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Skechers Takes Another Step in the Right Direction

Rick Munarriz, The Motley Fool

There are a lot more people walking a mile in Skechers(NYSE: SKX) shoes these days. Shares of the footwear giant initially moved sharply higher after posting well-received fourth-quarter results following Thursday's close.

Sales for the holiday quarter rose 11% to hit a record $1.08 billion -- up 14% on a constant currency basis -- but that's not the nugget that's sending Skechers stock higher. Skechers has come through with double-digit percentage growth in six of the past seven quarters, and the top-line results actually fell short of the $1.1 billion to $1.125 billion that it was targeting for the period three months ago. The real head turner is at the other end of the income statement, where for the second period in a row Skechers was able to overcome weaker than forecasted revenue to deliver guidance-topping bottom-line results.  

Exterior of a Skechers store in Times Square.

Image source: Skechers.

Let's get running

Stocks tend to move on earnings, and Skechers has certainly lived up to the billing through the fiscal year. Volatility is implied in the ownership process. 

It's not a surprise to see the stock on the move again this time around.

There was strength across all of its businesses. Its 11.4% top-line spurt is the combination of an 18.4% surge in its booming international wholesale business, a 7.5% pop for its global retail business, and a 4.8% uptick in its up-and-down domestic wholesale segment.  

The news gets even better on the way down the income statement. Gross, operating, and net margins all widened. Net earnings clocked in at $47.7 million or $0.31 a share, well ahead of the $0.20 to $0.25 in earnings per share that Skechers was eyeing three months ago and the $0.21 a share in adjusted earnings it checked in with a year earlier. 

For the current quarter, Skechers is offering up mixed guidance. It sees $1.275 billion to $1.3 billion in sales for the first quarter, a mere 2% to 4% advance since the prior year during the seasonally potent period for footwear companies. This may wind up being only the second time over the past two years that Skechers fails to deliver double-digit sales growth -- largely explained away by the shift in the Easter holiday to April this year -- but the improvements on the bottom line are what investors are emphasizing this time around.

Skechers is projecting $0.70 to $0.75 in earnings per share for the period, once again ahead of market expectations. It wasn't a perfect report, but with the stock still more than a third below last year's highs, it was perfect enough to send Skechers initially higher on the fresh financials. 

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Rick Munarriz has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Skechers. The Motley Fool has a disclosure policy.