Here's How Skechers (SKX) is Charting the Path to Global Growth
Skechers U.S.A., Inc. SKX places a strong emphasis on delivering products that embody comfort, style, innovation and quality across its entire product range. From its robust direct-to-consumer (DTC) business to strategic international partnerships and an exciting product lineup, Skechers has truly solidified its position in the footwear industry.
Direct-to-Consumer Dominance
One of the pivotal factors contributing to Skechers' achievements is the remarkable expansion of its DTC business. In the second quarter of 2023, this segment demonstrated substantial 29% year-over-year growth, culminating in sales of $939.5 million. This surge can be attributed to the strong demand for Skechers' comfort-focused footwear and an effective strategy for product availability in physical stores. It is clear that the company knows how to generate demand effectively.
Skechers' international wholesale business is another substantial driver of sales. This is underpinned by its ongoing strength in the Asia Pacific (APAC), and Europe, the Middle East, and Africa (EMEA) regions, which experienced double-digit growth in numerous markets. Specifically, APAC grew 14% and EMEA saw a 7% increase year over year in the second quarter.
Diversification of Product Line
In its pursuit of innovation, Skechers constantly expands its product offerings. The second quarter of 2023 saw the introduction of highly sought-after products like the Skechers Hands Free slip-ins, alongside the unveiling of the Skechers Arch Fit and Skechers UNO collections. The company also broadened its range of walking and performance footwear, enhancing its appeal to a wider customer base.
Notably, Skechers has established successful collaborations with various partners. One of these noteworthy collaborations was with the iconic rock band, The Rolling Stones. Recently, the company revealed a limited-edition collection created in partnership with Skechers ambassador Ashley Park, showcasing fashion-forward footwear. This launch followed the release of the popular summer movie, Joy Ride. The company has exciting plans to continue unveiling more captivating collaborations throughout the remainder of 2023.
Widening Retail Presence
Skechers is strategically expanding its retail footprint. In the second quarter, the company expanded its retail presence by opening 50 company-owned Skechers stores and simultaneously closing 39 stores. These store openings comprised 28 locations in China, eight of which transitioned from franchise to company-owned, as well as eight big box stores in the United States, three stores each in Chile and Vietnam. The acquisition of a Scandinavian distributor led to the addition of 56 Skechers stores across four Nordic countries and two stores in Germany.
This brought the total number of Skechers stores worldwide to an impressive 4,705, with 3,161 being third-party stores at the end of the second quarter. The company anticipates opening 90-100 company-owned stores worldwide through the remainder of 2023.
Decent Outlook
Skechers' ambitious goals, innovative product offerings and strategic global expansion efforts paint a promising picture for its future. The company has set a target of achieving $10 billion in annual sales by 2026, which it plans to reach by expanding its retail network, advancing its omni-channel presence, and strengthening its distribution capabilities.
For 2023, management anticipates sales of $7.95-$8.1 billion, marking an increase from the $7.44 billion reported in 2022. Additionally, the company envisions earnings per share (EPS) of $3.25-$3.40, indicating a significant improvement from the $2.38 achieved in the previous year.
Skechers' dedication to comfort, style and innovation, its dynamic global presence, and its strategic partnerships make it an enticing investment option with a bright outlook for sustained growth and profitability.
Other Players in the Industry
As Skechers continues to make waves in the footwear industry, it is essential to take a closer look at the broader competitive landscape.
Deckers Outdoor Corporation DECK is a leading designer, producer and brand manager of innovative, niche footwear and accessories developed for outdoor sports, and other lifestyle-related activities.
Deckers is committed to building HOKA into a major player in the performance athletic market. The HOKA brand is expected to rise more than 20% in fiscal 2024, with most of the increase likely to come from the brand's DTC business. Deckers’ UGG brand’s revenues are anticipated to rise in the low-single digits, backed by international expansion and gains from DTC.
American Eagle Outfitters Inc. AEO is a specialty retailer of casual apparel, accessories and footwear for men and women. The company’s efforts to rationalize inventory and contain costs are paying off.
The strong performance of key brands like American Eagle and Aerie, coupled with expansions into premium and activewear segments, indicates potential for growth. The introduction of store designs and online enhancements demonstrates a commitment to improving the customer experience.
Urban Outfitters Inc. URBN is a lifestyle specialty retailer that offers fashion apparel and accessories, footwear, home décor and gift items. Urban Outfitters seems a promising bet due to its solid business strategies and sound fundamentals.
Management has been strengthening its direct-to-consumer business, enhancing productivity across existing channels and optimizing inventory levels. URBN’s strategic growth initiative, the FP Movement and store-growth endeavors are also impressive.
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American Eagle Outfitters, Inc. (AEO) : Free Stock Analysis Report
Skechers U.S.A., Inc. (SKX) : Free Stock Analysis Report
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