, 14 in India, 10 in Indonesia, eight in Saudi Arabia, four in Spain, three each in Australia, Turkey, Qatar and Italy, two each in Angola, Netherlands, Philippines, Taiwan, Thailand and UAE, and one each in Botswana, Brunei, Bulgaria, Canada, Denmark, Egypt, England, Iceland, Japan, Kazakhstan, Kosovo, Lebanon, Malaysia, Mexico, Northern Ireland, Pakistan, Poland and Vietnam. Additionally, the company closed 14 third-party owned stores.
So far in the third quarter, Skechers has opened four third-party owned stores comprising two in India and one each in Algeria and Australia. The company plans to open a total of 240–260 third-party owned stores in the second half of 2017.
Other Financial Aspects
Skechers ended the quarter with cash and cash equivalents of $751.6 million, long-term borrowings (net of current installments) of $68.3 million, and shareholders’ equity of $1,779.1 million, excluding non-controlling interest of $104.2 million. Capital expenditures incurred during the quarter were $47.6 million on store openings, remodels, and land to be utilized for China distribution center. Management now envisions capital expenditures of about $35–$40 million for the remaining year, reflecting planned opening of an additional 35−40 company-owned retail outlets, corporate upgrades and store remodeling projects.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the last one month period as none of them issued any earnings estimate revisions.
Skechers U.S.A., Inc. Price and Consensus
Skechers U.S.A., Inc. Price and Consensus | Skechers U.S.A., Inc. Quote
VGM Scores
At this time, Skechers' stock has a great Growth Score of A, though it is lagging a lot on the momentum front with a D. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for growth investors than value investors.
Outlook
Notably, the stock has a Zacks Rank #3 (Hold). We expect in-line returns from the stock in the next few months.