By Senad Karaahmetovic
Skechers (NYSE:SKX) shares are down nearly 13% in early Wednesday trading after the retailer reported weaker-than-expected profit for its third quarter and offered lackluster FY guidance.
Skechers USA reported a Q3 EPS of $0.64, missing FactSet’s analyst estimate of $0.73. Revenue for the quarter came in at $1.88 billion, better than the consensus estimate of $1.81 billion. Direct-to-consumer comparable (DTC) sales grew 11.9%, but inventory also soared 45% to $1.78 billion, almost $200 million higher than what analysts were expecting.
For this quarter, Skechers said it expects EPS to come between $0.30 and $0.40, missing the Bloomberg consensus of $0.51. Revenue is seen between $1.73 billion and $1.78 billion, again lower than the average analyst estimate of $1.81 billion.
“Our innovation continues to deliver results in Skechers Performance where our golfers are winning major championships and pickleball athletes are scoring big wins in our footwear,” the company said.
Morgan Stanley analysts cut the price target to $54 from $59 per share to reflect the Q3 miss.
“SKX’s valuation remains compelling, & its value focus on advantage in a potential recession. But to us, these are over-shadowed by TQ’s negative SG&A surprise & limited ‘23e visibility (particularly for brands). So the stock could tread water near term,” the analysts said.
Raymond James analysts are much more positive on SKX as cost pressure “appears largely transitory.”
"Despite concerns about the consumer, demand was strong in 3Q and this has continued 4QTD — we see this as the most important driver for SKX and other athletic global brands… We expect choppiness in 4Q on macro and Skechers -specific expense headwinds, but also see 2023 benefiting from strong underlying demand, likely recovery in China (easy compares), and potential for 2022 transitory costs (supply chain, DC-related) to become y/y margin benefits as they ease. Net, our bull thesis is intact,” they wrote in a client note.