© Stocksak. Skechers (SKX) Tumbles 13% After EPS, Guidance Miss; MS Sees Limited NT Upside
By Senad Karaahmetovic
Skechers (NYSE) shares fell nearly 13% in early Wednesday trading, after the retailer reported a weaker-than-expected profit for third quarter and provided poor FY guidance.
Skechers USA reported a Q3 of $0.64, missing FactSet’s analyst estimate of $0.73. The quarter’s revenue was $1.88 billion, which was higher than the consensus estimate (1.81 billion). Direct-to-consumer comparable sales (DTC) grew 11.9%. Inventory also soared by 45% to $1.78 Billion, almost $200 M more than analysts expected.
Skechers stated that it expects EPS between $0.30 to $0.40 for the current quarter. This is below the Bloomberg consensus of 0.51. Again, this is lower than the average analyst estimate (1.81 billion) of revenue.
“Our innovation continues to deliver results in Skechers Performance where our golfers are winning major championships and pickleball athletes are scoring big wins in our footwear,” the company said.
Morgan Stanley analysts lowered the price target from $59 to $54 to reflect Q3’s miss.
“SKX’s valuation remains compelling, & its value focus on advantage in a potential recession. But to us, these are over-shadowed by TQ’s negative SG&A surprise & limited ‘23e visibility (particularly for brands). So the stock could tread water near term,” the analysts said.
Raymond James analysts are much more positive on SKX as cost pressure “appears largely transitory.”
“Despite concerns about the consumer, demand was strong in 3Q and this has continued 4QTD — we see this as the most important driver for SKX and other athletic global brands… We expect choppiness in 4Q on macro and Skechers -specific expense headwinds, but also see 2023 benefiting from strong underlying demand, likely recovery in China (easy compares), and potential for 2022 transitory costs (supply chain, DC-related) to become y/y margin benefits as they ease. Net, our bull thesis is intact,” they wrote in a client note.