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Skechers U.S.A., Inc. (SKX - Free Report) delivered mixed fourth-quarter 2023 results, with the bottom line outpacing the Zacks Consensus Estimate and the top line missing the same. However, both metrics improved year over year.
The company's performance improved due to the strong brand appeal and high demand for its comfort-focused products, complemented by robust marketing and distribution efforts.
Demand for comfort technology products, advantageous pricing and an increase in direct-to-consumer sales positively impacted the outcomes. Management is focused on its long-term growth plan, which involves expanding its international footprint and deepening its direct-to-consumer connections. The company is aiming to reach a sales goal of $10 billion by 2026, reflecting its optimistic outlook and confidence in future growth.
Over the past year, shares of this current Zacks Rank #2 (Buy) company have gained 33.3% against the industry’s 1.9% decline.
Skechers U.S.A., Inc. Price, Consensus and EPS Surprise
Skechers posted fourth-quarter earnings of 56 cents per share, outpacing the Zacks Consensus Estimate of earnings of 52 cents. Also, the bottom line rose 16.7% from the year-earlier quarter.
SKX generated sales of $1,960.9 million, lagging the consensus estimate of $2,017 million. However, the top line grew 4.4% year over year, driven by 6.9% growth in international sales and a 0.3% increase in domestic sales. Increases in domestic and international sales were driven by robust direct-to-consumer (“DTC”) sales. On a constant-currency basis, total sales grew 2.8%.
We note that the company’s wholesale sales fell 8.3% year over year to $962.6 million, while DTC rose 20.3% to $998.3 million. Our estimate for the company’s wholesale and DTC sales was pegged at $1,062 million and $930 million, respectively.
Wholesale sales declined 7.4% year over year in the Americas (“AMER”) and 19.5% in Europe, the Middle East & Africa (EMEA), partly offset by increases of 7.1% in the Asia Pacific (“APAC”). Wholesale average selling price per unit increased 1.2%, while unit volume dropped by 9.5%.
DTC sales growth included increases of 11.6% in domestic DTC sales and 26.6% in international DTC sales. The DTC unit volume rose 11.8% and the average selling price increased 7.7%. Also, growth of 14.6% in the Americas, 21.2% in APAC and 53.1% in EMEA aided the segment’s performance.
Region-wise, sales increased 3.2% year over year to $955.4 million in AMER, while the metric decreased 7.3% to $383.5 million in EMEA and increased 15.3% year over year to $622 million in APAC. We expected sales from the AMER, EMEA and APAC regions to increase 2.1%, 3.5% and 14.7%, respectively, for the quarter under review.
Image Source: Zacks Investment Research
Margins & Costs
Gross profit increased 14.5% year over year to $1,041.4 million. Also, the gross margin expanded 470 basis points (bps) to 53.1% due to a rise in average selling prices, a higher mix of DTC sales and lower freight costs. We expected the metric to expand by 260 bps to 51% for the quarter under review.
Total operating expenses grew 10.7% year over year to $911.1 million. The metric, as a percentage of sales, increased 270 bps to 46.5%. We expected total operating expenses to increase 10.4% for the quarter.
Selling expenses increased 15.8% from the year-ago period to $182.9 million. Also, general and administrative expenses jumped 9.5% to $728.2 million. Increased costs were due to higher brand demand creation expenditure, along with elevated facility costs, such as rent, depreciation and labor.
Other Financial Aspects
As of Dec 31, 2023, cash and cash equivalents totaled $1,189.9 million, whereas short-term investments amounted to $72.6 million.
Skechers ended the quarter with long-term borrowings of $242.9 million and shareholders’ equity of $4019.3 million, excluding non-controlling interests of $380.7 million. The total inventory decreased 16.1% year over year to $1,525.4 million. The company incurred a capital expenditure of $85 million in the quarter.
In the fourth quarter of 2023, management repurchased 1.1 million shares of its Class A common stock for $60 million. In 2023, it bought back 3.2 million shares for $160.1 million. As of Dec 31, 2023, $265.7 million was available under SKX’s share buyback program.
Store Update
As of Dec 31, 2023, SKX had 5,168 stores, including 563 domestic stores, 1,085 international locations, and 3,520 distributors, licensee and franchise stores.
In 2023, the company opened 35 domestic stores, 268 international stores, and 841 distributors, licensee and franchise stores. It closed 11 domestic stores, 88 international stores, and 414 distributor, licensee and franchise stores in the same period.
Outlook
For 2024, management targets sales between $8.6 billion and $8.8 billion. It envisions earnings per share (“EPS”) between $3.65 and $3.85. Management anticipates a capital expenditure of $350-$400 million for 2024.
For the first quarter of 2024, SKX is likely to achieve sales between $2.18 billion and $2.23 billion and EPS between $1.05 and $1.10.
Other Key Picks
A few other top-ranked stocks are Abercrombie & Fitch Co. (ANF - Free Report) , American Eagle Outfitters Inc. (AEO - Free Report) and The TJX Companies, Inc. (TJX - Free Report) .
Abercrombie operates as a specialty retailer of premium, high-quality casual apparel. It currently sports a Zacks Rank #1 (Strong Buy). The company registered an EPS surprise of 60.5% in the last reported quarter.
The Zacks Consensus Estimate for Abercrombie’s current fiscal-year sales suggests growth of 15.1% from the year-ago reported number. ANF has a trailing four-quarter earnings surprise of 713%, on average.
American Eagle Outfitters is a specialty retailer of casual apparel, accessories and footwear for men and women. It presently flaunts a Zacks Rank #1.
The Zacks Consensus Estimate for American Eagle Outfitters’ current fiscal-year earnings and sales indicates growth of 45.4% and 5%, respectively, from the previous year’s reported numbers. AEO has a trailing four-quarter average earnings surprise of 23%.
TJX Companies is a leading off-price retailer of apparel and home fashions in the United States and worldwide. It currently has a Zacks Rank #2.
The Zacks Consensus Estimate for TJX Companies’ current fiscal-year earnings and sales indicates growth of 20.6% and 8%, respectively, from the fiscal 2023 reported figures. TJX has a trailing four-quarter average earnings surprise of 6.3%.
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Skechers (SKX) Q4 Earnings Beat Estimates, Sales Rise Y/Y
Skechers U.S.A., Inc. (SKX - Free Report) delivered mixed fourth-quarter 2023 results, with the bottom line outpacing the Zacks Consensus Estimate and the top line missing the same. However, both metrics improved year over year.
The company's performance improved due to the strong brand appeal and high demand for its comfort-focused products, complemented by robust marketing and distribution efforts.
Demand for comfort technology products, advantageous pricing and an increase in direct-to-consumer sales positively impacted the outcomes. Management is focused on its long-term growth plan, which involves expanding its international footprint and deepening its direct-to-consumer connections. The company is aiming to reach a sales goal of $10 billion by 2026, reflecting its optimistic outlook and confidence in future growth.
Over the past year, shares of this current Zacks Rank #2 (Buy) company have gained 33.3% against the industry’s 1.9% decline.
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
Q4 Highlights
Skechers posted fourth-quarter earnings of 56 cents per share, outpacing the Zacks Consensus Estimate of earnings of 52 cents. Also, the bottom line rose 16.7% from the year-earlier quarter.
SKX generated sales of $1,960.9 million, lagging the consensus estimate of $2,017 million. However, the top line grew 4.4% year over year, driven by 6.9% growth in international sales and a 0.3% increase in domestic sales. Increases in domestic and international sales were driven by robust direct-to-consumer (“DTC”) sales. On a constant-currency basis, total sales grew 2.8%.
We note that the company’s wholesale sales fell 8.3% year over year to $962.6 million, while DTC rose 20.3% to $998.3 million. Our estimate for the company’s wholesale and DTC sales was pegged at $1,062 million and $930 million, respectively.
Wholesale sales declined 7.4% year over year in the Americas (“AMER”) and 19.5% in Europe, the Middle East & Africa (EMEA), partly offset by increases of 7.1% in the Asia Pacific (“APAC”). Wholesale average selling price per unit increased 1.2%, while unit volume dropped by 9.5%.
DTC sales growth included increases of 11.6% in domestic DTC sales and 26.6% in international DTC sales. The DTC unit volume rose 11.8% and the average selling price increased 7.7%. Also, growth of 14.6% in the Americas, 21.2% in APAC and 53.1% in EMEA aided the segment’s performance.
Region-wise, sales increased 3.2% year over year to $955.4 million in AMER, while the metric decreased 7.3% to $383.5 million in EMEA and increased 15.3% year over year to $622 million in APAC. We expected sales from the AMER, EMEA and APAC regions to increase 2.1%, 3.5% and 14.7%, respectively, for the quarter under review.
Image Source: Zacks Investment Research
Margins & Costs
Gross profit increased 14.5% year over year to $1,041.4 million. Also, the gross margin expanded 470 basis points (bps) to 53.1% due to a rise in average selling prices, a higher mix of DTC sales and lower freight costs. We expected the metric to expand by 260 bps to 51% for the quarter under review.
Total operating expenses grew 10.7% year over year to $911.1 million. The metric, as a percentage of sales, increased 270 bps to 46.5%. We expected total operating expenses to increase 10.4% for the quarter.
Selling expenses increased 15.8% from the year-ago period to $182.9 million. Also, general and administrative expenses jumped 9.5% to $728.2 million. Increased costs were due to higher brand demand creation expenditure, along with elevated facility costs, such as rent, depreciation and labor.
Other Financial Aspects
As of Dec 31, 2023, cash and cash equivalents totaled $1,189.9 million, whereas short-term investments amounted to $72.6 million.
Skechers ended the quarter with long-term borrowings of $242.9 million and shareholders’ equity of $4019.3 million, excluding non-controlling interests of $380.7 million. The total inventory decreased 16.1% year over year to $1,525.4 million. The company incurred a capital expenditure of $85 million in the quarter.
In the fourth quarter of 2023, management repurchased 1.1 million shares of its Class A common stock for $60 million. In 2023, it bought back 3.2 million shares for $160.1 million. As of Dec 31, 2023, $265.7 million was available under SKX’s share buyback program.
Store Update
As of Dec 31, 2023, SKX had 5,168 stores, including 563 domestic stores, 1,085 international locations, and 3,520 distributors, licensee and franchise stores.
In 2023, the company opened 35 domestic stores, 268 international stores, and 841 distributors, licensee and franchise stores. It closed 11 domestic stores, 88 international stores, and 414 distributor, licensee and franchise stores in the same period.
Outlook
For 2024, management targets sales between $8.6 billion and $8.8 billion. It envisions earnings per share (“EPS”) between $3.65 and $3.85. Management anticipates a capital expenditure of $350-$400 million for 2024.
For the first quarter of 2024, SKX is likely to achieve sales between $2.18 billion and $2.23 billion and EPS between $1.05 and $1.10.
Other Key Picks
A few other top-ranked stocks are Abercrombie & Fitch Co. (ANF - Free Report) , American Eagle Outfitters Inc. (AEO - Free Report) and The TJX Companies, Inc. (TJX - Free Report) .
Abercrombie operates as a specialty retailer of premium, high-quality casual apparel. It currently sports a Zacks Rank #1 (Strong Buy). The company registered an EPS surprise of 60.5% in the last reported quarter.
You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Abercrombie’s current fiscal-year sales suggests growth of 15.1% from the year-ago reported number. ANF has a trailing four-quarter earnings surprise of 713%, on average.
American Eagle Outfitters is a specialty retailer of casual apparel, accessories and footwear for men and women. It presently flaunts a Zacks Rank #1.
The Zacks Consensus Estimate for American Eagle Outfitters’ current fiscal-year earnings and sales indicates growth of 45.4% and 5%, respectively, from the previous year’s reported numbers. AEO has a trailing four-quarter average earnings surprise of 23%.
TJX Companies is a leading off-price retailer of apparel and home fashions in the United States and worldwide. It currently has a Zacks Rank #2.
The Zacks Consensus Estimate for TJX Companies’ current fiscal-year earnings and sales indicates growth of 20.6% and 8%, respectively, from the fiscal 2023 reported figures. TJX has a trailing four-quarter average earnings surprise of 6.3%.