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Skechers (SKX) Beats on Q1 Earnings, Raises 2022 EPS Outlook
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Skechers U.S.A., Inc. (SKX - Free Report) reported first-quarter 2022 results with both the top and the bottom line outpacing the Zacks Consensus Estimate and improving year over year. SKX gained from growth across domestic and international channels, driven by strong wholesale and direct-to-consumer sales.
Skechers’ focus on offering comfort technology in its products has been yielding for a while. SKX is committed to accomplish sales of $10 billion by 2026. Management also raised sales and earnings view for 2022.
Shares of this well-known footwear company have gained 4.3% in after-hours trading on Apr 26. The currently Zacks Rank #3 (Hold) stock has increased 3.9% in the past three months against the industry’s 0.9% dip.
Let’s Analyze the Results
Skechers posted first-quarter earnings of 77 cents a share, beating the Zacks Consensus Estimate of 72 cents. Also, the bottom-line figure rose 22.2% from 63 cents earned in the year-earlier quarter.
SKX generated sales of $1,819.6 million that came above the Zacks Consensus Estimate of $1,691 million. The top line jumped 26.8% year over year owing to a 28.7% increase in domestic sales and a 25.5% rise in international sales. On constant-currency basis, total sales grew 28.7%. Management highlighted that quarterly sales set a new record for Skechers, despite the persistent pandemic-led headwinds, including worldwide store closures and supply-chain concerns.
Skechers U.S.A., Inc. Price, Consensus and EPS Surprise
Starting the first quarter of 2022, Skechers reported segment results for wholesale and direct-to-consumer operations, including its joint venture businesses. Both segments recorded growth, with Wholesale improving 32.7% and Direct-to-Consumer (DTC) growing 15.7%. Wholesale sales grew 32.7%, mainly on increases in AMER with 41.6% and EMEA with 42% rate. Wholesale volume also expanded 22.7% while average selling price inched up 8.6%.
DTC sales jumped 15.7% on strength of 157.3% in EMEA, 11.2% in AMER and 8.5% in APAC. DTC average selling price climbed 15.1% as a result of lower promotions and higher prices.
Solid gains from broad-based demand for SKX’s innovative comfort products, backed by its multimedia marketing team and an improved infrastructure aided the first-quarter performance. Skechers’ total international business comprised nearly 57% of sales, reflecting sturdy brand awareness worldwide.
Skechers recorded double-digit growth in both its physical stores and e-commerce business, mainly driven by a 15% increase in average price per unit from higher demand for comfort technology offerings and lower promotions.
Management launched sites in the Netherlands and Italy, and intends to unveil more across Europe, Asia and South America in 2022. The rollout of its e-commerce platform continued in the first quarter with the introduction of the sites in France and Spain. SKX has been enhancing its online presence for a while by further investing in the digital and omni-channel capabilities.
Regionwise, sales increased 31% year over year to $946.9 million in the Americas, 49% to $441.2 million in EMEA and 4% to $431.5 million in APAC.
Margins & Costs
Gross profit increased 20.2% year over year to $824.2 million. Gross margin declined 250 basis points (bps) to 45.3% due to increased freight expenses per unit, somewhat offset by increased average selling prices.
Total operating expenses grew 22.8% year over year to $648.3 million. However, the metric improved 120 bps as a percentage of sales to 35.6%. Selling expenses increased 18.5% from the year-ago period’s tally to $108.2 million due to a rise in global demand creation spend. Also, general and administrative expenses jumped 23.7% to $540.1 million due to elevated volume-driven labor, and warehouse and distribution costs.
Store Update
During the reported quarter, Skechers opened 31 company-owned stores, including 13 in the United States and seven in China. Simultaneously, SKX shuttered 41 locations in the quarter, comprising 12 in the United States and seven in China. SKX’s 2,958 third-party stores included 77 stores that were inaugurated in the first quarter. As of Mar 31, 2022, SKX had 4,308 stores, including 516 domestic stores, 834 international locations and 2,958 distributor, licensee and franchise stores.
In the second quarter, management opened 10 company-owned stores to date. It aims to open an additional 160-180 stores by 2022 end.
Other Financial Aspects
As of Mar 31, 2022, cash and cash equivalents totaled $589.9 million while short-term investments amounted to $104.9 million. Skechers ended the quarter with long-term borrowings of $265.3 million and shareholders’ equity of $3,367.8 million, excluding non-controlling interests of $298.1 million. Further, the total inventory was $1,471 million.
In the reported quarter, management repurchased roughly 652,000 shares for $25 million. As of Mar 31, 2022, roughly a $475-million amount was available under its share repurchase program.
Skechers incurred capital expenditures worth $89.4 million during the first quarter. Management anticipates capital expenditures between $175 million and $225 million for the rest of 2022.
Outlook
Skechers now projects 2022 sales in the range of $7.2-$7.4 billion, up from the earlier forecast of $7-$7.2 billion and $6.29 billion, recorded in 2021. The Zacks Consensus Estimate for sales in 2022 is currently pegged at $7.12 billion.
For 2022, management expects earnings per share in the band of $2.75-$2.95, higher than $2.70-$2.90 guided earlier. Skechers delivered adjusted earnings of $2.59 in 2021. The Zacks Consensus Estimate for 2022 earnings is pegged at $2.82.
Skechers envisions second-quarter 2022 sales between $1.75 billion and $1.80 billion and earnings in the band of 50-55 cents a share. The Zacks Consensus Estimate for sales and earnings for the second quarter is currently pegged at $1.78 billion and 82 cents, respectively.
SKX expects gross margins to decline from the year-earlier period’s reported figure for both the second quarter and 2022, as freight costs will offset higher pricing.
Eye These Solid Picks
Some better-ranked stocks in the Consumer Discretionary space are Oxford Industries (OXM - Free Report) , G-III Apparel (GIII - Free Report) and Gildan Activewear (GIL - Free Report) .
The Zacks Consensus Estimate for Oxford Industries’ current financial year’s sales and EPS suggests growth of 10.2% and 13%, respectively, from the corresponding year-ago reported numbers.
G-III Apparel currently has a Zacks Rank of 1. GIII has a trailing four-quarter earnings surprise of 160.6%, on average.
The Zacks Consensus Estimate for G-III Apparel 's current financial-year sales suggests growth of 8.7% while the same for EPS indicates a rise of 5.2% from the respective year-ago reported figures.
Gildan Activewear has a Zacks Rank #2 (Buy) at present. GIL has an expected long-term earnings growth rate of 8%.
The Zacks Consensus Estimate for Gildan Activewear’s 2022 sales and EPS suggests growth of 8.9% and 3.3%, respectively, from the corresponding year-ago reported figures. GIL has a trailing four-quarter earnings surprise of 66.6%, on average.
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Skechers (SKX) Beats on Q1 Earnings, Raises 2022 EPS Outlook
Skechers U.S.A., Inc. (SKX - Free Report) reported first-quarter 2022 results with both the top and the bottom line outpacing the Zacks Consensus Estimate and improving year over year. SKX gained from growth across domestic and international channels, driven by strong wholesale and direct-to-consumer sales.
Skechers’ focus on offering comfort technology in its products has been yielding for a while. SKX is committed to accomplish sales of $10 billion by 2026. Management also raised sales and earnings view for 2022.
Shares of this well-known footwear company have gained 4.3% in after-hours trading on Apr 26. The currently Zacks Rank #3 (Hold) stock has increased 3.9% in the past three months against the industry’s 0.9% dip.
Let’s Analyze the Results
Skechers posted first-quarter earnings of 77 cents a share, beating the Zacks Consensus Estimate of 72 cents. Also, the bottom-line figure rose 22.2% from 63 cents earned in the year-earlier quarter.
SKX generated sales of $1,819.6 million that came above the Zacks Consensus Estimate of $1,691 million. The top line jumped 26.8% year over year owing to a 28.7% increase in domestic sales and a 25.5% rise in international sales. On constant-currency basis, total sales grew 28.7%. Management highlighted that quarterly sales set a new record for Skechers, despite the persistent pandemic-led headwinds, including worldwide store closures and supply-chain concerns.
Skechers U.S.A., Inc. Price, Consensus and EPS Surprise
Skechers U.S.A., Inc. price-consensus-eps-surprise-chart | Skechers U.S.A., Inc. Quote
Starting the first quarter of 2022, Skechers reported segment results for wholesale and direct-to-consumer operations, including its joint venture businesses. Both segments recorded growth, with Wholesale improving 32.7% and Direct-to-Consumer (DTC) growing 15.7%. Wholesale sales grew 32.7%, mainly on increases in AMER with 41.6% and EMEA with 42% rate. Wholesale volume also expanded 22.7% while average selling price inched up 8.6%.
DTC sales jumped 15.7% on strength of 157.3% in EMEA, 11.2% in AMER and 8.5% in APAC. DTC average selling price climbed 15.1% as a result of lower promotions and higher prices.
Solid gains from broad-based demand for SKX’s innovative comfort products, backed by its multimedia marketing team and an improved infrastructure aided the first-quarter performance. Skechers’ total international business comprised nearly 57% of sales, reflecting sturdy brand awareness worldwide.
Skechers recorded double-digit growth in both its physical stores and e-commerce business, mainly driven by a 15% increase in average price per unit from higher demand for comfort technology offerings and lower promotions.
Management launched sites in the Netherlands and Italy, and intends to unveil more across Europe, Asia and South America in 2022. The rollout of its e-commerce platform continued in the first quarter with the introduction of the sites in France and Spain. SKX has been enhancing its online presence for a while by further investing in the digital and omni-channel capabilities.
Regionwise, sales increased 31% year over year to $946.9 million in the Americas, 49% to $441.2 million in EMEA and 4% to $431.5 million in APAC.
Margins & Costs
Gross profit increased 20.2% year over year to $824.2 million. Gross margin declined 250 basis points (bps) to 45.3% due to increased freight expenses per unit, somewhat offset by increased average selling prices.
Total operating expenses grew 22.8% year over year to $648.3 million. However, the metric improved 120 bps as a percentage of sales to 35.6%. Selling expenses increased 18.5% from the year-ago period’s tally to $108.2 million due to a rise in global demand creation spend. Also, general and administrative expenses jumped 23.7% to $540.1 million due to elevated volume-driven labor, and warehouse and distribution costs.
Store Update
During the reported quarter, Skechers opened 31 company-owned stores, including 13 in the United States and seven in China. Simultaneously, SKX shuttered 41 locations in the quarter, comprising 12 in the United States and seven in China. SKX’s 2,958 third-party stores included 77 stores that were inaugurated in the first quarter. As of Mar 31, 2022, SKX had 4,308 stores, including 516 domestic stores, 834 international locations and 2,958 distributor, licensee and franchise stores.
In the second quarter, management opened 10 company-owned stores to date. It aims to open an additional 160-180 stores by 2022 end.
Other Financial Aspects
As of Mar 31, 2022, cash and cash equivalents totaled $589.9 million while short-term investments amounted to $104.9 million. Skechers ended the quarter with long-term borrowings of $265.3 million and shareholders’ equity of $3,367.8 million, excluding non-controlling interests of $298.1 million. Further, the total inventory was $1,471 million.
In the reported quarter, management repurchased roughly 652,000 shares for $25 million. As of Mar 31, 2022, roughly a $475-million amount was available under its share repurchase program.
Skechers incurred capital expenditures worth $89.4 million during the first quarter. Management anticipates capital expenditures between $175 million and $225 million for the rest of 2022.
Outlook
Skechers now projects 2022 sales in the range of $7.2-$7.4 billion, up from the earlier forecast of $7-$7.2 billion and $6.29 billion, recorded in 2021. The Zacks Consensus Estimate for sales in 2022 is currently pegged at $7.12 billion.
For 2022, management expects earnings per share in the band of $2.75-$2.95, higher than $2.70-$2.90 guided earlier. Skechers delivered adjusted earnings of $2.59 in 2021. The Zacks Consensus Estimate for 2022 earnings is pegged at $2.82.
Skechers envisions second-quarter 2022 sales between $1.75 billion and $1.80 billion and earnings in the band of 50-55 cents a share. The Zacks Consensus Estimate for sales and earnings for the second quarter is currently pegged at $1.78 billion and 82 cents, respectively.
SKX expects gross margins to decline from the year-earlier period’s reported figure for both the second quarter and 2022, as freight costs will offset higher pricing.
Eye These Solid Picks
Some better-ranked stocks in the Consumer Discretionary space are Oxford Industries (OXM - Free Report) , G-III Apparel (GIII - Free Report) and Gildan Activewear (GIL - Free Report) .
Oxford Industries currently sports a Zacks Rank # 1 (Strong Buy). OXM has a trailing four-quarter earnings surprise of 112.8%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Oxford Industries’ current financial year’s sales and EPS suggests growth of 10.2% and 13%, respectively, from the corresponding year-ago reported numbers.
G-III Apparel currently has a Zacks Rank of 1. GIII has a trailing four-quarter earnings surprise of 160.6%, on average.
The Zacks Consensus Estimate for G-III Apparel 's current financial-year sales suggests growth of 8.7% while the same for EPS indicates a rise of 5.2% from the respective year-ago reported figures.
Gildan Activewear has a Zacks Rank #2 (Buy) at present. GIL has an expected long-term earnings growth rate of 8%.
The Zacks Consensus Estimate for Gildan Activewear’s 2022 sales and EPS suggests growth of 8.9% and 3.3%, respectively, from the corresponding year-ago reported figures. GIL has a trailing four-quarter earnings surprise of 66.6%, on average.