Skechers Shares Drop Sharply on Missed Earnings, Guidance

Skechers USA Inc. (NYSE: SKX) shares tanked on Friday, following the third-quarter financial report after the markets closed on Thursday. Although the company might have had a small miss on the bottom line, the real fallout for this stock came from the guidance.

The company said that it had $0.42 in earnings per share (EPS) and $942.4 million in revenue. Thomson Reuters consensus estimates had called for $0.47 in EPS and revenue of $942.42 million. In the same period of last year, Skechers posted EPS of $0.43 and $856.18 million in revenue.

For the fourth quarter, the company expects net sales in the range of $710 million to $735 million, while assuming single-digit increases and comps in its international wholesale business and total retail business, respectively, as well as a single-digit decrease in its domestic wholesale business.

The consensus estimates call for $0.23 in EPS and $799.91 in revenue for the fourth quarter.

David Weinberg, chief operating officer and chief financial officer of Skechers, commented:

Skechers achieved a new third quarter sales record for the period, and the second highest sales quarter in our 24-year history. This also resulted in a new nine-month sales record of $2.8 billion. The quarterly sales increase was primarily the result of 18.3 percent growth in our international wholesale business, which now comprises 40.1 percent of our total sales, or 47.9 percent including international retail. We believe that our international business represents the greatest growth opportunity with many countries continuing to show strong growth in the quarter, including China at just over 50 percent in net sales. To further grow our business internationally, we have transitioned certain international distributors to our subsidiary or joint venture model, including Israel most recently to a joint venture, and we are in the final stages of South Korea moving to a joint venture as well. We are also pleased with the 16.0 percent sales growth in our global retail business with 556 Company-owned Skechers retail stores, including 150 international locations, at quarter end. Including third-party-owned stores, there are now 1,716 Skechers stores worldwide.

On the books, Skechers cash and cash equivalents totaled $665.3 million, an increase of $154.6 million, or 30.3%, over the same period last year.

Shares of Skechers were down over 17% to $18.86 Friday morning, a new 52-week low. The consensus analyst price target is $30.25, and a 52-week high is $34.27.