Skechers U.S.A., Inc.’s SKX growth initiatives across its multi-brand portfolio, digital integration, wholesale growth, direct-to-consumer (DTC) expansion and international business have positioned it for sustained growth. The company’s ability to adapt to evolving consumer preferences, particularly with its focus on comfort technology and lifestyle-oriented products, has contributed significantly to its success.
With continued investments in infrastructure, omnichannel capabilities and global expansion, Skechers is well-positioned to achieve its ambitious sales targets and maintain its market leadership. Driven by these factors, shares of this global footwear company have gained 6.7% over the past year against the Zacks Shoes and Retail Apparel industry’s decline of 12.7%.
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Skechers’ Global Infrastructure Investment & Strong Segment
SKX is investing heavily in global infrastructure, enhancing retail stores, e-commerce platforms and distribution centers to improve omnichannel capabilities and grow its DTC business. The focus is on creating a seamless shopping experience by integrating physical stores with digital platforms and strengthening loyalty programs.
Skechers has been optimistic about continued growth of its wholesale segment throughout fiscal 2024. This confidence is based on consistent product demand, and investments in logistics and retailer relationships. The company’s wholesale segment saw strong growth in the third quarter of 2024, with sales rising 20.6% to $1.42 billion, driven by a 26% increase in domestic sales and an 18% rise internationally. The EMEA region registered a 30.9% year-over-year increase.
Meanwhile, the performance of the DTC segment reflects Skechers' focus on enhancing direct engagement with consumers, improving the retail experience and effectively utilizing online platforms to broaden its reach. The DTC segment of SKX exhibited robust growth in the third quarter of 2024, with sales climbing 9.6% year over year to $931.7 million.
Skechers' comfort technology has been a key driver of strong consumer appeal, reflected in both its brick-and-mortar stores and online channels. International sales, which moved up 16.4% year over year, now account for 61% of total sales, highlighting the importance of Skechers' global footprint.
SKX Ups 2024 Forecast, Aims for $10B in Sales by 2026
Skechers has raised its fiscal 2024 sales forecast. It expects revenues between $8.93 billion and $8.98 billion, up from the previously mentioned $8.88-$8.98 billion. This suggests an increase from the $8 billion reported in fiscal 2023. The company has also revised its earnings per share (EPS) forecast to $4.20-$4.25, up from the prior stated $4.08-$4.18, indicating strong growth from the $3.49 EPS reported in the previous year.
SKX plans to invest between $375 million and $400 million in capital expenditure to support key initiatives, including store openings, expanding its omnichannel presence and enhancing its distribution infrastructure. These investments are part of the company’s strategy to reach $10 billion in annual sales by 2026.
Is Skechers a Value Play Stock?
From a valuation perspective, Skechers’ shares present an attractive opportunity, trading at a discount relative to historical and industry benchmarks. The stock offers compelling value for investors seeking exposure to the sector, with a forward 12-month price-to-earnings ratio of 13.29, below the five-year median of 15.29 and the industry’s average of 23.26. Additionally, SKX’s current Value Score of A reinforces its attractiveness.
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SKX Grapples With Lower Margin
Skechers has been facing challenges with its profitability and operational efficiency. The company registered a gross margin decline to 52.1% in the third quarter, down 80 basis points from last year due to increased promotions and pricing pressure. SKX expects margins to be flat or slightly decline in the fourth quarter due to continued freight and promotional costs. Persisting margin compression could hurt profitability and investor sentiment.
Wrapping Up
Investors may find Skechers appealing due to its growth initiatives and ability to adapt to changing consumer preferences. The company’s focus on expanding its product portfolio, enhancing digital platforms and strengthening its global infrastructure positions it well for growth. Despite margin pressures, Skechers shows resilience through strong segment performances and robust international sales. With continued investments in innovation and expansion, the company is poised to meet its ambitious targets, making it attractive for investors seeking long-term potential in the footwear industry. The company currently has a Zacks Rank #3 (Hold).
Key Picks
Some better-ranked stocks are Gildan Activewear Inc. GIL, Abercrombie & Fitch Co. ANF and Steven Madden, Ltd. SHOO.
Gildan is a manufacturer and marketer of premium quality branded basic activewear for sale principally in the wholesale imprinted activewear segment of the North America apparel market. It currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Gildan’s current financial year’s earnings and sales indicates growth of 15.6% and 1.5%, respectively, from the 2023 reported figures. GIL has a trailing four-quarter average earnings surprise of 5.4%.
Abercrombie is a specialty retailer of premium, high-quality casual apparel. It carries a Zacks Rank of 2 at present.
The Zacks Consensus Estimate for Abercrombie’s fiscal 2025 earnings and sales indicates growth of 67.5% and 14.8%, respectively, from fiscal 2024 reported levels. ANF has a trailing four-quarter average earnings surprise of 14.8%.
Steven Madden designs, sources, markets, and sells fashion-forward name-brand and private-label footwear. It currently has a Zacks Rank of 2.
The Zacks Consensus Estimate for Steven Madden’s 2024 earnings and sales indicates growth of 8.6% and 13.4%, respectively, from the year-ago actuals. SHOO has a trailing four-quarter average earnings surprise of 9.8%.
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