Skechers Q4 Earnings Beat, Revenues Miss Estimates

Skechers USA, Inc. (SKX - Free Report) registered second straight quarter of positive earnings surprise when it reported fourth-quarter 2018 results. Management’s first-quarter 2019 earnings view is also above the Zacks Consensus Estimate. Cumulatively, these raised investor’s sentiment sidelining the second consecutive quarter of sales miss. Moreover, both the top and bottom lines grew year over year.

Shares of this Manhattan Beach, CA-based company surged roughly 18% during the after-market trading session on Feb 7. We note that shares of this Zacks Rank #3 (Hold) stock have gained 11.1% in a month compared with the industry’s advancement of 7.3%.

The company witnessed sales growth of 17.9% across its international business, comprising company-owned retail, distributor, subsidiary and joint venture, and sales increase of 4.1% at its domestic business. The international business remains a significant growth driver. Of late, Skechers completed the transition of India joint venture to a wholly owned subsidiary and entered into a deal to form a joint venture in Mexico with its current distribution partner.

Let’s Delve Deep

This designer, developer, marketer and distributor of footwear recorded earnings of 31 cents a share that beat the Zacks Consensus Estimate of 23 cents and management’s projection of 20-25 cents. We also note that in spite of increase in cost of sales and higher operating expenses bottom line surged 47.6%. Certainly, healthy top-line fueled growth.

The company delivered net sales of $1,080.8 million that increased 11.4% (or 13.7% on a constant currency basis) from the year-ago quarter but came below of the Zacks Consensus Estimate of $1,097 million. We also note that the top line fell short of management’s guidance of $1,100-$1,125 million.

Skechers’ domestic e-commerce business contributed to sales growth in the quarter, registering an increase of 8.9%.

Gross profit for the reported quarter grew 13.6% to $515.7 million, while gross margin expanded 90 basis points (bps) to 47.7% on account of solid domestic margin due to higher retail prices and improved product mix, partly offset by adverse foreign currency exchange rates. Operating income came in at $83.7 million, up 50.4% from the prior-year quarter, while operating margin increased 200 bps to 7.7%.

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