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Why Skechers (SKX) Isn't Any More in Investors' Good Books
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Investors must make prudent and timely decisions to maintain precision in their portfolio. They must blot out non-profitable stocks to safeguard their returns. Presently, Skechers U.S.A., Inc. (SKX - Free Report) is one such stock. Not only has the designer, developer, marketer, and distributor of footwear recently been downgraded to a Zacks Rank #5 (Strong Sell), its shares have plunged over 46% in the past one year.
After beginning the year on a high note, Skechers failed to carry the momentum into the second quarter of fiscal 2016 amid economic upheaval and a tough domestic retail environment. Moreover, the company succumbed to a negative earnings surprise of 5.9% in the quarter, after registering an earnings beat of 18.9% in its fiscal first quarter. Foreign currency headwinds and higher general and administrative expenses hurt the bottom line. Also, the rate of sales growth in the quarter declined from 27.4% witnessed in the prior quarter.
Undoubtedly strategic marketing initiatives, product innovation across multiple categories and growth witnessed across international subsidiary and joint venture businesses as well as international company-owned Skechers retail stores provided cushion to the top line. However, shipments pulled from the second quarter into the first quarter played spoilsport.
Fashion obsolescence also remains the primary concern for Skechers' business model, which requires sustained focus on product and design innovation. Also, the company’s pioneering position might be hurt by delays in its product launches.
Additionally, Skechers faces intense competition in the footwear industry from top guns like NIKE, Inc. (NKE - Free Report) , The Timberland Company, Kenneth Cole Productions, Adidas, and Puma on several attributes such as style, price, quality, comfort and brand name. Further, an aggressive pricing strategy to stave off competition may strain margins.
Consequently, analysts are bearish, and the estimates for 2016 and 2017 are trending down. Over the past 60 days, the Zacks Consensus Estimate of $1.81 and $2.05 for fiscal 2016 and fiscal 2017 has dropped 27 cents and 44 cents, respectively.
From the above analysis it is quite apparent that Skechers has lost its sheen as an investment opportunity, at least for the near term. So for the time being, you can shift your focus to better-placed retail stocks.
Stocks that Warrant a Look
Some better-ranked stocks in the same industry are Deckers Outdoor Corp. (DECK - Free Report) and Francesca's Holdings Corporation , both carrying a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
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Why Skechers (SKX) Isn't Any More in Investors' Good Books
Investors must make prudent and timely decisions to maintain precision in their portfolio. They must blot out non-profitable stocks to safeguard their returns. Presently, Skechers U.S.A., Inc. (SKX - Free Report) is one such stock. Not only has the designer, developer, marketer, and distributor of footwear recently been downgraded to a Zacks Rank #5 (Strong Sell), its shares have plunged over 46% in the past one year.
SKECHERS USA-A Price, Consensus and EPS Surprise
SKECHERS USA-A Price, Consensus and EPS Surprise | SKECHERS USA-A Quote
Why the Downgrade?
After beginning the year on a high note, Skechers failed to carry the momentum into the second quarter of fiscal 2016 amid economic upheaval and a tough domestic retail environment. Moreover, the company succumbed to a negative earnings surprise of 5.9% in the quarter, after registering an earnings beat of 18.9% in its fiscal first quarter. Foreign currency headwinds and higher general and administrative expenses hurt the bottom line. Also, the rate of sales growth in the quarter declined from 27.4% witnessed in the prior quarter.
Undoubtedly strategic marketing initiatives, product innovation across multiple categories and growth witnessed across international subsidiary and joint venture businesses as well as international company-owned Skechers retail stores provided cushion to the top line. However, shipments pulled from the second quarter into the first quarter played spoilsport.
Fashion obsolescence also remains the primary concern for Skechers' business model, which requires sustained focus on product and design innovation. Also, the company’s pioneering position might be hurt by delays in its product launches.
Additionally, Skechers faces intense competition in the footwear industry from top guns like NIKE, Inc. (NKE - Free Report) , The Timberland Company, Kenneth Cole Productions, Adidas, and Puma on several attributes such as style, price, quality, comfort and brand name. Further, an aggressive pricing strategy to stave off competition may strain margins.
Consequently, analysts are bearish, and the estimates for 2016 and 2017 are trending down. Over the past 60 days, the Zacks Consensus Estimate of $1.81 and $2.05 for fiscal 2016 and fiscal 2017 has dropped 27 cents and 44 cents, respectively.
From the above analysis it is quite apparent that Skechers has lost its sheen as an investment opportunity, at least for the near term. So for the time being, you can shift your focus to better-placed retail stocks.
Stocks that Warrant a Look
Some better-ranked stocks in the same industry are Deckers Outdoor Corp. (DECK - Free Report) and Francesca's Holdings Corporation , both carrying a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>