SKX Q2 2016 results

Investment Analysis Clubs Saul’s Investing Discussions
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SKECHERS USA, Inc. (SKX), a global leader in footwear, today announced financial results for the second quarter ended June 30, 2016.

Second quarter 2016 net sales were $877.8 million compared to $800.5 million for the second quarter of 2015. Gross profit for the second quarter of 2016 was $416.3 million, or 47.4 percent of net sales, compared to $374.6 million, or 46.8 percent of net sales, for the second quarter of last year. Earnings from operations for the second quarter of 2016 were $100.4 million, or 11.4 percent of net sales, compared to earnings from operations of $112.3 million, or 14.0 percent of net sales for the second quarter of 2015.

“Skechers achieved new record second quarter net sales of $877.8 million, which led to a $1.86 billion net sales record for the first six months of 2016,” began David Weinberg, chief operating officer and chief financial officer. “The growth in the quarter was primarily attributable to a 34.6 percent increase in our international subsidiary and joint venture businesses and a 40.5 percent increase in our international Company-owned Skechers retail stores. This resulted in our international wholesale and retail business comprising 41.9 percent of total sales for the second quarter and 45.0 percent for the first six months of 2016. Company-owned Skechers retail sales increased 15.4 percent for the quarter. As expected, in our domestic wholesale business, shipments were pulled forward from April into March, resulting in significantly reduced shipments in April and a sales decrease of 5.4 percent in the second quarter, but an increase of 3.2 percent for the first six-months. Our strong gross margins of 47.4 percent for the quarter were primarily the result of higher sales increases in our international subsidiary and joint venture businesses as well as our Company-owned retail stores.”

http://finance.yahoo.com/news/skechers-announces-second-quar…

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Down around 15% in immediate after-hours trading.

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I haven’t seen it down more than 12%. Obviously awful but not quite 15%.

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For the love of all things bananas, can we please refrain from posting what non-thinking robotic algorithms do nano-seconds after a report is released? All it does is make Monkey start screeching in anxiety and out of ignorance. This kind of post is full of sound and fury signifies nothing. Sometimes a huge drop after hours is followed by a gain the next day. Or is reversed, inversed, or spiraled out of control due to conference call info. Noise.

So please, kind humans, let’s keep this board quiet enough so that all the jungle animals can get a little rest. Let the hyenas over there in the desert make all the noise while we focus on what was said about the business itself more clearly. Please and thank you.

Monkey

(long SKX)

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Revenue miss of $11 million, earnings miss of $.04. Adjusted for Malaysia fire and currency effects,
Still have $.01 or so miss.

No outlook given in the press release. Press release did include cautious language about uncertain political and economic circumstances both in US and international.

Revenues did grow YoY by about 5% or so.

Nothing horrible in the initial numbers, but nothing to brag home about. As was suspected it was a challenging quarter from currency fluctuations, to factory fire, to BREXIT to strength of US currency relative to ROW.

Key will be to examine inventory numbers and the like.

Tinker

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Its down almost 16% looks like it might not have a great day tomorrow.

Andy

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I’ll be having a great buying day tomorrow! I’m in for another 1% at least!

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I’m with you, Mispoken. Tomorrow is a great buying opportunity for a great company.

Thanks, MrTBS, for the early alert.

Jim

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Here’s more from The Street:

Shares of Skechers (SKX) are tanking by 14.48% to $27.52 in after-hours trading on Thursday, after the Manhattan Beach, CA-based footwear and apparel retailer posted worse-than-expected second quarter results after today’s closing bell.

The company reported earnings of 48 cents per share on revenue of $877.8 million. Analysts surveyed by Thomson Reuters projected earnings of 52 cents per share on revenue of $886.87 million.

Skechers posted earnings of 52 cents per share on revenue of $800.5 million for last year’s second quarter.

Read the whole thing at https://www.thestreet.com/story/13648292/1/skechers-skx-stoc…

Here’s a look at their numbers:


Net Sales (millions)		Q1		Q2		Q3		Q4			
2013								515.8		450.7		
2014				546.5		587.1		674.3		569.7	
2015				768.0		800.5		856.2		722.7	
2016				978.8		877.8

EPS (diluted)			Q1		Q2		Q3		Q4			
2013								0.18		0.09	
2014				0.20		0.23		0.33		0.14		
2015				0.37		0.52		0.43*		0.19	
2016				0.63		0.48

*SKX 3-for-1 stock split 10/15/15, but all EPS figures are split-adjusted

Current (2016 Q2 Earnings):

Revenue Growth (millions)
2015 Q2 TTM Revenue = 2812.5
2016 Q2 TTM Revenue = 3435.5
Year Over Year Revenue Growth =22.15%, previous quarter rev growth 29.2%

EPS Growth (diluted)
2015 Q2 TTM Earnings = 1.36
2016 Q2 TTM Earnings = 1.73
Year Over Year EPS Growth =27.2%, previous quarter EPS growth 65.4%

P/E (Check Current Price) = 32.18/1.73 = 18.6

1YPEG = 18.6/27.2 = 0.68

Just my initial reaction: Took it like a gut blow. I thought it was a pretty big miss, even taking into account foreign exchange rate, the Brazilian VAT taxes, and the Malaysian factory fire. So I thank TMFBreakerRob for the longer-term perspective expressed on the Skechers’ Rule Breaker board.

After all, their international growth is just staggering.

“The growth in the quarter was primarily attributable to a 34.6% increase in our international subsidiary and joint venture businesses and a 40.5% increase in our international company-owned Skechers retail stores,” Skechers COO and CFO David Weinberg said in a statement.

From https://www.thestreet.com/story/13648292/1/skechers-skx-stoc…

I still think this is a miss, but not the end of the world. I would like to know why their sales are so lumpy though, with different quarters appearing stronger than others. Why are sales being pushed back to other quarters or rushed into the current quarter (but at the next quarter’s expense).

These are just my initial reactions at seeing the numbers. I will definitely be reading through the conference call notes with great interest this weekend.

Matt
Long SKX
MasterCard (MA), PayPal (PYPL), and Verizon (VZ) Ticker Guide
See all my holdings at http://my.fool.com/profile/CMFCochrane/info.aspx

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July 1, 2013 the share price was $9. Shares have tripled in the 3 years that you have been keeping track of.

Results did lead to appreciation.

Shall have to determine if said business results and momentum will continue going forward.

Tinker

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No outlook given in the press release.
Near the end of the PR, it says “net sales estimated between $950 million and $975 million” for Q3

Why are sales being pushed back to other quarters or rushed into the current quarter (but at the next quarter’s expense).
As far as I understand, things like holidays that lie around their quarter closing date. So the holiday sales can be in Q1 this year and Q2 the next.

I still think this is a miss
It’s within their own guidance of between $875m and $900m, albeit the lower end. It would’ve been a beat if you exclude foreign exchange loss, taxes in Brazil, and fire in Malaysia, which amount to 7 cents. EPS could’ve been $0.55. Please correct me if I’m wrong. I’m still learning and this is my first time reading both the PR and transcript, trying to form my own opinion, before reading any comments from the board.

Cheers.

nomb
Long SKX

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Couple more things:

When they said during last earning that Easter sales was shifted to Q1 from Q2, I don’t remember them saying it will affect Q2. At that time, the forecast that they provided did look high to me. They only mentioned in the 8K that the forecast is made based on assumption that “no significatnt shift or pull forward of orders from the third quarter into the second quarter”, like last year.

Last Q, they said:
Our first and third quarter net sales have the potential to become larger relative to the net sales balance of the other quarters as our international business becomes a greater percentage of our total net sales. We therefore believe there could be upside opportunity for the third quarter of 2016 and the balance of the year.

I expect better results next quarter.

nomb

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Fellow fools,

Not that I’m arguing for much relevancy here, just trying to practice application of concepts and knowledge:

From one of our fellow gentle posters we have Benjamin Graham’s “maximum acceptable P/E” , applied to sketchers would result in around 62 (percent earnings growth rate times 2+8). Have I got that right?

Gwh

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From one of our fellow gentle posters we have Benjamin Graham’s “maximum acceptable P/E” , applied to sketchers would result in around 62 (percent earnings growth rate times 2+8). Have I got that right?

Maybe that’s what Benjamin Graham said (I don’t know), but I sure wouldn’t say it! I’d prefer to see a PE in line with, or lower than, the percent earnings growth. Just my opinion!
Saul

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Thanks for the reply.

“Maybe that’s what Benjamin Graham said (I don’t know), but I sure wouldn’t say it! I’d prefer to see a PE in line with, or lower than, the percent earnings growth. Just my opinion!
Saul”

I’m with you on that. I was just trying To get a check on my math and use of concept. And a little bit trying to put some scale to the concerns that gentle posters were having about the recent price drop of sks.

Gwh (mid size position, sks)

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It would be 8.5 rather than 8, giving the formula 8.5 + (2 x growth). Saul, does this formula give you results similar to your calculations?

It also depends on how you calculate the growth rate - over how many years do you average? My book (“Benjamin Graham and the Power of Growth Stocks”) doesn’t talk about that.

Vuru.co uses free cash flow growth averaged over 10 years, which is also from Graham, but the formula is more complicated. My book doesn’t give that formula, but says that the simpler formula above is close enough for stock picking.

Here’s Vuvu’s account: http://vuru.co/help/302