Is Skechers USA Inc. SKX part of your portfolio? If not, then this is the right time to add the stock as it looks very promising. Moreover, the underlying factors are capable of carrying the momentum further. The stock sports a Zacks Rank #1 (Strong Buy) and has more than doubled year to date, demonstrating its inherent strength.
Strong Performance
After succumbing to a negative earnings surprise of 2.3% in the final quarter of 2014, this designer, developer, marketer, and distributor of footwear, registered back-to-back earnings beat of 8.9% and 56.6% in the first and second quarters of 2015, respectively. The stock has surged roughly 10.5% following its impressive second-quarter 2015 performance.
Skechers’ second-quarter earnings of $1.55 per share beat the Zacks Consensus Estimate of 99 cents. Results benefited from the resolution of the West Coast port issue and a shift in back-to-school shipments due to pent-up demand in both domestic and international markets.
Net sales of $800.5 million also outdid the Zacks Consensus Estimate of $722 million and rose 36.4% year over year, driven by aggressive marketing initiatives, product innovation across multiple categories, and healthy performance across all revenue channels. Although the rate of sales growth decelerated from 40.5% recorded in the first quarter of 2015, this was the seventh straight quarter in which the company outperformed the estimate.
Zacks Consensus Estimate Trends Upward
Following Skechers’ encouraging performance, the Zacks Consensus Estimate witnessed an uptrend as analysts raised their estimates.
Analysts polled by Zacks are now constructive on the stock’s future performance. Over the past 60 days, the Zacks Consensus Estimate of $4.97 and $6.47 per share for 2015 and 2016 has surged 17.2% and 19.6%, respectively. Moreover, the Zacks Consensus Estimate for the third quarter has increased 5.9% to $1.62 over the same time frame.
Sturdy Fundamentals
With increased focus on the new line of products, cost containment, inventory management, a global distribution platform and sturdy backlogs, the company remains confident of sustaining its growth momentum. Management is focused on product innovation, additional Skechers store openings, and increasing distribution channels by entering into international distribution agreements to boost sales and profitability.
Skechers has been steadily gaining ground by offering stylish and casual shoes at a more compelling price than conventional athletic brands. The company has benefited from the so-called athleisure trend that has been sweeping the retail sector in the U.S. Also, the growing preference for cheaper shoes in the nation is boosting the company’s market share.
Favorably Ranked Stocks
Investors interested in the retail space may consider favorably ranked stocks such as Boot Barn Holdings, Inc. BOOT, sporting a Zacks Rank #1, Carter's, Inc. CRI and American Eagle Outfitters Inc. AEO, both holding a Zacks Rank #2 (Buy).
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