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Here Are Factors Influencing Skechers’ (SKX) Q1 Earnings


Skechers U.S.A., Inc. SKX is slated to release first-quarter 2018 results on Apr 19 after the market closes. In the trailing four quarters, it had outperformed the Zacks Consensus Estimate by an average of 23.6%. In the preceding two quarters, it surpassed the consensus mark by 61.5% and 37.2%, respectively.

The question lingering in investors’ minds now is whether Skechers will be able to post positive earnings surprise in the first quarter or not. Let’s see how things are shaping up prior to this announcement.

What to Expect?

The company is likely to report bottom-line growth for the third straight quarter. The Zacks Consensus Estimate for the quarter under review is pegged at 75 cents compared with 60 cents in the prior-year period. Meanwhile, analysts polled by Zacks expect revenues of $1.20 billion, reflecting more than 11.7% growth on a year-over-year basis.

Skechers U.S.A., Inc. Price, Consensus and EPS Surprise

Skechers U.S.A., Inc. Price, Consensus and EPS Surprise | Skechers U.S.A., Inc. Quote

Encouragingly, management had earlier projected first-quarter net sales in the band of $1,175-$1,200 million compared with $1,072.8 million reported in the prior-year quarter. Additionally, the company anticipates earnings per share in the range of 70-75 cents. On top of it, management expects to witness stable-to-better gross margins in the first quarter.

Factors at Play

Skechers’ greater emphasis on new line of products, store remodeling projects, cost containment efforts, inventory management and global distribution platform are the primary growth catalysts. Moreover, its e-commerce business has also contributed to sales growth. Notably, the company currently operates e-commerce sites in Chile, Germany and the UK, and has launched additional sites in Spain and Canada.

Skechers’ international business also remains a considerable sales growth driver for the company, with Europe and China being the biggest markets outside the United States. Furthermore, it is poised to enhance its global reach in the footwear market through its distribution networks, subsidiaries and joint ventures (JVs).

However, analysts remain concerned about higher selling, general & administrative expenses that may hurt the company's margin, and in turn the bottom line. Selling expenses have increased 37%, 31.6%, 32.1% and 7.4% in the first, second, third and fourth quarters of 2017, respectively. Following the same chronological order, general & administrative expenses have also increased 16.6%, 25.5%, 21% and 24.7%, respectively. Nonetheless, the growth rate of general & administrative expenses has decelerated sequentially.

What the Zacks Model Unveils?

Our proven model shows that Skechers is likely to beat estimates this quarter as the stock has the right combination of two key ingredients — a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen.

Skechers has an Earnings ESP of +0.67% and a Zacks Rank #2. This makes us reasonably confident of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Other Stocks With Favorable Combination

Here are some other companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:Macy's, Inc. (M) has an Earnings ESP of +5.14% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Kohl's Corporation KSS has an Earnings ESP of +0.91% and a Zacks Rank #2.

The Gap, Inc. GPS has an Earnings ESP of +2.35% and a Zacks Rank #2.

Costco Wholesale Corporation COST has an Earnings ESP of +1.05% and a Zacks Rank #3.

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