Why SKX Might Be Your Next Value Pick: A Closer Look at Its Potential

Core Viewpoint - Skechers U.S.A., Inc. (SKX) is identified as a compelling value play in the Shoes and Retail Apparel industry, trading at a forward price-to-earnings ratio of 14.20, which is significantly below the industry average of 23.44 and the Consumer Discretionary average of 19.36, indicating potential for investors seeking attractive entry points [1] Financial Performance - SKX shares are currently trading 9.1% below their 52-week high of $75.09, reached on June 12, 2024, while the stock has gained 12.3$68.23, trading above its 50-day and 200-day simple moving averages of $64.20 and$65.02, respectively, indicating a continued uptrend [3][4] Growth Strategies - Skechers is making significant investments in global infrastructure, focusing on retail stores, e-commerce platforms, and distribution centers to enhance omnichannel capabilities and expand its direct-to-consumer (DTC) business [6] - The wholesale segment is expected to continue growing throughout fiscal 2024, with third-quarter sales rising 20.6% to $1.42 billion, driven by a 26$931.7 million, reflecting the company's focus on consumer engagement and online platform expansion [8] International Sales - International sales have seen substantial year-over-year growth of 16.4%, now accounting for 61% of Skechers' total sales, highlighting the importance of its global presence [9] Financial Outlook - Skechers has raised its fiscal 2024 sales forecast to between $8.93 billion and$8.98 billion, up from the previous estimate of $8.88-$8.98 billion, reflecting solid growth from $8 billion reported in fiscal 2023 [10] - The company also raised its earnings per share (EPS) guidance to$4.20-$4.25 from$4.08-$4.18, showcasing significant growth from the$3.49 EPS achieved last year [10] Capital Expenditure - To support its goal of reaching $10 billion in annual sales by 2026, Skechers anticipates capital expenditure of$375-$400 million, focusing on store openings and enhancing distribution infrastructure [11] Margin Challenges - Skechers registered an 80-basis-point contraction in the third-quarter gross margin to 52.1% due to higher promotional activities and pricing pressures, with expectations of flat or slightly declining margins in the fourth quarter [12] - The company experienced a 5.7% decline in sales in China, attributed to macroeconomic challenges and subdued consumer spending on non-essential goods, which is concerning given China's role in Skechers' international growth strategy [13] Investment Sentiment - Despite promising growth potential, Skechers faces near-term challenges such as margin pressures and a slowdown in China, reflected in a Zacks Rank 3 (Hold), suggesting investors may want to wait for clearer signs of margin recovery before making new investments [14]