Skechers USA: A Balanced Financial Outlook with a Hold Rating

In a report released today, Christopher Nardone from Bank of America Securities reiterated a Hold rating on Skechers USA (SKX – Research Report), with a price target of $71.00.

Christopher Nardone has given his Hold rating due to a combination of factors surrounding Skechers USA’s financial performance and market position. Skechers reported a higher-than-expected earnings per share (EPS) in the first quarter of 2024, driven by a significant gross margin improvement and robust wholesale sales figures. The balanced growth across various regions and sales channels, with particularly strong direct-to-consumer (DTC) sales, has led to an optimistic revision of future EPS guidance by the management. Despite these positive trends, the stock is trading at a forward P/E ratio of 16x, suggesting a balanced risk/reward scenario at the current valuation.

Moreover, Skechers showed an encouraging wholesale outlook, particularly in the United States market, which bodes well for the company’s visibility and order book. The improvement in gross margin was influenced by lower freight costs and a favorable product and channel mix, which is expected to continue driving margin expansion. However, the report indicates that the key opportunity for Skechers lies in achieving cost control and hitting its medium-term operating margin targets, as the company is poised to balance its strategic investments with efforts to improve profitability structurally. These factors collectively justify Nardone’s Neutral (Hold) rating and suggest a cautious optimism for Skechers’ stock performance.

Based on the recent corporate insider activity of 44 insiders, corporate insider sentiment is negative on the stock. This means that over the past quarter there has been an increase of insiders selling their shares of SKX in relation to earlier this year.

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Skechers USA (SKX) Company Description:

SKECHERS USA, Inc. engages in designing, development and marketing of lifestyle footwear for men, women, and children of all ages. It operates through the following segments: Domestic Wholesale Sales, International Wholesale Sales, and Retail Sales. The Domestic Wholesale Sales segment distributes footwear through the domestic wholesale distribution channels: department stores, specialty stores, athletic specialty shoe stores and independent retailers, as well as catalog and internet retailers. The International Wholesale Sales segment includes international direct subsidiary sales and international distributor sales. The Retail Sales segment refers to e-commerce which operates through the concept stores, factory outlet stores, and warehouse outlet stores. The company was founded by Robert Greenberg and Michael Greenberg in 1992 and is headquartered in Manhattan Beach, CA.