Skechers (SKX) has beaten analysts’ earnings expectations in two of the first three quarters of 2018. The company is scheduled to announce its fourth-quarter results on February 7. Analysts expect Skechers’ fourth-quarter adjusted EPS to grow 9.5% to $0.23. Skechers’ fourth-quarter earnings are expected to be driven by higher sales, partially offset by higher expenses to support growth initiatives.
Based on the guidance issued in October, Skechers expects its 2018 fourth-quarter EPS in the $0.20–$0.25 range.
Recapping Q3 performance
Skechers’ 2018 third-quarter adjusted EPS declined 1.7% on a year-over-year basis to $0.58 but beat analysts’ expectation of $0.51. The company’s third-quarter bottom line declined as higher sales were more than offset by currency headwinds and higher taxes.
Skechers’ gross margin expanded by 40 basis points to 47.9% in third quarter of 2018 due to improved domestic margins, driven by higher retail pricing and a favorable product mix, and partially offset by currency headwinds. However, Skechers’ operating margin declined by ten basis points to 10.5% due to expenses to support international growth—especially in China—and its direct-to-consumer business.
Valuation and full-year earnings
As of February 1, Skechers was trading at a 12-month forward PE of 13.6x. In comparison, peers Nike (NKE), Under Armour (UAA), Lululemon (LULU), and Columbia Sportswear (COLM) were trading at 12-month forward PEs of 27.4x, 61.6x, 33.2x, and 22.0x, respectively.
Analysts expect Skechers’ adjusted EPS to rise 3.4% to $1.84 in 2018. Currently, analysts anticipate that Skechers’ adjusted EPS will grow 7.1% to $1.97 in 2019.