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Here's Why You Should Add Skechers (SKX) to Your Portfolio

Zacks Equity Research

Skechers U.S.A., Inc. SKX clearly appears to be a preferred pick, as it seems to have all it takes to catch investors’ attention. Notably, the company is gaining from its focus on new line of products, cost-containment efforts, inventory management, and global distribution platform. Also, its domestic e-commerce business continues to gain traction. These factors have helped the company deliver robust second-quarter 2019 results and are driving the stock higher. (Read: Skechers Stock Up on Q2 Earnings Beat, Upbeat View)

In the past three months, shares of this Manhattan Beach, CA-based company have rallied 23%, outperforming the industry’s decline of 0.9%.



Let’s delve deeper to find out the factors driving this Zacks Rank #1 (Strong Buy) stock’s performance, which also flaunts a VGM Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.

International Business: Key Catalyst

International business is a major sales growth driver for Skechers, with Europe and China being significant markets outside the United States. Notably, the company witnessed sales growth of 19.8% during the second quarter across its international business representing 55.7% of total sales. Skechers’ international wholesale and direct-to-consumer businesses grew 18.2% and 25.8%, respectively. Management expects international and direct-to-consumer businesses to sustain growth momentum and increase at a mid-teen and high single-digit rate, respectively, in the remaining part of the year.

Growth Initiatives Bode Well

Skechers is focused on its new line of products, corporate upgrades and store remodeling projects, cost-containment efforts, inventory management, and global distribution platform. The company’s domestic e-commerce business registered an increase of 36.1% during the second quarter. Comparable-store sales increased 4.9%, including e-commerce sales growth of 34.3%. Also, it is focused on product innovation, additional store openings and increasing distribution channels by entering into distribution agreements to boost sales and profitability.

Apart from these, Skechers continues to offer a diversified portfolio of brands that includes a wide range of fashion, athletic, non-athletic, and work footwear at compelling prices. We believe that this multi-brand strategy enables it to roll out new products without cannibalizing its existing brands and helps to expand the targeted demographic profile of customers.

Upbeat View

Impressive second-quarter performance prompted management to provide an upbeat view for the third quarter. For third-quarter 2019, management guided earnings in the range of 65-70 cents a share and net sales in the band of $1.325-$1.350 billion. The company had reported earnings of 58 cents and net sales of $1.176 billion in the prior-year quarter.

We expect all the aforementioned factors to continue bolstering the company’s performance, and help it remain in investors’ good books.

Other Key Picks

Rocky Brands, Inc. RCKY delivered average positive earnings surprise of 7.6% in the trailing four quarters. It currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

adidas AG ADDYY has a long-term earnings growth rate of 15% and a Zacks Rank #2.

Deckers Outdoor Corporation DECK has a long-term earnings growth rate of 12.1% and a Zacks Rank #2.

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