We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Skechers (SKX) Misses on Q3 Earnings & Sales; Stock Down
Read MoreHide Full Article
Skechers USA Inc. (SKX - Free Report) continues with its dismal performance in 2016. After witnessing a negative earnings surprise of 5.9% in the second quarter, this Manhattan Beach, CA-based footwear retailer again missed the Zacks Consensus Estimate by 8.7% in the third quarter. On the revenue front too, the company missed the estimate for the second straight quarter. Consequently, management issued a bleak fourth-quarter outlook.
The soft projection along with lower-than-expected results led the shares of this Zacks Rank #5 (Strong Sell) company to plunge over 15% during after-market trading hours yesterday.
Skechers delivered quarterly earnings of 42 cents a share that missed the Zacks Consensus Estimate of 46 cents and slipped 2.3% from 43 cents posted in the year-ago quarter. Foreign currency headwinds, rise in general and administrative expenses, and higher effective tax rate hurt the bottom line. Even an increase in net sales failed to act as a savior.
The company reported net sales of $942.4 million that surged 10.1% from the year-ago quarter but fell short of the Zacks Consensus Estimate of $953 million. We also observed that the rate of sales growth in the third quarter improved marginally from 9.7% registered in the second quarter but was significantly lower than 27.4% experienced in the first quarter. The currency translation adversely impacted international wholesale and retail sales by $15.9 million.
Undoubtedly strategic marketing initiatives, product innovation across multiple categories and growth witnessed across international wholesale business as well as company-owned global retail business cushioned the top line. Skechers’ domestic e-commerce business grew 13% during the quarter. The company operates e-commerce sites in Chile, Germany and the U.K., and has plans to launch the same in Spain and Canada.
Management now projects fourth-quarter 2016 net sales in the band of $710–$735 million, way below the Zacks Consensus Estimate of $796.4 million. Additionally, the company now expects single-digit growth in comparable-store sales in international wholesale business and total retail business, whereas single-digit decline in domestic wholesale business.
Gross profit for the reported quarter grew 11.1% to $430 million, whereas gross margin expanded 40 basis points (bps) to 45.6%. Operating income came in at $103.4 million, up 8.1% from the prior-year quarter, while as a percentage of net sales, it decreased 20 bps to 11%.
The domestic wholesale business recorded net sales decline of 3.4%. The number of pairs shipped inched up 0.6%, while average selling price per pair dipped 4%. Management stated that challenging retail landscape, discounts on other normally full-priced brands and shorter back-to-school season impacted the domestic wholesale business results. Management expects wholesale business in the U.S. to decrease in the fourth quarter and remained cautiously optimistic for the first quarter of 2017.
Skechers’ international wholesale business revenues, which constituted 40.1% of total sales, soared 18.3% on the back of a 35.4% rise in wholly-owned subsidiary and joint venture (JV) businesses. However, these were neutralized by 18.6% decline in distributor business on account of the transitioning of Latin American and Central Eastern European distributors to subsidiaries in the year-ago quarter. Further, this included the transition of Israel to a JV in the quarter under review.
On a combined basis, retail business sales grew 16%, whereas comparable-store sales advanced 3.2%. Domestic retail sales rose 8.1%, while International retail sales soared 45.3%.
Store Update
Skechers operated 1,160 branded stores internationally, owned and operated by JVs, franchisees and distributors at the end of the reported quarter. Of the total, 503 are distributor-owned or franchised retail stores; 540 are JV stores, and 117 are company-franchised stores in countries where Skechers directly distributes its products.
During the third quarter of 2016, 137 third-party stores were opened – including 82 stores in China, 5 in both India and Saudi Arabia, 4 in Germany, Taiwan, the UAE and Vietnam, 3 in both Hong Kong and Turkey, 2 each in Australia, Japan, South Korea, Singapore, Qatar and the Philippines and 1 each in Croatia, Denmark, Hungary, Italy, Malaysia, Mexico, Morocco, New Zealand, Sri Lanka, Thailand and Zimbabwe – while 10 stores were closed.
So far in the fourth quarter, Skechers has opened 11 third-party stores. The company plans to open 130–140 more third-party stores in the remainder of 2016.
Skechers operated 556 company-owned retail outlets globally, comprising 150 international locations at the end of the third quarter. During the quarter, the company opened 11 stores and has opened 2 stores so far in the fourth quarter. The company closed 1 domestic outlet in the quarter under review. It expects to open approximately 15–20 more outlets during the year.
Strategic Initiatives
Management is focused on product innovation, additional Skechers store openings and increasing distribution channels by entering into international distribution agreements to boost sales and profitability. Moreover, Skechers’ international business remains a considerable sales growth driver for the company with Europe being the significant market outside the U.S. Moreover, Skechers is poised to enhance its global reach in the footwear market through its distribution networks, subsidiaries and JVs. The company is transitioning international distributors to subsidiary or JV model. Israel has been transitioned to a JV, while South Korea is in its final stage. Skechers has been steadily gaining ground by offering stylish and casual shoes at a more compelling price. The company is focusing on the new line of products, cost containment and a global distribution platform.
Other Financial Aspects
Skechers ended the quarter with cash and cash equivalents of $665.3 million, long-term borrowings (net of current installments) of $67.6 million, and shareholders’ equity of $1,596.3 million, excluding non-controlling interest of $78.5 million.
Capital expenditures incurred during the quarter were $25.8 million on store openings, remodels and upgradation and automation of European distribution center. Management now envisions capital expenditures of about $5–$10 million for the remainder of 2016, reflecting planned opening of an additional 15−20 retail outlets and the completion of the European Distribution Center automation system in the later part of the year.
American Eagle Outfitters delivered an average positive earnings surprise of 9.3% over the trailing four quarters and has a long-term earnings growth rate of 11.8%.
Foot Locker delivered an average positive earnings surprise of 3.1% over the trailing four quarters and has a long-term earnings growth rate of 9.9%.
DSW delivered an average positive earnings surprise of 24% over the trailing four quarters and has a long-term earnings growth rate of 8.3%.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>
Unique Zacks Analysis of Your Chosen Ticker
Pick one free report - opportunity may be withdrawn at any time
Image: Bigstock
Skechers (SKX) Misses on Q3 Earnings & Sales; Stock Down
Skechers USA Inc. (SKX - Free Report) continues with its dismal performance in 2016. After witnessing a negative earnings surprise of 5.9% in the second quarter, this Manhattan Beach, CA-based footwear retailer again missed the Zacks Consensus Estimate by 8.7% in the third quarter. On the revenue front too, the company missed the estimate for the second straight quarter. Consequently, management issued a bleak fourth-quarter outlook.
The soft projection along with lower-than-expected results led the shares of this Zacks Rank #5 (Strong Sell) company to plunge over 15% during after-market trading hours yesterday.
Skechers delivered quarterly earnings of 42 cents a share that missed the Zacks Consensus Estimate of 46 cents and slipped 2.3% from 43 cents posted in the year-ago quarter. Foreign currency headwinds, rise in general and administrative expenses, and higher effective tax rate hurt the bottom line. Even an increase in net sales failed to act as a savior.
The company reported net sales of $942.4 million that surged 10.1% from the year-ago quarter but fell short of the Zacks Consensus Estimate of $953 million. We also observed that the rate of sales growth in the third quarter improved marginally from 9.7% registered in the second quarter but was significantly lower than 27.4% experienced in the first quarter. The currency translation adversely impacted international wholesale and retail sales by $15.9 million.
Undoubtedly strategic marketing initiatives, product innovation across multiple categories and growth witnessed across international wholesale business as well as company-owned global retail business cushioned the top line. Skechers’ domestic e-commerce business grew 13% during the quarter. The company operates e-commerce sites in Chile, Germany and the U.K., and has plans to launch the same in Spain and Canada.
Management now projects fourth-quarter 2016 net sales in the band of $710–$735 million, way below the Zacks Consensus Estimate of $796.4 million. Additionally, the company now expects single-digit growth in comparable-store sales in international wholesale business and total retail business, whereas single-digit decline in domestic wholesale business.
Gross profit for the reported quarter grew 11.1% to $430 million, whereas gross margin expanded 40 basis points (bps) to 45.6%. Operating income came in at $103.4 million, up 8.1% from the prior-year quarter, while as a percentage of net sales, it decreased 20 bps to 11%.
SKECHERS USA-A Price, Consensus and EPS Surprise
SKECHERS USA-A Price, Consensus and EPS Surprise | SKECHERS USA-A Quote
Segmental Sales Synopsis
The domestic wholesale business recorded net sales decline of 3.4%. The number of pairs shipped inched up 0.6%, while average selling price per pair dipped 4%. Management stated that challenging retail landscape, discounts on other normally full-priced brands and shorter back-to-school season impacted the domestic wholesale business results. Management expects wholesale business in the U.S. to decrease in the fourth quarter and remained cautiously optimistic for the first quarter of 2017.
Skechers’ international wholesale business revenues, which constituted 40.1% of total sales, soared 18.3% on the back of a 35.4% rise in wholly-owned subsidiary and joint venture (JV) businesses. However, these were neutralized by 18.6% decline in distributor business on account of the transitioning of Latin American and Central Eastern European distributors to subsidiaries in the year-ago quarter. Further, this included the transition of Israel to a JV in the quarter under review.
On a combined basis, retail business sales grew 16%, whereas comparable-store sales advanced 3.2%. Domestic retail sales rose 8.1%, while International retail sales soared 45.3%.
Store Update
Skechers operated 1,160 branded stores internationally, owned and operated by JVs, franchisees and distributors at the end of the reported quarter. Of the total, 503 are distributor-owned or franchised retail stores; 540 are JV stores, and 117 are company-franchised stores in countries where Skechers directly distributes its products.
During the third quarter of 2016, 137 third-party stores were opened – including 82 stores in China, 5 in both India and Saudi Arabia, 4 in Germany, Taiwan, the UAE and Vietnam, 3 in both Hong Kong and Turkey, 2 each in Australia, Japan, South Korea, Singapore, Qatar and the Philippines and 1 each in Croatia, Denmark, Hungary, Italy, Malaysia, Mexico, Morocco, New Zealand, Sri Lanka, Thailand and Zimbabwe – while 10 stores were closed.
So far in the fourth quarter, Skechers has opened 11 third-party stores. The company plans to open 130–140 more third-party stores in the remainder of 2016.
Skechers operated 556 company-owned retail outlets globally, comprising 150 international locations at the end of the third quarter. During the quarter, the company opened 11 stores and has opened 2 stores so far in the fourth quarter. The company closed 1 domestic outlet in the quarter under review. It expects to open approximately 15–20 more outlets during the year.
Strategic Initiatives
Management is focused on product innovation, additional Skechers store openings and increasing distribution channels by entering into international distribution agreements to boost sales and profitability. Moreover, Skechers’ international business remains a considerable sales growth driver for the company with Europe being the significant market outside the U.S. Moreover, Skechers is poised to enhance its global reach in the footwear market through its distribution networks, subsidiaries and JVs. The company is transitioning international distributors to subsidiary or JV model. Israel has been transitioned to a JV, while South Korea is in its final stage. Skechers has been steadily gaining ground by offering stylish and casual shoes at a more compelling price. The company is focusing on the new line of products, cost containment and a global distribution platform.
Other Financial Aspects
Skechers ended the quarter with cash and cash equivalents of $665.3 million, long-term borrowings (net of current installments) of $67.6 million, and shareholders’ equity of $1,596.3 million, excluding non-controlling interest of $78.5 million.
Capital expenditures incurred during the quarter were $25.8 million on store openings, remodels and upgradation and automation of European distribution center. Management now envisions capital expenditures of about $5–$10 million for the remainder of 2016, reflecting planned opening of an additional 15−20 retail outlets and the completion of the European Distribution Center automation system in the later part of the year.
Stocks to Consider
Some better-ranked stocks in the retail sector include American Eagle Outfitters, Inc. (AEO - Free Report) , DSW Inc. and Foot Locker, Inc. (FL - Free Report) , all carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
American Eagle Outfitters delivered an average positive earnings surprise of 9.3% over the trailing four quarters and has a long-term earnings growth rate of 11.8%.
Foot Locker delivered an average positive earnings surprise of 3.1% over the trailing four quarters and has a long-term earnings growth rate of 9.9%.
DSW delivered an average positive earnings surprise of 24% over the trailing four quarters and has a long-term earnings growth rate of 8.3%.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>