Skechers Downgraded To Neutral At Citigroup Citing Near-Term Business Weakness

Citi’s Corinna Van der Ghinst believes the lack of visibility into Skechers USA Inc SKX's top line over the next 12 months could lead to further volatility in the stock over the next year, “while keeping valuation in a depressed range until the company returns to a more predictable growth trajectory.”

Van der Ghinst downgraded the rating on the company from Buy to Neutral, while lowering the price target from $33 to $21.

Deteriorating Visibility

The analyst believes Skechers has meaningful long-term opportunities for global growth, “supported by the company’s diversification across product categories & int’l markets over the past 3 years.”

Expressing concern regarding the declining visibility into both the top line and SG&A over the next year, Van der Ghinst mentioned there was potential for further declines in the United States over the next few quarters.

Related Link: Skechers Falls After Tripping Up On Another Q3 Report

International Deceleration

Deceleration in international wholesale is being driven by distributor conversions, tough comps and timing shift, while there continues to be a lack of clarity regarding the timing of international investments across various markets.

“Cleaner inventories at US retail may not be enough to re-accelerate weaker US trends as retailers plan to keep inventories tight into FY17 and brick & mortar traffic remains sluggish,” the analyst stated, while adding that there was risk to the merchandising and product cycle as Skechers works on its innovation pipeline.

The company reported its Q3 results below expectations, while also issuing a disappointing guidance for Q4.

In Friday's pre-market, Skechers was seen down 16.09 percent at $19.25.

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