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Skechers' (SKX) Q1 Earnings Meet, Muted Outlook Hurts Stock
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Skechers USA Inc.’s (SKX - Free Report) first-quarter 2018 earnings came in line with analysts’ expectations, following two successive quarters of earnings beat. This Manhattan Beach, CA-based company recorded earnings of 75 cents a share that met the Zacks Consensus Estimate and the higher end of management’s projection of 70-75 cents. The bottom line surged 25% from 60 cents reported in the year-ago period buoyed by improved top-line performance.
The company delivered net sales of $1,250.1 million that increased 16.5% from the year-ago quarter and also came ahead of the Zacks Consensus Estimate of $1,198 million for the sixth straight quarter. Notably, the top line comfortably surpassed management’s guidance of $1,175-$1,200 million.
Sales for the quarter mainly gained from healthy performances at the international wholesale business, company-owned global retail business and domestic wholesale business.
In spite of the decent outcome, the stock plunged 22.7% during after-market trading session yesterday.
What Hurt the Stock?
Analysts pointed that bleak outlook for the second quarter hurt investor sentiment. Management now projects second-quarter earnings between 38 cents and 43 cents a share compared with 38 cents delivered in the year-ago period. We note that the company’s guided range is significantly down from the current Zacks Consensus Estimate of 56 cents, which could witness a downward revision in the coming days.
Additionally, the company anticipates net sales in the band of $1.120-$1.145 billion compared with $1,025.9 million reported in the prior-year quarter. Sales projection includes an expected shift in shipments from the second quarter to the later part of the year for quite a few important international distributors and domestic accounts. Analysts polled by Zacks expect second-quarter net sales to be $1.16 billion.
We note that shares of this designer, marketer and distributor of footwear has increased 3.8% in the past three months compared with the industry’s decline of 1.2%.
Skechers U.S.A., Inc. Price, Consensus and EPS Surprise
Skechers’ domestic e-commerce business contributed to sales growth in the quarter, registering an increase of 12.7%. The company currently operates e-commerce sites in Chile, Germany, the U.K., Spain and Canada.
Gross profit for the reported quarter grew 22.4% to $583.1 million, while gross margin expanded 230 basis points (bps) to 46.7%. Operating income came in at $148.8 million, up 19.6% from the prior-year quarter, while operating margin increased 30 bps to 11.9%.
Segmental Sales Synopsis
The domestic wholesale revenues rose 8.5% year over year. The company shipped 15.1% more pairs compared with the prior-year period. However, average price per pair declined 5.7%.
Skechers’ international wholesale business revenues, which constituted 46.2% of total sales, advanced 17.9% on the back of a 25.7% rise in wholly-owned subsidiary and joint venture (JV) businesses, offset by 22.2% decline in distributor sales. The company’s JV business registered growth of 25.4%, while wholly-owned international subsidiary business grew by 25.9% for the quarter.
On a combined basis, global company-owned retail business sales grew 26.4% driven by higher store count and comps growth of 9.5%. Domestic retail sales rose 13.5%, while International retail sales surged 62.1%. Comps increased 7% at domestic retail stores and 17.6% at international retail stores.
Store Update
Skechers operated 657 company-owned retail outlets globally, comprising 203 international locations at the end of the quarter under review. During the quarter, the company opened 15 stores and closed three. So far in the second quarter, the company has opened two new concept outlets. Looking ahead, the company anticipates opening additional 60-75 company-owned SKECHERS stores and remodel or relocate 15-20 existing stores.
During the quarter, 79 third-party owned stores were opened, including 21 in China, 19 in India, seven in South Korea, three in both Indonesia and Taiwan, two each in Australia, England, Israel, Netherlands, Japan, Turkey and Nigeria and one each in Denmark, Greece, Hungary, Italy, Malaysia, Portugal, Serbia, Sweden, Switzerland, the UAE, Ukraine and Vietnam. The company shuttered 27 stores during the quarter.
So far in the second quarter, the company has opened nine third-party owned stores with plans to open another 450-475 third-party owned SKECHERS branded stores to in 2018.
Other Financial Aspects
Skechers ended the quarter with cash and cash equivalents of $700.1 million (down $36.4 million from Dec 31, 2017), long-term borrowings (net of current installments) of $70.6 million, and shareholders’ equity of $1,946.2 million, excluding non-controlling interest of $137.2 million.
During the quarter, the company bought back roughly 76,000 shares at a cost of $3 million under its existing share buyback program. The company still has approximately $147 million remaining under its share repurchase program of $150 million to be utilized by Feb 8, 2021.
Capital expenditures incurred during the quarter were $34.5 million on store openings, remodels along with corporate office upgrades. Management now envisions capital expenditures of about $50-$55 million for the remainder of 2018, reflecting planned opening of stores, corporate upgrades and store remodeling projects.
Nordstrom, Inc. (JWN - Free Report) , with a long-term earnings growth rate of 6%, carries a Zacks Rank #2 (Buy).
Kohl's Corporation (KSS - Free Report) has a long-term earnings growth rate of 6.7% and a Zacks Rank #2.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
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Skechers' (SKX) Q1 Earnings Meet, Muted Outlook Hurts Stock
Skechers USA Inc.’s (SKX - Free Report) first-quarter 2018 earnings came in line with analysts’ expectations, following two successive quarters of earnings beat. This Manhattan Beach, CA-based company recorded earnings of 75 cents a share that met the Zacks Consensus Estimate and the higher end of management’s projection of 70-75 cents. The bottom line surged 25% from 60 cents reported in the year-ago period buoyed by improved top-line performance.
The company delivered net sales of $1,250.1 million that increased 16.5% from the year-ago quarter and also came ahead of the Zacks Consensus Estimate of $1,198 million for the sixth straight quarter. Notably, the top line comfortably surpassed management’s guidance of $1,175-$1,200 million.
Sales for the quarter mainly gained from healthy performances at the international wholesale business, company-owned global retail business and domestic wholesale business.
In spite of the decent outcome, the stock plunged 22.7% during after-market trading session yesterday.
What Hurt the Stock?
Analysts pointed that bleak outlook for the second quarter hurt investor sentiment. Management now projects second-quarter earnings between 38 cents and 43 cents a share compared with 38 cents delivered in the year-ago period. We note that the company’s guided range is significantly down from the current Zacks Consensus Estimate of 56 cents, which could witness a downward revision in the coming days.
Additionally, the company anticipates net sales in the band of $1.120-$1.145 billion compared with $1,025.9 million reported in the prior-year quarter. Sales projection includes an expected shift in shipments from the second quarter to the later part of the year for quite a few important international distributors and domestic accounts. Analysts polled by Zacks expect second-quarter net sales to be $1.16 billion.
We note that shares of this designer, marketer and distributor of footwear has increased 3.8% in the past three months compared with the industry’s decline of 1.2%.
Skechers U.S.A., Inc. Price, Consensus and EPS Surprise
Skechers U.S.A., Inc. Price, Consensus and EPS Surprise | Skechers U.S.A., Inc. Quote
Let’s Delve Deep
Skechers’ domestic e-commerce business contributed to sales growth in the quarter, registering an increase of 12.7%. The company currently operates e-commerce sites in Chile, Germany, the U.K., Spain and Canada.
Gross profit for the reported quarter grew 22.4% to $583.1 million, while gross margin expanded 230 basis points (bps) to 46.7%. Operating income came in at $148.8 million, up 19.6% from the prior-year quarter, while operating margin increased 30 bps to 11.9%.
Segmental Sales Synopsis
The domestic wholesale revenues rose 8.5% year over year. The company shipped 15.1% more pairs compared with the prior-year period. However, average price per pair declined 5.7%.
Skechers’ international wholesale business revenues, which constituted 46.2% of total sales, advanced 17.9% on the back of a 25.7% rise in wholly-owned subsidiary and joint venture (JV) businesses, offset by 22.2% decline in distributor sales. The company’s JV business registered growth of 25.4%, while wholly-owned international subsidiary business grew by 25.9% for the quarter.
On a combined basis, global company-owned retail business sales grew 26.4% driven by higher store count and comps growth of 9.5%. Domestic retail sales rose 13.5%, while International retail sales surged 62.1%. Comps increased 7% at domestic retail stores and 17.6% at international retail stores.
Store Update
Skechers operated 657 company-owned retail outlets globally, comprising 203 international locations at the end of the quarter under review. During the quarter, the company opened 15 stores and closed three. So far in the second quarter, the company has opened two new concept outlets. Looking ahead, the company anticipates opening additional 60-75 company-owned SKECHERS stores and remodel or relocate 15-20 existing stores.
During the quarter, 79 third-party owned stores were opened, including 21 in China, 19 in India, seven in South Korea, three in both Indonesia and Taiwan, two each in Australia, England, Israel, Netherlands, Japan, Turkey and Nigeria and one each in Denmark, Greece, Hungary, Italy, Malaysia, Portugal, Serbia, Sweden, Switzerland, the UAE, Ukraine and Vietnam. The company shuttered 27 stores during the quarter.
So far in the second quarter, the company has opened nine third-party owned stores with plans to open another 450-475 third-party owned SKECHERS branded stores to in 2018.
Other Financial Aspects
Skechers ended the quarter with cash and cash equivalents of $700.1 million (down $36.4 million from Dec 31, 2017), long-term borrowings (net of current installments) of $70.6 million, and shareholders’ equity of $1,946.2 million, excluding non-controlling interest of $137.2 million.
During the quarter, the company bought back roughly 76,000 shares at a cost of $3 million under its existing share buyback program. The company still has approximately $147 million remaining under its share repurchase program of $150 million to be utilized by Feb 8, 2021.
Capital expenditures incurred during the quarter were $34.5 million on store openings, remodels along with corporate office upgrades. Management now envisions capital expenditures of about $50-$55 million for the remainder of 2018, reflecting planned opening of stores, corporate upgrades and store remodeling projects.
Skechers currently carries a Zacks Rank #2 (Buy).
Looking for High Performance Stocks
Macy's, Inc. (M - Free Report) has a long-term earnings growth rate of 8.5% and a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Nordstrom, Inc. (JWN - Free Report) , with a long-term earnings growth rate of 6%, carries a Zacks Rank #2 (Buy).
Kohl's Corporation (KSS - Free Report) has a long-term earnings growth rate of 6.7% and a Zacks Rank #2.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
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