Store traffic

I went by a local highly popular mall. It was a busy time and the Apple store was fairly packed – many dozens of customers. There was a Skechers store not far away. There were three customers I could see.

Is this sort of thing concerning? Apple, as everybody seems to know, is doomed, despite having lots of customers. Is Skechers getting its customers elsewhere? Or was my observation an anomaly? If not, how does Skechers achieve success without customers in its stores?

-IGU-

When I was in the country of Panama, I went into a Skechers store in a mall. I think we were the only customers until it was time to leave. Prices were higher there than what I had seen in Super Shoes here in the states.

We didn’t buy anything.

My wife and I each have 3 pairs of Skechers. She might have more as she wears Skechers at her job.

We got them all either on-line or at Super Shoes. There is no Skechers store anywhere close to where I live.

Fool on,

mazske

Long SKX

You don’t need to see a “Genius” to wear your Skechers! LOL

The Captain

4 Likes

Apple, as everybody seems to know, is doomed, despite having lots of customers

I’d be curious to hear your factual basis for saying this.

Apple, as everybody seems to know, is doomed, despite having lots of customers

I’d be curious to hear your factual basis for saying this.

I assumed the original poster was being sarcastic. I’m pretty sure he was.

4 Likes

Apple, as everybody seems to know, is doomed, despite having lots of customers.
I’d be curious to hear your factual basis for saying this.

Just snark. Against all common wisdom, I am mostly invested in AAPL.

-IGU-
(retired)

I didn’t want to pile on the testimonials; however, before you buy the stock, I highly recommend buying the shoes. There’s no better way to get a handle on the product. I have found no more comfortable shoe period. My wife made fun of them saying that they will fall apart in no time. They didn’t, and I am going to make her pick out a pair now.

Based on Saul’s recommendation, my enthusiasm for the shoe, and my own due diligence I purchased the stock 9 months ago and periodically purchased the stock until it has become my fourth largest holding, but I am down 15% overall. That said, I am delighted with the business’ performance to date.

I am looking forward to the day where SKX stock treats me as well as the shoes do.

Best,

bulwnkl

9 Likes

Is Skechers getting its customers elsewhere? Or was my observation an anomaly? If not, how does Skechers achieve success without customers in its stores?

They can still be successful without high store traffic because most of their business is wholesale. In their latest quarter, only 20% of SKX sales came through their retail channel. There’s higher margin when you are your own middle man, so retail accounted for 27% of the quarter’s gross profit. Both of those portions are slightly down (as a percent of total) from the same Q last year. Meaning, wholesale is growing even faster than retail. That’s how.

Being long SKX, I prefer to see stores overflowing; but as long as more people buy Skechers every day (whether in a SKX store, in another store, or online), I’ll be happy.

They call me,
Mr. TBS

5 Likes

All the Sketcher stores in my area are the “factory outlet” type.

One does wonder why companies maintain retail stores in pricey malls if they get little traffic. Are they run at a loss? Why have them? Is it a form of advertising? Or ego on the part of management.

According to Mr TBS figures they must be getting “enough” retail traffic to make money at it. Shoes are a relatively high priced item so few customers could still mean plenty of money. And some of those customers may later buy on line too.

Sketchers seems to have large and somewhat bewildering line of shoes. At their on line site I had difficulty in screening them for desired traits- in my case stability (bad ankles) So they may need retail stores to give customers plenty of choice.

Like tires on a car, shoes are not the best place to go stingy and shop by price alone.

From a strategy perspective, we can identify several reasons for a shoe maker to have a retails network (large or small). Fit and comfort are major reasons for a purchase, so the ability for a customer to come in and try them on is important. Customers can do that in a Skechers store or in any other store that carries Skechers shoes, but in a Skechers store, the company can more easily and cheaply expose the customer to a wider range of products and without having their competitors nearby! Point-of-sale displays and marketing are totally within their own control.

Is mall-walking (for exercise) still a thing these days? What better place to put your comfortable shoes/brand in front of a target audience, at the very time they’re most engaged and thinking about the comfort of their shoes?

The retail sales do have a higher gross margin (essentially, just the cost of the shoes and getting the shoes to the stores) because of the previously identified, absent middle-man. Unfortunately for the casual SEC filing observer, SKX includes all the store operating costs (rent, wages, etc.) in SG&A, so we can’t as easily gauge the net margin/profitability of the retail network. Rest assured, I’m sure SKX does that analysis internally, but the fact that they continue to open new stores DOES NOT guarantee that existing (or even future) ones are net profitable.

Some excerpts from retail sections of the latest SKX 10-Q, for those curious:

Revenue: Our retail segment sales increased $37.4 million to $198.5 million for the three months ended March 31, 2016, a 23.2% increase over sale s of $161.1 million for the three months ended March 31, 2015. The increase in retail sales was primarily attributable to increased comparable store sales of 9.8% resulting from increased sales across several key divisions including Women’s GO, Women’s Sport, Girls, and Men’s Sport divisions. During the first quarter of 2016, we opened one domestic outlet store, five domestic warehouse stores, one international concept store, and two international outlet stores. In addition, we closed one domestic concept store. For the three months ended March 31, 2016, our domestic retail sales increased 15.3% compared to the same period in 2015, which was primarily attributable to positive comparable domestic store sales of 8.2% and a net increase of 30 domestic stores. Our international retail store sales increased 59.0% compared to the same period in 2015, which was primarily attributable to positive comparable international store sales of 17.7% and a net increase of 42 international stores compared to the prior period.

Gross Profit: Gross profit for our retail segment increased $22.2 million, or 23.7%, to $115.6 million for the three months ended March 31, 2016 as compared to $93.4 million for the three months ended March 31, 2015. Gross margins for all our company-owned domestic and international stores and our e-commerce business were 58.2% for the three months ended March 31, 2016 as compared to 58.0% for the three months ended March 31, 2015. Gross margins for our domestic stores, which includes e-commerce, were 60.7% and 59.4% for the three months ended March 31, 2016 and 2015, respectively. The increase in domestic retail gross margins was primarily attributable to higher margins on our Women’s Go, Women’s Sport and Men’s Sport footwear. Gross margins for our international stores were 50.3% for the three months ended March 31, 2016 as compared to 51.8% for the three months ended March 31, 2015. The decrease in gross margins for the international retail segment primarily resulted from a sales mix of products with slightly lower margins.
Our cost of sales includes the cost of footwear purchased from our manufacturers, duties, quota costs, inbound freight (including ocean, air and freight from the dock to our distribution centers), broker fees and storage costs. Because we include expenses related to our distribution network in general and administrative expenses while some of our competitors may include expenses of this type in cost of sales, our gross margins may not be comparable, and we may report higher gross margins than some of our competitors in part for this reason.

Additional Retail Investing Activities: Excluding the costs of upgrading our European Distribution Center, we expect our capital expenditures for the remainder of 2016 to be approximately $37 million to $42 million, which includes opening an additional 55 to 65 retail stores and several store remodels.

They call me,
Mr TBS

6 Likes

It was a busy time and the Apple store was fairly packed – many
dozens of customers.

I’d be willing to bet 90% of those people were there getting help on their “easy to use” products, getting something fixed, or trying to figure out whether the reason they couldn’t do something was because of them (lack of knowledge/ease of use) or a defective/broken product.

The other 10% were probably buying something.

Even if it was a 70/30 split (and I wouldn’t go any deeper than that), it still isn’t fair in any way to compare the foot traffic in an Apple store (which is all about “help me use my XXXXX”) and a shoe store – any shoe store.

(I own substantial amounts of both AAPL and SKX, by the way… so no particular axe to grind except for both to do well!)

2 Likes