We recently upgraded the recommendation on Skechers U.S.A., Inc. (SKX) the designer, marketer and distributor of footwear, to Outperform from Neutral. 

We believe, Skechers’ sustained focus on new lines of products, opening of new retail stores and distribution channels, and the development of new international distribution agreements, should facilitate the increase in sales and profitability. With growing operations in Brazil, China, Hong Kong and Chile, the company remains on track to continue its growth momentum in fiscal year 2010.
The company’s quarterly earnings had outperformed the Zacks Consensus Estimate in all the four quarters of fiscal year 2009. Skechers’ fourth-quarter earnings of 58 cents a share surpassed the Zacks Consensus Estimate of 52 cents, and improved substantially from a net loss of 44 cents delivered in the prior-year quarter. 

The company’s earnings surprise history, when compared to the Zacks Consensus Estimate varies from 11.5% to 700% with the four quarters averaging 195.8%. 

Further, the company’s international business provides an enormous second leg of growth, in our opinion. Skechers through its distribution networks, subsidiaries and joint ventures is poised to enhance its global reach in the footwear market.
The company’s domestic wholesale business also regained its lost momentum in fourth-quarter 2009 rising 38%, after falling 10% in the third quarter, 20% in the second quarter, and 18% in the first quarter, driven by strong sales in men’s, women’s and kid’s product lines, and increase in price.
Moreover, a healthy balance sheet and in-demand inventory position it to capitalize on future growth opportunities. We therefore believe that the stock will Outperform in the near future.
Read the full analyst report on “SKX”
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