After seeing the pitfalls that come with being a one-trick pony, I have to commend footwear designer and retailer Skechers
The one-trick pony I'm referring to is shoe rival K-Swiss
Skechers' reach doesn't end there: It also targets men and women in the "active, casual, dress casual and dress footwear" market segments. And it's all working; management yesterday announced 20% sales growth for 2006, while diluted earnings jumped 50%. Its first-quarter outlook was also strong and ahead of what analysts were expecting.
Shares of Skechers have almost doubled in the past year and now trade for a lofty 24 times trailing earnings. Its price-to-earnings ratio will look more reasonable if bottom-line trends continue their impressive run. Problem is, the footwear space is subject to volatile fashion changes: what's hot one season may sit on store shelves the next. K-Swiss is currently suffering as consumers shun its Classic design, while Timberland
Additionally, Skechers' yearly net profit margin is still only 5.9%, even with the success it is seeing selling its brands. In contrast, K-Swiss posts margins near 15%, and Deckers' hovered around 12% over the last 12 months. Again, things are going well at Skechers and could continue for awhile, but I don't see much in terms of a sustainable competitive advantage like I see at industry leader Nike
For related Foolishness:
- Skechers' Shoe Fits: Fool by Numbers
- A Shoe Drops at K-Swiss: Fool by Numbers
- The Fall and Rise of Deckers Outdoor
- The Worst Stock for 2007: Crocs
Fool contributor Ryan Fuhrmann is long shares of Nike but has no financial interest in any other company mentioned. Feel free to email him with feedback or to discuss any companies mentioned further. The Fool has an ironclad disclosure policy.