Skechers Falls after Susquehanna Warns of Margin Pressure



Skechers stock falls after analyst action

Skechers (SKX) stock fell 7.9% to $26.42 on September 12 after Susquehanna analyst Sam Poser lowered his fiscal 2018 and 2019 EPS estimates for the company, citing margin pressure. The analyst also lowered his price target on Skechers by $1 to $25. Poser said Skechers’s operating margin might get impacted by currency headwinds, rising investments, and weakness in the Korea, Japan, and Latin America businesses.

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Susquehanna believes that while the footwear maker should be able to achieve low double-digit growth in its top line, it might not witness leverage in SG&A expenses at least over the next one year. Skechers’s deteriorating profitability and rising operating expenses have bothered analysts for some time now. Operating expenses increased at almost twice the rate of sales during the second quarter of 2018, resulting in a 120-basis-point deterioration in operating income.

Skechers saw the following downgrades after it posted weak second-quarter results in July:

  • Argus downgraded the stock from “buy” to “hold.”
  • Wells Fargo downgraded the stock from “outperform” to “market perform.”
  • Susquehanna downgraded the stock from “positive” to “neutral.”

What’s Wall Street’s take on Skechers?

The average target price from the 13 analysts that cover Skechers is 2.2 on a scale where one is a “strong buy” and five is a “strong sell.” The stock’s ratings have deteriorated over the past six months, as more analysts have turned bearish on the stock. The company was rated a 1.7 in July before second-quarter results and 1.5 in April.

Eight analysts rate Skechers as a “buy,” while five analysts rate the company as a “hold.” There still aren’t any “sell” recommendations on the company.

The company is currently sitting at a year-to-date loss of 30%. In comparison, industry leader Nike (NKE) has gained 32%, while Under Armour (UAA) is up 39% so far this year.


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