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On Jul 31, we upgraded our recommendation on Skechers U.S.A., Inc. (SKX - Analyst Report), the designer, marketer and distributor of footwear, to Outperform, following better-than-expected second-quarter 2013 results. The company attained a Zacks Rank #1 (Strong Buy) status on Jul 19.

Why the Upgrade?

Skechers showcased a strong operating performance during the second quarter, marking a sharp recovery from a loss posted in the year-ago quarter on the back of strong sales across international wholesale and company-owned retail businesses.

The quarterly earnings came in at 14 cents a share compared with a loss of 4 cents delivered in the prior-year quarter, and handily surpassed the Zacks Consensus Estimate of 3 cents. Increased demand of products and healthy performance across all revenue channels led to an 11.5% surge in revenue to $428.2 million, which also came ahead of the Zacks Consensus Estimate of $425 million.

The stronger-than-anticipated results triggered an uptrend in the Zacks Consensus Estimates, as analysts become more constructive on the stock’s future performance. This is evident from the movement witnessed in the Zacks Consensus Estimate that surged 17% to $1.10 for 2013 and 20.4% to $1.83 per share for 2014 in the past 30 days.

With more emphasis on the new line of products, cost containment efforts, inventory management and global distribution platform, the 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.

Other Stocks to Consider

Apart from Skechers, the other stocks worth considering in the Footwear & Accessories industry include Brown Shoe Co. Inc. (BWS - Snapshot Report) holding a Zacks Rank #1 (Strong Buy), and Wolverine World Wide Inc. (WWW - Snapshot Report) and Deckers Outdoor Corp. (DECK - Analyst Report), both carrying a Zacks Rank #2 (Buy).

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