Skechers (NYSE:SKX) is stepping up to provide fresh financials this week, and it's going to have to be a strong showing if the footwear maker wants to justify its recent gains. Shares of Skechers have moved higher in seven of the past eight months, and it's in the process of bouncing back after last year's 19% slide.
Growth has slowed at Skechers. It has posted single-digit growth in three of the past four quarters. It had a streak of 14 consecutive quarters of double-digit percentage growth before that. The shares are rallying in recent months, but the stock is still trading nearly 47% below its all-time peak set two summers ago.
Skechers' guidance back in April was calling for $950 million to $975 million in net sales for the second quarter, 8% to 11% more than the $881.1 million it rang up a year earlier. If it were to land smack dab in the middle of that outlook it would be the fourth time in the past five quarters that Skechers fails to crack into the double digits when it comes to top-line growth.
The news gets worse on the bottom line. The walking and athletic footwear giant is targeting earnings per share between $0.42 and $0.47. Skechers posted a profit of $0.48 a share a year earlier. Even if it lands at the high-end of its range it will be the fifth consecutive quarter of declining earnings.
Analysts are perched near the midpoints of Skechers' earlier projections, holding out for a profit of $0.44 a share on $966.5 million. Bulls will argue that Skechers may just be playing it safe with its guidance, but Wall Street pros have actually overestimated Skechers' ultimate profit in three of the past four quarters.
One thing that will help Skechers is the timing of the Easter holiday. It's a popular shoe-shopping break, and it slipped from March last year to April this time around. It should provide a modest boost in pitting this Easter-backed quarter with last year's Easter-free second quarter.
Another thing to watch is how Skechers' domestic wholesale business holds up. It's been a laggard in recent quarters, clocking in flat during the first quarter. It's been Skechers' retail business and international wholesale operations shouldering the burden of growth.
One final nugget to keep an eye on is the footwear distributor's expansion rate. Skechers went from expecting to open 70 to 90 new stores this year in February to just 50 to 75 new company-owned retail locations when it reported in April. Skechers would have to nearly double to get back to its 2015 all-time highs, something that won't happen overnight -- but a strong second quarter would keep momentum going in the right direction.
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