Skechers (SKX) mid-quarter review

Skechers (SKX) mid-quarter review

Let me preface by emphasizing that what I am giving are my own inexact impressions, which may definitely include misunderstandings.

Who is Skechers?
This company was founded in 1992 and is headquartered in California. My take, which may be completely wrong, is that where Nike is primarily a sneaker and sport shoe manufacturer, and it sells clothes too, and Under Armor is primarily a clothing store and it sells some sports shoes too, Skechers seems to me to be primarily a shoe seller, actually primarily a comfort shoe seller, and sells sport shoes, and sneakers, and kids shoes, too. They operate approximately 1,210 Skechers retail stores, including flagship stores in Times Square, but also sell through department stores etc.

Skechers designs, develops, markets, and distributes footwear for men, women, and children, as well as performance footwear for men and women under the Skechers GO brand name. It operates through four segments: Domestic Wholesale, International Wholesale, Retail, and E-commerce. The company offers casual footwear, including boots, oxfords, slip-ons and sandals for men and women; dress casuals, seasonal sandals and boots, and relaxed fit casuals for men and women. It also sells Skechers memory foam styles, lightweight performance-inspired athletics, classic athletic styles, and others under Skechers Sport brand name… (This goes on and on and on, but you get the idea).

You should know that they had a bit of a scandal some years back when the FTC said that their Shape-Up line didn’t provide all the health benefits they were promising. Their sales fell off a cliff for a short while and then bounced back as they introduced new lines. They are now much larger and much more diversified, and they’ve learned their lesson about health claims.

What is your history with them?
I’ve been a stockholder for roughly a year and a half now. They are my second largest position, and have been one of my top three for a long time. I took my initial positions at $15 to $18.

Aren’t they a fashion fad and likely to go out of fashion?
Skechers shoes are about as far from high fashion as you can get. They specialize in comfortable shoes that are inexpensive (comparatively speaking), and people buy multiple pairs of them because they are so comfortable. I know people who now won’t buy anything else simply because of the comfort factor. Chris posted about a little girl whose mother was complaining because the girl wouldn’t take off her Twinkle Toes Skechers at night to go to bed. That doesn’t sound like high fashion to me.

How is the company doing?
Well, let’s see. Their earnings for the past three years went like this (post split) in cents. Can you say “straight up?”

2012	  06
2013	  39
2014	 100 

Their earnings for the first nine months of 2015 are up 70%. In other words, they already have $1.38 for 2015 (which is 38 cents, or 38%, more than they had all last year, and they have another quarter to go).

How about revenue? (In billions of dollars)

2012	  1.56
2013	  1.85
2014	  2.38 

From 2013 to 2014 they were up 29%. In the first 9 months of this year they were up 34%, and they already have more revenue than they had all last year. Backlog was up 28% from a year ago. Comparable sales were up 10.4% last quarter.

No wonder that the price fell from $53 to $25 with all that awful news! I guess they missed some analyst’s estimate. SKX closed Friday at $29 and had a PE of 18.6 and a rate of growth of trailing earnings of 73%.

Here’s management’s analysis of the quarter and the future
At the close of the quarter, there were 1,210 Skechers stores worldwide, including just over 830 outside the United States. The Company continued its positive sales trend in the third quarter with double-digit gains in our international subsidiary, distributor and joint venture operations, including a triple-digit increase in China. We believe that this positive momentum will continue to grow across our three main business channels in 2016. We continue to invest in our global business to further gain market share.

We are continuing our retail expansion and plan to open an additional 12 to 17 company-owned stores before the end of the year, in addition to the five that have already during October. Along with the 12 Skechers stores already opened through our international distributor and franchise partners this month, another 45 to 55 Skechers stores are also planned through the remainder of the year—which will bring us to more than 1,280 stores by year-end. Given our double digit retail comps, increase in backlogs of approximately 28% and market share gains, we believe consumer demand remains strong for our footwear categories worldwide. With the improved efficiencies in our distribution centers and our solid financial position, including, $511 million in cash, we are well positioned for continued growth. While we are comfortable with the analysts’ current consensus for the next quarter, we see significant potential in the first quarter and entire year of 2016.

To summarize
Here’s a 2-sentence excerpt from a post by Tom Engle: SKX is a company that I have followed and owned for quite a while. I like Skechers at today’s prices. The report was a really good one. I agree with him. This company is doing great, with no obvious threat in sight. It sold off for no particular good reason, except that the price had risen a lot this year. I’m comfortable with it as my second biggest, and quite oversized, position.

Hope you found this interesting, entertaining, and useful.


For Knowledgebase for this board
please go to Post #9939.

A link to the Knowledgebase is also at the top of the Announcements column
on the right side of every page on this board


Thanks Saul, as usual great stuff, like the legal disclaimer:
Let me preface by emphasizing that what I am giving are my own inexact impressions, which may definitely include misunderstandings.

Unfortunately that won’t stop dumb people from being dumb and whiners from whining.

I am gaining much more faith in SKX the more I study it and your analysis is very helpful. It is currently 9.1% of my 1YPEG bucket and is losing to the S&P by 5.67%. Nevertheless, I like the investment and am ready to nibble on more. (Need to sell more of my EMC as it is being taken private and is going nowhere now).

Thanks for the great posts, I one day hope to have the time, energy and brains to contribute at one half your level.



Agreed Pete and thank you too Saul.

I’ve liquidated my Youku (YUKU) position after a 35% gain that is now in the end state of a Baidu takeover play. I can’t be bothered to wait for the remaining few % and there are some real bargains out there now.

I’ve re-invested some into SKX which is technically averaging up on my original investment but doesn’t feel like it given how far it has fallen from its peak. It seems to be at one of the best value points it has been in a long long time.

Considering adding some SWKS too although I’ve already been cut by that falling knife.

I might keep some powder dry for fed hike day in case it brings a buying opportunity or two.


Thanks for the information. FWIW - I was surprised when reading this morning a bunch of Kohl’s Black Friday advertisements hit my screen. Skechers Shoes were being promoted as a Black Friday blow out, price cuts on various shoes from $69 to $39.

I know SKX talked about inventory on the last conf call but was surprised to see the advertisement.

Might be nothing, might be something, still long on SKX.


Might be nothing, might be something, still long on SKX

I’d liken it nothing given it is Kohl’s nature to advertise like that throughout the year, and especially so this week/end until the end of the year. The sale is inclusive of Nikes and most/all brands carried in Kohl’s stores.

Disclosure: I bought my first pair of Skechers at Kohl’s. Bought two other pairs since (from a factory outlet store) and snagged some shares since the most recent earnings report.

1 Like