A retail giant can only prosper if it focuses on innovation. It is indeed one of the best ingredients of success, especially when customers are so unwilling to spend and the competition is intense. An apt example here is that of Skechers USA (SKX, Financial), a footwear retailer, which has focused on new product innovation and the results are commendable.
The company recently reported its third-quarter results, which once again proved its worth. The numbers smashed Street's expectations. However, its share price dropped since currency fluctuations affected the bottom line to some extent.
A sneak peek into the quarter
Driven by the great demand for its products, revenue rose a whopping 30.7% over last year, clocking in at $674.3 million. This was higher than the analysts' estimate of $618 million. The company's addition of new products, especially during the back-to-school season, to its portfolio has been a key factor in attracting more and more customers to its stores. Also, it opened 22 new stores during the quarter, which helped in growing the overall revenue. Out of 22, 14 were domestic and 8 were international.
Going by the segments, Skechers' domestic sales registered a growth of 18.5%, as prices increased by 1.2% and volumes by 16.1%. Furthermore, revenue from the International segment rose 60.6% as markets such as Europe showed growth. Higher joint venture and distributor sales also led to a higher top line.
Overall retail sales climbed 25% during the quarter and were driven by same store sales growth of 11%. Increase in distribution channels was another key factor for growth.
Furthermore
The footwear retailer has not only managed to attract more customers through its innovative and marketing efforts but also managed its costs efficiently. This resulted in an expansion of 50 basis points in the gross margin, clocking in at 45.2%. Its cost containment measures resulted in a bottom line of $1 per share as compared to $0.53 per share in the prior year. Excluding some negative effects of currency fluctuations, the earnings stood at $1.07 per share, way ahead of analysts' expectations.
Skechers is one of the leading brands of branded lifestyle footwear, and its performance has been mind blowing in the last year. It added products such as the SKCH+3 and Daddy's Money brands at the end of 2012, which resonated well with the customers. This is probably the reason that its share price has risen by 75% in the last one year.
However, other players such as Deckers Outdoor Corp (DECK, Financial) and Wolverine World Wide (WWW, Financial) have not been so rewarding for their investors. Deckers' share price has appreciated by 5% and that of Wolverine has declined 21%, during the last year. This indicates Skechers' strength over its peers.
Concluding thoughts
Given the company's strategic initiatives, such as ramped-up marketing and promotions, expansion of the store base and introduction of new products, Skechers should continue to lure customers to its stores. Its ad campaigns and e-commerce efforts have been impressive too, and will help the company grow further. Thus, this stock is worth considering for your portfolio.
