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Skechers U.S.A., Inc. (SKX - Free Report) reported sturdy second-quarter 2023 results, with the top and the bottom lines outpacing the Zacks Consensus Estimate and improving year over year. Results gained from strength in brands and demand for comfort technology products, aided by solid marketing and distribution capabilities. Also, continued broad-based strength globally, mainly in the company’s direct-to-consumer unit further drove the performance.
We note that sturdy demand for comfort technology footwear, enhanced in-store product availability and effective demand creation resulted in 29% growth. Further, we note that management expects the acquisition of the Scandinavia distributor deal to be slightly accretive to earnings in 2023. Via the Scandinavia team, it continues expanding the Skechers brand in the Nordic region. The company looks forward to achieve its goal of 10 billion in annual sales by 2026.
Over the past six months, shares of this current Zacks Rank #3 (Hold) company have increased 7.2% against the industry’s 11.8% decline.
Image Source: Zacks Investment Research
Q2 Highlights
Skechers posted second-quarter earnings of 98 cents per share, outpacing the Zacks Consensus Estimate of earnings of 52 cents per share. Also, the bottom line surged 69% from the year-earlier quarter’s tally.
SKX generated sales of $2,012.5 million, surpassing the consensus estimate of $1,908 million. The top line grew 7.7% year over year owing to a 17.9% increase in international sales. We note that the company witnessed a 4.6% drop in domestic sales due to 25% decline in the domestic wholesale business. On a constant-currency basis, total sales grew 9%.
Starting from the first quarter of 2022, Skechers reported segmental results for wholesale and direct-to-consumer (DTC) operations, including its joint venture businesses. We note that the company’s wholesale sales fell 5.9% to $1,073 million while DTC rose 29.1% to $939.5 million.
Wholesale sales declined 18.7% in Americas (AMER), partly offset by increases of 14.3% in Asia Pacific (APAC) and 7.4% in Europe, Middle East & Africa (EMEA). Wholesale average selling price per unit increased 8% while unit volume dropped 13.1%.
DTC sales growth included increases of 29% in domestic DTC sales and 30% in international DTC sales. DTC unit volume rose 23.8% and the average selling price rose 4.4%. Also, growth of 28.2% in the Americas, 25.1% in APAC and 47.2% in EMEA aided the segment’s performance.
Region-wise, sales dipped 0.7% year over year to $1,027 million in the AMER while the metric increased 15.7% to $433.3 million in EMEA and 20.2% year over year to $552.2 million in APAC.
Margins & Costs
Gross profit increased 18.7% year over year to $978.6 million. Also, the gross margin expanded 460 basis points (bps) to 52.7% due to a rise in average selling prices and a higher mix of DTC sales.
Total operating expenses grew 13.4% year over year to $842.8 million. The metric, as a percentage of sales, increased 210 bps to 41.9%. Selling expenses jumped 12.3% from the year-ago period’s level to $187.1 million. Also, general and administrative expenses jumped 13.7% to $655.7 million. Increased costs were due to the labor, warehouse and distribution expenses, along with elevated facility costs such as rent and depreciation.
Other Financial Aspects
As of Jun 30, 2023, cash and cash equivalents totaled $896.5 million, while short-term investments amounted to $80.6 million.
Skechers ended the quarter with long-term borrowings of $236.8 million and shareholders’ equity of $3,839.3 million, excluding non-controlling interests of $352.1. million. Further, the total inventory decreased 18.3% to $1,486 million.
In the second quarter of 2023, management repurchased roughly 579,475 shares of its Class A common stock for $30 million. Year to date, it bought back nearly 1.3 million shares for $60 million. As of Jun 30, 2023, nearly $365.7 million was available under SKX’s share buyback program.
Store Update
In the reported quarter, management opened 50 company-owned stores while closing 39 stores. Store openings consisted of 28 in China, eight of which were transferred from franchise to company-owned, eight big box stores in the United States, and three each in Chile and Vietnam. Also, it added 56 Skechers outlets in four Nordic countries and two stores in Germany from the acquisition of the company’s Scandinavian distributor.
As of Jun 30, 2023, SKX had 4,705 stores, including 552 domestic stores, 992 international locations, and 3,161 distributors, licensee and franchise stores. Third quarter to-date, the company has introduced two company-owned stores in the United States, and one each in Colombia and Chile. For the rest of the year, it intends to open 90-100 company-owned stores worldwide.
Outlook
For 2023, management believes to accomplish sales between $7.95 billion and $8.1 billion, compared with the earlier view of $7.9-$8.1 billion. It now envisions earnings per share (EPS) between $3.25 and $3.40 versus the prior expectation of $3.00-$3.20. Total capital expenditures are likely to be in the $300-$350 million band for the year.
For the third quarter of 2023, SKX is likely to achieve sales between $1.95 billion and $2.00 billion and EPS of between 70 cents and 75 cents.
RCL has a trailing four-quarter earnings surprise of 26.4%, on average. The Zacks Consensus Estimate for RCL’s 2023 sales and EPS indicates increases of 48.7% and 162.9%, respectively, from the year-ago period’s reported levels.
lululemon athletica is a yoga-inspired athletic apparel company. LULU carries a Zacks Rank #2 (Buy), at present.
The Zacks Consensus Estimate for lululemon athletica’s current financial-year sales and EPS suggests growth of 17.1% and 18.4%, respectively, from the year-ago corresponding figures. LULU has a trailing four-quarter earnings surprise of 9.9%, on average.
Ralph Lauren, a footwear and accessories dealer, has a Zacks Rank of 2 at present. RL has a trailing four-quarter earnings surprise of 17.4%, on average.
The Zacks Consensus Estimate for Ralph Lauren’s current financial-year sales and EPS suggests growth of 2.8% and 13.1%, respectively, from the year-ago corresponding figures.
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Skechers' (SKX) Q2 Earnings Beat Estimates, Sales Rise Y/Y
Skechers U.S.A., Inc. (SKX - Free Report) reported sturdy second-quarter 2023 results, with the top and the bottom lines outpacing the Zacks Consensus Estimate and improving year over year. Results gained from strength in brands and demand for comfort technology products, aided by solid marketing and distribution capabilities. Also, continued broad-based strength globally, mainly in the company’s direct-to-consumer unit further drove the performance.
We note that sturdy demand for comfort technology footwear, enhanced in-store product availability and effective demand creation resulted in 29% growth. Further, we note that management expects the acquisition of the Scandinavia distributor deal to be slightly accretive to earnings in 2023. Via the Scandinavia team, it continues expanding the Skechers brand in the Nordic region. The company looks forward to achieve its goal of 10 billion in annual sales by 2026.
Over the past six months, shares of this current Zacks Rank #3 (Hold) company have increased 7.2% against the industry’s 11.8% decline.
Image Source: Zacks Investment Research
Q2 Highlights
Skechers posted second-quarter earnings of 98 cents per share, outpacing the Zacks Consensus Estimate of earnings of 52 cents per share. Also, the bottom line surged 69% from the year-earlier quarter’s tally.
SKX generated sales of $2,012.5 million, surpassing the consensus estimate of $1,908 million. The top line grew 7.7% year over year owing to a 17.9% increase in international sales. We note that the company witnessed a 4.6% drop in domestic sales due to 25% decline in the domestic wholesale business. On a constant-currency basis, total sales grew 9%.
Starting from the first quarter of 2022, Skechers reported segmental results for wholesale and direct-to-consumer (DTC) operations, including its joint venture businesses. We note that the company’s wholesale sales fell 5.9% to $1,073 million while DTC rose 29.1% to $939.5 million.
Wholesale sales declined 18.7% in Americas (AMER), partly offset by increases of 14.3% in Asia Pacific (APAC) and 7.4% in Europe, Middle East & Africa (EMEA). Wholesale average selling price per unit increased 8% while unit volume dropped 13.1%.
DTC sales growth included increases of 29% in domestic DTC sales and 30% in international DTC sales. DTC unit volume rose 23.8% and the average selling price rose 4.4%. Also, growth of 28.2% in the Americas, 25.1% in APAC and 47.2% in EMEA aided the segment’s performance.
Region-wise, sales dipped 0.7% year over year to $1,027 million in the AMER while the metric increased 15.7% to $433.3 million in EMEA and 20.2% year over year to $552.2 million in APAC.
Margins & Costs
Gross profit increased 18.7% year over year to $978.6 million. Also, the gross margin expanded 460 basis points (bps) to 52.7% due to a rise in average selling prices and a higher mix of DTC sales.
Total operating expenses grew 13.4% year over year to $842.8 million. The metric, as a percentage of sales, increased 210 bps to 41.9%. Selling expenses jumped 12.3% from the year-ago period’s level to $187.1 million. Also, general and administrative expenses jumped 13.7% to $655.7 million. Increased costs were due to the labor, warehouse and distribution expenses, along with elevated facility costs such as rent and depreciation.
Other Financial Aspects
As of Jun 30, 2023, cash and cash equivalents totaled $896.5 million, while short-term investments amounted to $80.6 million.
Skechers ended the quarter with long-term borrowings of $236.8 million and shareholders’ equity of $3,839.3 million, excluding non-controlling interests of $352.1. million. Further, the total inventory decreased 18.3% to $1,486 million.
In the second quarter of 2023, management repurchased roughly 579,475 shares of its Class A common stock for $30 million. Year to date, it bought back nearly 1.3 million shares for $60 million. As of Jun 30, 2023, nearly $365.7 million was available under SKX’s share buyback program.
Store Update
In the reported quarter, management opened 50 company-owned stores while closing 39 stores. Store openings consisted of 28 in China, eight of which were transferred from franchise to company-owned, eight big box stores in the United States, and three each in Chile and Vietnam. Also, it added 56 Skechers outlets in four Nordic countries and two stores in Germany from the acquisition of the company’s Scandinavian distributor.
As of Jun 30, 2023, SKX had 4,705 stores, including 552 domestic stores, 992 international locations, and 3,161 distributors, licensee and franchise stores. Third quarter to-date, the company has introduced two company-owned stores in the United States, and one each in Colombia and Chile. For the rest of the year, it intends to open 90-100 company-owned stores worldwide.
Outlook
For 2023, management believes to accomplish sales between $7.95 billion and $8.1 billion, compared with the earlier view of $7.9-$8.1 billion. It now envisions earnings per share (EPS) between $3.25 and $3.40 versus the prior expectation of $3.00-$3.20. Total capital expenditures are likely to be in the $300-$350 million band for the year.
For the third quarter of 2023, SKX is likely to achieve sales between $1.95 billion and $2.00 billion and EPS of between 70 cents and 75 cents.
Eye These Solid Picks
Some better-ranked companies are Royal Caribbean (RCL - Free Report) , lululemon athletica (LULU - Free Report) and Ralph Lauren (RL - Free Report) .
Royal Caribbean sports a Zacks Rank #1 (Strong Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
RCL has a trailing four-quarter earnings surprise of 26.4%, on average. The Zacks Consensus Estimate for RCL’s 2023 sales and EPS indicates increases of 48.7% and 162.9%, respectively, from the year-ago period’s reported levels.
lululemon athletica is a yoga-inspired athletic apparel company. LULU carries a Zacks Rank #2 (Buy), at present.
The Zacks Consensus Estimate for lululemon athletica’s current financial-year sales and EPS suggests growth of 17.1% and 18.4%, respectively, from the year-ago corresponding figures. LULU has a trailing four-quarter earnings surprise of 9.9%, on average.
Ralph Lauren, a footwear and accessories dealer, has a Zacks Rank of 2 at present. RL has a trailing four-quarter earnings surprise of 17.4%, on average.
The Zacks Consensus Estimate for Ralph Lauren’s current financial-year sales and EPS suggests growth of 2.8% and 13.1%, respectively, from the year-ago corresponding figures.