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Skechers (SKX) Rides High on Growth Strategies: Apt to Hold

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Skechers U.S.A., Inc. SKX is climbing up the charts, thanks to its robust growth strategies and a sturdy fourth-quarter 2021 performance. SKX has been gaining from growth in its domestic and international channels for a while, driven by wholesale and direct-to-consumer sales.

SKX witnessed segmental growth during the fourth quarter, backed by continued global demand for its Comfort Technology footwear. Skechers remains focused on developing comfort footwear, expanding apparel offering, advancing e-commerce capabilities and tapping opportunities to drive the overall sales.

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Zacks Investment Research

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Shares of this footwear leader have appreciated 28.7% over the course of a year against the industry’s 0.5% dip. The Zacks Consensus Estimate for Skechers’ current financial-year sales and earnings per share (EPS) suggests respective growth of 11.1% and 21.5%, from the corresponding year-ago reported figures.

Let’s Delve Deeper

Skechers has been directing resources toward enhancing its digital capabilities. Investments made to integrate store and digital ecosystems for developing a seamless omni-channel experience are driving higher sales. Moreover, SKX has been enhancing its distribution facilities and supply-chain production capabilities. Management is rolling out the e-commerce sites and launched the platforms in the United Kingdom, India, Germany and Austria. It plans to expand to additional markets in 2022. These investments highlight SKX’s progress as an omni-channel retailer.

During the fourth quarter of 2021, SKX’s domestic e-commerce business surged 115% from the same-period level in 2019. Skechers’ direct-to-consumer sales increased 30.3% in the reported quarter, backed by growth across the domestic and international retail stores owing to higher average selling price on fewer promotions and elevated prices. Domestic direct-to-consumer sales also rose 17% while international direct-to-consumer business increased 52%. Increase in the domestic direct-to-consumer business was backed by a 24% gain in the brick-and-mortar stores.

In addition, Skechers’ international business remains a significant sales driver. SKX has been enhancing its global reach in the footwear market through its distribution networks, subsidiaries and joint ventures. In fourth-quarter 2021, international sales increased 34% year over year and contributed 65% to quarterly sales. International wholesale segment sales rose 30%, aided by growth in all channels and brand strength. Also, 123.5% growth in Distributor sales, accounting for a 61.3% sales rise in Europe and an 8.6% sales improvement in China drove the International Wholesale business. Worldwide comparable same-store sales rose 21%, including 36%, internationally.

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. SKX is also focusing on comfort-based footwear and apparel products. Management is focusing on designing and developing new products. In 2022, management plans to introduce more innovative and comfort technology products, build multi-platform marketing campaigns and launch more e-commerce sites around the world.

Aforesaid efforts buoyed Skechers’ fourth-quarter 2021 results, wherein both its top and the bottom line outpaced the Zacks Consensus Estimate and grew year over year. Results gained from growth across domestic and international channels. SKX’ focus on offering signature comfort technology in its products as well as gains from global growth aided its performance.

Skechers’ joint-venture business grew 10% during the quarter on solid sales in China and Mexico. Management projected sales in the range of $7-$7.2 billion and earnings per share of $2.70-$2.90 for 2022. Management is committed to accomplish sales of $10 billion by 2026.

Wrapping Up

Despite these strengths, Skechers is not completely immune to concerns like supply-chain disruptions, manufacturing delays, extended transit times, port congestion and higher freight rates. Also, SKX has been witnessing higher operating expenses for a while.

Nonetheless, we believe that greater emphasis on a new line of products including focus on comfort technology products, store-growth projects and digital endeavors bode well. Skechers has a Zacks Rank #3 (Hold) at present.

Eye These Solid Picks

Delta Apparel DLA, the manufacturer of activewear and lifestyle apparel products, sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Delta Apparel’s current financial-year sales and EPS suggests respective growth of 12.3% and 19.1%, from the corresponding year-ago figures. DLA has a trailing four-quarter earnings surprise of 21.3%, on average.

Ralph Lauren RL, the designer and marketer of premium lifestyle products, flaunts a Zacks Rank of 1 at present. RL has an expected EPS growth rate of 15% for three-five years.

The Zacks Consensus Estimate for Ralph Lauren’s next financial-year sales and EPS suggests growth of 40% and 381.2%, respectively, from the year-ago corresponding figures. RL has a trailing four-quarter earnings surprise of 94.1%, on average.

Gildan Activewear GIL, the manufacturer and marketer of premium quality branded basic activewear, has a Zacks Rank #2 (Buy), currently. GIL has a trailing four-quarter earnings surprise of 85%, on average.

The Zacks Consensus Estimate for Gildan Activewear’s current-year sales and EPS suggests respective growth of 8.2% and 9.4% from the year-ago corresponding readings. UAA has an expected EPS growth rate of 9% for three-five years.


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