What to Expect from Skechers’ Q1 Earnings

Skechers (NYSE:SKX) will likely release its first-quarter results after the financial markets close on Thursday. The footwear company withdrew its first-quarter guidance on March 18. The company pulled back its guidance due to the impact of COVID-19 and the resulting uncertainty.

Skechers has temporarily shut down its company-owned retail stores in North America and select European markets. Earlier, the company closed company-owned and third-party-owned stores in many international regions that were severely impacted by COVID-19. Skechers sells its products in the US and over 170 countries. The products are sold through department stores, specialty stores, and over 3,550 company-owned and third-party stores.

Skechers’ sales grew 23.1% YoY (year-over-year) to $1.33 billion in the fourth quarter of 2019. The sales beat analysts’ estimate of $1.25 billion. The sales growth of 31.2% in the company’s international business and 13% growth in domestic sales drove the top-line growth. Meanwhile, the international business continued to be a key growth driver. The international business accounted for 59.3% of the company’s overall revenue in the fourth quarter. Notably, Skechers’ operations in China, India, the United Kingdom, the UAE, and Mexico performed well.

Skechers sees huge growth prospects in the international market. The company plans to open additional stores in several countries. Also, the company has been creating greater visibility internationally for its brand through marketing campaigns.

Meanwhile, the comparable sales of the company-owned stores and e-commerce business grew 9.9% YoY in the fourth quarter. The strength of the e-commerce business is vital. Online retailers compete for market share. A strong e-commerce business is even more important in the current situation. Customers shop online to meet social-distancing guidelines amid the pandemic. Recently, Nike (NYSE:NKE) reported strong e-commerce growth in its third quarter of fiscal 2020. The company’s digital sales rose 36% on a currency-neutral basis in the fiscal third quarter.

Skechers’ fourth-quarter adjusted EPS grew 25.8% YoY to $0.39. The adjusted EPS was in line with analysts’ expectations. Strong sales and lower taxes drove the company’s earnings. Overall, the company’s sales grew 12.5% to $5.22 billion in 2019 and the EPS rose 17.2% to $2.25.

Before withdrawing the first-quarter guidance, Skechers predicted sales of $1.4 billion–$1.425 billion. The company also expected a first-quarter EPS of $0.70–$0.75. However, the COVID-19 outbreak disrupted the company’s growth plans.

Analysts expect Skechers’ first-quarter sales to fall by 4.5% YoY to $1.22 billion. They expect the company’s first-quarter adjusted EPS to fall 45% to $0.39. So far, Skechers stock has fallen by 43.3% this year. Meanwhile, Nike and Columbia Sportwear (NASDAQ:COLM) stocks have fallen by 15.9% and 34.2%, year-to-date, as of Tuesday.

Columbia Sportwear will likely post its first-quarter results on April 30. Recently, the company withdrew its guidance due to pandemic-led disruption. Also, the company temporarily suspended its quarterly dividend.

Currently, ten analysts recommend a “buy,” while two recommend a “hold” for Skechers stock. None of the analysts covering the company have a “sell” recommendation. The stock has an average target price of $32.73, which implies an upside of about 34%. However, analysts will likely revise their target prices based on the company’s guidance discussion on Thursday.