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Skechers (SKX) Up 40% in 6 Months, Gains on Strong Demand

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With the easing of pandemic-led regulations and outdoor movement picking up pace, apparel and shoe retailers are witnessing strong revival in their business. One such company is Skechers U.S.A., Inc. SKX. This well-known footwear and apparel products retailer is gaining on strong demand for casual and comfort products. Such trends have contributed to the company’s domestic and international businesses during second-quarter fiscal 2021. Strategic efforts to boost brand offerings and infrastructural capabilities have also been yielding.

Shares of the company have gained 40.1% in the past six months compared with the industry’s rise of 26.2%. That said, let’s take a closer look at the aspects adding sheen to this Zacks Rank #1 (Strong Buy) stock.

Favorable Market Conditions

During the second quarter, Skechers witnessed higher demand for comfort products across several markets as consumers began returning to a normal lifestyle. The company gained from favorable consumer response for seasonal, athletic and casual footwear lines along with apparel offerings. Such trends have boosted the company’s wholesale and direct-to-consumer sales, which in turn led to growth across domestic and international channels. It also gained from higher average selling prices, driven by increased sales units and less promotional activity.

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Strategic Endeavors

Skechers’ multi-brand strategy enables it to roll out new products without cannibalizing its existing brands and helps in expanding its customer base. Lately, the company is focusing on comfort-based footwear and apparel products as consumers are embracing a relaxed lifestyle and incorporating the same into their work and weekend wear. Apart from new product development, the company has also been undertaking measures related to store remodeling, cost-containment and inventory management.

Skechers’ international business remains a significant sales growth driver, with Europe and China being the major markets outside the United States. The company continues to enhance its global reach in the footwear market through distribution networks, subsidiaries and JVs. The company is making strategic investments to improve infrastructure worldwide, primarily e-commerce platforms and distribution centers.

Speaking of e-commerce, Skechers has been directing resources to enhance digital capabilities, which includes augmenting website features, mobile application and loyalty program. Investments made toward integrating store and digital ecosystems to develop a seamless omnichannel experience have been yielding. Initiatives such as “Buy Online, Pick-Up in Store” and “Buy Online, Pickup at Curbside” are worth mentioning.

Encouraging View

The company expects its business to continue gaining from robust demand conditions. Its investments in long-term growth strategies including brands and infrastructural capabilities also keeps it well placed for growth in the forthcoming periods. The company envisions third-quarter 2021 sales between $1.60 billion and $1.65 billion and earnings in the band of 70-75 cents a share. The company reported sales of $1.30 billion and earnings of 53 cents in the year-ago quarter. For 2021, Skechers guided sales in the range of $6.15-$6.25 billion and earnings in the band of $2.55-$2.65 per share. The company had reported sales of $4.6 billion and earnings of 64 cents in 2020.

3 Hot Stocks to Consider

The Childrens Place, Inc. PLCE, sporting a Zacks Rank #1, has a long-term earnings growth rate of 8%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Steven Madden, Ltd. SHOO, which carries a Zacks Rank #2 (Buy), has a long-term earnings growth rate of 15%.

Nike, Inc. NKE, with a Rank #2, delivered an earnings surprise of 16.02% in the last four quarters, on average.

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