Mid-Cap Growth or Big-Time Gains? Analyzing Skechers’ Growth



Skechers: The growth history

Based in Manhattan Beach, Skechers (SKX) was incorporated in California in 1992. Skechers designs and markets both lifestyle and performance footwear under several lines and brand names.

Skechers became the second-largest footwear brand in the United States in 2015.

Skechers sells its products through its 525 stores as well as through other retailers such as department stores and specialty sporting goods retailers.

The company has several footwear lines that are designed to appeal to a vast demographic, ranging from toddlers to baby boomers. Due to the company’s innovative brand campaigns and fun image, its footwear products have found a ready and growing market, particularly among kids and tweens.

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Skechers: High US market share in athletic footwear

Skechers went public in 1999. The company had a market capitalization of ~$4.7 billion on June 10, 2016. Though it was a much smaller company than rivals Nike (NKE) and Adidas (ADDYY), Skechers held the number two spot in the US athletic footwear market in 1Q15, according to the NPD Group.

Market leaders Nike and Adidas have market capitalizations of ~$92.8 billion and $26.7 billion, respectively. However, their products are geared toward performance footwear for more dedicated athletes. In contrast, Skechers has a more casual image.

Skechers: A growth stock

Despite its small size, Skechers is expanding quickly, in terms of both store count and sales. The company’s revenue has grown (MDY) at a CAGR (compound annual growth rate) of 9.5% in the last five years and 26.4% in the last three years—the fastest among its athletic footwear peers.

Skechers’ revenue came in at $3.1 billion in 2015, a rise of 32.4% year-over-year (or YoY). In contrast, competitors Deckers Outdoors (DECK) and Wolverine Worldwide (WWW) have grown their sales at annualized rates of 12.7%, and 16.6%, respectively, over the last five fiscal years.

Deckers clocked sales of $1.8 billion in the fiscal year ended March 31, 2015, a rise of 3.2% YoY. Wolverine Worldwide saw a sales fall of 2.5% YoY to $2.7 billion in 2015.

Skechers’ stock price performance has also been far ahead of other companies in the industry over the past five years.

In this series, we’ll analyze Skechers’ business model, its competitive positioning, its financials, and its stock price performance and returns relative to those of its shareholders.

We’ll start with a discussion of Skechers’ product strategy.


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