Skechers shares tank on weak outlook for the sneaker business

Key Points
  • Skechers' stock plunges more than 25 percent after the sneaker company issued a disappointing outlook for the current quarter.
  • Its earnings and sales for the first quarter ended March 31 topped analysts' expectations, but those results were largely overlooked by Wall Street.
Pedestrians walk by a Skechers store on May 16, 2012 in New York City.
Justin Sullivan | Getty Images

Skechers shares plunged by 28 percent Friday after the shoe retailer issued a disappointing outlook for the current quarter.

The company said it expects to bring in sales of $1.12 billion to $1.145 billion during the period, along with diluted earnings per share of 38 cents to 43 cents. Analysts on average were calling for sales of roughly $1.15 billion and earnings of 55 cents a share, according to a Factset survey.

Skechers said the outlook includes a likely shift in shipments from the second quarter to the latter half of the year for a handful of key accounts in the U.S. and international distributors. That means those sales might not be realized until later, as inventory builds awaiting distribution.

"We believe previous operational missteps coupled with lack of full-year guidance are the root causes of the earnings volatility," Susquehanna analyst Sam Poser wrote in a note to clients. Skechers doesn't provide annual guidance, leaving analysts and investors with only the softer quarterly outlook to chew over.

Skechers' stock had been on a tear until recently. Even with Friday's losses, shares are up more than 20 percent from a year ago.

For the first quarter ended March 31, Skechers reported earnings of 75 cents per share on revenues of $1.25 billion. Analysts on average had expected earnings of 74 cents a share on revenues of $1.2 billion, according to a Thomson Reuters survey.

Same-store sales were up 9.5 percent overall, which included bigger gains internationally than in the U.S.

"We remain extremely optimistic about Skechers' near-, medium-, and long-term prospects, with the brand clearly resonating broadly with customers across regions, categories, gender, and age (as evidenced by the impressive 9.5% comp in 1Q)," Evercore ISI analyst Omar Saad said in a note. "In what we see as year 5 of a 20-year sneaker closet-fill boom, the market underappreciates the significant value creation opportunity for this scaled and sophisticated global active footwear brand."

According to NPD analyst Matt Powell, Skechers was the fourth-biggest sneaker brand in the U.S. in 2017.

Still, the market is becoming more and more crowded by not only the big players (i.e. Nike, Adidas and Under Armour) but also by younger brands selling directly to consumers. The fear on Wall Street is the Skechers name might be losing momentum.

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