Skechers USA (SKX) is trading nicely higher today (+9%) after reporting Q4 earnings results last night and guiding for Q1. In case you're not familiar, Skechers makes footwear for men, women, and children. It primarily sells wholesale via department stores and shoe stores (Foot Locker, Finish Line, Famous Footwear) but it also has its own retail locations and it sells shoes online. In terms of pricing, SKX sees itself as being in the sweet spot between private label and the big guys (Nike etc.)
SKX has been making strides in recent years by revamping its product offering with enhanced designs and comfort innovations. Also, SKX's higher-end performance shoe segment has been doing well. And they are expanding very nicely in international markets, particularly in China. They are also benefitting from an industry trend toward athletic shoes.
What strikes us about SKX is that they seem to successfully appeal to various age groups, from kids to teens to adults, and both men and women. It's rare that kids would want to buy shoes that their older parents would buy. However, SKX seems to walk this tightrope quite well whereas many other footwear/apparel companies stumble. It's a nice place to be in. It's partly due to signing endorsement deals with various celebrities who appeal to different age groups. Current sponsors include Camila Cabello, Meghan Trainor, Joe Montana, Howie Long, Sugar Ray Leonard, Brooke Burke-Charvet and Kelly Brook. So you can see the various age demographics.
Turning to the Q4 results, EPS jumped to $0.21 from $0.04 in the prior year period. That was quite a bit better than prior guidance of $0.09-0.14. Revenue rose 27.0% year/year to $970.6 mln, which was well above prior guidance of $860-885 mln. In terms of guidance for Q1, SKX expects EPS of $0.70-0.75, which is a bit below market expectations. They expect Q1 revenue of $1.175-1.200 bln, which is also below market expectations.
Growth came across all three of its distribution channels. International wholesale sales increased 40.2% while total international wholesale and retail sales combined represented 52.6% of total sales. Domestic wholesale sales increased 11.6%. Company-owned global retail sales increased 25.8%, with comps of +12% globally. Expanding in China has been a big focus for SKX and these results show they are making good progress.
In the US, Skechers remained the No. 1 walking, work, casual lifestyle, and casual dress footwear brand, and the No. 2 casual athletic footwear brand. Celebrity endorsements are big for SKX and the chart-topping singer Camila Cabello drove worldwide appeal in marketing campaigns. She sings that popular Havana song.
In sum, this was a nice surprise quarter. In fact SKX has now reported back-to-back large beats after having missed EPS expectations in four of the past five quarters before that. Overall, SKX benefitted from a robust holiday selling season that included increased demand for its innovative lighted children's footwear and comfortable adult styles. The problem was the Q1 guidance being below expectations. Hopefully, they are just being conservative. Investors seem to not be too worried about it.