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Skechers (SKX) Rides High on Growth Strategies: Apt to Hold

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Skechers U.S.A., Inc. (SKX - Free Report) appears encouraging on the back of robust business strategies. The company remains focused on boosting its omni-channel capabilities by expanding its direct-to-consumer (DTC) business and enhancing its foothold internationally. SKX has been gaining from growth in its domestic and international channels for a while now. Continued global demand for its Comfort Technology footwear is steadily driving results.

This footwear leader has appreciated 34.9% in the past six months, outperforming the industry’s 24.7% growth. Moreover, the Zacks Consensus Estimate for Skechers’ 2023 sales and earnings per share (EPS) is currently pegged at $7.92 billion and $2.95 each, suggesting respective growth of 6.4% and 24% from the corresponding year-ago reported figures. For 2024, the Zacks Consensus Estimate for sales and EPS stands at $8.80 billion and $3.66 each, indicating corresponding increases of 11.1% and 24.2% from the prior-year reported numbers. This reflects the analysts’ optimism about the stock.

Let’s Delve Deeper

Skechers has been making strategic investments to improve the infrastructure worldwide, primarily e-commerce platforms and distribution centers. The company is focused on designing and developing new products. Going ahead, SKX plans to introduce more innovative and comfortable technology products, build multi-platform marketing campaigns and launch more e-commerce sites around the world.

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Skechers has been directing resources to enhance its digital capabilities, including augmenting website features, mobile applications and a loyalty program. Investments made to integrate store and digital ecosystems for developing a seamless omnichannel experience are likely to drive greater sales. The company has updated its point-of-sale systems to better engage with customers, both offline and online. Initiatives such as “Buy Online, Pick-Up in Store” and “Buy Online, Pickup at Curbside” are worth mentioning.

During the fourth quarter of 2022, Skechers’ DTC sales grew 10.8% year over year to $829.6 million. This is backed by 30% growth domestically with a triple-digit increase in e-commerce and a double-digit increase in retail stores. Both these channels gained from solid inventory levels. International DTC sales were flat year over year owing to a decline in China. However, excluding China, sales rose 22% on double-digit increases across the company’s stores and online. DTC sales jumped on growth of 27% in AMER and 19.1% in EMEA. DTC volumes also jumped 14.8% year over year.

Furthermore, Skechers’ international business remains a significant sales growth driver for the company. SKX is poised to enhance its global reach in the footwear market through its distribution networks, subsidiaries and joint ventures. In fourth-quarter 2022, international sales increased 8.7% year over year. Region-wise, sales increased 22.5% year over year to $925.6 million in the Americas and 28.9% to $413.7 million in EMEA.

Wrapping up, Skechers is likely to continue performing well on the back of such sturdy endeavors. The company’s 2023 outlook reflects sales momentum across most of the company’s international markets throughout the year. A China market recovery with a steady improvement in the course of the year, better distribution operating efficiency on enhanced capacity and remediation endeavors are tailwinds.

Also, the gross margin is likely to benefit from lower logistics costs mainly in freight. For 2023, management believes in accomplishing sales between $7.75 billion and $8 billion and earnings per share between $2.80 and $3.00. A VGM Score of B further speaks volumes for this Zacks Rank #3 (Hold) stock.

Eye These Solid Picks

Here we have highlighted three top-ranked stocks, namely, Ralph Lauren (RL - Free Report) , Oxford Industries (OXM - Free Report) and Deckers (DECK - Free Report) .

Ralph Lauren, a footwear and accessories dealer, has a Zacks Rank #1 (Strong Buy) at present. RL has a trailing four-quarter earnings surprise of 23.6%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Ralph Lauren’s current financial-year sales and EPS suggests growth of 5.5% and 14%, respectively, from the year-ago corresponding figures.

Oxford Industries, which designs, sources, markets and distributes lifestyle products and other brands, carries a Zacks Rank #2 (Buy). Oxford Industries has a trailing four-quarter earnings surprise of 18.9%, on average.

The Zacks Consensus Estimate for OXM’s current financial-year sales and EPS suggests growth of 13.7% and 10.4% from the year-ago reported numbers.

Deckers, a footwear dealer, has a Zacks Rank of 2 at present. DECK has a trailing four-quarter earnings surprise of 31%, on average.

The Zacks Consensus Estimate for Deckers’ current financial-year sales and EPS suggests growth of 11% and 17.1%, respectively, from the year-ago corresponding figures.

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