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Skechers (SKX) to Keep Gaining from E-commerce Strength in 2021

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Zacks Equity Research
·4 min read
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The coronavirus pandemic-induced altered shopping habits have propelled e-commerce to a new high. Surging online shopping trends is a significant upside for several retailers, including Skechers U.S.A., Inc. SKX. Moreover, the company is on track with investments to boost its e-commerce capabilities that include enhancing website features and delivery systems. Such efforts are likely to keep adding gleam to the company’s performance in 2021. Also, Skechers is gaining from consumers’ favorable response toward its assortments. The company’s efforts to boost global distribution infrastructure are also encouraging.

Markedly, this Zacks Rank #3 (Hold) company’s shares have surged 20.5% in the past three months compared with the industry’s rally of 16.7%. That said, let’s take a closer look at the factors that are acting as aces in Skechers’ stack.

Strong Online Presence

Skechers’ domestic e-commerce increased significantly during the third quarter of 2020, with year-over-year rise of nearly 172%.  Online sales have been an important sales driver within direct-to-consumer channel. Sturdy advancement in the online realm indicates that the company’s investments have been yielding. This includes efforts to augment website and mobile application features. Moreover, the company’s “Buy Online, Pick-Up in Store” and “Buy Online, Pickup at Curbside” services are boosting sales.

We note that during the third quarter, the company began full-scale upgrades in its point-of-sales systems that enable customers to shop for products online and pick them in stores per their convenience.  It also opened new distribution centers in Panama and Colombia. Distribution centre expansions in China, North America and Europe are also on track. The company is on track to improve its e-commerce platform in Canada, South America, India and Japan as well as ramp up supply chain to meet online product demand.

Other Strategic Growth Efforts

Skechers is focused on designing and developing new products that match consumers’ evolving needs. Markedly, replenished product assortments drove growth in the company’s domestic wholesale business during the third quarter. Industry experts believe that enhanced focus on fitness amid the pandemic has been a major boost to demand for sportswear-related apparel items.

Moreover, the company is adhering to store remodeling projects, inventory management initiatives and expansion of distribution network to further augment its performance. Earlier this year, Skechers collaborated with The Goodyear Rubber & Tire Company to use the latter’s rubber technology in its footwear.

Wrapping Up

We note that Skechers’ brick-and-mortar stores have been recovering from the adverse impacts of the pandemic. In fact, the company witnessed sequential growth across stores in big box location, during the third quarter. Moreover, several international regions, where the company’s operations were soft due to the pandemic, are now depicting encouraging trends. In this context, the company returned to growth in China and is witnessing green shoots in several other regions like France, Australia, New Zealand, Scandinavia and Germany among others. We expect these trends along with continued growth in the e-commerce platform to aid the company’s performance in the coming year.

Hot Retail Stocks to Consider

Capri Holdings Limited CPRI, flaunting a Zacks Rank #1 (Strong Buy), has a long-term earnings growth rate of 5.6%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Tapestry, Inc. TPR, also flaunting a Zacks Rank #1, has a long-term earnings growth rate of 11.7%.

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