Thinking about SKX

Investment Analysis Clubs Saul’s Investing Discussions
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Hello Friends,

In a time of chimpanzees, Monkey is looking for the best bargains possible, since this is where fortunes are made, or lost, depending.

Right now I want to think deeply about SKX.

Currently it’s Monkey’s sixth largest position at 6% of the whole banana-flavored enchilada.

Above it are: SWKS, DIS, AAPL, AMZN, and SE, in order of allocation. So SKX is in most excellent company. Does it deserve to be?

So I’m just trying to think from the other side right now: if I owned SKX, why would I be selling it? It’s down nearly 3% on a big up day for the market. It’s a company that sells essentials (shoes) at good prices (not a luxury brand) that people love. It’s growing. It’s got serious branding chops. It’s been taken to the jungle by some fierce jungle cats. Are inventory issues somehow predicting a major growth slow-down? Are people worried that what happened once before will happen again, namely a loss of brand-cool-factor? Is this company too closely aligned with fashion, which comes and goes with humanoid whimsy?

I really want to understand why some folks think it’s a good idea to sell SKX right now. Thoughts? Because if there aren’t too many good ideas to the grumpy bear side, then Monkey might commit some more golden fruit to this holding, bumping it up a percentage or two. It truly looks appetizing.

So far, the only jungle noise Monkey has come up with today is: “Skechers USA Inc. (NYSE: SKX) was downgraded to Neutral from Positive with a $30 price target (versus a $28.02 close) at Susquehanna. The consensus target price is $41.26, and the 52-week range is $19.01 to $54.53.”

Humbly Yours,

Monkey
Long SKX

p.s. It’s funny that humans have to wear shoes. No wonder your toes are shrinking and can’t grab a branch to save your lives.

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Is this company too closely aligned with fashion, which comes and goes with humanoid whimsy?

Hi Monkey, You ask a bunch of good questions there, so I’ll take a shot at this one. It’s hard to see this as a high fashion issue. My wife wears only Skechers shoes since she tried them. It’s because they are comfortable, even though they aren’t particularly fashionable. A lot of people in previous discussions on the board have stated that they wouldn’t have dreamt of buying such “unfashionable” shoes until they tried a pair, and then bought three pairs, or whatever. They are comfortable, attractive, and relatively inexpensive. Somehow they have become quite popular also. They are able to keep gradually increasing their average price per pair.

I think they are down today because that one firm reduced them to neutral (with a target price above the current price). Seems to me that it would be a reasonably good buy here but please make your own decision.

Saul

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It’s got serious branding chops.

Brand recognition is on the rise too:

YouGov takes a daily pulse of consumer perceptions about a brand with its BrandIndex gauging a company’s “buzz,” or whether consumers have heard about a brand, whether from advertising or news, and whether the perception formed is positive or negative, generating ratings from 100 to -100. Its Buzz Improvers list shows, on the other hand, the brands with the highest increasein positive perceptions. It says the rankings are representative of the general population.

…

But one footwear specialist not only outranked the others in improving the perception consumers had about the brand, but it is within striking distance of Nike and could conceivably surpass the Swoosh if it maintains its current trajectory.

What company is it? Skechers (NYSE:SKX).

Read the entire article at http://www.fool.com/investing/general/2016/01/22/can-you-gue…

Matt
MasterCard (MA) Ticker Guide
See all my holdings at http://my.fool.com/profile/CMFCochrane/info.aspx

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The most recent nums (dated 1-15-16 late afternoon) I could find seem positive.

Read More At Investor’s Business Daily: http://news.investors.com/business/011516-790107-under-armou…

Under Armour (NYSE:UA) hit the ground running with triple-digit gains in athletic shoe sales last week, far outpacing rival Nike (NYSE:NKE).

In the week ended Jan. 9, Under Armour’s athletic shoe sales soared 116.9% from a year earlier, according to a report by Deutsche Bank analyst Dave Weiner, citing data from market researcher SportScanInfo.

The favorable report, though, couldn’t keep Under Armour’s shares from falling Friday. Shares closed down 1.8% to 68.63 on the stock market today, a much smaller decline than the general market. But earlier Friday, the stock fell to its lowest level since January 2015.

Sector leader Nike saw athletic shoe sales rise 14.1% from a year earlier last week. Nike’s stock closed down 1.6% to 57.56 after briefly undercutting its 200-day line.

Skechers USA (NYSE:SKX), which is expanding into athletic footwear, saw its athletic shoe sales rise a hefty 36% from a year earlier for the week. Skechers’ shares closed up 2.3% to 26.99.

Adidas remained in the red, with a 7.4% year-on-year decline in athletic shoe sales last week, as its Reebok brand saw sales fall 59.8% year over year and its losses remain a “drag” on the overall business, Weiner said.

Total athletic footwear sales increased 10% last week from a year earlier, Weiner said.

For the third week in a row, basketball shoe sales were “robust,” with a 21.1% rise from a year earlier, Weiner said.

Nike’s Jordan Retro 4 basketball shoe for men and kids was the top seller this past week, followed by Nike’s Jordan Retro 8 ‘Chrome’ basketball shoe launched Dec. 19, Weiner said.

Casual athletic shoe sales showed “continued strength,” with a 27.6% year over year increase last week, Weiner said. While Nike continued to “dominate” the category with its Air Force 1 platform, Adidas’ Superstar models “held their own,” Weiner noted.

Running-shoe sales increased 1.7% from a year earlier last week, with Nike’s women’s Roshe Run shoe as the top seller, Weiner said.

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Thanks, fellas.

Saul: “they seem like a reasonably good buy here” does not sound entirely enthusiastic. As in, “they’re a great buy here” has more conviction. It’s a silly distinction to make, but am I right to note much more reservation in your thinking about SKX than you previously had?

In other news, below are the quotes about the downgrade:

“The investment bank, sticking with the $30 price target it cut SKX to 2 months ago, doesn’t see prospects of upside near-term as it still thinks consensus 4Q EPS estimates are too high.” = In the short-term we think SKX will not do well because everyone else thinks they’ll do a little better. This does not make sense.

Neither does this: “Susquehanna says SKX doesn’t have an inventory problem considering the level of full-price sales which have been occurring and pace of product being sold. Instead, it calls such inventory growth an optics problem.” What in the Lord Almighty does this mean? Sketchers doesn’t have too many shoes on hand because they’re selling lots and lots. Instead, it just looks like they have a lot of extra shoes, which is bad.

Is Monkey understanding you humans right? And if so, have y’all lost your minds? Is this actual things you say and believe in? Help. Please.

Monkey

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Hey Monkey,

Please don’t lump the analysts in with us humans, we don’t inderstand them either!
Brian
Long SKX

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Hi again Monkey, a while ago it had a PE of 36. This morning it had a PE of 18. I guess that you don’t have to be as wildly enthusiastic to buy it at a PE of 18 as you did at a PE of 36. By the way, that report someone just posted said their athletic shoes grew at 36% in whatever period they were talking about.

I think you are correct about the optics remark. They are implying that it looks like inventory was growing but it was just because sales were growing so fast, which is also what the company said, as I remember.

Saul

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I think its worth holding on to here around the $27 price. The thing they have going for them is they make a lot of profits at the price. May bounce around in the 25-30 until the inventory stuff gets more clarity from the next report, but so long as that doesn’t get worse or hurt earnings I think its a solid spot for it

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Just for balance, another analyst reiterated a Buy for SKX today and set the price target to $54:

https://www.tipranks.com/analysts/sam-poser

I don’t have his report to read his rational. I will try and find it.

Sincerely,
Charlie

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Did anyone else do a double take when they saw out of the corner of their eye a post titled, “Thinking about SKX”?

No? Just me? OK, never mind then.

Fletch

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