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Here's Why You Should Add Skechers (SKX) to Your Portfolio

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Skechers U.S.A., Inc. (SKX - Free Report) clearly appears to be a preferred pick, as it seems to have all it takes to catch investors’ attention. Notably, the company is gaining from its focus on new line of products, cost-containment efforts, inventory management, and global distribution platform. Also, its domestic e-commerce business continues to gain traction. These factors have helped the company deliver robust second-quarter 2019 results and are driving the stock higher. (Read: Skechers Stock Up on Q2 Earnings Beat, Upbeat View)

In the past three months, shares of this Manhattan Beach, CA-based company have rallied 23%, outperforming the industry’s decline of 0.9%.

Let’s delve deeper to find out the factors driving this Zacks Rank #1 (Strong Buy) stock’s performance, which also flaunts a VGM Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.

International Business: Key Catalyst

International business is a major sales growth driver for Skechers, with Europe and China being significant markets outside the United States. Notably, the company witnessed sales growth of 19.8% during the second quarter across its international business representing 55.7% of total sales. Skechers’ international wholesale and direct-to-consumer businesses grew 18.2% and 25.8%, respectively. Management expects international and direct-to-consumer businesses to sustain growth momentum and increase at a mid-teen and high single-digit rate, respectively, in the remaining part of the year.

Growth Initiatives Bode Well

Skechers is focused on its new line of products, corporate upgrades and store remodeling projects, cost-containment efforts, inventory management, and global distribution platform. The company’s domestic e-commerce business registered an increase of 36.1% during the second quarter. Comparable-store sales increased 4.9%, including e-commerce sales growth of 34.3%. Also, it is focused on product innovation, additional store openings and increasing distribution channels by entering into distribution agreements to boost sales and profitability.

Apart from these, Skechers continues to offer a diversified portfolio of brands that includes a wide range of fashion, athletic, non-athletic, and work footwear at compelling prices. We believe that this multi-brand strategy enables it to roll out new products without cannibalizing its existing brands and helps to expand the targeted demographic profile of customers.

Upbeat View

Impressive second-quarter performance prompted management to provide an upbeat view for the third quarter. For third-quarter 2019, management guided earnings in the range of 65-70 cents a share and net sales in the band of $1.325-$1.350 billion. The company had reported earnings of 58 cents and net sales of $1.176 billion in the prior-year quarter.

We expect all the aforementioned factors to continue bolstering the company’s performance, and help it remain in investors’ good books.

Other Key Picks

Rocky Brands, Inc. (RCKY - Free Report) delivered average positive earnings surprise of 7.6% in the trailing four quarters. It currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

adidas AG (ADDYY - Free Report) has a long-term earnings growth rate of 15% and a Zacks Rank #2.

Deckers Outdoor Corporation (DECK - Free Report) has a long-term earnings growth rate of 12.1% and a Zacks Rank #2.

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