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Skechers (SKX) Drives Growth via Innovation & Market Expansion

Skechers' SKX success story hinges on robust demand for its comfort technology products and enhanced digital capabilities. A diverse range of footwear across various categories like fashion, athletic, non-athletic and work footwear allows it to capture the market and attract customers from different demographic profiles. Its initiative of introducing products keep it relevant in a constantly evolving industry.

SKX has been always dedicated to maintaining a balance between style, comfort, innovation and quality at an affordable price. The introduction of two categories, Football and Basketball, showcases its dedication to broadening products within the performance division.

The company’s robust results in fiscal 2023 were mainly backed by innovative marketing efforts, growing base of loyal consumers and expansion in the global market. Skecher’s achievement of surpassing 50% of its sales from the DTC segment in the fourth quarter of 2023 marks a significant milestone.

The year-over-year growth of 20.3% in the DTC segment in the final quarter demonstrates strength and appeal of Skechers' products and marketing initiatives. This growth was fueled by strong performance in both physical and digital stores. Indeed, it is evident that the DTC segment is one of the major contributors to the top line.

 

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Skechers, being a global footwear brand, has surpassed 5,000 retail stores, reflecting widespread popularity and demand for its comfort products. Becoming a Fortune 500 company is another significant milestone. In the fourth quarter, it expanded 67 new stores along with 12 closures, reaching a total of 1,648 stores.

Additionally, Skechers' global expansion includes openings in various countries like China, the United States, Colombia, Italy, Mexico, Thailand, United Kingdom, Chile, Malaysia, Peru, France, Spain and Vietnam. This indicates the company’s efforts to increase its global presence and accessibility to customers.

Despite all macroeconomic challenges, Skechers' reported impressive numbers in its last reported earnings. Achieving record sales, gross margins and earnings per share of $8 billion, 51.9% and $3.49 per share, respectively, were definitely accomplishments. Additionally, hitting a 9.8% operating margin was a significant achievement when the aim is for double-digit margin.

All the above accomplishments showcase the strength of the Skechers brand and the team's ability to drive profitable growth. Maintaining focus by expanding its brand presence, developing top-notch products and executing strategies for growth are all key elements to sustain this momentum.

Looking Ahead

Backed by the progress in fiscal 2023, SKX is optimistic about its targets for fiscal 2024. It is working on strategic initiatives and global collaborations. It aims sales to be between $8.6 billion and $8.8 billion and net earnings per share in the $3.65-$3.85 range. For the first quarter of 2024, forecasting sales of $2.17-$2.23 billion and net earnings per share of $1.05-$1.10 reflects a strong start to the year.

Skechers aims to take proactive approach to strengthen and expand its DTC segment. Management also plans for growth strategies, particularly focusing on opening new stores, enhancing omnichannel capabilities and expanding distribution capacity in key markets like China. These initiatives align with its long-term growth strategy, and focus on maximizing operational efficiency and customer reach.

Lately, SKX has been facing significant challenges in its wholesale segment. However, tides are now turning in favor of the company, thanks to positive order trends for the first half of the year.

This Zacks Rank #3 (Hold) stock has outperformed the industry in the past year. Shares of the company have gained 14% against the industry's decline of 27.7%.

3 Key Picks

We have highlighted three better-ranked stocks in the broader sector, namely Crocs, Inc. CROX, Ralph Lauren Corporation RL and Gildan Activewear Inc. GIL.

Crocs develops and manufactures lifestyle footwear and accessories. It currently has a Zacks Rank #2 (Buy). CROCS has a trailing four-quarter earnings surprise of 14.2%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Crocs’ current financial-year sales and earnings suggests growth of 4% and 3%, respectively, from the year-ago reported figures.

Ralph Lauren, a major designer, marketer and distributor of premium lifestyle products, has a Zacks Rank #2. RL has a trailing four-quarter earnings surprise of 18.7%, on average.

The Zacks Consensus Estimate for Ralph Lauren’s current financial-year sales and earnings suggests growth of 2.7% and 22.7%, respectively, from the year-ago reported numbers.

Gildan Activewear, a distributer and manufacturer of activewear products, currently carries a Zacks Rank #2. In the last reported quarter, GIL delivered an earnings surprise of 4.2%.

The Zacks Consensus Estimate for Gildan Activewear’s current fiscal-year sales and earnings suggests growth of 1.7% and 14.4%, respectively, from the year-ago reported numbers.

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Skechers U.S.A., Inc. (SKX) : Free Stock Analysis Report

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