Skechers USA, Inc
) second-quarter 2013 earnings came in at 14 cents a share, a
significant recovery from the loss of 4 cents delivered in the
prior-year quarter, owing to strong sales across international
wholesale and company-owned retail businesses. The quarterly
earnings handily surpassed the Zacks Consensus Estimate of 3
Increased demand of products and healthy performance across
all revenue channels led to an 11.5% surge in revenues to $428.2
million. Total revenue also came ahead of the Zacks Consensus
Estimate of $425 million.
With more emphasis on the new line of products, cost
containment efforts, inventory management and global distribution
platform, this Zacks Rank #1 (Strong Buy) company anticipates
sustaining the growth momentum in 2013. Moreover, Skechers
expects to benefit from back-to-school deliveries and projects
significant growth for the upcoming quarter as the demand for the
company's products remains strong.
The quarter exhibited a major improvement in gross profit,
which soared 13.7% to $194.9 million, reflecting higher sales
volume. Moreover, gross margin expanded 90 basis points to 45.5%,
reflecting increased sales and favorable product mix.
The domestic wholesale business marked an elevation of 6.6%,
reflecting a jump of 7.1% in pairs shipped coupled with
double-digit growth across the men's and women's divisions. The
company's Performance Division remained strong with double-digit
gain at the men's Performance line.
Skechers' international business increased 10.7% on the back
of a 35.1% rise in international subsidiary and joint venture
sales. However, distributor sales declined 27.7%. Tough
macroeconomic conditions in Europe continue to disappoint.
However, China, Chile, Canada, Hong Kong and Singapore portrayed
Citing economic and political challenges in several markets,
Skechers apprehends international distributor sales to be low for
the year. However, subsidiary and joint venture businesses are
expected to rise.
On a combined basis, retail business sales grew 18.9%, whereas
comparable-store sales advanced 16.5%. Domestic retail sales rose
19%, while comparable-store sales increased 16.5%. International
retail sales jumped 17.7%, whereas comparable-store sales climbed
The company's licensing division has been another source of
revenue, whereby the company licenses its name and images.
Skechers generated $1.4 million in revenues during the quarter
from its licensing partners, which include apparel, eyewear and
The 37.2% 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, which competes with
Deckers Outdoor Corp.
), had 355 retail stores under operation at the end of the second
quarter. During the quarter, the company opened 2 stores each in
Puerto Rico and Chicago, while it opened 1 store each in Santa
Barbara, Japan and Phoenix. The company shuttered 5 outlets in
the quarter. So far, in the third quarter of 2013, Skechers has
opened 1 outlet in Puerto Rico, 1 in Atlanta, and 1 store in the
suburb of Chicago. The company closed 1 location and plans to
close another in the coming month. For the remaining part
of the year, the company anticipates opening 35 to 40
At the end of the quarter, the company operated 124 outlets
under joint ventures in Asia, including stores operated by
licensees, 276 distributor-owned or licensed Skechers retail
stores globally, and 23 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 the company's first store in Myanmar. 3 stores
each were opened in the UAE and Mexico, 7 in Indonesia and 2 each
in South Korea, Peru and Singapore. The company opened 1 store
each in Egypt, Taiwan, India, Columbia and Lebanon. So far in the
third quarter, 5 outlets were opened with 30 more on the cards.
In the second quarter, the company shuttered 2 outlets, 1 each in
Singapore and Russia.
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
$333 million, long-term debt of $122.5 million and shareholders'
equity of $887.8 million, excluding non-controlling interest of
$47.2 million. Capital expenditures for the quarter were
approximately $9.8 million.
Other Stocks to Consider
Apart from Skechers, the other stocks in the Footwear &
Accessories industry worth considering include
Wolverine World Wide Inc.
Brown Shoe Co. Inc.
), both carrying a Zacks Rank #1 (Strong Buy).
BROWN SHOE CO (BWS): Free Stock Analysis
DECKERS OUTDOOR (DECK): Free Stock Analysis
SKECHERS USA-A (SKX): Free Stock Analysis
WOLVERINE WORLD (WWW): Free Stock Analysis
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