Skechers' Revenue Took Off, but the Outlook Is Downbeat | SKX Message Board Posts

Skechers USA Inc.

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Msg  102 of 103  at  10/27/2022 5:30:32 AM  by


Skechers' Revenue Took Off, but the Outlook Is Downbeat


Skechers' Revenue Took Off, but the Outlook Is Downbeat


Skechers USA stock tumbled on Wednesday after the company issued a fourth-quarter outlook that fell well below Wall Street's expectations.

Skechers (ticker: SKX) believes fourth-quarter sales will range between $1.725 billion and $1.775 billion, while earnings per share will be between 30 and 40 cents. Before the company issued those forecasts, the consensus call among analysts tracked by FactSet was for $1.84 billion in revenue and earnings of 56 cents a share.

The guidance reflects the effects of congestion in the supply chain on the company's distribution networks, as well as the impact of Covid-19 on Asia, management said in a call with analysts.

"China has not recovered at the pace we had originally expected," said Chief Financial Officer John Vandemore on Tuesday afternoon. "Unfortunately, that market continues to be challenged by COVID. We're looking for some early signs that things are starting to recover, but I believe as long as lockdowns and other restrictions and operations are in place, it's going to inhibit China from fully recovering. And then FX is another headwind."

Skechers stock fell 5.7% to $33.84 Wednesday morning.

It didn't help that the company's third-quarter results were mixed. Skechers' revenue jumped 12.4% from a year earlier to a record $1.87 billion, surpassing estimates for $1.79 billion. That said, adjusted earnings of 64 cents a share missed projections for 70 cents a share. Gross margins decreased 2.8 percentage points from a year earlier to 47.1% as freight costs rose.

Vandemore said gross margin should improve in the fourth quarter relative to the third, but that forecast may be too ambitious for investors, according to UBS analyst Jay Sole.

"While we are very bullish on SKX's long-term growth outlook, in the near-term the market may not come around to our view," Sole wrote in a research note. "Our guess is investors will be concerned the macro outlook could deteriorate."

Sole reiterated a Buy rating on the stock, pointing to the company's strong top-line growth. He added that the supply-chain problems that led to this quarter's earnings shortfall could begin to resolve themselves in the second half of 2023, which could drive significant earnings growth in the long run.

Cowen's John Kernan had a more muted take. He said current Wall Street estimates are too high headed into fiscal 2023, given that he sees cost pressures lingering. He maintained a Market Perform rating, but trimmed his target for the stock price to $31 from $33.

Skechers' results are certain to add to the unease about the resiliency of the sports apparel sector. Adidas (ADDYY) and Nike (NKE) set off alarm bells earlier in the profit-reporting season , posting softer-than-expected results and issuing downcast guidance for fiscal 2022. So far, all three companies have flagged similar issues: slowing demand in China, unfavorable foreign exchange rates, and rising problems with inventory tied to supply chain snafus.

Skechers' inventory increased by 45% compared with the year-earlier period. While management said they expected to "sell through at regular prices," the news prompted some fears that the company will have to resort to more discounts, as has been the case with Nike.

Adidas stock fell 1% on Wednesday, while Nike gained 1.1%. The S&P 500 dropped 0.4%.


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