Skechers (SKX, Financial), based in Manhattan Beach, California, designs, develops and markets a diverse range of lifestyle footwear for men, women and children, as well as performance footwear for men and women. The company has its presence felt across 100 countries.
Third-quarter results
Third quarter 2014 net sales were $674.3 million compared to $515.8 million for the third quarter of 2013. Gross profit for the third quarter of 2014 was $304.5 million or 45.2 percent of net sales compared to $230.5 million or 44.7 percent of net sales for the third quarter of last year. Earnings from operations for the third quarter of 2014 were $74.1 million versus earnings from operations of $44.0 million in the third quarter of 2013.
Net earnings for the third quarter were $51.1 million compared to net earnings of $26.8 million in the third quarter of 2013. Diluted net earnings per share for the third quarter were $1.00 on 50,984,000 weighted average shares outstanding, compared to diluted net earnings per share of $0.53 on 50,604,000 weighted average shares outstanding for the third quarter of 2013. The company’s diluted EPS for the third quarter of 2014 was negatively impacted by foreign currency exchange losses of $2.3 million net of tax or $0.05 per diluted share, as well as a $3.8 million net of tax or $0.08 per diluted share attributable to warehousing costs related to completing the first phase of the automation upgrade of the company’s European distribution facility and transitioning from a third-party warehouse to a company-owned facility in Chile. In total, these expenses reduced diluted EPS by $0.13 during the third quarter of 2014.
“With product and marketing initiatives that continue to resonate with our consumers worldwide, we achieved a 30.7 percent net sales increase over the third quarter last year, and the highest quarterly revenues in the Company’s 22-year history. These results followed record first and second quarter revenues, resulting in a 29.5 percent net sales increase for the first nine months of 2014 as compared to the same period last year,” began David Weinberg, chief operating officer and chief financial officer. “The growth in the quarterly revenue came across our three key distribution channels. We achieved net sales increases of 18.5 percent in our domestic wholesale business, 60.6 percent in our international wholesale business, and 25.0 percent in our company-owned global retail business, which included an 11.0 percent increase in comparable net sales for the quarter on top of a double-digit increase last year in comparison to the third quarter in 2012.” (Source: company’s website)
Plans in hand
With relevant product and advertising, market share gain and solid financial position, including $440.8 million in cash, the company is well positioned for continued growth. The company expects top-line growth of about 15%-20% during the first quarter of 2015. The company is concentrating on a retain expansion and plan to open an additional 10 to 15 company-owned Skechers stores before the end of the year. The company also plans to open another 35 to 45 Skechers stores through international distributors and franchise partners before the end of the year—which will touch the 1,000 store milestone. SKX is also improving its international efficiencies with the opening of a new distribution facility in Chile in the third quarter and the completion of phase one of the automation of a European distribution center in Belgium in the fourth quarter.
Opportunities in India
The company may expand rapidly in India, since India is witnessing a fast changing retail scenario. Footwear industry in this part of the globe will observe phenomenal growth in the rears to come. Various International players enetered this market and provided a significant boost. SKX certainly has very good opportunities here. India is the second largest footwear producing company after China, accounting about 13% of world footwear production.
Final thoughts
Skechers is investing in product innovation, marketing and infrastructure to advance and solidify its brand reputation to gain momentum around the globe. The company is all set to for several new key lines launching in both the lifestyle sport and performance running and walking categories.
The company offers designs and comfort at very reasonable prices internationally. Naturally, it is becoming a hit among the customers. It is already capturing emerging trends in the athletic industry. The company is in a good phase witnessing high revenues. According to me, it should be a buy as of now. It is going to create shareholder returns.
