Is Skechers Part of Your Porfolio? - Analyst Blog

It is the right time to add Skechers USA Inc. SKX to your portfolio, if you haven't yet, as the stock is looking very promising now and the underlying factors are capable of carrying the momentum further. The stock holds a Zacks Rank #1 (Strong Buy) and has surged roughly 25.3% year-to-date, demonstrating its inherent strength. We believe the stock could prove to be a solid bet for investors.

Skechers' primary strength is its earnings surprise history. The company had outperformed the Zacks Consensus Estimates in 6 out of the past 9 quarters. Looking at its earnings surprise history of the last four quarters, this developer and distributor of footwear for men, women and children has topped the Zacks Consensus Estimate by an average of 125.8%, including a whooping earnings surprise of 84.9% in first-quarter 2014.

Shares of Skechers crafted a new 52-week high of $42.62 yesterday, and have shot up approximately 14.6%, since posting solid first-quarter results. The quarterly earnings of 61 cents a share surpassed the Zacks Consensus Estimate of 33 cents, and rose over fourfold from 13 cents in the prior-year quarter. The improved results were owing to strong top-line growth, effective cost management and a shift in a portion of advertising expenses to the second quarter as Easter fell in April this year.

Increased demand for products, product innovation across multiple categories and healthy performance across all revenue channels led to a 21% rise in revenues to $546.5 million, which came ahead of the Zacks Consensus Estimate of $507 million.

With increased focus on the new line of products, cost containment, inventory management, global distribution platform, healthy Apr 2014 order rates and backlogs, the company is confident of sustaining the growth momentum throughout 2014.

Ever since Skechers posted better-than-expected results, the Zacks Consensus Estimate has been trending upwards. The Zacks Consensus Estimates for 2014 and 2015 increased 13.8% and 14% to $2.06 and $2.69, respectively, in the last 30 days.

Management remains committed to focus on innovative products, opening of additional stores and increasing distribution channels with the development of international distribution agreements to improve its sales and profitability. Moreover, international business remains a significant growth driver for the company's sales. Skechers, through its subsidiaries and joint ventures, is poised to enhance its global reach in the footwear market.

Other Stocks that Warrant a Look

Other better-ranked retail stocks that look promising and are expected to continue with their upbeat performance include Carter's, Inc. CRI, Iconix Brand Group, Inc. ICON and Wolverine World Wide Inc. WWW, all carrying a Zacks Rank #2 (Buy).