Skechers USA Inc. 's ( SKX ) fourth-quarter
2012 earnings came in at 8 cents a share that fared far better than
a loss of 54 cents delivered in the prior-year quarter and the
Zacks Consensus Estimate of a loss of 11 cents on the back of
growth witnessed across domestic wholesale, international, and
company-operated retail businesses.
With more emphasis on the new line of products, increase in
backlog by 20% for domestic and international wholesale operations,
cost containment efforts, inventory management and margin
improvement, the company anticipates sustaining the growth momentum
Let's Unveil the Picture
Skechers, which competes with Deckers Outdoor
Corporation ( DECK ), stated that
total net sales for the quarter surged 39.7% to $395.6 million from
the prior-year quarter, reflecting healthy performance across all
revenue channels. Moreover, total revenue outpaced the Zacks
Consensus Estimate of $342 million.
The domestic wholesale business marked an elevation of 72%,
reflecting an increase of 9.8% in price per pair and a jump of
56.8% in pairs shipped coupled with strong performance across
men's, women's and kids' divisions.
Skechers' international business surged 30% on the back of 17%
growth in international distributor business and a 40.5% rise in
international subsidiary and joint venture sales. The tough
macroeconomic conditions weighed upon the company's performance in
Spain and Italy. However, Italy is now witnessing soft recovery.
Europe, Pan-Asia region (including Japan), Philippines, South
Korea, Taiwan, Australia/New Zealand, Middle East and Africa all
showed growth momentum.
On a combined basis, retail business sales grew 16.2%, whereas
comparable-store sales advanced 10.3%. Domestic retail sales rose
16.6% due to the addition of 5 new stores, while comparable-store
sales increased 9.9%. International retail sales jumped 14%,
reflecting the healthy performance of 3 new stores, whereas
comparable-store sales climbed 12.6%.
The company's licensing division has been another source of
revenue, whereby the company licenses its name and images. The
company generated $2.6 million in revenue during the quarter from
its licensing affiliates, which includes apparel, eyewear,
backpacks, and socks.
Another highlight of the quarter was 39.4% rise in sales from
the company's e-Commerce division. Though the company uses it as a
marketing tool, the division remains successful in driving
incremental sales during the quarter. The company operates 3
e-Commerce websites, in the U.S., UK and Germany.
The quarter exhibited a marked improvement in gross profit,
which soared 50% to $168.5 million, whereas gross margin expanded
280 basis points to 42.6%. The increase was due to higher sales
volume, enhanced inventory and contemporary products.
Skechers had 354 retail stores under operation at the end of the
fourth quarter. The company during the quarter opened 1 store each
in Puerto Rico, Texas, Utah, and Ariz., and 2 outlets in Calif. The
company also opened 3 locations in Chile, taking the total count to
21, and shuttered 1 outlet in Ariz. So far, in the first quarter of
2013, the company has shuttered 6 stores, and plans to open 4 new
stores and close 2 more outlets. The company's 2013 target includes
opening of 30 to 35 company-operated locations.
At the end of the quarter, the company operated 106 outlets
under joint ventures in Asia, including stores operated by
licensees, 257 distributor-owned or licensed Skechers retail stores
globally, and 21 company-licensed locations in Canada, Spain,
Portugal, Ireland, and the Netherlands.
During the quarter, Skechers' under its joint ventures and
through its franchisees and distributors, opened 32 outlets, which
included 1 each in Australia, U.A.E., Oman, Aruba, Estonia, South
Africa, Ukraine, Serbia, Malaysia, Singapore, Thailand and Canada;
2 each in Mexico, Taiwan, Colombia and South Korea; 3 in Hong Kong;
and 4 in Saudi Arabia. The company shuttered 5 outlets in the
quarter, one each in the U.A.E., Estonia and Venezuela, and the
remaining 2 in Spain.
Management remains committed to focus on new lines of products,
opening of additional Skechers stores and increasing distribution
channels with the development of international distribution
agreements to boost its sales and profitability. Moreover,
international business remains a significant growth driver for the
company's sales. Skechers, through its distribution networks,
subsidiaries and joint ventures, is poised to enhance its global
reach in the footwear market.
The company also increased its product offerings under the
Performance Division from a single style, Skechers GOrun to
Skechers GOwalk, Skechers GOrun Ride, and Skechers GOrun2. The
company has also introduced Daddy's Money for Juniors and SKCH+3
Other Financial Aspects
Skechers ended the quarter with cash and cash equivalents of
$325.8 million, total long-term debt of $140.2 million and
shareholders' equity of $919.1 million, including non-controlling
interest of $43.1 million. Capital expenditures for the quarter
were approximately $24.3 million.
Zacks Rank forSkechers
Currently, Skechers carries a Zacks Rank #3 (Hold). However,
there are certain other stocks in the consumer discretionary sector
that warrant a look, such as Nike Inc . ( NKE ) and
Francesca's Holdings Corporation ( FRAN ), both of which
hold a Zacks Rank #2 (Buy) and are expected to continue with their
upbeat performances.DECKERS OUTDOOR (DECK): Free Stock Analysis
ReportFRANCESCAS HLDG (FRAN): Free Stock Analysis
ReportNIKE INC-B (NKE): Free Stock Analysis ReportSKECHERS USA-A (SKX): Free Stock Analysis
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