Skechers (NYSE:SKX) stock rallied for double-digit gains on Friday after the shoemaker reported on its second-quarter earnings. The gains added to what is now a 71% return so far this year -- after a 39% drubbing in 2018. The year didn't start out pretty, though.

During Skechers' first quarter, both sales and earnings came in near the lower end of expectations due to global economic headwinds, negative currency exchange rates, and a floating Easter holiday (a popular apparel shopping event) that messed with comparable figures from last year. Skechers handily put those worries behind it in Q2, though, and it looks like another sales record will be set in 2019.

What just happened

Negative currency exchange rates were a factor again in the spring. As more than half of Skechers' sales come from overseas, a strengthening U.S. dollar means money is lost when a foreign currency is converted back into U.S. greenbacks. Nevertheless, Skechers was back in double-digit growth mode, notching an 11% increase year-over-year (up 14% when excluding exchange rates). The positive trajectory did much to erase the memory of the meager 2% revenue advance at the start of the year.


Six Months Ended June 30, 2019

Six Months Ended June 30, 2018

YOY Change


$2.54 billion

$2.38 billion


Gross profit margin



(0.7 pp)

Operating expenses

$935 million

$925 million


Adjusted earnings per share




YOY = year over year. Pp = percentage point. Data source: Skechers.

Besides a strong currency headwind, there was one other blight on the second-quarter report: Gross profit margin on shoes sold was down. Skechers said it increased its promotional pricing to clear out seasonal merchandise in some areas. In contrast, the overall U.S. business rebounded, the direct-to-consumer digital business was up 14%, and U.S. comparable-store sales on the retail side (a combination of foot traffic and average customer ticket size) were up 4.2%. Operating expenses were close to flat after a big surge in 2018 due to numerous expansion efforts, including building a distribution network in China and breaking ground on a headquarters expansion project in Southern California. It all added up to a solid bottom-line increase for shareholders. 

A shot from the ground up of three young people jogging across a bridge.

Image source: Getty Images.

Skechers puts 2018 woes in the rearview mirror

All in all, it was an excellent quarter, and it looks like the short-term challenges Skechers was facing late in 2018 and early 2019 are behind it. There is still worry that the global economy is in a precarious spot, especially given ongoing trade disputes and resulting slowdowns in consumer activity in some regions around the globe.

But Skechers' brand is winning in spite of those challenges. Even though more than half of sales are derived from overseas, international business still shines as the best opportunity for the quirky shoemaker. New company-owned retail stores are opening in new markets -- especially in emerging countries like India, China, and the Middle East -- and ex-U.S. sales reaccelerated to nearly 20% growth during the quarter.


International YOY Growth

Q2 2019


Q1 2019




YOY = year over year. Data source: Skechers.

For the third quarter, management sees sales coming in between $1.325 billion and $1.350 billion, good for at least 13% growth over the same period a year ago. Earnings per share should be between $0.65 and $0.70, compared with $0.58 in 2018.

After a challenging stretch fraught with heavy investment and volatile bottom-line earnings results, Skechers looks like it's out of the dog house again.

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