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Why Is Skechers (SKX) Up 23.7% Since Last Earnings Report?
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A month has gone by since the last earnings report for Skechers (SKX - Free Report) . Shares have added about 23.7% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Skechers due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Skechers' Q3 Earnings Miss Estimates, Sales Rise Y/Y
Skechers reported mixed third-quarter 2022 results, with the top line outpacing the Zacks Consensus Estimate while the bottom line missing the same. Also, the top line improved year over year. Despite macroeconomic headwinds, supply-chain issues and COVID-related restrictions, results gained from sturdy consumer demand for SKX’s comfort technology products, and higher wholesale and direct-to-consumer sales.
With Skechers’ international business accounting for 60% of its total sales, SKX is focused on the infrastructure abroad. Management is on track to accomplish a goal of 10 billion in annual sales by 2026.
Q3 Highlights
Skechers posted third-quarter earnings of 55 cents a share, missing the Zacks Consensus Estimate of 74 cents. Also, the bottom line declined 16.7% from the year-earlier quarter’s tally. This includes an adverse impact of 9 cents per share due to declines in foreign exchange rates, particularly in EMEA.
SKX generated sales of $1,878.4 million, surpassing the Zacks Consensus Estimate of $1,842 million. The top line grew 20.5% year over year owing to a 14.9% increase in domestic sales and a 24.6% rise in international sales, mainly buoyed by strength in wholesale sales. On a constant-currency basis, total sales grew 27.3%.
Starting from the first quarter of 2022, Skechers reported segmental results for wholesale and direct-to-consumer operations, including its joint venture businesses. All segments registered growth, with wholesale sales growing 26.2% and direct-to-consumer (DTC) increasing 11.9%.
Wholesale sales were driven by 58.8% growth in EMEA and 18.1% in AMER, whereas wholesale volumes jumped 25.1% and average selling price rose 1.4%. DTC sales jumped on growth of 13.8% in AMER and 10% in APAC. DTC average selling price grew 0.6%, with volumes growing 11.1% year over year.
Region-wise, sales increased 16.2% year over year to $948 million in the Americas and 47.6% to $469.8 million in EMEA. The metric grew 8.6% year over year to $460.6 million in APAC.
Margins & Costs
Gross profit increased 13.8% year over year to $883.9 million. However, the gross margin declined 280 basis points (bps) to 47.1% due to increased freight and logistics and a rise in the proportion of distributor sales, somewhat offset by higher average selling prices.
Total operating expenses grew 19.5% year over year to $754 million. The metric, as a percentage of sales, fell 30 bps to 40.1%. Selling expenses jumped 18% from the year-ago period’s level to $166.6 million due to a rise in global digital and brand demand creation spend. Also, general and administrative expenses jumped 19.9% to $576.8 million. Increased costs were driven by the domestic distribution center, where supply-chain and logistics headwinds induced elevated labor, and warehouse and distribution expenses.
Store Update
During the reported quarter, Skechers opened 76 company-owned outlets, including 46 in China, 8 Big Box stores in the United States, a flagship in Madrid and its first store in Rotterdam.
SKX also expanded and relocated two stores at Lima malls, namely Jockey Plaza and Plaza Norte, and closed 34 locations in the reported quarter, including 21 in China and two concept stores in the United States.
Other Financial Aspects
As of Sep 30, 2022, cash and cash equivalents totaled $508.3 million, while short-term investments amounted to $103 million. Skechers ended the quarter with long-term borrowings of $225.5 million and shareholders’ equity of $3,458.7 million, excluding non-controlling interests of $290.2 million. Further, the total inventory increased 21% to $1,779.4 million.
Skechers incurred a capital expenditure worth $100.1 million in the third quarter. Management anticipates capital expenditure of $300-$325 million for 2022.
Outlook
Skechers envisions fourth-quarter 2022 sales between $1.725 billion and $1.775 billion, and earnings of 30-40 cents a share. The Zacks Consensus Estimate for fourth-quarter sales and earnings is currently pegged higher at $1.82 billion and 57 cents per share, respectively.
For the fourth quarter, management anticipates a sequential gross margin improvement and an effective tax rate of 19-20%.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
The consensus estimate has shifted -38.63% due to these changes.
VGM Scores
Currently, Skechers has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Skechers has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
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Why Is Skechers (SKX) Up 23.7% Since Last Earnings Report?
A month has gone by since the last earnings report for Skechers (SKX - Free Report) . Shares have added about 23.7% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Skechers due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Skechers' Q3 Earnings Miss Estimates, Sales Rise Y/Y
Skechers reported mixed third-quarter 2022 results, with the top line outpacing the Zacks Consensus Estimate while the bottom line missing the same. Also, the top line improved year over year. Despite macroeconomic headwinds, supply-chain issues and COVID-related restrictions, results gained from sturdy consumer demand for SKX’s comfort technology products, and higher wholesale and direct-to-consumer sales.
With Skechers’ international business accounting for 60% of its total sales, SKX is focused on the infrastructure abroad. Management is on track to accomplish a goal of 10 billion in annual sales by 2026.
Q3 Highlights
Skechers posted third-quarter earnings of 55 cents a share, missing the Zacks Consensus Estimate of 74 cents. Also, the bottom line declined 16.7% from the year-earlier quarter’s tally. This includes an adverse impact of 9 cents per share due to declines in foreign exchange rates, particularly in EMEA.
SKX generated sales of $1,878.4 million, surpassing the Zacks Consensus Estimate of $1,842 million. The top line grew 20.5% year over year owing to a 14.9% increase in domestic sales and a 24.6% rise in international sales, mainly buoyed by strength in wholesale sales. On a constant-currency basis, total sales grew 27.3%.
Starting from the first quarter of 2022, Skechers reported segmental results for wholesale and direct-to-consumer operations, including its joint venture businesses. All segments registered growth, with wholesale sales growing 26.2% and direct-to-consumer (DTC) increasing 11.9%.
Wholesale sales were driven by 58.8% growth in EMEA and 18.1% in AMER, whereas wholesale volumes jumped 25.1% and average selling price rose 1.4%. DTC sales jumped on growth of 13.8% in AMER and 10% in APAC. DTC average selling price grew 0.6%, with volumes growing 11.1% year over year.
Region-wise, sales increased 16.2% year over year to $948 million in the Americas and 47.6% to $469.8 million in EMEA. The metric grew 8.6% year over year to $460.6 million in APAC.
Margins & Costs
Gross profit increased 13.8% year over year to $883.9 million. However, the gross margin declined 280 basis points (bps) to 47.1% due to increased freight and logistics and a rise in the proportion of distributor sales, somewhat offset by higher average selling prices.
Total operating expenses grew 19.5% year over year to $754 million. The metric, as a percentage of sales, fell 30 bps to 40.1%. Selling expenses jumped 18% from the year-ago period’s level to $166.6 million due to a rise in global digital and brand demand creation spend. Also, general and administrative expenses jumped 19.9% to $576.8 million. Increased costs were driven by the domestic distribution center, where supply-chain and logistics headwinds induced elevated labor, and warehouse and distribution expenses.
Store Update
During the reported quarter, Skechers opened 76 company-owned outlets, including 46 in China, 8 Big Box stores in the United States, a flagship in Madrid and its first store in Rotterdam.
SKX also expanded and relocated two stores at Lima malls, namely Jockey Plaza and Plaza Norte, and closed 34 locations in the reported quarter, including 21 in China and two concept stores in the United States.
Other Financial Aspects
As of Sep 30, 2022, cash and cash equivalents totaled $508.3 million, while short-term investments amounted to $103 million. Skechers ended the quarter with long-term borrowings of $225.5 million and shareholders’ equity of $3,458.7 million, excluding non-controlling interests of $290.2 million. Further, the total inventory increased 21% to $1,779.4 million.
Skechers incurred a capital expenditure worth $100.1 million in the third quarter. Management anticipates capital expenditure of $300-$325 million for 2022.
Outlook
Skechers envisions fourth-quarter 2022 sales between $1.725 billion and $1.775 billion, and earnings of 30-40 cents a share. The Zacks Consensus Estimate for fourth-quarter sales and earnings is currently pegged higher at $1.82 billion and 57 cents per share, respectively.
For the fourth quarter, management anticipates a sequential gross margin improvement and an effective tax rate of 19-20%.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
The consensus estimate has shifted -38.63% due to these changes.
VGM Scores
Currently, Skechers has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Skechers has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.