Shares of Skechers (NYSE: SKX) dropped about 5 percent Wednesday after the stock was downgraded on growing signs of a "crowded" footwear and apparel market, research firm Susquehanna Financial Group said.
The fierce competition could lead to Skechers falling short of its revenue goals, as some of its new products are "promising, but unproven," Susquehanna analyst Sam Poser wrote in a Wednesday note to clients.
Companies such as Adidas, Nike and Puma are more "proven" in consumers' minds today, thus making it easier for those brands to get into big-box retailers, he added.
"Hot brands such as Adidas (XETRA: ADS-DE) & Puma are receiving much larger allocations [from retailers]," Poser said. "Nike (NYSE: NKE) is commanding its usual allotment of incremental dollars... several retailers are planning incremental dollars to fund Under Armour. (NYSE: UAA)"
The stock was downgraded to negative from positive, and Poser initiated a new price target of $25, down from a previous $30 target.
As of Tuesday's close, shares of Skechers are up more than 35 percent over the past 6 months and are up more than 20 percent year-to-date. The stock hit a 52-week intraday low below $19 per share last October.
In February, Skechers reported stronger-than-expected fourth-quarter revenue and estimated sales would outperform in its current quarter, which sent shares soaring more than 19 percent.
"The strong quarterly growth was primarily the result of a 17.1 percent increase in our international wholesale business, led by China with an increase of 48.5 percent," David Weinberg, Skechers chief operating officer, said in a press release at the time.
But Skechers needs to remain focused on its domestic wholesale business, Poser wrote on Wednesday. Expanding internationally and making foreign investments comes with an expensive price tag, meanwhile U.S. sales are falling, he said.
Susquehanna slashed its U.S. wholesale sales growth forecasts for the full years 2017 and 2018 from 7 and 7.6 percent, respectively, to 2.5 and 4 percent.
Skechers year-to-date performance
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