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Does Skechers' 6-Month Fall of 25% Signal More Trouble Ahead?
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Shares of Skechers U.S.A., Inc. (SKX - Free Report) have declined roughly 25% in the past six months against the industry’s 13.6% growth. The stock came under pressure following the company’s soft second-quarter 2018 results and muted third-quarter earnings view. This Zacks Rank #5 (Strong Sell) company also remained volatile and traded within the range of $24.11-$33.46 in the past 30 days.
We note that sluggish performance across domestic wholesale and international distributor businesses negatively impacted the results. Even, management’s remark of revival in both units during the second half failed to lift investors’ spirit. Investors also remain concerned about higher operating expenses that hurt the bottom line.
The Zacks Consensus Estimate has been witnessing a downtrend in the past 30 days, clearly indicating that analysts covering the stock are pessimistic on its future performance. The consensus mark for the third and fourth quarter declined 12 cents and 7 cents to 52 cents and 18 cents, respectively. For 2018, the estimate moved down to $1.73 from $2.06 in the aforementioned time frame.
A Brief Introspection
Skechers disappointed investors with its second-quarter 2018 performance, wherein bottom line fell short of the Zacks Consensus Estimate and also declined year over year. Further, the company’s third-quarter earnings projection of 50-55 cents is down from 59 cents in the year-ago period.
This designer, developer, marketer and distributor of footwear recorded earnings of 29 cents a share that missed the Zacks Consensus Estimate of 40 cents and management’s projection of 38-43 cents. We also note that in spite of registering top-line growth, the bottom line declined 23.7% from 38 cents reported in the year-ago period. The downside can be attributed to increased operating expenses, unfavorably foreign exchange impacts and a higher effective tax rate.
Selling expenses and general & administrative expenses have also been increasing for quite some time now. In the first and second quarter of 2018, selling expenses increased 14.4% and 14.1% each, while general & administrative expenses rose 25.8% and 21.5%, respectively. While operating income decreased 5.7% at $81.4 million from the prior-year quarter number, operating margin contracted 120 basis points to 7.2%. This can be attributed to increased international advertising and distribution-related costs.
Management Looking at Every Nook & Corner
Management is trying all means to put the company back on the growth trajectory. Greater emphasis on new line of products, cost containment, inventory management and global distribution also bode well. Solid performances at the international wholesale and company-owned global retail businesses led to top-line growth. The company’s domestic e-commerce business also continues to gain traction.
We hope that these factors will help win back investors’ confidence on the stock, which is trading close to its 52-week low.
Deckers Outdoor Corporation (DECK - Free Report) delivered an average positive earnings surprise of 71.9% in the trailing four quarters. The company has a long-term earnings growth rate of 11.3% and a Zacks Rank #2 (Buy).
Wolverine World Wide, Inc. (WWW - Free Report) pulled off an average positive earnings surprise of 17.8% in the trailing four quarters. It has a long-term earnings growth rate of 10% and a Zacks Rank of 2.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
Image: Bigstock
Does Skechers' 6-Month Fall of 25% Signal More Trouble Ahead?
Shares of Skechers U.S.A., Inc. (SKX - Free Report) have declined roughly 25% in the past six months against the industry’s 13.6% growth. The stock came under pressure following the company’s soft second-quarter 2018 results and muted third-quarter earnings view. This Zacks Rank #5 (Strong Sell) company also remained volatile and traded within the range of $24.11-$33.46 in the past 30 days.
We note that sluggish performance across domestic wholesale and international distributor businesses negatively impacted the results. Even, management’s remark of revival in both units during the second half failed to lift investors’ spirit. Investors also remain concerned about higher operating expenses that hurt the bottom line.
The Zacks Consensus Estimate has been witnessing a downtrend in the past 30 days, clearly indicating that analysts covering the stock are pessimistic on its future performance. The consensus mark for the third and fourth quarter declined 12 cents and 7 cents to 52 cents and 18 cents, respectively. For 2018, the estimate moved down to $1.73 from $2.06 in the aforementioned time frame.
A Brief Introspection
Skechers disappointed investors with its second-quarter 2018 performance, wherein bottom line fell short of the Zacks Consensus Estimate and also declined year over year. Further, the company’s third-quarter earnings projection of 50-55 cents is down from 59 cents in the year-ago period.
This designer, developer, marketer and distributor of footwear recorded earnings of 29 cents a share that missed the Zacks Consensus Estimate of 40 cents and management’s projection of 38-43 cents. We also note that in spite of registering top-line growth, the bottom line declined 23.7% from 38 cents reported in the year-ago period. The downside can be attributed to increased operating expenses, unfavorably foreign exchange impacts and a higher effective tax rate.
Selling expenses and general & administrative expenses have also been increasing for quite some time now. In the first and second quarter of 2018, selling expenses increased 14.4% and 14.1% each, while general & administrative expenses rose 25.8% and 21.5%, respectively. While operating income decreased 5.7% at $81.4 million from the prior-year quarter number, operating margin contracted 120 basis points to 7.2%. This can be attributed to increased international advertising and distribution-related costs.
Management Looking at Every Nook & Corner
Management is trying all means to put the company back on the growth trajectory. Greater emphasis on new line of products, cost containment, inventory management and global distribution also bode well. Solid performances at the international wholesale and company-owned global retail businesses led to top-line growth. The company’s domestic e-commerce business also continues to gain traction.
We hope that these factors will help win back investors’ confidence on the stock, which is trading close to its 52-week low.
Three More Hot Stocks Awaiting Your Look
Rocky Brands, Inc. (RCKY - Free Report) delivered an average positive earnings surprise of 56.3% in the trailing four quarters. The company sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Deckers Outdoor Corporation (DECK - Free Report) delivered an average positive earnings surprise of 71.9% in the trailing four quarters. The company has a long-term earnings growth rate of 11.3% and a Zacks Rank #2 (Buy).
Wolverine World Wide, Inc. (WWW - Free Report) pulled off an average positive earnings surprise of 17.8% in the trailing four quarters. It has a long-term earnings growth rate of 10% and a Zacks Rank of 2.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
See This Ticker Free >>