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Skechers (SKX) Hits 52-Week High: Momentum Here to Stay

Zacks Equity Research

Skechers U.S.A., Inc. SKX touched a 52-week high of $40.50, before closing the session a tad lower at $39.01 on Jul 19. The company’s second-quarter 2019 results remained the primary factor behind the stock’s bullish run on the bourses. Markedly, the stock has gained 12% since the announcement of its quarterly results on Jul 18. (Read: Skechers Stock Up on Q2 Earnings Beat, Upbeat View)

In the past six months, shares of this Manhattan Beach, CA-based company have rallied approximately 53%, outperforming the industry’s 8.5% growth.


 

Notably, the company is benefiting from its focus on new line of products, cost-containment efforts, inventory management, and global distribution platform. Also, its domestic e-commerce business is performing well.

All these factors helped the company to deliver robust second-quarter results, wherein the top and bottom lines not only surpassed the Zacks Consensus Estimate but also grew year over year. Its international wholesale and direct-to-consumer businesses acted as the primary catalysts.

This 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.

Quite apparent, analysts are steadily growing bullish on the stock. This is visible from the upward revision in the Zacks Consensus Estimate. The Zacks Consensus Estimate for the current financial year and the next has moved north by 7 cents and 15 cents to $2.09 and $2.40, respectively, in the past 30 days.

All said, let’s take a closer look at this Zacks Rank #1 (Strong Buy) stock. You can see the complete list of today’s Zacks #1 Rank stocks here.

Skechers’ Growth Story

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.

Also, the company’s domestic e-commerce business continues to gain traction. In the second quarter, its domestic e-commerce business registered an increase of 36.1%. Comparable-store sales increased 4.9%, including e-commerce sales growth of 34.3%.

These apart, 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 the company to roll out new products without cannibalizing its existing brands and helps to expand the targeted demographic profile of customers.

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

Other Key Picks

adidas AG ADDYY has a long-term earnings growth rate of 15% and sports a Zacks Rank #1.

Zumiez Inc. ZUMZ has a long-term earnings growth rate of 13.5% and a Zacks Rank #1.

Deckers Outdoor Corporation DECK has a long-term earnings growth rate of 11.6% and a Zacks Rank #2 (Buy).

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