Skechers' International & Direct-to-Consumer Units Bode Well
Zacks Investment Research | Jan 14, 2020 09:10PM ET
Skechers U.S.A., Inc. (NYSE:SKX) appears in good shape, courtesy of continued strength in its international and direct-to-consumer businesses. These businesses remain the primary revenue drivers. Moreover, greater emphasis on new line of products, cost-containment efforts, inventory management and global distribution capabilities are noteworthy.
As stated, Skechers’ international business continues to experience strength on increases in Germany, the U.K., Spain, India, the UAE, Turkey, China, Russia and Japan. It is well poised to enhance its global reach in the footwear market through its distribution networks, subsidiaries and joint ventures. Moreover, the joint venture in Mexico is performing well. Impressively, management has been making strategic investments to improve infrastructure worldwide, primarily e-commerce platforms and distribution centers.
Apparently, the company witnessed sales growth of 21.9% across its international business, representing 58.8% of total sales in the third quarter of 2019. Management expects to sustain the momentum in its international unit going ahead, given the continued enhancement of its global footprint and leading position in several markets.
Speaking of Skechers’ direct-to-consumer business, it is experiencing robust sales growth with sturdy comparable store sales (comps) worldwide. Markedly, the company-owned direct-to-consumer business rose 13.3% in the third quarter. Momentum in the company’s international and direct-to-consumer businesses are likely to get reflected in the top-line performance in the final quarter. The company had earlier guided fourth-quarter 2019 net sales in the range of $1.225-$1.250 billion, which reflects year-over-year growth of 13-16%.
While the company’s international business is performing outstandingly, its domestic business has started to gain traction. The company’s domestic wholesale business returned to growth in the third quarter, after a decline in the preceding quarter. During its last earnings call, management projected an increase in domestic wholesale business during the final quarter.
Although the aforesaid factors make us confident of Skechers’ upbeat performance on bourses, the company is not completely immune to concerns related to higher operating expenses and foreign currency translations. We are apprehensive of the company’s higher operating expenses that might hamper its profits. It is witnessing increased general & administrative expenses due to additional spending to support international business growth.
Wrapping Up
Moving along, we believe that the company’s well-chalked endeavors along with robust growth in international and direct-to-consumer businesses will help it maintain the solid show.
Shares of the leading footwear designer and marketer have surged more than 67% in a year compared with the Zacks Investment Research
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