Shares of footwear company Skechers (SKX) have lost significant value, declining over 36% in the past three months. Moreover, SKX stock came under pressure during morning trading on April 25 despite the company reporting better-than-expected first-quarter earnings.
This selloff is primarily driven by external factors rather than company performance, with investor concerns focused on tariffs and broader macroeconomic uncertainty. However, with its solid financials and long-term growth prospects, the stock’s current valuation might be offering a compelling buying opportunity.
A significant source of pressure on Skechers stock has been the renewed tension over trade policies. Most of the company’s products are manufactured in China and Vietnam, making it vulnerable to potential tariff hikes and rising labor costs. These fears have re-emerged amid the political rhetoric around international trade, particularly in light of President Donald Trump’s administration’s tough stance on imports. Investors are wary that these factors could shrink Skechers’ margins in the future.
Adding to the unease is the broader concern over a possible economic slowdown. As a consumer discretionary stock, Skechers is sensitive to shifts in consumer spending. If households start tightening their wallets, companies like Skechers may experience headwinds in demand, which would inevitably impact revenues and profitability.
Acknowledging the unpredictable landscape, Skechers’ management withdrew full-year guidance and chose not to provide specific projections for the second quarter. This cautious approach disappointed investors and contributed to the negative sentiment surrounding the stock.
Skechers to Navigate Challenges Well
However, a closer look at Skechers’ Q1 performance tells a more optimistic story. The company reported record quarterly revenue of $2.41 billion, a strong signal that global demand remains robust. This growth was broad-based, spanning both wholesale and direct-to-consumer (DTC) channels, with international markets making up 65% of total sales.
In the wholesale division, sales rose 7.8%, with the U.S. market growing 4.2% and international wholesale increasing 9.5%. Domestic demand was driven by the popularity of Skechers’ comfort-focused footwear. The company saw widespread growth internationally thanks to its strong brand reputation and product innovation.
The DTC segment also showed encouraging momentum, growing 6% overall. The U.S. saw an 11% increase, boosted by a strong e-commerce presence. While international DTC growth was muted at 2.9%, stripping out the impact of China reveals a more promising 12% increase. Despite current weakness in China, Skechers remains committed to the market and plans to continue investing in product development, marketing, and infrastructure to capture future growth there.
The company’s value proposition, including affordable pricing and comfortable footwear, remains a key competitive advantage, especially in uncertain economic times. It continues to innovate in both lifestyle and high-performance categories and is investing in demand generation to drive long-term growth. Additionally, Skechers is actively expanding its direct-to-consumer network and enhancing its partnerships with retail distributors globally.
Skechers is also investing in distribution centers across the U.S., China, and Europe to streamline delivery and support growth. It’s also implementing sourcing strategies and price adjustments to offset the impact of tariffs.
With geopolitical challenges and tariff pressures likely to linger, Skechers is leveraging multiple strategies — cost-sharing with vendors, shifting manufacturing to other regions, and passing on some costs to consumers — to protect margins. These efforts give it an edge, especially compared to larger rivals like Nike (NKE), which has faced criticism over product innovation and internal challenges.
SKX’s Valuation Looks Compelling
Perhaps the most compelling aspect of Skechers’ investment case is its valuation. After the recent drop, the stock trades at just 10.1 times its projected 2026 earnings per share of $4.81. That’s too cheap for a company with global brand recognition, consistent growth, and a strong balance sheet.
Wall Street analysts seem to agree. The stock holds a “Strong Buy” consensus rating, and the average price target of $65.91 represents a potential upside of 35%.
The Bottom Line
In short, while short-term challenges exist, Skechers’ value proposition, solid demand, and compelling valuation make it an attractive bet.
On the date of publication, Sneha Nahata did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
