Let’s have a look at what happened to earnings over the past few quarters and then look forward to Q4 2015 and FY 2016.
In Q1 2015, we had bad weather, the port shutdown, strong dollar, and some other issues with their distribution. They reported a weaker than expected quarter but still showed strong toppling and bottom line growth. EPS was $0.37. Despite these problems year over year EPS growth was 80.3% and year over year revenue growth was 40.5%. 1 year TTM EPS growth was 105.8%
In Q2 2015, SKX posted a MONSTER quarter with EPS of $0.52 (forecasts were for $0.32 if I recall correctly). Now this amazing quarter was only partially due to their business growth. The rest of the “growth” was not really growth because they “took” business from Q1 2015 and Q3 2015. So the observed strength in Q2 was in large part due to “weakness” in Q1 and Q3. SKX customers order product in June that should have been ordered in July.
As mentioned above, the reported number in Q3 2015 were lower because of the June order that came a month early. It’s really a timing issue as it was with AMBA last quarter and AMBA’s “low” guidance for the quarter in progress. In addition to the shift in orders, the legal costs (2 lawsuits) were an additional drag on earnings.
In Q4 2015, we can expect good growth in revenues over Q4 2014. Earnings, however, may not show that good of growth because the legal issues are still ongoing in the current quarter. Also, there was some weakness in the US but this is likely temporary. So, without the legal impairments we may be expecting $0.24 EPS versus $0.14 in Q4 2014. This would be a year over year increase of 71%. Perhaps the legal costs will be 5 cents so we might get EPS growth of 36% (19 cents minus 14 cents is 5 cents which is divided by 14 cents to arrive at 36%). Also, Q4 is SKX’s weakest quarter but it was also the weakest quarter in 2014 so it’s an apples to apples comparison (not considering the legal costs in 2015).
In Q1 2016, we should see substantial year over year growth because SKX’s business still growing so fast and because Q1 2015 was weaken as cited above.
In Q2 2016, we should see a crappy quarter because Q2 2015 was strengthened as noted above.
Then in Q3 2016, we should see another amazing growth quarter because Q3 2015 was weakened by several factors.
This is how I see it. Of course, there could be factors in future quarters which affect the reported EPS numbers. We do not yet know what will happen, but we do know how the numbers lined up in the recent past. It seems the “market” and the stock price reacts violently to the reported numbers even when deviations from expectations can be explained either by sales transferring from one quarter to the next (or previous) or by one-time charges which we do not expect to see in the future. This seems to have happened with AMBA and now with SKX.