Skechers U.S.A., Inc.

 SKX Details

Skechers U.S.A., Inc. (NYSE: SKX) is a manufacturer and marketer of Skechers Performance footwear for men and women and lifestyle footwear for men and women. Its operating segments are 1) Domestic Wholesale, which distributes products through domestic wholesale distribution channels, 2) International Wholesale segment, which sells products to department stores and speciality retail stores through its joint ventures and subsidiaries and 3) Direct-to-Consumer, which offers products through e-commerce, concept stores, factory, and warehouse outlet stores.

Latest News:

• Signing Tyson McGuffin and Catherine Parenteau: On April 21, 2022, Skechers, has increased its presence in the fast-growing sport by signing two of the world's top-ranked players, Tyson McGuffin and Catherine Parenteau, as Official Footwear Sponsors of the 2022 Minto US OPEN Pickleball Championships. The two athletes, competing in individual brackets and as a mixed doubles team at the US OPEN in Naples, Florida, have been wearing Skechers Pickleball footwear and Skechers branded apparel on the court. They will make their official debut as Skechers Brand Ambassadors on Sunday, April 24, when they compete in individual brackets and as a mixed doubles team for the first time.

FY21 Results:

• Surge in Revenue: In FY21, the company's sales amounted to USD 6.29 billion, representing a 36.71% YoY increase from USD 4.60 billion in FY20, driven by growth in all segments.
• Sharp-Uptick in Bottomline: In FY21, the firm reported net earnings of USD 741.50 million, up from USD 98.56 million in FY20, with diluted earnings per share (EPS) of USD 4.73.
• Cash and Debt Position: As of December 31, 2021, the company had cash & cash equivalents (including short-term investments) of USD 894.86 million and total debt of USD 341.61 million.

Key Risk:

• Competition Risk: The company competes in the highly competitive footwear industry, where it faces direct competition from more significant, more well-funded, technologically advanced manufacturing and marketing players. If this pattern continues, the company may experience pricing pressure and market share loss, both of which might hurt its bottom line.

Outlook:

• Revenue and EPS Guidance: SKX forecasts Q1FY22 sales to be in between USD 1.675 – 1.725 billion and diluted EPS ranging between USD 0.70 – 0.75. For FY22, the company expects to generate revenues in the range of USD 7.0 – 7.2 billion, with diluted EPS of USD 2.70 – 2.90.

Valuation Methodology: EV/Sales Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation:

SKX's stock price has fallen 17.89% in the past six months and is currently leaning towards the lower end of its 52-week range of USD 33.50 to USD 55.87. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 46.02.

Considering the correction in the stock price, improvement in fundamentals, positive outlook, associated risks, and current valuation. We recommend a "Hold" rating on the stock at the current price of USD 42.05, up 2.09% as of April 21, 2022, at 06:46 AM PDT.

Three-Year Technical Price Chart (as on April 21, 2022, at 06:46 AM PDT). Source: REFINITIV, Analysis by Kalkine Group

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: All forecasted figures and industry information have been taken from REFINITIV.  

Note 3: The report publishing date is as per the Pacific Time Zone.