Footwear-maker Skechers USA (SKX, Financial) released impressive results for the second quarter. Skechers saw a commendable improvement in sales. Its aggressive marketing strategies and distribution helped the company achieve its highest quarterly revenue in the 22-year history. Skechers is in a strong position with an impressive balance sheet. Management is geared up for another impressive quarter with new products and the growing demand for footwear driving its sales. With the future looking bright and several strategies in the pipeline, Skechers is set for a robust performance.
Impressive results on the back of growing demand
Skechers posted a good 37% growth in the top line to $587 million. It was better than $428 million as compared to the same quarter a year ago. The sales were robust and were the key reason behind Skechers posting such terrific results. Analysts had been expecting Skechers to earn $0.40 per share on $509 million on revenue.
Good improvement in the sales and growing demand for the footwear were the two main reasons why Skechers USA is soaring. The footwear-maker is seeing worldwide demand for its lifestyle performance and kids’ footwear. It is expecting this to drive its wholesale business on the international fronts as well. Skechers is accelerating its marketing campaigns.
It is making use of television commercials, strong digital and social media to support this effort. On the other hand, the company is receiving good responses for its product innovation, and is confident that it will be well received by customers in future.
It is seeing robust demand for its products. Its offerings such as Women's Sport and Sport Active lines are on fire in the market; in the last quarter, they saw a good triple-digit improvement. In addition, Skechers is focusing on the comfort element in its lifestyle and athletic footwear. With this segment, Skechers is finding opportunities to develop products that are both stylish and comfortable.
Product innovation
The SKECHERS GO running shoe is expected to create a unique image in the market in the coming days. The footwear is already popular in the market, but it has come in to further attention after Meb Keflezighi's win at the Boston Marathon while wearing the shoe. In the walking category, SKECHERS GOwalk is seeing good demand due to the new style that the company recently launched in the market on improving outsoles.
Skechers is further bringing in SKECHERS GOwalk 2 Super Sock which excels both in comfort and style. Moreover, in order to support its products, Skechers is undertaking promotion and advertisement through television campaigns especially for its running footwear by featuring Keflezighi as a brand ambassador.
Skechers is pleased with the performance that it is seeing in Europe. The footwear had a weak presence, but is now showing a good rebound, and the company is positive about the performance as it is seeing triple-digit growth in every region where it directly distributes its products. After the completion, Skechers is expected to increase in capacity and efficiency to better leverage its growth momentum in that region.
Skechers is also geared up for expansion after opening stores in California and Texas, it is further planning to open 20 to 25 new stores in this quarter. Skechers is planning on expanding its company-owned retail operations with another 40 to 50 stores globally. Its international distributors, joint ventures and licensees are planning to open another 60 to 65 stores.
Conclusion
Skechers is in a good position. The stock is cheap with a trailing P/E of 25.74. With forward P/E of 16.94, the earnings of the footwear-maker are also growing at a good pace. Skechers can also be a good long-term prospect as its earnings for the next five years are growing at CAGR of 20%, which is better than the industry average. So, including Skechers in the portfolio will be a profitable venture for investors.
