Skechers Reports Its Fifth Straight Fall in Earnings in 2Q17

Skechers (SKX), which released its 2Q17 results on July 20, 2017, reported EPS (earnings per share) of $0.38. The company missed analysts’ consensus expectation by a margin of $0.06.

Its EPS fell 24% during the quarter, driven by a rise in selling, general, and administrative expenses. This was the fifth consecutive quarterly earnings fall for the footwear manufacturer.

Skechers’s 2Q17 selling expenses rose 100 basis points to 9.7% of its sales, primarily due to its higher advertising expenses and a rise in its selling commissions.

The company’s general and administrative expenses rose 210 basis points to 29.8% of its sales as it continued to expand and focus on its long-term global growth target. As a result, its operating margin fell 343 basis points to 8.4% of its sales during the quarter.

Rival Nike (NKE), reported a ~22.4% YoY rise in its quarterly EPS to $0.60 in the quarter, outperforming Wall Street’s expectations. Its higher earnings were driven by a rise in its revenue, a fall in its selling and administrative expenses, a lower tax rate, and a fall in its average share count.

Under Armour (UAA), however, reported a net income of -$2 million, or $1 per share. The company, however, bested analysts’ expectations of -$0.04 per share.

Skechers’s management expects its earnings to rise in the 0%–12% range in 3Q17. Its EPS are expected to lie between $0.42 and $0.47 during the quarter. However, this estimate is lower than what analysts expect. On average, analysts expect EPS of $0.56 for Skechers in 3Q17.

Investors seeking to add exposure to SKX can consider the iShares Morningstar Small-Cap ETF (IJK), which invests ~0.4% of its holdings in the company.