Skechers (SKX) Thrives On Diversified Strategies, DTC Growth

Skechers U.S.A., Inc. SKX gained from the strength of its brands and the demand for comfort technology products in the second quarter of fiscal 2023. This success has been supported by robust marketing and distribution capabilities. Strength in the company’s direct-to-consumer (DTC) unit further drove its performance in the quarter under review.The global footwear brand focuses on enhancing distribution efficiencies, venturing into new product categories, and expanding its international presence. In line with this strategy, Skechers recently made a move to acquire its Scandinavian distributor, which is anticipated to catalyze increased sales growth in the coming years.

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A pivotal driver of Skechers' success is the significant surge in DTC sales, which experienced 29% growth in the second quarter of 2023. Benefitting from ongoing momentum in global direct-to-consumer operations and widespread international wholesale success, the company consistently demonstrates the robustness of the Skechers brand and the effective execution of an enduring growth plan.Skechers maintains a diverse brand lineup, spanning fashion, athletic, non-athletic and work footwear, all at attractive prices. This strategy facilitates product innovation, without diluting existing brands, and broadens the customer base. The company is bolstering global infrastructure, particularly e-commerce platforms and distribution centers.The expansion of physical stores remains a priority for Skechers, as evidenced by the opening of 50 stores in the second quarter of 2023. Its major growth in store expansion includes China, the United States, Chile, Vietnam, and the Nordic region. The company aims to open 90-100 stores worldwide throughout 2023.Skechers' international business serves as another significant sales driver. With a focus on global expansion through distribution networks, subsidiaries and partnerships, the company's international sales rose 17.9% year over year in the second quarter, contributing 60% to the total quarterly sales.Talking about Skechers' online presence, it has made significant investments in digital and omnichannel capabilities to create a seamless shopping experience for customers. This includes augmenting loyalty programs and integrating physical stores with digital platforms. Notable initiatives such as "Buy Online, Pick-Up in Store" and "Buy Online, Pickup at Curbside" have been implemented to enhance convenience and drive online sales.

Skechers is experiencing robust global sales, especially in the international markets. The acquisition of the Scandinavian distributor is anticipated to enhance 2023 earnings. (Read more: Skechers' Q2 Earnings Beat Estimates, Sales Rise Y/Y)The company aims for a $10-billion annual sales target by 2026 by expanding its store network, fostering omni-channel expansion and enhancing distribution capabilities. Management projects sales of $7.95-$8.1 billion for 2023 compared with the earlier stated $7.9-$8.1 billion, whereas it reported $7.44 billion in 2022. It envisions earnings per share (EPS) between $3.25 and $3.40 versus the prior mentioned $3.00-$3.20, whereas it delivered $2.38 last year.The third quarter is anticipated to yield sales of $1.95-$2.00 billion and EPS of 70-75 cents. The company recorded sales of $1.88 billion and EPS of 55 cents in the year-earlier quarter.This Zacks Rank #1 (Strong Buy) stock has outpaced the Zacks shoes and retail apparel industry in the past year. In the said period, shares of the company have gained 25.9% against the industry’s decline of 6%.

Here we have highlighted three more top-ranked stocks, namely Urban Outfitters, Inc. URBN, American Eagle Outfitters Inc. AEO and Crocs, Inc. CROX.Urban Outfitters, which specializes in the retail and wholesale of general consumer products, flaunts a Zacks Rank #1 at present. The company’s expected EPS growth rate for three to five years is 20.8%. You can see the complete list of today’s Zacks #1 Rank stocks here.The Zacks Consensus Estimate for Urban Outfitters’ current financial-year sales and earnings suggests growth of 5.3% and 66.3% from the year-ago period’s reported figure. URBN has a trailing four-quarter earnings surprise of 19.2%, on average.American Eagle is a specialty retailer of casual apparel, accessories and footwear. The company currently has a Zacks Rank #2 (Buy). The expected EPS growth rate for three to five years is 9.6%.The Zacks Consensus Estimate for American Eagle’s current fiscal-year earnings suggests growth of 8.3% from the year-ago reported numbers. AEO has a trailing four-quarter earnings surprise of 9.2%, on average.Crocs is one of the leading footwear brands with a focus on comfort and style. It currently has a Zacks Rank #2. CROX delivered an earnings surprise of 20.5% in the last reported quarter.The Zacks Consensus Estimate for Crocs’ current financial-year sales and earnings suggests growth of 12.9% and 11.2%, respectively, from the year-ago reported numbers. CROX has a trailing four-quarter earnings surprise of 19.9%, on average.

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