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Skechers (SKX) Q1 Earnings Decline Y/Y, Revenues Increase

Zacks Equity Research

Skechers USA, Inc. SKX came out with its first-quarter 2019 results, wherein the top line improved year over year but the bottom line declined from the year-ago period. We note that the stock get hurt, possibly due to the third successive quarter of sales miss and soft second-quarter earnings view.

Management guided earnings in the range of 30-35 cents a share, whose mid-point of 32.5 cents is below the current Zacks Consensus Estimate of 35 cents. The company had reported earnings of 29 cents in the second quarter of 2018. The company now anticipates second-quarter 2019 net sales in the band of $1.200-$1.225 billion compared with $1.135 billion reported in the prior-year quarter. The Zacks Consensus Estimate for the same is $1.22 billion.

Nevertheless, management pointed that international wholesale and global retail businesses are the primary growth drivers. Also, the company informed that it shipped a record number of pairs from its distribution centers in Japan and Europe, and registered sturdy performance across international distributors and joint ventures, including China. Further, Skechers completed the transition of Indian joint venture to a wholly owned subsidiary and entered into a deal to form a joint venture in Mexico with its current distribution partner.

Skechers U.S.A., Inc. Price, Consensus and EPS Surprise

 

Skechers U.S.A., Inc. Price, Consensus and EPS Surprise | Skechers U.S.A., Inc. Quote

Let’s Delve Deep

This designer, developer, marketer and distributor of footwear posted earnings of 71 cents a share, down 5.3% from 75 cents reported in the year-ago period. On an adjusted basis, earnings for the quarter under review came in at 73 cents. The Zacks Consensus Estimate for the quarter is pegged at 72 cents.

This Zacks Rank #1 (Strong Buy) company delivered net sales of $1,276.8 million that increased 2.1% (or 5.2% on a constant currency basis) from the year-ago quarter but came below of the Zacks Consensus Estimate of $1,291 million.

The company witnessed sales growth of 9.3% across its international business but a decline of 6.3% in its domestic business. Skechers’ international wholesale business grew 8.7%, while company-owned global retail business rose 6.7%. The company’s domestic wholesale business fell 10.9%. Comparable store sales in company-owned stores and e-commerce inched up 0.7%, comprising 0.2% in the United States and 2.3% internationally.

Gross profit for the reported quarter grew 1.3% to $590.5 million. However, gross margin contracted 40 basis points (bps) to 46.3% on account of lower international margins due to deep discounts and adverse foreign currency exchange rates. This was partly offset by improved margins at company-owned domestic retail business. Operating income came in at $165.9 million, up 11.5% from the prior-year quarter, while operating margin increased 110 bps to 13%.

Other Financial Aspects

Skechers ended the quarter with cash and cash equivalents of $687.5 million, long-term borrowings (net of current installments) of $93.8 million, and shareholders’ equity of $2,062.5 million, excluding non-controlling interest of $173 million.

During the quarter, the company bought back roughly 458,000 shares at a cost of $15 million under its existing share buyback program. The company still has approximately $35 million as of Mar 31, 2019.

Looking for High Performance Stocks

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Foot Locker FL has a long-term earnings growth rate of 9.4% and flaunts a Zacks Rank #1.

Boot Barn Holdings BOOT has a long-term earnings growth rate of 20.7% and a Zacks Rank #2 (Buy).

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