Skechers Rides On Robust DTC Segment, Digital Initiatives

Skechers U.S.A., Inc. SKX continues to lead the market through its strategic emphasis on a varied brand lineup, cutting-edge digital capabilities, and ambitious global expansion plans. The company's well-devised growth strategies, particularly in its direct-to-consumer (DTC) and international segments, not only demonstrate its agility in responding to shifting consumer tastes but also bolster its potential for sustained growth and market dominance.

Exploring the Details

To maintain its competitive edge and meet sales goals, Skechers is dedicated to strategic investments in infrastructure and technology. This includes plans to open retail locations, enhance omnichannel capabilities and build a second distribution center in China. These initiatives aim to improve operational efficiency and extend the company's global reach. Skechers' financial stability and strategic investments reflect a strong path to achieve its operational and financial targets in 2024 and beyond.
Skechers continues to diversify its extensive product portfolio, which includes styles ranging from fashion and athletic to non-athletic and work footwear. The strategy of managing multiple brands simultaneously enables the company to launch products without impacting existing ones, thereby attracting a broader customer base.

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SKX is intensifying its digital initiatives by upgrading website features, mobile apps, and customer loyalty programs. By integrating in-store and online experiences, Skechers aims to provide a seamless shopping journey that drives sales volumes. Improvements to point-of-sale systems are also underway to enhance customer interactions both online and in physical stores, boosting sales and customer satisfaction.
Meanwhile, the DTC segment saw a 17.3% year-over-year increase in sales, reaching $829.9 million in the first quarter of 2024. This robust growth is evident across both physical stores and e-commerce platforms, driven by effective marketing strategies and continuous product innovations, particularly in comfort technologies.
Skechers' international business operations have been a pivotal driver of its overall growth trajectory. The company's success in the global markets reflects its ability to adapt to diverse consumer preferences, capitalize on emerging trends and leverage effective distribution strategies tailored to each region's unique dynamics.
International sales grew 15.2% year over year in the first quarter, accounting for 64.5% of the total sales. The APAC region, in particular, saw growth of 15.9%, reflecting the company's ability to adapt to diverse consumer preferences and leverage emerging market trends.

Optimistic Outlook

For fiscal 2024, Skechers forecasts sales between $8.73 billion and $8.88 billion, revised upward from the previously mentioned $8.6-$8.8 billion. This projection represents a significant increase from the $8 billion in sales recorded in fiscal 2023. Additionally, the company anticipates earnings per share between $3.95 and $4.10, suggesting growth from the $3.49 reported in the previous year.
Skechers plans to allocate between $325 million and $375 million for capital expenditure. This investment will support key strategic initiatives, such as store openings, omnichannel capability expansion and distribution infrastructure enhancements. The company is confidently progressing toward its ambitious goal of achieving $10 billion in annual sales by 2026.

Zacks Rank & Estimates

This Zacks Rank #1 (Strong Buy) company has demonstrated remarkable market performance over the past year, significantly outpacing the Zacks Shoes and Retail Apparel industry. During this period, SKX shares jumped 40% against the industry's 9.5% decline. This performance underscores Skechers' robust market strategies and its ability to outperform even during challenging economic times.
The Zacks Consensus Estimate of current and next year's sales is pegged at $8.84 billion and $9.68 billion, respectively, suggesting year-over-year growth of 10.5% and 9.6%. Also, the Zacks Consensus Estimate for current and next-quarter earnings is pegged at $4.07 and $4.61 per share, respectively, indicating year-over-year increases of 16.6% and 13.3%.

Other Key Picks

Some other top-ranked stocks are The Gap, Inc. GPS, Abercrombie & Fitch Co. ANF and Canada Goose GOOS.
Gap is a premier international specialty retailer offering a diverse range of clothing, accessories and personal care products. The company currently sports a Zacks Rank #1.
The Zacks Consensus Estimate for Gap's fiscal 2024 earnings and sales indicates growth of 17.5% and 0.1%, respectively, from the fiscal 2023 reported figures. GPS has a trailing four-quarter average earnings surprise of 202.7%.
Abercrombie is a specialty retailer of premium, high-quality casual apparel. The company flaunts a Zacks Rank of 1 at present. ANF delivered a 28.9% earnings surprise in the last reported quarter.
The consensus estimate for Abercrombie's current fiscal-year earnings and sales indicates growth of 47.5% and 10.5%, respectively, from the fiscal 2023 reported figures. ANF has a trailing four-quarter average earnings surprise of 210.3%.
Canada Goose is a global outerwear brand. It sports a Zacks Rank of 1 at present.
The Zacks Consensus Estimate for Canada Goose's current fiscal-year earnings indicates growth of 13.7% from the year-ago period's reported figures. GOOS has a trailing four-quarter average earnings surprise of 70.9%.

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