On Apr 10, 2014, Zacks Investment Research upgraded Skechers USA Inc. (SKX), the footwear retailer, to a Zacks Rank #1 (Strong Buy).
Why the Upgrade?
Estimates for Skechers have shown an uptrend since the company reported fourth-quarter 2013 results. The company posted earnings of 28 cents a share that surpassed the Zacks Consensus Estimate of 17 cents and rose over threefold from 8 cents delivered in the prior-year quarter owing to strong top-line growth across all business channels and product categories on both domestic and international fronts.
Increased demand for products, product innovation across multiple categories and healthy performance across all revenue channels led to a 13.9% jump in revenue to $450.7 million in the quarter that also came ahead of the Zacks Consensus Estimate of $447 million.
With more emphasis on the new line of products, cost containment efforts, inventory management, global distribution platform and strong backlogs (up 30%), management anticipates sustaining the growth momentum in 2014.
Management remains committed to focus on new lines of products, opening of additional Skechers stores and increasing distribution channels with the development of international distribution agreements to boost its sales and profitability. Moreover, international business remains a significant growth driver for the company’s sales. Skechers, through its distribution networks, subsidiaries and joint ventures, is poised to enhance its global reach in the footwear market.
The better-than-expected results triggered an upward revision in the Zacks Consensus Estimate, as analysts become more constructive on the stock’s future performance. This is evident from the movement witnessed in the Zacks Consensus Estimate that increased 4.6% to $1.81 for 2014 and 4% to $2.36 per share for 2015 in the past 60 days.
Other Stocks that Warrant a Look
Other better-ranked retail stocks that look promising and are expected to continue with their upbeat performance include Brown Shoe Co. Inc. (BWS), Foot Locker, Inc. (FL) and American Apparel, Inc. (APP). All these stocks carry a Zacks Rank #2 (Buy).