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Back in the 1990s and early 2000s, Skechers (SKX - Free Report) were inescapable. Every kid, tween, teen, and young adult seemed to have a pair, but more than that, they all wanted a pair because Skechers were the epitome of cool; it certainly helped that the company had the branding power to have pop stars like Britney Spears in their advertisements.

Skechers and its D’Lites slowly faded into the fashion margins, but like all trends—and especially anything from the 90s…Adidas (ADDYY - Free Report) Superstars and choker necklaces, anyone? —the company’s quirky sneakers have made a resurgence.

 

Freakin’ D-LITEful

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Skechers have also been helped by the so-called “ugly sneaker” trend that’s taken the fashion industry by storm. From Kanye West’s Yeezy Wave Runner 700s to Balenciaga’s Triple S, the uglier the better. And apparently, the more the shoe looks like a Skechers sneaker, the better, too.

Strong Third Quarter Earnings

Last quarter, the Zacks Rank #1 (Strong Buy) stock reported third quarter earnings that soared past estimates, causing shares to jump over 35% to a new 52-week high.

Earnings came in at 59 cents per share, coming in way above the Zacks Consensus Estimate of 43 cents per share. The company said its profit in Q3 was helped by sales growth in its international wholesale business, its company-owned global retail business, and a lower effective tax rate.

Total revenues grew 16.2% to $1.095 billion, also beating our consensus estimate of $1.065 billion. Skechers saw an impressive 4.4% increase in comparable store sales as well.

CFO David Weinberg said that “We believe the momentum we are experiencing will continue this year and in the coming year."

In the wake of this report, many analysts increased their price targets on the retailer; Wedbush raised its target to $35 from $25 and Cowen and Co. boosted its target to $36 from $35, while Morgan Stanley increased its target to $31 from $28.50.

Growth Estimates Have Improved

In addition to this slew of price target increases, Skechers’ strong earnings report has certainly helped improve its short-term growth estimates

For its current quarter, the company expects earnings to increase an incredible 225%, a testament to the growing popularity of the Skechers brand in addition to how well the company believes it will perform during this holiday season.

Skechers projects net sales in the fourth quarter to fall in the range of $860 million to $885 million, and diluted earnings per share of $0.09 to $0.14.

Earnings estimates for 2018 are also on the rise, jumping to $2.15 per share from $1.97 per share in the last 60 days. Revenues are anticipated to jump about 11.5% in the same time frame.

Shares are Rallying

SKX has had an incredible run these past two or so months, and year-to-date, the stock is up almost 44% compared to the S&P 500’s return of about 16.4%.

Skechers is currently trading with a forward P/E of 20.79.

And it’s not just SKX right now either. While Shoes and Retail Apparel has had an up-and-down year, it’s is an overall strong industry right now, and sits in the top 18% of all industries that we cover.

Even among this impressive landscape, Skechers is a standout. Just today, it recieved another PT increase at Susquehanna, which hiked its target to $46 from $38 on the company.

If its management team can keep on executing its growth strategies, and the brand remains a hot sneaker choice among fashion bloggers and insiders, shares should continue to rise

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