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Bear of the Day: Skechers (SKX)

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Skechers (SKX - Free Report) is a Zacks Rank #5 (Strong Sell) that designs, develops, markets, and distributes footwear for men, women, and children in the United States and overseas. The company offers casual, casual athletic, sport athletic, trail, sandals, boots, and retro fashion footwear for men and women.

Skechers brands include Skechers USA, Skechers Sport, Skechers Active, Modern Comfort, Skechers Street, Twinkle Toes, Z-Strap, Skechers Stretch Fit, Skechers GOrun and many more.

The stock has had a pretty good year, moving up over 50% in the first seven months of the year. However, the stock sold off over the last few months and the company just reported an earnings miss.

Additionally, estimates are falling for next year. Investors should be cautious as the stock struggles to get back to all-time highs.

More about SKX

Skechers operated almost 4,000 company-and third party owned stores at the close of last year. The company sells its products through department and specialty stores, athletic and independent retailers, boutiques, and online retailers; and through its e-commerce sites, concept stores, and factory and warehouse outlet stores.

Skechers was founded in 1992, is headquartered in Manhattan Beach, CA. The company is valued just over $7 billion and has a Forward PE of 19. SKX has Zacks Style Scores of “C” in both Momentum and Value, but an “F” in Growth.

Earnings History

The company has a decent track record of beating earnings more than not. Since the beginning of 2020, Skechers has reported six beats out of the last eight quarters. Unfortunately, this last quarter the company reported its biggest miss on EPS since 2018.

Skechers U.S.A., Inc. Price and EPS Surprise

Skechers U.S.A., Inc. Price and EPS Surprise

Skechers U.S.A., Inc. price-eps-surprise | Skechers U.S.A., Inc. Quote

Q4 Earnings and Estimates

The company reported earnings back in October seeing a 12% miss on the bottom line. Revenues also came in below expectations and the company cut its FY21 guidance to $2.45-2.50 v the $2.58 expected. Their revenue outlook was also lowered.

There were some positives to the report. Direct to customer sales were up 44% year over year and margins came in higher y/y.

Management commented that supply chain constraints will remain a challenge. They are seeing progress in key global ports, but it remains a headwind at the moment.

Estimates have fallen along with the cut in guidance. Over the last month, we have seen a drop in the current year’s estimates to $2.48 from $2.62, or 5%. For next year, we see a 3% drop.

Argus recently dropped its rating to Hold from Buy based on these earnings. The firm cites supply-chain challenges and lowered their 2021 EPS forecast.

The Technicals

The stock is holding steady for now and is trading over its 50 and 200-day moving averages. However, the 50-day is still below that 200-day, which is a bearish sign. While the stock has rallied 20% off its recent lows, sellers are stepping in just under the $50 level. A break below $45 would mean the bears are in control and might look to break those October lows around $40.  

In Summary

Investors should be cautious of Skechers as the supply chain issues are hurting earnings. Above the $50 level, the bulls could be in the clear. However, a move under the $45 level could bring more selling.

Investors looking to get into shoes might want to look at Steven Madden (SHOO - Free Report) . This stock just popped on a 5% EPS beat and is trading at all time highs. SHOO is a Zacks Rank #2 (Buy).

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