Skechers Stock Nails Both Ends
Skechers (NYSE: SKX) is taking a big step up this earnings season, fittingly enough since footwear is what it does for a living. Shares of Skechers moved sharply higher in Thursday's after-hours trading after posting record sales for the third quarter.
Net sales rose 16.2% to $1.095 billion for the quarter, well ahead of the $1.05 billion to $1.075 billion it was targeting back in July that would've represented just 11% to 14% in top-line growth. This is in line with the 16.9% surge in net sales it posted during the second quarter that also topped its earlier forecast, but this time, it also followed through with a blowout on the bottom line.
Net earnings soared 41.8% to $92.3 million, or $0.59 a share. It was gunning for a profit-per-share of between $0.42 and $0.47. A favorably low tax rate helped pad its bottom-line results, but this still snaps an unwelcome streak of five consecutive quarters of year-over-year declines in net income.
Going the distance
Skechers is growing across all three of its businesses. The walking and athletic footwear maker managed a 25.7% in its international wholesale business and a 1.4% for its domestic wholesale operations. Don't let the weak stateside wholesale business growth deter you, as this was a figure that had been negative for more than a year until turning positive during this year's second quarter. Sales for its company-owned retail business rose 18.6% as new stores and a 4.4% uptick in comps combined to deliver another period of double-digit growth on the retail front.
Skechers was able to grow its retail business despite hurricane-related store closures in Texas and Florida. It still has some outlets in Puerto Rico that have yet to open.
We've already covered that a lower effective tax rate helped prop up profitability for the first time in more than a year, but it wasn't the only factor. Skechers managed to overcome pesky expense increases to still grow its earnings from operations by 12.7% over the prior year's third quarter.
Skechers' outlook is better than it may seem at first glance. It's eyeing a profit of $0.09 to $0.14 per share on $860 million to $885 million in net sales for the current quarter. This is a far cry from the $0.59 a share on nearly $1.1 billion it just delivered, but there's heavy seasonality to this business. Demand diminishes when the weather starts to turn and outdoor diversions aren't as popular. The end of the back-to-school shopping season also results in a seasonal setback. Skechers earned just $0.04 a share on $769.3 million in sales a year earlier, so we're talking about doubling, if not tripling on the bottom line, with net sales rising 12% to 15% for the current quarter.
Beating its top- and bottom-line projections is obviously comforting, but guidance suggesting that this will be the second consecutive quarter of year-over-year improvement in earnings and the third period of double-digit growth in sales is stronger confirmation that the Skechers turnaround is real.
10 stocks we like better than SkechersWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Skechers wasn't one of them! That's right -- they think these 10 stocks are even better buys.
Click here to learn about these picks!
*Stock Advisor returns as of October 9, 2017
Rick Munarriz has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Skechers. The Motley Fool has a disclosure policy.