One of the top New Year’s resolutions every year is to get in better shape. And, despite the boom in 2023 of new weight loss drugs, many still prefer the old fashioned “diet and exercise” route to a happier healthier new year.
And those resolutions to get in shape, which often go hand-in-hand with buying exercise equipment and workout clothing, makes this a great time to look at a company that is firing on all cylinders in the fitness world, Skechers (SKX).
Skechers has been blitzing the competition recently with a combination of fashionable design and comfort forward footwear. The company has been using a multipronged approach, both expanding its physical store presence as well as amping up its online game…and making sure both operations are in sync. The company opened close to 900 stores last year, but made sure physical locations offered curbside pickup of online orders as well as the capacity to address any online order issues.
The company is attempting to employ a seamless strategy similar to that taken by Amazon (AMZN), which has a much larger online presence, but has integrated its products and services in physical locations such as Amazon Fresh and Whole Foods.
At the same time Skechers has brought on a slew of brand ambassadors and influencers in a wide range of demographics, ages, and specific sports focused areas. These range from Snoop Dogg to Martha Stewart to a recently announced deal with Harry Kane, captain of England’s national soccer team, as Skechers enters the soccer boot market.
One of the company’s most important initiatives kicked off recently as well. For the first time Skechers is going head to head with brands like Nike (NKE) in the highly competitive, but highly lucrative, basketball shoe category. Skechers introduced its inaugural shoe foray with high profile names Julius Randle of the New York Knicks and dynamic shooting guard Terance Mann from the Los Angeles Clippers…representing the two huge U.S. coastal markets.
And Skecher’s strategy has been paying off. In the company’s latest earnings report, Skechers announced record quarterly sales of over $2 billion (with the audacious goal of topping $10 billion annually by 2026), an almost 8% increase in the quarter YoY.
Diluted EPS increased 69%, while direct-to-consumer sales, the large digital push the company has been making, increased by almost 24%. And, as the supply chain woes from the pandemic eased further, Skechers was able to work through an outsized inventory glut, reducing inventory by 24% from the end of 2022.
Working through inventory also allowed the company to increase what is becoming a very healthy cash war chest, which grew by over 61% for the year in the latest quarter, to $1.27 billion.
Not only is Skechers expanding in a range of sports and demographically, but it is also seeing strong growth geographically as well. As COO David Weinberg stated in the latest quarterly report, “All regions grew, including the Americas, with growth of 7% in the United States due to continued strength in our Direct-to-Consumer channel, and Asia Pacific with growth of 18% in China.”
Skechers was also able to increase gross margins in the midst of its growth spurt due to a combination of “higher average selling prices, a higher proportion of Direct-to-Consumer sales, and lower freight costs.” Gross margins increased 590 basis points to 52.9%.
In our POWR Rankings, Skechers has an overall B rating, outpacing 88.46% of the stocks we track. The three components in which Skechers has been gaining ground the past few quarters are Value, Quality, and Sentiment. The stock averages a 75% score in those three categories.
As its basketball and soccer forays gain traction, Skechers should continue to see excellent growth both in the U.S. and globally. The company has been putting the right structure in place with its digital offerings working together with a rapidly expanding physical footprint, especially in the growing Chinese market. This should put the company on a nice footing even as New Year’s resolutions fall by the wayside, and we go back to cheering for sports teams while wearing our new workout gear.
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SKX shares were trading at $62.41 per share on Tuesday afternoon, up $0.07 (+0.11%). Year-to-date, SKX has gained 0.11%, versus a -0.51% rise in the benchmark S&P 500 index during the same period.
About the Author: Steven Adams
After earning a law degree cum laude with a focus on securities law, Steven worked as a Nasdaq market maker for a large broker dealer, and then as a trader for an arbitrage focused proprietary hedge fund. He subsequently worked as a consultant for a Fortune 500 consulting firm serving both government and commercial clients, including the NYSE, Prudential, FDIC, and NASA.
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