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This Stock Is Worth Investing In

May 16, 2014 | About:
Suravi Thacker

Suravi Thacker

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Macroeconomic conditions have been quite harsh on retailers. Factors such as severe weather conditions and a shift in Easter have kept customers away from malls and other retail stores, resulting in loss of sales. As a result, footwear retailers have posted dismal results for the holiday quarter. However, there is an exception to this. Skechers USA (SKX) has been a great performer and its holiday quarter delivered strong numbers, bucking the industry wide trend. Its results beat analysts’ expectations, leading to a sharp increase in its stock price.

Results Thereof

Revenue surged 23% over last year’s quarter, clocking in at $546.5 million. Higher demand for its products led to an increase in sales. Both the wholesale and the retail segment registered a growth of 20.7% and 15.9%, respectively. Wholesale segment witnessed an increase in sales as all the categories, including men, women and kids division, moved north. This resulted in a jump of 14.8% in the number of products shipped. Also, a rise of 5% in average unit price pushed revenue higher.

On the retail front, net sales climbed 15.9% as the company opened 10 new stores during the quarter. Also, it registered same store sales growth of 5.8%. Within the retail segment, international region performed better with a 48.8% increase in sales. However, even domestic sales increased by 10.7%. Hence, the company is doing extremely well in the retail segment also.

Overall Skechers is experiencing a great demand in the International space. In fact, total revenue from its international business jumped 26.3%, which highlights the company’s popularity in such markets.

The footwear company registered an expansion of 130 basis points in its gross margin for the quarter. This expansion was driven by favorable product mix as well as higher sales. Skechers’ bottom line was the best part about its earnings. Earnings grew four times to $0.61 per share as against $0.13 per share in the prior year. The earnings were far ahead of the estimate of $0.33 per share. The retailer’s cost management techniques were quite impressive which, coupled with the higher top line, led to an increase in profits.

How About the Competitors?

Skechers has also been able to outpace its peers such as Wolverine World Wide (WWW) and Crocs (CROX). Skechers has provided a return of 88.8%, in terms of stock price appreciation, in the last year. On the other hand, Wolverine World Wide’s stock price dropped by 1.1% and Crocs’ price declined 15.1%. This highlights Skechers’ attractiveness and its outperformance against its peers.

Moreover, both the peers’ holiday quarter results were not up to the mark. In fact, Crocs was the worst performer with flat top line and lower bottom line over the previous year. The retailer’s sales were hampered by aforementioned factors such as colder winters and shift in Easter. Also, it was unable to manage its costs efficiently.

Even Wolverine posted a drop in its revenue of 2.8% over the last year wherein lower store traffic hampered sales. However, the retailer managed to post an increase of 20% in its earnings, clocking in at $0.36 per share.

Conclusion

Skechers’ efforts into new products and higher promotions have been paying off. Skechers' plans to continue to develop new products should delight its customers. Also, increased TV commercials are helping the footwear company in driving sales higher. Moreover, it is one of the best performing companies among its peers and has been quite rewarding to investors. Hence, prudent investors should grab this opportunity in order to maximize gains.


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