Skechers (NYSE:SKX) Beats Q1 Sales Targets, Stock Soars

Footwear company Skechers (NYSE:SKX) announced better-than-expected results in Q1 CY2024, with revenue up 12.5% year on year to $2.25 billion. The company expects next quarter's revenue to be around $2.2 billion, in line with analysts' estimates. It made a GAAP profit of $1.33 per share, improving from its profit of $1.02 per share in the same quarter last year.

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Skechers (SKX) Q1 CY2024 Highlights:

• Revenue: $2.25 billion vs analyst estimates of $2.2 billion (2.3% beat)
• EPS: $1.33 vs analyst estimates of $1.10 (20.6% beat)
• Revenue and EPS Guidance for full year 2024 both raised, both above Consensus expectations
• Gross Margin (GAAP): 52.5%, up from 48.9% in the same quarter last year
• Store Locations: 5,203 at quarter end, increasing by 654 over the last 12 months
• Market Capitalization: $9.24 billion

“We began the new year by setting a new sales record, delivering results above expectations, and further expanding the Skechers brand globally,” said Robert Greenberg, Chief Executive Officer of Skechers.

Synonymous with "dad shoe", Skechers (NYSE:SKX) is a footwear company renowned for its comfortable, stylish, and affordable shoes for all ages.

FootwearBefore the advent of the internet, styles changed, but consumers mainly bought shoes by visiting local brick-and-mortar shoe, department, and specialty stores. Today, not only do styles change more frequently as fads travel through social media and the internet but consumers are also shifting the way they buy their goods, favoring omnichannel and e-commerce experiences. Some footwear companies have made concerted efforts to adapt while those who are slower to move may fall behind.

Sales GrowthA company’s long-term performance can give signals about its business quality. Even a bad business can shine for one or two quarters, but a top-tier one may grow for years. Skechers's annualized revenue growth rate of 12.1% over the last five years was mediocre for a consumer discretionary business. Within consumer discretionary, a long-term historical view may miss a company riding a successful new product or emerging trend. That's why we also follow short-term performance. Skechers's recent history shows the business has slowed as its annualized revenue growth of 11% over the last two years is below its five-year trend.

Skechers also reports sales performance excluding currency movements, which are outside the company’s control and not indicative of demand. Over the last two years, its constant currency sales averaged 13.3% year-on-year growth. Because this number is higher than its revenue growth during the same period, we can see that foreign exchange rates have been a headwind for Skechers.

This quarter, Skechers reported robust year-on-year revenue growth of 12.5%, and its $2.25 billion of revenue exceeded Wall Street's estimates by 2.3%. The company is guiding for revenue to rise 9.3% year on year to $2.2 billion next quarter, improving from the 7.7% year-on-year increase it recorded in the same quarter last year. Looking ahead, Wall Street expects sales to grow 9.4% over the next 12 months, a deceleration from this quarter.

Operating MarginOperating margin is an important measure of profitability. It’s the portion of revenue left after accounting for all core expenses–everything from the cost of goods sold to advertising and wages. Operating margin is also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

Skechers was profitable over the last two years but held back by its large expense base. It's demonstrated mediocre profitability for a consumer discretionary business, producing an average operating margin of 9.2%. In Q1, Skechers generated an operating profit margin of 13.3%, up 2.1 percentage points year on year.

Over the next 12 months, Wall Street expects Skechers to maintain its LTM operating margin of 10.4%.Key Takeaways from Skechers's Q1 Results This was one of those rare 'beat and raise' quarters you love to see. We were impressed by how significantly Skechers blew past analysts' constant currency revenue expectations this quarter. We were also excited its operating margin outperformed Wall Street's estimates. Looking forward to the full year, the company raised its revenue and EPS guidance for 2024 and both are comfortably ahead of analysts' expectations. Overall, this quarter's results seemed fairly positive and shareholders should feel optimistic. The stock is up 7.4% after reporting and currently trades at $63.15 per share.