Skechers U.S.A. (SKX) - Bear of the Day

Skechers U.S.A. (SKX) third-quarter 2010 results missed the Zacks expectations for the top and bottom lines, reflecting sluggish sales trends and order cancellations. Consequently, total inventories increased 70.3% to $326.7 million, over the prior-year quarter.

Management hinted that extended delivery times also led to the inventory pile-up. However, Skechers indicated that it would try to lower its inventory level over the next two quarters, while generating reasonable margins.

We believe that international business should act as a catalyst to normalize the inventory level. Currently, we are maintaining our Underperform recommendation on the stock until we find any catalyst triggering a change in our opinion.
 
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