Skechers’ DTC and Product Growth Will Offset Wholesale Issues in Q2, Analysts Say
Despite slowdowns in the U.S. wholesale market, analysts are bullish on Skechers ahead of its second quarter earnings report next week.
In a Monday note to investors, Wedbush analyst Tom Nikic said that gains in the DTC channel, product innovation and international business would “more than offset” challenges in the U.S. wholesale channel for Skechers in Q2.
“While [wholesale] is clearly a tough channel at the moment, Skechers generates over 75% of revenues and ~80% of gross profit in other channels (DTC + international) and these channels are performing very well,” Nikic wrote, adding that he expects to see growth in China this quarter as well.
In its first quarter results reported in April, Skechers hit a new milestone and saw more than $2 billion in quarterly sales for the first time. This marked a 10 percent increase over the same time last year. Even the wholesale channel, which has been largely challenged due to consumer caution and excess inventory, grew 3.5 percent to $43.3 million in Q1.
Watch on FN
In light of the strong results, Skechers said it expects between $1.85 billion and $1.90 billion in Q2 revenues, with diluted earnings per share of between $0.40 and $0.50. For the fiscal year 2023, Skechers is looking to achieve sales between $7.9 billion and $8.1 billion and diluted earnings per share of between $3.00 and $3.20.
Nikic also highlighted Skechers‘ success with its Slip-in sneaker, a hands-free innovation that appears to resonating with consumers, including President Joe Biden, who was recently spotted wearing a pair while boarding Air Force One.
Williams Trading analyst Sam Poser also noted Skechers’ Slip-ins success in a June note, adding that “global consumer demand for the brand remains very strong.” Along with Slip-ins, he called out other strong categories like the ArchFit, kid’s and work.
“The good news, based on our proprietary checks, is that demand for new styles and categories is strong and strengthening,” Poser wrote. “That strength is being driven through product that is focused on comfort and walking, categories that do not compete with Nike and other athletic brands.”
UBS analyst Jay Sole said in a note last week that Skechers is in a position to beat its EPS guidance in Q2 and potentially raise full-year guidance as well, given the strong position of the brand’s identity and products.
“While the market is somewhat concerned weak US wholesale channel trends and a choppy macroeconomic climate in China could lead to a Q2 disappointment, the base case view is Skechers has enough strength globally, particularly in its DTC channel, to beat its full year 2023 EPS guide,” Sole wrote.
Skechers reports earnings for the second quarter after markets close on July 27.
