3 Reasons To Take A Look At Skechers

| About: Skechers USA (SKX)
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Summary

Strong international growth.

Brand building and marketing.

Strength in recent financials.

Skechers (NYSE:SKX), a footwear company for men, women and children, has been performing well lately, beating analyst expectations on revenue and earnings growth. But in a highly competitive industry, the company does not enjoy the status of a Nike (NYSE:NKE) or the 'coolness factor' of an Under Armour (NYSE:UA). So can Skechers continue its winning streak going forward and prove to be a good investment? I think there are three reasons that make this company interesting right now.

1. International Growth: The Company reported in its Q3 2014 earnings call that its total distributor business overseas grew over 87% over the prior year. Growth in China was over 90%, along with strong business in countries like Japan and Canada. Sales of its European subsidiaries grew over 72% over past year. The company is witnessing its strongest growth overseas, with its international wholesale segment having grown to over 30% of sales. Also the international backlog remains strong, boding well for the coming months. The company has over 500 stores overseas operated by distributors, licensees, etc., and it opened 32 new international locations in the third quarter.

While greater reliance on overseas business exposes the company to greater risk of economic slowdown overseas, as well as risks from foreign exchange movement, it also opens up new markets with large populations and great potential for growth. For example, even though domestically the company's sales of children's footwear did not perform as well as the adult line - in China the kid's footwear brand is doing well.

2. Branding and Marketing: Skechers is not considered in the same league with some of its major competitors like Nike, when it comes to performance footwear. But it has actually been working on positioning itself strongly as a lifestyle brand with growing appeal among adults, as seen in its strong sales in its GO and Active brands. The company is focused on marketing its products aggressively as comfort footwear through campaigns at major marathons, print and TV ads. Recently it signed on Demi Lovato to promote its brand amongst teens and young adults, and Ringo Starr to build its appeal among older customers in the USA and abroad. The company is also trying to boost its kids segment by testing new products like a "smart shoe" that has a game on its side. If the company continues to build its brand internationally as the go-to, comfort footwear line for the whole family, then it could build on its success overseas.

3. Recent Financials: Positive trends in the company's financials add to its attractiveness at present. The company has been beating analyst estimates on revenue and earnings in recent quarters. In the third quarter, its total sales grew by over 30% over the previous year, along with an 11% increase in comp store sales. It has a strong backlog worldwide, which is a good sign for 2015. Even though the company's SGA has increased due to greater volumes, overseas expansions and new store additions, it has still decreased as a percentage of sales.

Earnings as a percentage of revenue have also increased from 8.5% last year to 11%, while gross margins at 45.2% have also shown improvement. The company holds about $8.65 in cash per diluted share and has seen a decrease in its long-term debt in the third quarter.

Overall, Skechers has some good things going for it right now, and if it continues to innovate and grow its appeal amongst customers of all ages domestically and internationally, then it could continue along a long-term growth path in the future.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it. The author has no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I am a self-taught individual investor and this article expresses my views based on my own research I am not a professional financial adviser and this is not professional investment advice. You must do your own research or contact your financial adviser before making any investment decisions. I am not being influenced or paid by any organization to write this article.