Bullish on Skechers

On Feb 18, we upgraded our recommendation on Skechers U.S.A., Inc. ( SKX - Analyst Report ) , the designer, developer and distributor of footwear and apparel, to Outperform, following better-than-expected fourth-quarter 2012 results. The company attained a Zacks Rank #1 (Strong Buy) status shortly after reporting impressive results.

Why the Upgrade?

Skechers is now showing signs of stability as evident from its fourth quarter results. The quarterly earnings of 8 cents a share fared far better than a loss of 54 cents delivered in the prior-year quarter and the Zacks Consensus Estimate of a loss of 11 cents on the back of growth witnessed across domestic wholesale, international, and company-operated retail businesses.

Following sturdy results, the Zacks Consensus Estimates for the first and second quarters of 2013 rose by 4.3% and 21.4% to 24 cents and 17 cents, respectively in the last 7 days. For 2013 and 2014, the Zacks Consensus Estimates increased by 4.7% and 3.2%, to 89 cents and $1.28, respectively, over the same time frame.

With more emphasis on a new line of products, increased backlog, cost containment efforts, inventory management and margin improvement, the company anticipates sustaining growth momentum in 2013. We believe Skechers, through its distribution networks, subsidiaries and joint ventures is poised to enhance its global reach in the footwear market.

Skechers continues to offer a diversified portfolio of brands that includes a wide range of fashion, athletic, non-athletic and work footwear at compelling prices. This multi-brand strategy enables the company to roll out new products without cannibalizing its existing brands and helps expand the targeted demographic profile of customers.

Other Stocks to Consider

Other stocks worth considering in the apparel, footwear & accessories industry are Adidas AG ( ADDYY ) , Francesca's Holdings Corporation ( FRAN - Snapshot Report ) and Nike Inc. ( NKE - Analyst Report ) . All the stocks hold a Zacks Rank #2 (Buy).