Skechers (SKX) Thrives on DTC Growth & Diversified Portfolio
Skechers U.S.A., Inc.’s SKX diversified portfolio, focusing on fashion, athletic, non-athletic and work footwear, underpins its resilience and broad market appeal. Emphasizing comfort-based products aligns with current consumer trends. The company’s strategic focus on multi-brand offerings, global retail expansion, digital transformation and direct-to-consumer (DTC) growth, coupled with its strong financial management, positions it well for sustained growth and market leadership in the dynamic global footwear industry.
This Zacks Rank #3 (Hold) stock has outpaced the Zacks Shoes and Retail Apparel industry over the past year. In the said period, shares of the company have gained 38.4% against the industry’s decline of 16%.
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Let’s Dig Deeper
Skechers has been diligently expanding its global retail network, crossing the milestone of over 5,000 retail locations worldwide. This expansion effort saw the opening of numerous new stores across various regions, further solidifying its worldwide presence and ensuring greater accessibility for customers. Throughout the fourth quarter, the brand enhanced its retail footprint by inaugurating 67 new company-owned stores while closing 12, bringing its total to 1,648 outlets.
The brand witnessed remarkable growth in its DTC segment, surpassing 50% of its total sales for the first time. This milestone highlights the success of Skechers' integrated retail strategy, showcasing its prowess in meeting consumer demands across both physical stores and digital platforms.
The DTC segment's sales grew 20.3% year over year in the fourth quarter of 2023, reflecting the strong appeal of SKX's products and their innovative comfort technology. Supported by strategic marketing efforts and efficient distribution, DTC sales amounted to $998.3 million in the quarter, accounting for 50.9% of total sales.
Skechers' international operations have significantly contributed to its growth, with international sales increasing 6.9% in the fourth quarter of 2023, making up about 64% of total sales. This underscores the brand's extensive global reach.
The Asia Pacific (APAC) region, particularly China, stood out with a remarkable sales growth of 15.3% year over year. China itself experienced a 22.3% increase. The success in international markets is a testament to SKX’s ability to cater to varied consumer tastes, seize on emerging trends and employ effective regional distribution strategies.
Looking ahead, management is set to further strengthen its DTC segment and international sales. The company is planning the launch of new stores, the enhancement of omnichannel capabilities and the construction of a new distribution center in China. For fiscal 2024, Skechers anticipates sales to be between $8.6 billion and $8.8 billion, an increase from $8 billion in fiscal 2023. Earnings per share are projected to be between $3.65 and $3.85, up from the previous year's $3.49.
Skechers is planning to allocate $350-$400 million in capital expenditures for fiscal 2024, targeting strategic areas such as new store openings, omnichannel expansion and distribution infrastructure improvement. The company remains optimistic about achieving its goal of $10 billion in annual sales by 2026.
Stocks to Consider
A few better-ranked stocks are The Gap, Inc. GPS, Abercrombie & Fitch Co. ANF and Deckers Outdoor Corporation DECK.
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 Gap’s fiscal 2023 sales indicates growth of 385% from fiscal 2022’s reported figures. GPS has a trailing four-quarter average earnings surprise of 138%.
Abercrombie is a specialty retailer of premium, high-quality casual apparel. The company flaunts a Zacks Rank #1 at present. ANF delivered a 60.5% earnings surprise in the last reported quarter.
The Zacks Consensus Estimate for Abercrombie’s current fiscal-year sales implies growth of 15% from fiscal 2022’s reported number. ANF has a trailing four-quarter average earnings surprise of 713%.
Deckers is a leading designer, producer and brand manager of innovative, niche footwear and accessories. It currently sports a Zacks Rank #1.
The Zacks Consensus Estimate for Deckers’ current fiscal-year earnings and sales indicates growth of 38.6% and 15.7%, respectively, from fiscal 2024’s reported figures. DECK has a trailing four-quarter average earnings surprise of 32.1%.
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Abercrombie & Fitch Company (ANF) : Free Stock Analysis Report
Skechers U.S.A., Inc. (SKX) : Free Stock Analysis Report
Deckers Outdoor Corporation (DECK) : Free Stock Analysis Report
The Gap, Inc. (GPS) : Free Stock Analysis Report
