Skechers (SKX) to Benefit From Business Strength Amid Risks
Skechers U.S.A., Inc. SKX has been benefiting from its robust business strategies. The company remains committed to enhancing its omni-channel capabilities by expanding its direct-to-consumer (“DTC”) business and improving its foothold internationally. The company’s DTC sales increased 23.8% year over year in the third quarter of 2023, following 29.1% growth in the preceding quarter. Results gained from strength in brands and demand for comfort technology products, aided by solid marketing and distribution capabilities.
The company has also been directing its resources to boost its digital capabilities, including augmenting website features, mobile applications and loyalty programs. The implementation of omnichannel features, such as "Buy Online, Pick-Up in Store" and "Buy Online, Pickup at Curbside," reflects the company's commitment to improving customer engagement.
Skechers also remains focused on expanding its physical presence. For instance, SKX opened 72 company-owned stores in the third quarter, with a focus on China and other markets. The company's international business continues to exhibit solid momentum, with international sales accounting for 61% of overall sales in the third quarter. Sales in the EMEA and APAC regions increased by 2.3% and 14.4%, respectively, on a year-over-year basis.
Impressively, the company’s 2023 outlook reflects sales momentum across most businesses. For 2023, management projects sales between $7.95 billion and $8.05 billion and earnings per share between $3.33 and $3.43. These figures show an improvement from sales of $7.44 billion and EPS of $2.38 registered in 2022.
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This Zacks Rank #2 (Buy) stock has gained 23.1% in the past three months compared with the industry’s growth of 14.6%.
However, Skechers has been witnessing headwinds in its wholesale business for a while now. In the third quarter of 2023, the company saw a 1.4% decline in wholesale sales due to a 2.3% drop in international wholesale sales. The company expects its domestic wholesale business to remain under pressure in the fourth quarter.
Also, the company has been grappling with higher operating costs and expenses for a while. During the third quarter, total operating expenses grew 13.9% year over year to $858.7 million, while general and administrative expenses jumped 12.8% to $680.4 million. Increased costs were due to higher brand demand creation expenditures, along with elevated facility costs such as rent, depreciation and labor.
3 Other Key Stocks
A few other top-ranked stocks in the same space are The Gap, Inc. GPS, Deckers Outdoor Corporation DECK and Abercrombie & Fitch Co. ANF.
The Gap is a premier international specialty retailer offering a diverse range of clothing, accessories and personal care products. The company currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for The Gap’s current fiscal-year earnings implies growth of 387.5% from the previous year’s reported number. GPS has a trailing four-quarter average earnings surprise of 137.9%.
Abercrombie & Fitch is a specialty retailer of premium, high-quality casual apparel. The company currently flaunts a Zacks Rank #1. The Zacks Consensus Estimate for Abercrombie & Fitch’s current fiscal-year sales implies growth of 13.3% from the previous year’s reported number. ANF has a trailing four-quarter average earnings surprise of 713%.
Deckers Outdoor is a leading designer, producer and brand manager of innovative, niche footwear and accessories. It currently carries a Zacks Rank #2. The Zacks Consensus Estimate for Deckers’ current fiscal-year earnings and sales indicates growth of 20.9% and 11.4%, respectively, from the previous year’s reported figures. DECK has a trailing four-quarter average earnings surprise of 26.3%.
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Abercrombie & Fitch Company (ANF) : Free Stock Analysis Report
Skechers U.S.A., Inc. (SKX) : Free Stock Analysis Report
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The Gap, Inc. (GPS) : Free Stock Analysis Report
