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Mrinalini Chaudhuri
Mrinalini Chaudhuri
Articles (506) 

Skechers Is Poised to Grow

Company reported strong sales in the 1st quarter

April 21, 2017 | About:

California-based Skechers (NYSE:SKX) recently boasted of its first billion dollar-plus quarter. It achieved record sales in its first quarter due to the 16.8% increase in the company’s international wholesale business and a 12.8% increase in its company-owned global retail business.

First-quarter performance

Net sales during the quarter increased by 9.6% and were $1.073 billion ($978 million in the prior-year quarter).

Gross profit during the first quarter was $476.5 million, or 44.4% of net sales ($432.2 million, or 44.2% of net sales, in the prior-year quarter).

Selling expenses during the quarter increased by $19.9 million and were $73.8 million, or 6.9% of sales ($53.9 million, or 5.5% of sales, in the prior-year quarter).

General and administrative expenses during the quarter increased by $40.1 million and were $282.5 million, or 26.3% of sales ($242.3 million, or 24.8% of sales, in the prior-year quarter).

Earnings from operations during the quarter were $124.4 million (a decrease of 10.2% from the prior-year quarter).

Net earnings decreased by 3.7% and were $94.0 million.

Diluted net earnings per share were 60 cents.

Effective tax rate during the first quarter was 14.0% (which was 21.8% in the prior-year quarter).

Cash and cash equivalents at the year end was $607.8 million (an increase of $164.0 million, or 37.0%, from March 31, 2016).

Total inventory, including inventory in transit, was $585.8 million (an increase of $84.0 million, or 16.7%, over March 31, 2016).

Working capital was $1.32 billion on March 31 ($1.07 billion as of March 31, 2016).

Expectations for 2017

 

Range

 

Second Quarter

Full Year

Net sales

To be between $950 million and $975 million

 

EPS

To be between 42 cents and 47 cents

 

Capex

 

To be between $40 million and $45 million

Effective tax rate

 

To be between 14% and 19%

Focus

  • The management is currently focusing on China.
  • To improve inventory management.
  • Long-term global growth.
  • Design, marketing and distribution.
  • Innovation.

Conclusion

The company is growing its global footprint in Canada, Chile and China as well as in India, Australia and Turkey and many other markets. The international markets hold tremendous opportunity for this company. It is the No. 1 Casual, Work and Walking brand and the No. 2 All Footwear for Women in the U.S. It has a targeted approach to marketing to drive traffic, build brand recognition and properly position itself within the marketplace.

The company boasts of strong cash. The company offers affordable products and is constantly trying to reach out to a bigger customer base. The company’s bottom-line is improving. Its international business is doing well; it has increased its revenue outlook. The global activewear industry is growing. As per reports submitted by Allied Market research, the global sports apparel market is expected to rake in $184.6 billion by 2020, registering a CAGR of 4.3% during the forecast period 2015-2020.

2016 was not a great year for this footwear company, more so because of currency effects. This quarter the company’s sales increased due to the response coming from the international wholesale market. Though the company is suffering from decreased domestic sales, the international and retail segments have been able to offset such decrease. It boasts of a strong balance sheet and looks good after the first quarter release. Considering the current momentum, adding this company will reap shareholder returns.

Disclosure: I do not hold any position in the company.

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