Sterne Agee Has Sell On Skechers USA

Sterne Agee has a Sell rating and a $10 price target on shares of Skechers USA Ltd. SKX. In a note to clients, Sterne Agee writes, "We are forecasting 2Q11 EPS of ($0.36) as compared to $0.82 in 2Q10. Fiscal Year Ends Dec We expect revenues to be down 14% as the 2Q10 revenue represented the peak of toning sales. The expected sales decrease is broken out as follows: US wholesale (30%), DTC +2%, and International +30%. We expect GM to be down over 700bps due to the decrease of the toning business, and inventory levels that were up 99% to $376M at the end of 1Q11. Our 40% GM estimate reflects only modest headway in clearing the ~4m pairs of toning shoes. If SKX has gotten aggressive in liquidating inventory, which is not evident to us, margins and earnings will be below our estimates. We also have not seen any evidence that reductions in SG&A will occur in 2Q." Shares of SKX closed at $14.50 yesterday.