Skechers USA Inc. (SKX, Financial), a major footwear company, said first-quarter sales reached a record $1.25 billion. Despite strong sales growth, the company disclosed it expects lower sales and earnings for the upcoming quarter.
Brief summary of earnings
CEO Robert Greenberg said Skechers started 2018 strong, highlighted by 9.5% growth in comparable same-store sales worldwide. International wholesale and retail sales, which represented 54% of total sales, increased 17.9% from the prior-year quarter.
Chief Operating Officer David Weinberg highlighted several achievements, including record shipment volume in North America and Europe. Weinberg also mentioned key marketing initiatives for the company’s new products, including Skechers On the Go and Skechers D’lites. The company launched a new commercial for the latter, according to Weinberg.
Despite strong sales growth, Skechers reported higher selling, general and administrative expenses compared to the prior-year quarter, mainly to support international growth in joint venture and subsidiary businesses. The company reported net income of $117.7 million, or 75 cents per diluted share, nearly missing analyst expectations.
Skechers lowered its sales and earnings guidance for the upcoming quarter. The company expects net sales between $1.12 billion and $1.145 billion and diluted earnings between 38 and 43 cents per share. The lower earnings guidance, which reflects an expected shift in shipments from the second quarter to the final six months of the year, contributed to a 24% price decline in late-day trading April 19. The stock tumbled a further 27% April 20.
Company still offers good potential despite lower earnings guidance
GuruFocus ranks Skechers’ profitability 8 out of 10, suggesting good growth potential. The company’s operating margin of 9.16% is near a 10-year high of 11.11% and outperforms 67% of global competitors. Additionally, Skechers has a strong three-year compound annual growth rate of sales and a return on capital based on Joel Greenblatt (Trades, Portfolio)’s definition.
As the company offers good growth potential, Ken Heebner (Trades, Portfolio)’s Capital Growth Management Fund invested in 1.76 million shares of Skechers over the past six months. As of April 19, the fund had gained approximately 30% on the stock based on GuruFocus estimates.
Disclosure: No positions.
