Skechers USA Inc Is Killing It in Athleisure and Just Getting Started

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SKX stock - Skechers USA Inc Is Killing It in Athleisure and Just Getting Started

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Although retailers have been making a comeback this earnings season, it’s rare to find one who pulls out a performance quite like Skechers USA Inc (NYSE:SKX) did in the fourth quarter. While U.S. tax cuts caused the firm to post a $66.7 million loss, the rest of the report showed that every part of the business was firing on all cylinders. The good news pushed SKX stock up 7.5% on Friday.

Perhaps the most impressive part of Skechers’ Q4 results was its international success. The firm’s wholesale international business grew 40.2% — a significant achievement for CEO Robert Greenberg, who has been aiming to generate 50% of its sales overseas. The company didn’t do so badly at home in the States either — domestic wholesale sales rose 11.6%, the first double-digit growth in that segment in two years.

Margins were also on the rise, so much so that operating profit was nearly twice as high as the year-ago quarter at $55.7 million. Comps were up 12% and global retail sales made their way 25.8% higher. In short, it was an impressive showing for SKX stock.

Is It Too Late?

So, with all this good news on the table it might seem like you’ve missed the boat with Skechers. Sure, it would have been much better to buy when SKX stock was trading around $20 per share, but the firm is seen continuing this monumental growth in the year to come. Not only that, but comparatively speaking the stock isn’t all that expensive.

Skechers stock trades at 21.2x forward earnings while the S&P 500 Index trades at 19.9x. That means SKX is trading at a discount compared to the overall market. Not only that, but Skechers is also markedly cheaper than its main competitors. Nike Inc (NYSE:NKE) trades at 24.8x forward earnings while Under Armour Inc (NYSE:UAA) trades at a whopping 58.5x.

So although some of SKX’s rally is certainly behind it, the firm’s share price isn’t that lofty when you compare it to the rest of the market. It’s also important to note that the overarching market trends right now — i.e. the correction that the broader market is experiencing — is weighing on some of the firm’s gains. Once the market has settled, the stock could continue to rise further.

What Sets it Apart?

SKX stock might be cheaper than some rivals like NKE, but it’s also not as big and not as experienced. However, in the current market for athletic gear, that might be a good thing. Athleisure, or athletic wear that can be worn casually outside the gym, has been a huge trend in the U.S. and that fashion will likely make its way abroad as well. Skechers has succeeded by offering consumers something no other brand does: comfortable athleisure gear that is also affordable.

NKE and UAA charge a premium for their high-performance gear designed to enhance athletic ability. While that’s valuable to a subset of the population, the majority of athleisure wearers just want to be comfortable and stylish, and that’s exactly what SKX is offering.

Unlike its rivals, Skechers has been conservative about its endorsement deals, opting for retired sports stars like former Dallas Cowboys quarterback Tony Romo rather than ultra expensive celebrities like the NBA’s Steph Curry. Not only does that keep costs down, but it lowers the risk that expensive lines — like UAA’s Steph Curry sneakers — become major flops.

SKX has also kept its endorsement deals in line with its overall goals; the company signed Cuban-American singer and songwriter Camila Cabello in a bid to appeal to a more-international demographic.

The Bottom Line on SKX Stock

SKX stock has seen impressive growth over the past year but 2018 could be its best performance yet. The Skecher’s business expansion appears to be paying off and investors are only just beginning to reap the rewards of its success. While the Q4 earnings enthusiasm is already baked in to the company’s share price, that doesn’t mean it’s too expensive to add to your portfolio. SKX still has a lot of upside and makes for a great retail pick for 2018.

As of this writing Laura Hoy did not hold a position in any of the aforementioned securities.

Marie Brodbeck has a Finance degree from Duquesne University and has been a financial journalist for more than a decade. Her work can be seen in a variety of publications including InvestorPlace, Benzinga, Yahoo Finance and CCN.


Article printed from InvestorPlace Media, https://investorplace.com/2018/02/skechers-usa-inc-is-killing-it-in-athleisure-and-just-getting-started/.

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