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Understanding Macquarie’s Latest Rating for Skechers

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Price movement of Skechers

Skechers USA (SKX) has a market cap of $4.3 billion. SKX fell by 3.9% to close at $27.31 per share on April 7, 2016, bringing the stock’s weekly, monthly, and YTD (year-to-date) price movements to -10.3%, -13.2%, and -9.6%, respectively.

On the same day, SKX was trading 11.9% below its 20-day moving average, 11.1% below its 50-day moving average, and 24.8% below its 200-day moving average.

Understanding Macquarie's Latest Rating for Skechers

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ETFs and competitors

The SPDR S&P MidCap 400 Index Fund (MDY) invests 0.25% of its holdings in Skechers. The ETF tracks a market-cap-weighted index of the midcap US companies. The YTD price movement of MDY was 3.2% as of April 6, 2016.

The market caps of Skechers’ competitors are as follows:

  • Nike (NKE)—$102.5 billion
  • Columbia Sportswear (COLM)—$4.1 billion
  • Steven Madden (SHOO)—$2.2 billion

Macquarie’s view of Skechers’ 4Q15 and 2015 performance

Macquarie has initiated its coverage of Skechers with an “outperform” rating, setting a price target at $45 per share. By comparison, OTR Global has downgraded Skechers to a “mixed” rating from a “positive” one.

Skechers reported fiscal 4Q15 net sales of $722.7 million—a rise of 26.9% compared to net sales of $569.7 million in fiscal 4Q14. Its net income and EPS (earnings per share) rose to $29.4 million and $0.19, respectively, in fiscal 4Q15, compared to $21.9 million and $0.14, respectively, in fiscal 4Q14.

Fiscal 2015 results

In fiscal 2015, SKX reported net sales of ~$3.1 billion—a rise of 32.4% YoY (year-over-year). It reported the royalty income of $11.7 million in fiscal 2015, compared to $9.1 million in fiscal 2014. Its net income and EPS rose to $231.9 million and $1.50, respectively, in fiscal 2015, compared to $138.8 million and $0.91, respectively, in fiscal 2014.

Skechers’ cash and cash equivalents and inventories rose by 8.8% and 36.7%, respectively, in fiscal 2015. Its current ratio and debt-to-equity ratio rose to 2.7x and 0.49x, respectively, in fiscal 2015, as compared to 2.5x and 0.48x, respectively, in fiscal 2014.

In the next part, we’ll look at Constellation Brands.

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