Stock Story -
Footwear company Skechers (NYSE:SKX) missed analysts' expectations in Q2 CY2024, with revenue up 7.2% year on year to $2.16 billion. On the other hand, next quarter's outlook exceeded expectations with revenue guided to $2.33 billion at the midpoint, or 4.5% above analysts' estimates. It made a GAAP profit of $0.91 per share, down from its profit of $0.98 per share in the same quarter last year.
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Skechers (SKX) Q2 CY2024 Highlights:
- Revenue: $2.16 billion vs analyst estimates of $2.24 billion (3.5% miss)
- EPS: $0.91 vs analyst expectations of $0.95 (3.9% miss)
- Revenue Guidance for Q3 CY2024 is $2.33 billion at the midpoint, above analyst estimates of $2.22 billion
- The company lifted its revenue guidance for the full year from $8.8 billion to $8.93 billion at the midpoint, a 1.4% increase
- Gross Margin (GAAP): 54.9%, up from 52.7% in the same quarter last year
- Locations: 5,267 at quarter end, up from 4,705 in the same quarter last year
- Constant Currency Revenue rose 11% year on year (8.2% in the same quarter last year)
- Market Capitalization: $9.76 billion
FootwearBefore the advent of the internet, styles changed, but consumers mainly bought shoes by visiting local brick-and-mortar shoe, department, and specialty stores. Today, not only do styles change more frequently as fads travel through social media and the internet but consumers are also shifting the way they buy their goods, favoring omnichannel and e-commerce experiences. Some footwear companies have made concerted efforts to adapt while those who are slower to move may fall behind.
Sales GrowthReviewing a company's long-term performance can reveal insights into its business quality. Any business can have short-term success, but a top-tier one tends to sustain growth for years. Regrettably, Skechers's sales grew at a weak 11.9% compounded annual growth rate over the last five years. This shows it failed to expand in any major way and is a rough starting point for our analysis.
We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new product or emerging trend. Skechers's recent history shows its demand slowed as its annualized revenue growth of 10.3% over the last two years is below its five-year trend.
Skechers also reports sales performance excluding currency movements, which are outside the company’s control and not indicative of demand. Over the last two years, its constant currency sales averaged 11.7% year-on-year growth. Because this number aligns with its normal revenue growth, we can see Skechers's foreign exchange rates have been steady.
This quarter, Skechers's revenue grew 7.2% year on year to $2.16 billion, missing Wall Street's estimates. The company is guiding for revenue to rise 14.8% year on year to $2.33 billion next quarter, improving from the 7.8% year-on-year increase it recorded in the same quarter last year. Looking ahead, Wall Street expects sales to grow 11.3% over the next 12 months, an acceleration from this quarter.
Operating MarginOperating margin is a key measure of profitability. Think of it as net income–the bottom line–excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.
Skechers's operating margin has risen over the last year and averaged 9.3%. The company's higher efficiency is a breath of fresh air, but its suboptimal cost structure means it still sports mediocre profitability for a consumer discretionary business.
This quarter, Skechers generated an operating profit margin of 9.6%, down 1.2 percentage points year on year. This reduction is quite minuscule and indicates the company's overall cost structure has been relatively stable.
Key Takeaways from Skechers's Q2 Results We were disappointed to see Sketchers miss analysts' EPS and revenue expectations. On the other hand, we were glad to see full-year revenue expectations raised. Zooming out, we think this was still a decent, albeit mixed, quarter, showing the company is staying on track. The stock traded up 1.9% to $64.90 immediately after reporting.
