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