Earnings Preview: Skechers - Analyst Blog
February 13 2012 - 5:30AM
Zacks
Skechers USA Inc.
(SKX), the designer, marketer and distributor of footwear, is
slated to report its fourth-quarter 2011 financial results on
February 15, 2012. The current Zacks Consensus Estimate for the
quarter reflects a loss of 23 cents per share, representing a sharp
decline from earnings of 7 cents in the prior-year quarter.
Revenue, as per the Zacks Consensus Estimate, is $324 million.
Third-Quarter
Synopsis
Skechers delivered earnings of 7
cents a share, down approximately 90% from the prior-year period as
weak top-line performance weighed upon its bottom-line results.
However, the quarterly earnings fared better than the Zacks
Consensus Estimate of one cent a share.
However, including one-time items,
Skechers delivered earnings of 17 cents a share.
Skechers, which competes with
Deckers Outdoor Corporation (DECK), reported a
25.7% year over year drop in total net sales to $412.2 million,
reflecting lower sales of high priced toning shoes and sluggish
performances across other footwear lines. Moreover, the reported
revenue also came below the Zacks Consensus Estimate of $465
million.
Agreement of Estimate
Revisions
Of the 5 analysts covering the
stock, 2 revised the estimates downward in the last 30 days, while
none moved in the opposite direction.
In the last 7 days, none of the
analysts revised the estimates in either direction.
Magnitude of Estimate
Revisions
Following the estimate revisions,
the Zacks Consensus estimate of loss per share widened by 5 cents
over the last 30 days.
The downward revisions support the
view that revenue growth will remain muted in the coming quarters
as there is lack of near-term catalysts to drive sales. Further,
the company’s aggressive inventory offloading stance in order to
right-size its inventory coupled with lower average selling price
is taking a toll on its margins.
Mixed Earnings Surprise
History
With respect to earnings surprises,
Skechers has topped as well as missed the Zacks Consensus Estimate
over the last four quarters in the range of negative 53.3% to a
positive 600%. The average remained at positive 133.9%, indicating
that the company has surpassed the Zacks Consensus Estimate by the
same magnitude in the trailing four quarters.
Our Take
The company is trying to reposition
itself to drive growth by focusing on inventory optimization and
cost-containment efforts. Moreover, in our opinion, the company’s
international business provides an enormous scope for growth.
Further, Skechers’ sustained focus
on new line of products, opening of new retail stores and
distribution channels, and the development of new international
distribution agreements (in India and Mexico), should drive
profitability.
However, we remain on the sidelines
considering the company’s weak top-line performances and continued
margin pressure through lower average selling price.
Currently, we have a long-term
‘Neutral’ rating on the stock. Moreover, Skechers has a Zacks #3
Rank, which translates into a short-term ‘Hold’ recommendation.
DECKERS OUTDOOR (DECK): Free Stock Analysis Report
SKECHERS USA-A (SKX): Free Stock Analysis Report
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