Skechers (SKX) rides high on growth strategies: fit to hold

This story originally appeared on Zacks

Skechers USA, Inc. SKX is climbing the rankings, thanks to its robust growth strategies and strong performance in Q4 2021. SKX has been enjoying growth in its domestic and international channels for some time, driven by wholesale and direct-to-consumer sales.
SKX experienced segmental growth during the fourth quarter, supported by continued global demand for its Comfort Technology footwear. Skechers remains focused on developing comfortable footwear, expanding apparel offerings, enhancing e-commerce capabilities and exploiting opportunities to drive overall sales.

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Shares of this footwear leader have appreciated 28.7% in a year against an industry decline of 0.5%. Zacks consensus estimate for Skechers sales and earnings per share (EPS) for the current fiscal year suggests growth of 11.1% and 21.5% respectively, compared to the corresponding figures for the year former.

Let’s go deeper

Skechers has directed its resources towards improving its digital capabilities. Investments made to integrate the store and digital ecosystems to develop a seamless omnichannel experience drive increased sales. Additionally, SKX has improved its distribution facilities and supply chain production capabilities. Management deploys e-commerce sites and launches platforms in the United Kingdom, India, Germany and Austria. It plans to expand to other markets in 2022. These investments highlight SKX’s progress as an omnichannel retailer.
During the fourth quarter of 2021, SKX’s domestic e-commerce business jumped 115% from the level of the same period in 2019. Skechers’ direct-to-consumer sales increased 30.3% during the quarter considered, supported by the growth of national and international retail trade. stores due to higher average selling price on less promotions and high prices. Domestic direct-to-consumer sales also increased by 17%, while international direct-to-consumer sales increased by 52%. The increase in direct-to-consumer business in Canada was supported by a 24% gain in physical stores.
In addition, Skechers’ international operations remain an important sales driver. SKX has strengthened its global reach in the footwear market through its distribution networks, subsidiaries and joint ventures. In the fourth quarter of 2021, international sales increased 34% year over year and contributed 65% to quarterly sales. International Wholesale segment sales increased 30%, supported by growth across all channels and brand strength. In addition, distributor sales growth of 123.5%, representing a 61.3% sales increase in Europe and an 8.6% sales improvement in China, boosted international wholesale activity. . Global same-store same-store sales increased 21%, of which 36% internationally.
Skechers continues to offer a diverse brand portfolio that includes a wide range of fashion, athletic, non-athletic and work footwear at attractive price points. SKX also focuses on comfort-oriented footwear and apparel. Management focuses on the design and development of new products. In 2022, management plans to introduce more innovative and comfortable technology products, create cross-platform marketing campaigns, and launch more e-commerce sites globally.
The aforementioned efforts supported Skechers’ fourth-quarter 2021 results, in which its revenue and net income exceeded Zacks’ consensus estimate and grew year-over-year. Results driven by growth across domestic and international channels. SKX’s focus on delivering signature comfort technology in its products along with global growth gains supported its performance.
Skechers joint venture business grew 10% in the quarter on strong sales in China and Mexico. Management has forecast sales of $7 billion to $7.2 billion and earnings per share of $2.70 to $2.90 for 2022. Management has committed to sales of $10 billion. dollars by 2026.


Despite these strengths, Skechers is not completely immune to issues such as supply chain disruptions, manufacturing delays, extended transit times, port congestion and higher freight rates. Additionally, SKX has been experiencing higher operating expenses for some time.
Nonetheless, we believe the focus on a new product line, including a focus on convenience technology products, store growth plans and digital efforts bodes well. Skechers currently has a Zacks rank of #3 (Hold).

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Zacks’ consensus estimate for Delta Apparel’s current-year sales and EPS suggests growth of 12.3% and 19.1%, respectively, compared to the corresponding figures for the prior year. DLA has a surprise on earnings for the last four quarters of 21.3% on average.
Ralph Lauren RL, the designer and marketer of premium lifestyle products, currently has a Zacks ranking of 1. RL has an expected EPS growth rate of 15% over three to five years.
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The Zacks consensus estimate for Gildan Activewear sales and EPS for the current year suggests growth of 8.2% and 9.4% respectively compared to the corresponding readings of the previous year. UAA has an expected EPS growth rate of 9% over three to five years.

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