Monkey just finished listening to the Sketchers conference call
and he’s somewhat, umm, perplexed. Here are a few reasons why:
He had both Netflix and Chipotle in his noggin’ as examples of clarity. Here are the problems. Here’s what we’re doing to solve them. Here’s what our competition is doing. Here’s what we’re worried about. Here’s what we’re not worried about. Clear and easy to understand.
During the sketchers call, conversely, there were phrases like “domestic market is suffering from an uneasy political climate and a surplus of inventory and we’ll see about ‘back to school’.” Sounds to monkey like “we sold fewer shoes and we don’t know why.” The language was highly corporate and euphemistic and that is severely worrisome. Did anyone else have the same impression? Hopefully Monkey’s just hungry.
If 2 actually does mean “we’re selling less shoes here in America” then the Sketchers story becomes entirely about its international growth. Which would be fine, except if there’s not genuine reason given for the decline in the US, why can’t the same kind of decline happen everywhere else? Monkey is really confused about the lack of clarity about the US market basically. Whatever happened to “but they’re so cheap and comfortable and everybody needs shoes” argument? How does the ‘political climate’ even begin to affect the investment thesis?
And then there’s the whole quarter to quarter lumpiness–we sold a lot more in this quarter because it was pushed into it; we sold a lot less that quarter because things were pulled from it. Why this dance? It feels like it’s creating a puzzle where none really exist. You sell shoes. Did you sell more or less than before? And if quarter to quarter results are unreliable by nature, then zoom out and talk about half year to half year or year over year. Monkey’s head hurts. They’re shoes. Maybe that’s the thing: if y’all just swung from the branches and used your toes to do most things, we wouldn’t even be having this conversation.
So: for what still feel like amorphous reasons, Monkey’s tummy feels a bit unsettled after listening to that call. The Suits weren’t overtly obfuscating, but there was enough, ummm, corporate speak in there that felt unnecessary which suggests maybe the business is not as strong now as it was in the earlier innings? Or maybe not. Maybe the US slowdown is a blip and the international expansion will continue to be massive and the current p/e will prove a real value. Monkey just doesn’t like to feel swindled into thinking the lesser is actually the greater.
Saul: your thoughts? Did you have the same dis-ease?
Anyone else listen? Any rejoinders?
(long SKX but not long on shoes)