Skechers (NYSE: SKX) delivered its fourth record-revenue quarter in a row earlier this month. After posting solid performance across the board, management took the time to highlight some of the footwear company's strengths and long-term opportunities. Here's what investors need to know.
No. 1: International growth is healthy
COO David Weinberg said: "For the quarter, our wholly-owned international subsidiary business grew by 41.8%, and our joint venture sales grew by 58.9%. The markets with the highest dollar gains were China, South Korea, and the U.K., and those with the highest percentage gains were Italy and Spain."
A highlight of this year's international showing was China. Expecting to hit $500 million in 2017 revenue, the company blew past that number and turned in a full-year performance "just a little bit north of $575 million", propelled by a record 1.4 million pairs shipped for Singles' Day (the biggest online shopping day in China) and fourth quarter growth of 78%.
While the results in China were awesome, this isn't a one-country story. Skechers has done well in all its regions internationally, as its joint-venture model continues to fuel growth. The company doesn't break down sales by region, but it indicated that 50.6% of its revenue came from international sources this quarter. The company posted impressive 16.5% same-store sales growth for non-U.S. locations.
Management also discussed the long-term opportunity in India. While the business there is only $60 million to $70 million in revenue today, the potential is much greater. Management indicated that India could be a "multi-hundred million dollar country for us, maybe even closer to $1 billion." A lot needs to happen to make that a reality, but I like that management is taking the long view.
No. 2: E-commerce is big
Part of what is complementing the company's international business is its recent efforts to expand in e-commerce.
While Skechers has had an online business since 1998, it only recently became serious about this important sales channel. E-commerce business has done well this year, with a reported 21.9% growth domestically and double-digit growth in China.
It's likely that the company's recent success with e-commerce in China has encouraged management to continue to invest in its digital presence globally. Skechers currently has e-commerce sites in Chile, Germany, the U.K., Spain and Canada with the last two countries added in 2017. Once the company upgrades its website, it says it hopes to have a Skechers.com online presence around the world, in every place it has subsidiaries.
No. 3: Revenue growth will continue
"We don't see the growth slowing down, both domestically and internationally," Weinberg said.
While international growth has been impressive, domestic growth contributed to a record $4.16 billion revenue year for Skechers. Domestic wholesale revenue grew 11.6% in the fourth quarter and 4.1% for the year. The company expects to continue to expand the domestic wholesale business in the "mid-single digits". Its popular products, its solid brand, and value pricing in the U.S. have helped put a solid year in the books here at home. The company continues to be confident in the domestic market and has just opened an 18,000 square-foot superstore in Tucson, Arizona.
With solid top line results around the world and management's confidence in its growth prospects, Weinberg indicated that it would get "close to $6 billion [in revenue] in 2020". Given the company's track record of under-promising and over-delivering, I'm sure this target is well within reach.
While it was just a mention in the earnings call, management authorized a $150 million share buyback -- signaling its confidence about the future, especially after the stock registered a 54% gain in 2017. Without a doubt, there was a lot to like in the company's comments, and Skechers looks poised for a strong 2018.
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