Published on 24 Apr 2024 on Zacks via Yahoo Finance

Investing in Skechers (SKX) Ahead of Q1 Earnings: Risks & Rewards

As Skechers U.S.A., Inc. SKX gears up to unveil its first-quarter 2024 earnings results on Apr 25 after market close, investors find themselves at a crossroads, weighing the potential upsides and downsides of investing in this prominent footwear giant. With a track record of innovation, global expansion and solid financial performance, Skechers presents an intriguing investment opportunity. However, like any investment, it comes with its own set of challenges and uncertainties.Analysts' expectations paint a promising picture for Skechers' upcoming earnings, with the Zacks Consensus Estimate for revenues standing at $2,186 million, which signals a notable 9.3% improvement from the prior-year figure.Moreover, the company is anticipated to witness a year-over-year increase in its bottom line, with the consensus estimate for first-quarter earnings per share holding steady at $1.10 over the past 30 days. This forecast suggests an uptick of 7.8% from last year, hinting at potential earnings growth for Skechers amid a dynamic landscape.Well, the decision to invest in Skechers ahead of its first-quarter earnings requires careful consideration of both potential rewards and inherent risks.

Assessing Skechers' Pros & Cons

Skechers' recent performance has been impressive, with the company achieving record annual sales of $8 billion in 2023. This growth trajectory was supported by robust quarterly sales records, including fourth-quarter revenues of $1,960.9 million. Such consistent sales growth underscores the strong demand for Skechers products globally, reflecting positively on the company's brand strength and market position.Furthermore, Skechers' strategic initiatives, such as expanding into categories like football and basketball, demonstrate its commitment to innovation and diversification. Collaborations with top-tier athletes and celebrities, coupled with effective marketing campaigns, have helped elevate brand awareness and drive consumer engagement.The company's direct-to-consumer segment also continues to show strength, surpassing 50% of total sales for the first time. We anticipate direct-to-consumer revenues to increase 18.7% in the first quarter. This growth is fueled by expected improvements of 15.7% and 20.8% in the domestic and international direct-to-consumer businesses, respectively.Skechers' omnichannel strategy, along with its expanding retail footprint worldwide, positions it well to capitalize on evolving consumer preferences and shopping behaviors. Also, the company's focus on operational efficiency and cost management should support top and bottom-line growth.While Skechers' growth prospects appear promising, investors must also consider the risks. One notable challenge is the decline in wholesale sales, particularly in the domestic market. Conservative inventory management by retailers and inventory congestion issues in certain regions have weighed on wholesale performance. Furthermore, macroeconomic factors such as inflation and higher interest rates pose potential challenges for Skechers, impacting consumer spending behavior and overall company performance.