Skechers USA, Inc
) third-quarter 2013 earnings came in at 53 cents a share,
missing the Zacks Consensus Estimate of 61 cents but rising over
twofold from 22 cents delivered in the prior-year quarter. The
robust increase was driven by strong sales across domestic and
international wholesale operations, and company-owned retail and
Increased demand of products and healthy performance across
all revenue channels led to a 20.1% jump in revenue to $515.8
million. However, total revenue of this Zacks Rank #4 (Sell)
stock fell short of the Zacks Consensus Estimate of $519
With more emphasis on the new line of products, cost
containment efforts, inventory management, global distribution
platform and strong backlogs (up 19.7%), the company anticipates
sustaining the growth momentum in the upcoming holiday season as
well as in 2014.
The quarter exhibited a major improvement in gross profit,
which soared 22.7% to $230.5 million, reflecting higher sales
volume. Moreover, gross margin expanded 100 basis points to
44.7%, reflecting increased sales and a favorable product
The domestic wholesale business marked an elevation of 30.1%,
reflecting a jump of 25.2% in pairs shipped coupled with a 3.9%
increase in average price per pair along with growth witnessed
across the men's, women's and kids' divisions. The company's
Performance Division remained strong with double-digit gain at
the men's Performance line.
Skechers' international business increased 5.8% on the back of
a 16.1% rise in international subsidiary and joint venture sales.
However, distributor sales declined 17.3%. Tough macroeconomic
conditions in Spain and Italy impacted the results. However,
China, Chile, Canada, Hong Kong, Malaysia and Singapore portrayed
growth momentum. The company, which entered the Indian turf in a
joint venture, remains optimistic about the market, and expects
it to be accretive in the next 2 to 3 years.
Citing economic and political challenges in several markets,
such as Venezuela, Colombia, Egypt and Kenya, Skechers apprehends
international distributor sales to be low for the year. However,
with product demand remaining strong across the U.S. and
international subsidiaries, the company anticipates it to
favorably impact international distributor business next
On a combined basis, retail business sales grew 19.8%, whereas
comparable-store sales advanced 16.9%. Domestic retail sales rose
19.5%, while comparable-store sales increased 17.3%.
International retail sales soared 22.2%, whereas comparable-store
sales climbed 14.4%.
The company's licensing division has been another source of
revenue, whereby the company licenses its name and images.
Skechers generated $1.6 million in revenue during the quarter
from its licensing partners, which includes eyewear, socks and
The 30.3% rise in sales from the company's e-Commerce division
was one of the highlights of the quarter. Though the company uses
it as a marketing tool, the division was successful in driving
incremental sales during the quarter.
Skechers had 370 retail stores under operation at the end of
the quarter. During the quarter, the company opened eight each
domestic and international locations. These comprise new concept
stores in New York, New Jersey and Puerto Rico, 2 stores in
Toronto and 1 in Leeds. The company also opened 3 outlets in
Spain and another outlet in Chile, taking the total count to 22
in the region. Two U.S. locations were shuttered during the
So far, in the fourth quarter of 2013, Skechers has opened 4
outlets, comprising a new concept store in Paris. The company
closed 1 location and has no further plans to close stores in the
remaining part of the year. The company plans to open another 17
to 20 outlets in the year in the U.S., Chile, Canada and the
At the end of the quarter, the company operated 128 outlets
under joint ventures in Asia, including stores operated by
licensees, 294 distributor-owned or licensed Skechers retail
stores globally, and 26 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 26 outlets, which
included the company's first stores in Turkey and Brazil, and 5
stores in Mexico (taking the count to 31 in the region) 3 in the
Philippines, 2 each in India, Indonesia, Peru, Saudi Arabia and
Taiwan, and 1 each in Australia, Canada, Hong Kong, Malaysia,
Portugal and South Korea.
The company opened its first store in Kazakhstan, and
anticipates opening another 40 to 45 distributor, joint venture
or licensed outlets in the remainder of the year.
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.
Other Financial Aspects
Skechers ended the quarter with cash and cash equivalents of
$332.8 million, long-term debt of $119.5 million and
shareholders' equity of $916.8 million, excluding non-controlling
interest of $48.3 million. Capital expenditures for the quarter
were approximately $9.5 million.
Other Stocks to Consider
Besides Skechers, other stocks worth considering include
Deckers Outdoor Corp.
Brown Shoe Co. Inc.
), both carrying a Zacks Rank #1 (Strong Buy) and
) sporting a Zacks Rank #2 (Buy).
BROWN SHOE CO (BWS): Free Stock Analysis
DECKERS OUTDOOR (DECK): Free Stock Analysis
NIKE INC-B (NKE): Free Stock Analysis Report
SKECHERS USA-A (SKX): Free Stock Analysis
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