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) Q3 Earnings Miss Estimates, Sales Rise Y/Y
Read MoreHide Full Article
Skechers U.S.A., Inc. (SKX - Free Report) reported mixed third-quarter 2022 results, with the top line outpacing the Zacks Consensus Estimate while the bottom line missing the same. Also, the top line improved year over year. Despite macroeconomic headwinds, supply-chain issues and COVID-related restrictions, results gained from sturdy consumer demand for SKX’s comfort technology products, and higher wholesale and direct-to-consumer sales.
Continued solid demand for the comfort technology products drove higher sales. With double-digit increases in the wholesale and direct-to-consumer businesses, sales grew in almost every market except those struggling with the pandemic-related lockdown measures or major economic volatility.
With Skechers’ international business accounting for 60% of its total sales, SKX is focused on the infrastructure abroad. Management is on track to accomplish a goal of 10 billion in annual sales by 2026.
Q3 Highlights
Skechers posted third-quarter earnings of 55 cents a share, missing the Zacks Consensus Estimate of 74 cents. Also, the bottom line declined 16.7% from the year-earlier quarter’s tally. This includes an adverse impact of 9 cents per share due to declines in foreign exchange rates, particularly in EMEA.
SKX generated sales of $1,878.4 million, surpassing the Zacks Consensus Estimate of $1,842 million. The top line grew 20.5% year over year owing to a 14.9% increase in domestic sales and a 24.6% rise in international sales, mainly buoyed by strength in wholesale sales. On a constant-currency basis, total sales grew 27.3%.
Starting from the first quarter of 2022, Skechers reported segmental results for wholesale and direct-to-consumer operations, including its joint venture businesses. All segments registered growth, with wholesale sales growing 26.2% and direct-to-consumer (DTC) increasing 11.9%.
Wholesale sales were driven by 58.8% growth in EMEA and 18.1% in AMER, whereas wholesale volumes jumped 25.1% and average selling price rose 1.4%. DTC sales jumped on growth of 13.8% in AMER and 10% in APAC. DTC average selling price grew 0.6%, with volumes growing 11.1% year over year.
Region-wise, sales increased 16.2% year over year to $948 million in the Americas and 47.6% to $469.8 million in EMEA. The metric grew 8.6% year over year to $460.6 million in APAC.
Management launched e-commerce sites in Poland, Switzerland and Japan. It intends to launch more e-commerce sites in the coming year.
Margins & Costs
Gross profit increased 13.8% year over year to $883.9 million. However, the gross margin declined 280 basis points (bps) to 47.1% due to increased freight and logistics and a rise in the proportion of distributor sales, somewhat offset by higher average selling prices.
Total operating expenses grew 19.5% year over year to $754 million. The metric, as a percentage of sales, fell 30 bps to 40.1%. Selling expenses jumped 18% from the year-ago period’s level to $166.6 million due to a rise in global digital and brand demand creation spend. Also, general and administrative expenses jumped 19.9% to $576.8 million. Increased costs were driven by the domestic distribution center, where supply-chain and logistics headwinds induced elevated labor, and warehouse and distribution expenses.
Store Update
During the reported quarter, Skechers opened 76 company-owned outlets, including 46 in China, 8 Big Box stores in the United States, a flagship in Madrid and its first store in Rotterdam.
SKX also expanded and relocated two stores at Lima malls, namely Jockey Plaza and Plaza Norte, and closed 34 locations in the reported quarter, including 21 in China and two concept stores in the United States. As of Sep 30, 2022, SKX had 4,458 stores, including 532 domestic stores, 872 international locations, and 3,054 distributor, licensee and franchise stores.
In the fourth quarter to date, SKX inaugurated 14 company-owned stores, including one big box in the United States and five in China. For the rest of the year, management intends to open an additional 35-45 company-owned locations.
Other Financial Aspects
As of Sep 30, 2022, cash and cash equivalents totaled $508.3 million, while short-term investments amounted to $103 million. Skechers ended the quarter with long-term borrowings of $225.5 million and shareholders’ equity of $3,458.7 million, excluding non-controlling interests of $290.2 million. Further, the total inventory increased 21% to $1,779.4 million.
In the reported quarter, management repurchased roughly 639,295 shares of its Class A common stock for $25 million. As of Sep 30, 2022, $425.8 million was available under SKX’s share buyback program.
Skechers incurred a capital expenditure worth $100.1 million in the third quarter. Management anticipates capital expenditure of $300-$325 million for 2022.
Outlook
Management remains optimistic about the easing of pandemic-related restrictions, with only a few markets around the world still grappling with temporary closures and restrictions, and freight costs started to decline. However, macroeconomic challenges, such as inflation, unfavorable fluctuations in foreign currency exchange rates and congestion within Skechers’ distribution centers on robust demand for the products and supply-chain disruptions remain a concern.
Nevertheless, SKX is focused on navigating these challenges. It is focused on executing its long-term growth strategy, with a diverse assortment of innovative and comfortable products.
Skechers envisions fourth-quarter 2022 sales between $1.725 billion and $1.775 billion, and earnings of 30-40 cents a share. The Zacks Consensus Estimate for fourth-quarter sales and earnings is currently pegged higher at $1.82 billion and 57 cents per share, respectively.
For the fourth quarter, management anticipates a sequential gross margin improvement and an effective tax rate of 19-20%. This outlook includes the persistent impact of inefficiency on Skechers’ distribution networks with respect to supply-chain congestion and COVID-related operating limitations, mainly in the Asia Pacific region.
Image Source: Zacks Investment Research
Over the past three months, shares of this presently Zacks Rank #4 (Sell) stock have lost 8.2% compared to the industry’s 12.4% decline.
The Zacks Consensus Estimate for Designer Brands’ current financial-year revenues and earnings per share (EPS) suggests growth of 6.9% and 23.5%, respectively, from the corresponding year-ago reported figures. DBI has a trailing four-quarter earnings surprise of 55.1%, on average.
Delta Apparel is a manufacturer of activewear and lifestyle apparel products. DLA has a Zacks Rank #2 (Buy) at present.
The Zacks Consensus Estimate for Delta Apparel’s current financial-year sales and EPS suggests growth of 12.6% and 27.4%, respectively, from the year-ago corresponding figures. DLA has a trailing four-quarter earnings surprise of 34.2%, on average.
Caleres, a footwear dealer, has a Zacks Rank of 2 at present. CAL has a trailing four-quarter earnings surprise of 34.9%, on average.
The Zacks Consensus Estimate for Caleres’ current financial-year sales and EPS suggests growth of 5.6% and 0.9%, respectively, from the year-ago corresponding figures.
Unique Zacks Analysis of Your Chosen Ticker
Pick one free report - opportunity may be withdrawn at any time
Image: Bigstock
Skechers' (SKX) Q3 Earnings Miss Estimates, Sales Rise Y/Y
Skechers U.S.A., Inc. (SKX - Free Report) reported mixed third-quarter 2022 results, with the top line outpacing the Zacks Consensus Estimate while the bottom line missing the same. Also, the top line improved year over year. Despite macroeconomic headwinds, supply-chain issues and COVID-related restrictions, results gained from sturdy consumer demand for SKX’s comfort technology products, and higher wholesale and direct-to-consumer sales.
Continued solid demand for the comfort technology products drove higher sales. With double-digit increases in the wholesale and direct-to-consumer businesses, sales grew in almost every market except those struggling with the pandemic-related lockdown measures or major economic volatility.
With Skechers’ international business accounting for 60% of its total sales, SKX is focused on the infrastructure abroad. Management is on track to accomplish a goal of 10 billion in annual sales by 2026.
Q3 Highlights
Skechers posted third-quarter earnings of 55 cents a share, missing the Zacks Consensus Estimate of 74 cents. Also, the bottom line declined 16.7% from the year-earlier quarter’s tally. This includes an adverse impact of 9 cents per share due to declines in foreign exchange rates, particularly in EMEA.
SKX generated sales of $1,878.4 million, surpassing the Zacks Consensus Estimate of $1,842 million. The top line grew 20.5% year over year owing to a 14.9% increase in domestic sales and a 24.6% rise in international sales, mainly buoyed by strength in wholesale sales. On a constant-currency basis, total sales grew 27.3%.
Starting from the first quarter of 2022, Skechers reported segmental results for wholesale and direct-to-consumer operations, including its joint venture businesses. All segments registered growth, with wholesale sales growing 26.2% and direct-to-consumer (DTC) increasing 11.9%.
Wholesale sales were driven by 58.8% growth in EMEA and 18.1% in AMER, whereas wholesale volumes jumped 25.1% and average selling price rose 1.4%. DTC sales jumped on growth of 13.8% in AMER and 10% in APAC. DTC average selling price grew 0.6%, with volumes growing 11.1% year over year.
Region-wise, sales increased 16.2% year over year to $948 million in the Americas and 47.6% to $469.8 million in EMEA. The metric grew 8.6% year over year to $460.6 million in APAC.
Management launched e-commerce sites in Poland, Switzerland and Japan. It intends to launch more e-commerce sites in the coming year.
Margins & Costs
Gross profit increased 13.8% year over year to $883.9 million. However, the gross margin declined 280 basis points (bps) to 47.1% due to increased freight and logistics and a rise in the proportion of distributor sales, somewhat offset by higher average selling prices.
Total operating expenses grew 19.5% year over year to $754 million. The metric, as a percentage of sales, fell 30 bps to 40.1%. Selling expenses jumped 18% from the year-ago period’s level to $166.6 million due to a rise in global digital and brand demand creation spend. Also, general and administrative expenses jumped 19.9% to $576.8 million. Increased costs were driven by the domestic distribution center, where supply-chain and logistics headwinds induced elevated labor, and warehouse and distribution expenses.
Store Update
During the reported quarter, Skechers opened 76 company-owned outlets, including 46 in China, 8 Big Box stores in the United States, a flagship in Madrid and its first store in Rotterdam.
SKX also expanded and relocated two stores at Lima malls, namely Jockey Plaza and Plaza Norte, and closed 34 locations in the reported quarter, including 21 in China and two concept stores in the United States. As of Sep 30, 2022, SKX had 4,458 stores, including 532 domestic stores, 872 international locations, and 3,054 distributor, licensee and franchise stores.
In the fourth quarter to date, SKX inaugurated 14 company-owned stores, including one big box in the United States and five in China. For the rest of the year, management intends to open an additional 35-45 company-owned locations.
Other Financial Aspects
As of Sep 30, 2022, cash and cash equivalents totaled $508.3 million, while short-term investments amounted to $103 million. Skechers ended the quarter with long-term borrowings of $225.5 million and shareholders’ equity of $3,458.7 million, excluding non-controlling interests of $290.2 million. Further, the total inventory increased 21% to $1,779.4 million.
In the reported quarter, management repurchased roughly 639,295 shares of its Class A common stock for $25 million. As of Sep 30, 2022, $425.8 million was available under SKX’s share buyback program.
Skechers incurred a capital expenditure worth $100.1 million in the third quarter. Management anticipates capital expenditure of $300-$325 million for 2022.
Outlook
Management remains optimistic about the easing of pandemic-related restrictions, with only a few markets around the world still grappling with temporary closures and restrictions, and freight costs started to decline. However, macroeconomic challenges, such as inflation, unfavorable fluctuations in foreign currency exchange rates and congestion within Skechers’ distribution centers on robust demand for the products and supply-chain disruptions remain a concern.
Nevertheless, SKX is focused on navigating these challenges. It is focused on executing its long-term growth strategy, with a diverse assortment of innovative and comfortable products.
Skechers envisions fourth-quarter 2022 sales between $1.725 billion and $1.775 billion, and earnings of 30-40 cents a share. The Zacks Consensus Estimate for fourth-quarter sales and earnings is currently pegged higher at $1.82 billion and 57 cents per share, respectively.
For the fourth quarter, management anticipates a sequential gross margin improvement and an effective tax rate of 19-20%. This outlook includes the persistent impact of inefficiency on Skechers’ distribution networks with respect to supply-chain congestion and COVID-related operating limitations, mainly in the Asia Pacific region.
Image Source: Zacks Investment Research
Over the past three months, shares of this presently Zacks Rank #4 (Sell) stock have lost 8.2% compared to the industry’s 12.4% decline.
Stocks to Consider
Here we highlighted three better-ranked stocks, namely Designer Brands (DBI - Free Report) , Delta Apparel (DLA - Free Report) and Caleres (CAL - Free Report) .
Designer Brands designs, manufactures, and retails footwear and accessories. The stock currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Designer Brands’ current financial-year revenues and earnings per share (EPS) suggests growth of 6.9% and 23.5%, respectively, from the corresponding year-ago reported figures. DBI has a trailing four-quarter earnings surprise of 55.1%, on average.
Delta Apparel is a manufacturer of activewear and lifestyle apparel products. DLA has a Zacks Rank #2 (Buy) at present.
The Zacks Consensus Estimate for Delta Apparel’s current financial-year sales and EPS suggests growth of 12.6% and 27.4%, respectively, from the year-ago corresponding figures. DLA has a trailing four-quarter earnings surprise of 34.2%, on average.
Caleres, a footwear dealer, has a Zacks Rank of 2 at present. CAL has a trailing four-quarter earnings surprise of 34.9%, on average.
The Zacks Consensus Estimate for Caleres’ current financial-year sales and EPS suggests growth of 5.6% and 0.9%, respectively, from the year-ago corresponding figures.