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Why Skechers Is A Great Pick

August 26, 2014 | About:
Suravi Thacker

Suravi Thacker

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The footwear industry is indeed on a roll with each player trying to outperform the other by leaps and bounds. Skechers USA (SKX) reported its second-quarter results recently, which smashed analysts’ expectations. The impressive numbers rocked the Street, pushing its share price north. Let us get into the details.

Analyzing the numbers

Revenue for the quarter jumped 37.1% to $587.1 million, over last year’s quarter. This was much higher than the analysts’ expectation of $505 million. The top line was driven by increased demand for Skechers’ product growth across all the segments. Moreover, product innovation has been the primary driver as fresh styles attracted more and more customers to its stores. The company also spent a lot on marketing its products. Higher advertising and promotions led to increased demand.

Further, the company added 16 new stores during the quarter, helping revenue grow. Out of the 16 new stores, 13 stores were opened in the domestic market and 3 in the international market. The new stores included new concept stores, which are more attractive.

Additionally, the new Spring 2014 collection for men, women and children became quite popular among the customers, resulting in growth across all categories.

By the segments

Going by the segments, domestic wholesale business climbed 35.4%, helped by a 4 % increase in price and 30% jump in the number of pairs shipped. Also, international business rose 54% over last year, owing to higher subsidiary and joint venture sales.

The retailer business was one of the bright spots with a 28.8 % surge in sales, on the back of same store sales growth of 13.9%. Both domestic and international retail sales soared 21% and 75%, respectively.

Further, Skechers has undertaken certain cost containment measures, which helped the company register an impressive increase in its bottom line. Its earnings jumped to a staggering $0.68 per share as against $0.14 per share, last year. The analysts’ estimate was at $0.41 per share. Even the gross margin expanded 40 basis points to 45.9%, helped by a favorable product mix and higher sales.

Looking forward to

Skechers is also expected to perform well in the future. It plans to open new stores in the coming months, with 20 to 25 new stores in the third quarter as well as in the fourth quarter. The footwear retailer will also increase its distribution channels, in order to expand its reach.

Further, it will add new lines of products, which should lure more customers. In fact, product innovation has been key to the company’s success. Also, demand is expected to rise because of the back-to-school season.

In order to sell its products easily, Skechers plans to get into aggressive selling and marketing efforts. It will further strengthen its digital media presence and will bring in TV ads for each new line of products. Also, it will continue to use celebrities in the ad campaigns, which should be beneficial.

Ending thoughts

Skechers is making the right efforts at the right time. At the time when consumer demand is rising, efforts to market its products and introduce new ones were the most apt thing to do. Moreover, this company is witnessing higher sales across all its divisions, which highlights its strength in all categories. With plans to introduce new products and expand its geographical presence, Skechers should be the next pick for your portfolio.


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