The marketer of branded lifestyle footwear, Skechers USA (SKX, Financial), is performing well from the last few quarters. It managed to beat analysts' estimates in all the last four quarters and its shares have risen by a whopping 87.4% in the last one year. Thus, its recently reported third quarter results were also not an exception. The numbers were way beyond the Street's expectations. Both the top line and the bottom line grew remarkably as demand for its products surged.
Detailed insights
Revenue for the quarter surged over last year, mainly because its products became quite popular among customers. Its comfortable and lightweight footwear attracted people, especially during the back-to-school season. The company ramped up its marketing efforts, which resulted in increased demand across all the segments.
Target marketing campaigns such as, animated commercials for kids, focused commercials for men and women and other outdoor and digital marketing campaigns, helped attract customers from all age groups. Its advertisements also featured popular athletes and many TV personalities in order to gain customer attention.
Both the domestic and international segments registered growth of 18.5% and 60.6%, respectively. The key factors that contributed to this growth was higher volumes and a hike in product prices. Also, regions such as Europe showed growth. Further, the retailer added a total of 22 new stores during the quarter, including 8 in the International markets.
Not only new stores, but also the existing stores registered an increase in sales. Comparable store sales grew 11% during the quarter, resulting in a 25% rise in retail revenue. Another reason why the retail sales climbed was the strengthening of the ecommerce business.
As against the peers
When compared to peers such as Crocs (CROX, Financial) and Wolverine World Wide (WWW, Financial), Skechers continues to be the leader. Since the beginning of this year, it has provided the maximum return to its investors. Skechers' share price has appreciated by 72.6%, whereas the shares of Crocs and Wolverine have dropped by 21% each during the same time period.
Moreover, Crocs' recent quarter was not as interesting as that of Skechers. Through various restructuring efforts, the retailer managed to register top line growth of 5%. However, lack of innovation has been a matter of concern for the company.
On the other hand, Skechers focuses on innovation and brings in new merchandise for the customers. This attracts more customers to its stores. For instance, Skechers plans to launch its fresh new fall and winter 2015 collection, and customers are excited about it.
Wolverine's last quarter was even more dull with 1% decline in the top line as compared to the previous year. Weakness in the U.S. and poor performance of the Lifestyle brand has been the key reasons for the decline.
Valuation
Since Skechers has been doing extremely well, its valuation numbers show it as an expensive bet. It has a trailing P/E of 22.14, higher than the industry average of 17.49. However, its forward P/E at 16.29 indicates growth in its earnings. Furthermore, for the next five years, the company is estimated to grow at a CAGR of 20%. This is much higher than that of the industry (14.58%). Also, it is better than the growth rate of -3.10% seen in the last five years. Hence, this company is surely on the rise.
Final word
The footwear retailer is making a large number of efforts which add to the strengths of the company. In addition to adding new products for the fall, Skechers has come up with new marketing styles and has been adding new distribution centers. These efforts should benefit the retailer in the future. Moreover, its valuation numbers reflect growth and the company estimated to do well in the future. Although the stock is slightly expensive, it is worth the investors' money.
