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Although retailers have been making a comeback this earnings season, it’s rare to find one who pulls out a performance quite like Skechers USA Inc (NYSE:SKX) did in the fourth quarter. While U.S. tax cuts caused the firm to post a $66.7 million loss, the rest of the report showed that every part of the business was firing on all cylinders. The good news pushed SKX stock up 7.5% on Friday.
Perhaps the most impressive part of Skechers’ Q4 results was its international success. The firm’s wholesale international business grew 40.2% — a significant achievement for CEO Robert Greenberg, who has been aiming to generate 50% of its sales overseas. The company didn’t do so badly at home in the States either — domestic wholesale sales rose 11.6%, the first double-digit growth in that segment in two years.
Margins were also on the rise, so much so that operating profit was nearly twice as high as the year-ago quarter at $55.7 million. Comps were up 12% and global retail sales made their way 25.8% higher. In short, it was an impressive showing for SKX stock.
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Is It Too Late?
So, with all this good news on the table it might seem like you’ve missed the boat with Skechers. Sure, it would have been much better to buy when SKX stock was trading around $20 per share, but the firm is seen continuing this monumental growth in the year to come. Not only that, but comparatively speaking the stock isn’t all that expensive.
Skechers stock trades at 21.2x forward earnings while the S&P 500 Index trades at 19.9x. That means SKX is trading at a discount compared to the overall market. Not only that, but Skechers is also markedly cheaper than its main competitors. Nike Inc (NYSE:NKE) trades at 24.8x forward earnings while Under Armour Inc (NYSE:UAA) trades at a whopping 58.5x.
So although some of SKX’s rally is certainly behind it, the firm’s share price isn’t that lofty when you compare it to the rest of the market. It’s also important to note that the overarching market trends right now — i.e. the correction that the broader market is experiencing — is weighing on some of the firm’s gains. Once the market has settled, the stock could continue to rise further.
What Sets it Apart?
SKX stock might be cheaper than some rivals like NKE, but it’s also not as big and not as experienced. However, in the current market for athletic gear, that might be a good thing. Athleisure, or athletic wear that can be worn casually outside the gym, has been a huge trend in the U.S. and that fashion will likely make its way abroad as well. Skechers has succeeded by offering consumers something no other brand does: comfortable athleisure gear that is also affordable.