Skechers USA Inc.
) 2014 is turning out to be an exceptional year. After a robust
first-quarter performance, the company yet again came up with
stellar quarterly results. Investor confidence was reflected in an
8.1% rise in stock price in the after market trading hours.
Second-quarter 2014 earnings of 68 cents per share was way ahead of
the Zacks Consensus Estimate of 41 cents. Moreover, the reported
figure rose substantially from 14 cents in the prior-year
Skechers U S A , Inc - Quarterly EPS (BNRI) |
The robust results were owing to strong top-line growth and
effective cost management. Last quarter, the company had shifted a
portion of advertising expenses to the second quarter as Easter
fell in April this year.
Increased demand for products, product innovation across multiple
categories and healthy performance across all revenue channels led
to a 37.1% rise in revenues to $587.1 million in the quarter, which
surpassed the Zacks Consensus Estimate of $505 million.
With increased focus on the new line of products, cost containment,
inventory management, global distribution platform and backlogs,
the company is confident of sustaining the growth momentum
Gross profit for the quarter soared 38.2% to $269.4 million while
gross margin increased 40 basis points (bps) to 45.9%. The growth
was primarily driven by increased sales and a favorable product
Operating income for the quarter increased over threefold year over
year to $53.8 million while as a percentage of sales, it improved
520 bps to 9.2%.
Segmental Sales Synopsis for Q2
The domestic wholesale business marked a revenue increase of 35.4%,
reflecting a jump of 30.1% in pairs shipped that benefited from
relentless product development initiatives across multiple lines
and an increase of 4.0% in the average price per pair.
Skechers' international business revenue increased 54.0% on the
back of a 42.7% rise in international subsidiary and joint venture
(JV) sales as well as an improvement of 87.3% in distributor sales.
Though tough macroeconomic conditions in several key markets
impacted Skechers' international distributor business, the
company's partners in Philippines, Mexico, Turkey, Taiwan, South
Korea, New Zealand, the UAE and Australia experienced growth.
Looking ahead, this Zacks Rank #2 (Buy) company expects the
momentum witnessed during the quarter in subsidiary and JVs to
continue in the third quarter and last throughout fiscal 2014.
On a combined basis, retail business sales grew 28.8% and
comparable-store sales jumped 13.9%. Domestic retail sales rose
20.9% while comparable-store sales increased 12.1%. International
retail sales soared 75.1% and comps climbed 24.6%.
Skechers had 413 retail stores and 524 distributor, JV and licensed
stores under operation at the end of second-quarter 2014. At the
quarter-end, the company's JV and licensed stores comprised 153
outlets under JVs in Asia including stores operated by licensees,
337 distributor-owned or licensed Skechers retail stores globally
and 34 company-licensed locations in Brazil, Canada, Spain, France,
Portugal and Ireland.
During the second quarter, the company opened 16 stores, including
13 domestic stores and 3 international outlets. These comprise new
concept stores in California, Florida, Iowa, Kansas, Louisiana, New
Jersey, Tennessee, Texas and Washington, as well as outlets in
Canada, France and the U.K. Further, the company closed 2 domestic
concept stores in the quarter.
So far, in the third quarter of 2014, Skechers has opened 2
outlets, one new concept store each in California and Texas. Going
forward, the company plans to open 20-25 retail stores during rest
of the quarter and another 20-25 stores in the fourth quarter.
During the second quarter, Skechers opened 34 distributor, JV or
licensed stores, which included the company's first store in Libya,
6 stores in India; 4 in Mexico; 3 in Australia; 2 each in Malaysia,
Georgia and South Korea and 1 each in Saudi Arabia, Estonia,
Latvia, Indonesia, Macau, Denmark, Kenya, Russia, Belarus, Taiwan,
Brunei, Hong Kong Portugal and Turkey. One South Korean outlet was
closed in the quarter.
So far, in the third quarter of 2014, Skechers has opened 3
distributor JV outlets. Going forward, the company plans to open
about 60-65 more stores in 2014.
Overall, the company targets to increase its store count to about
1,050 by the end of 2014.
Management remains committed to its focus on new lines of products,
opening additional Skechers stores and increasing distribution
channels with the development of international distribution
agreements to boost sales and profitability. Moreover, Skechers'
international business remains a significant sales growth driver
for the company. Also, through its distribution networks,
subsidiaries and JVs, Skechers is poised to enhance its global
reach in the footwear market.
Other Financial Aspects
Skechers, which competes with
Deckers Outdoor Corp.
), ended second-quarter 2014 with cash and cash equivalents of
$414.8 million, long-term debt of $110.3 million and shareholders'
equity of $1,001.8 million, excluding non-controlling interest of
Capital expenditures for the quarter were approximately $12.6
million. The company expects another $35-$45 million worth of capex
in the 2014 mainly diverted towards store expansion and remodeling.
Other Stocks to Consider
Another stock worth considering in the shoe space is
Brown Shoe Co. Inc.
), which also sports a Zacks Rank #2.
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