Skechers (NYSE:SKX) reports earnings soon, presenting investors with a potential opportunity. COVID-19 won't change why customers buy shoes, suggesting that Skechers's long-term growth prospects haven't changed. The company offers value-priced shoes that should be appealing in the current environment, plus significant growth potential once economies start to recover. Investors looking for a stock  that might be ready to rebound should start with Skechers.

Not everyone can afford $100+ shoes

According to Grandview Research, the footwear market is expected to grow by nearly 4% annually through 2025. A study by Allied Market Research suggests a 5.5% annual growth rate through 2027. With many countries pushing their citizens to stay active for health reasons, people are getting more use out of their shoes -- and replacing those shoes more often.

Athletic shoes on the shelf at a retail store.

Image source: Getty Images.

 Skechers sets itself apart by focusing on the lower-priced range of the shoe market. From 2016 through 2019, the average pair of Skechers shoes worldwide sold for between $21 and $23. By comparison, four out of Nike's five top-selling retail products were priced at more than $130 each .

Footwear price-per-unit projections suggest a tailwind that should assist Skechers.

Footwear global price per unit projections from 2020 through 2025

Data source: Statista. Chart by author.

We can see that for mid-range to high-priced shoes, growth in price per pair over the next five years will be tough to come by. By comparison, average prices in Skecher's low-end part of the market, are projected to post solid growth through 2025.

With unemployment still high, and economies worldwide on questionable footing, consumers may be pushed to choose value options. It's true that Skechers may never carry Nike's brand recognition. However, at average prices, you could buy nearly six pairs of Skechers for the cost of one pair of Nike shoes. With family budgets under pressure, buying shoes for the whole family vs. expensive shoes for one person isn't a difficult decision.

One year doesn't break this company

Skechers was in the middle of a multiple-year growth trend when COVID-19 upended the company's plans. If we look at the shoe company's sales growth, including projections for 2020 and 2021, the uptrend remains apparent.

Skechers full-year sales in billions from 2015 - 2019 and projections for 2020 and 2021.

Source: Skechers; estimates from Yahoo Finance. Chart by author.

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In an investor presentation from August, Skechers gave investors a look at the company's long-term growth drivers.

Segment

Domestic Wholesale

International Wholesale

Global Direct to Consumer

Annual Sales Growth 2015 through 2019

0.6%

22.5%

16%.

(Source: Skechers.)

Investors should be encouraged by these figures for two reasons. First, Skechers has been on a multiyear journey to expand its international store count. During full-year 2018, 80% of Skecher's new stores were international locations. In 2019, 85% of new store openings were international. Many international markets are further along the COVID-19 crisis than the U.S., and international expansion should translate to better sales growth overall.

Second, the company's CFO, John Vandemore said Skechers will be investing in connecting directly with its customer base. Over the next few quarters, Skechers plans to relaunch its web site, launch a new mobile app, and begin a new loyalty program. With the pandemic forcing shoppers online, Skechers hopes these actions will continue its 428% annual online sales growth from last quarter .

Vandemore suggested encouraging trends in the last conference call, saying that "each and every month of the quarter got better and stronger." With roughly 90% of company-owned stores now reopened, Skechers upcoming earnings should show a further path of recovery.

Follow the money

Following other investors into buying a stock isn't a guarantee of success. However, when hedge funds decide to pile into a company, it makes sense to investigate further. Near the end of 2018, roughly 20 funds carried a long position in Skechers's shares; in Q3 2020 that figure is 33. The fact that managers for millionaires and billionaires are buying Skechers' stock suggests they may spy a bullish opportunity here.

In addition, over the next two quarters, analysts expect Skechers to return to revenue growth. The growth doesn't stop there, as revenue is expected to rise by 23% annually in 2021. Analysts are also calling for a significant earnings recovery in full-year 2021 to within a few pennies per share of what the company made in 2019. In short, the pandemic has been a challenge for companies worldwide, yet Skechers seems poised to return to its long-term growth trend by next year. Investors looking for a mid-cap growth stock may find Skechers a perfect fit for their portfolio.