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Skechers on a Roll, Hits High

Zacks Equity Research

Shares of Skechers USA Inc. (SKX) have been gaining momentum since it released robust fourth quarter and fiscal 2013 results. During the reported period, the company set records of posting the second highest sales ever for the fourth quarter as well as the fiscal year, apart from delivering solid earnings, which beat the Zacks Consensus Estimate for both the periods.

Driven by this stellar performance, shares of this footwear retailer have shot up 21.9%, since reporting strong results on Feb 12, 2014. Additionally, Skechers hit a 52-week high of $36.78 yesterday and eventually closed at $36.54, amassing a return of nearly 65.6% over the past year.

The last traded price of the company is 13% below the Zacks Consensus average analyst price target of $42, which intimates further upside potential for the stock and ushers in optimism for investors. The average volume of shares traded in the last 3 months stands at 506.2K.

Skechers’ fourth-quarter earnings of 28 cents a share rose over threefold from the prior-year quarter, owing to strong top-line growth across all business channels and product categories on both domestic and international fronts.  Moreover, for fiscal 2013, its earnings of $1.08 a share grew over 5 times on a year-over-year basis.

Results mainly benefited from increased demand for products, product innovation across multiple categories and healthy performance across all revenue channels.

Also, the company is confident of sustaining the growth momentum in 2014, on the back of stronger emphasis on the new line of products, cost containment efforts, inventory management, global distribution platform, strong backlogs at the year end and healthy Jan 2014 sales.

This encouraging outlook is the silver lining to its impressive performance, boosting investors’ confidence in this Zacks Rank #2 (Buy) stock.

Further, management remains committed to focus on opening of additional Skechers stores and increasing distribution channels with the development of international distribution agreements to boost its sales and profitability, as international business remains a significant growth driver for the company’s sales.

Skechers, which competes with Deckers Outdoor Corp. (DECK) and Nike Inc. (NKE), is poised to enhance its global reach in the footwear market, through its distribution networks, subsidiaries and joint ventures. Apart from Skechers, Foot Locker Inc. (FL) also achieved a 52-week high of $47.23 on Mar 31, 2014.

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