How Skechers Offers Value and Growth

Pretty decent write-up looking at the growth and value SKX currently offers investors. I wholeheartedly agree of course. But I liked this excerpt the best, addressing whether Skechers’ products could just be a fashion fad:

Bears continue to deride Skechers as being overly reliant on “fads” and primed for another collapse in its sales and profits. These critiques seem to be aimed at the company that existed five years ago, not the version of Skechers that exists today.

Today’s Skechers enjoys success in walking shoes, kids shoes, casual, work footwear, and a variety of other categories. It’s not going to sink or swim based on any one trend.

The company has also become more disciplined about planning for obsolescence and maintaining plenty of new products in the pipeline. Bears will argue that its products are often derivatives of more popular styles, but Skechers’ ability to create mass-market versions of these styles at a more affordable price represents a real value proposition to consumers. The “fast follower” strategy can work as well in retail is it does in technology.

Read the entire piece at…

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I saw a little news blurb yesterday that explained that SKX was down yesterday because retail stocks and ETF’s were selling off because Macy’s and another big retailer (I forget which) had poor earnings reports. Well duh…Skechers already reported their earnings. Their earnings were up 70% year over year. And its PE is 16.7. Somebody’s computer was set to just sell retail.
Good chance to fill out your position.


Somebody’s computer was set to just sell retail.
Good chance to fill out your position.

Lots of people (investors) lump “retail” into a giant undifferentiated blob and that gives savvy investors great opportunities to pickup bargains. This board likes Skechers. I like “Dress for Less” Ross Stores (ROST).

Denny Schlesinger


I liked ROST (and TJX) too. But what cannot eventually be conquered by the leviathan AMZN? Now I even wonder about my large holding in CVS which hitherto I thought impregnable. I have never seen such widespread and continual disruption by one company. It (Bezos) is quite simply a phenomenon.


But what cannot eventually be conquered by the leviathan AMZN?

Good question!

Most bricks and mortar retailers have an online presence and once you display merchandise on line it’s an easy step to sell it and to deliver it. The online is usually their fastest growing segment. But Ross Stores has no online sales at all. They cultivate the bargain hunting atmosphere in their stores, not nicely organized racks but stuff on tables to riffle through. While I was in the US I used to frequent their stores looking for button down Oxford shirts. Usually I would find two or three, maybe four that suited me but you can’t go to Ross stores in the hopes of finding a dozen identical or matched items. So you buy a couple and go back the next week to see what you find.

I’ve been an Amazon shopper for a very long time and I love Amazon for standard items, brand name items like books. With the scarcity in Venezuela I’ve been increasing my shopping at Amazon and have the stuff sent to me by currier. I use Fruit of the Loom socks and I had no difficulty in buying a pack of seven at Amazon. Then I looked for face towels. We have used Cannon for ever but that brand is gone. So I chanced on some unknown brands. The first set I got were thin and scratchy. The next set over large and much to thick and plush. That’s the difficulty with Amazon, you can’t feel the merchandise. Returns, for me, from Venezuela, are extremely difficult. So I stick to well known brand names and known products.

And you have to have a credit card to buy at Amazon. The niche Ross targets is very difficult for Amazon to penetrate. In addition, Ross has an army of very experienced buyers and often the stuff they buy goes into storage waiting for the right season. That’s too specialized for Amazon and possibly too small a niche to bother with.

I’m not saying Ross is entirely safe, nothing is. But Ross has some formidable moats and a history to prove it, that’s 25 years of 22% annual fairly steady growth:

The next chart is very informative, it’s a 14 year comparison of six retailers:

2 off price: ROST and TJX
1 specialized store: BKE
2 storied department store: M
1 once very popular brand: GPS
1 a giant from the recent past: WMT

I didn’t include Amazon because it’s literally “off the chart”

The full lesson that can be learned from these charts is too long to include here but the highlights are that off-price is the niche to be in because there are many more poor people than rich. Walmart had its decades in the Sun but they have saturated their market and China is no longer as good a supplier as it used to be with rising wages. If Amazon is eating into retail it’s not at the expense of off-price, not yet anyway.

BTW, investors who prefer TJX over ROST because their stores are better organized are missing the point! TJX is more like a department store and look at what is happening to them.

Denny Schlesinger