Sketcher's mid-quarter update

http://seekingalpha.com/article/2462675-skechers-q3-mid-quar…

So where are we now with 2 months booked for the 3rd quarter of 2014? Analysts have become extremely bullish on Skechers with 6 buy recommendations and raised price targets recently. Susquehanna, Sterne Agee and Citigroup all have price targets between 65 and 70 and have written about the strong sell throughs of their products at the major footwear chains in July and August. July had a roughly 30-40% increase in retail sell throughs and August is more in the 40-50% range in year over year increases in sell throughs. The magnitude of these increases is almost hard to comprehend, but the fact is that Skechers brand is taking significant market share from its competitors. Skechers combination of comfort, styles, color and low price are resonating with the consumer and sharp increases in demand are bearing that out. The strength this quarter is following the trend of Q1 and Q2 where revenue increased 20% and 37% respectively and earnings per share increased by 400% and 500% respectively. As a caution, last year’s Q1 and Q2 were coming off a low base so this year’s earnings growth is a bit exaggerated, but the main point is that demand is rising sharply for the company’s products.

So what is the set up for Q3 revenue and earnings? The company did 517 million in revenue and .53 per share in earnings in last year’s 3rd quarter. Revenue and earnings estimates have been steadily rising as analysts see the growth in sell throughs and raise their numbers accordingly. The current revenue estimate is 626 million and the estimate for earnings per share is for .91 cents. This would represent 21% revenue growth and 71% earnings per share growth year over year. While the quarter is still on going and more sell through data will be coming through for September, we will boldly say that the current estimates again look extremely low. Based on 20-25% increases in backlog coming into Q3 and the 30-50% increase in sell throughs, we believe a revenue number of 650 million and above to be a minimum case for this quarter. We also believe earnings per share of at least 1.10 per share is already the most likely scenario. If the red hot trends continue through September and consumer spending for the back to school season shows any strength, we believe revenue could exceed 675 million and possibly approach 700 million. Earnings per share of 1.20 could be possible with that level of revenue. With this level of demand and this level of market share gain, revenue gains year over year should be in the 30% range which gives us a 670 million revenue estimate for q3. For now, we will stick with that prediction until more information becomes available.

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