Earnings preview: Here’s all you need to know ahead of Skechers’ Q2 report

Skechers, Inc. (NYSE: SKX) has been an investors’ favourite due to its positive earnings surprises and stable financial performance in the highly competitive footwear market. The sneaker maker is all set to unveil its June-quarter results Thursday after the closing bell. While the outlook remains bullish, the continuing slump in the domestic wholesale business could be a dampener.

The Manhattan Beach, California-based company has been successful in tackling competition and the softness in sales through various steps including cost-cutting. Currently, sales are on the recovery path, reflecting the revamped product line-up and effective management of inventory.  Moreover, an increasing number of customers now use the company’s online platform for shopping.

The improvments in the distribution channel and growing international presence, especially in China and Europe, bodes well for the company. These factors could give the top-line a boost in the second quarter. Looking ahead, the management is quite bullish about the overseas operations.

It needs to be seen to what extent the international market would help the company override the slump in the domestic market, especially for the wholesale business. Though the cost-management strategy has helped reduce expenses, elevated general and administrative expenses will eat into margins.

Looking ahead, the management is quite bullish about the company’s international operations

Market watchers are of view that the company will report higher earnings for the second quarter, estimated at $0.34 per share. Supporting the bottom-line, revenues are seen growing 7.4% annually to $1.22 billion. The consensus estimate is slightly above the company’s own guidance for the quarter.

Related: Skechers Q1 2019 Earnings Conference Call Transcript

For the first quarter, the company posted earnings of $0.71 per share, which was lower than $0.75 per share reported a year earlier. However, net sales moved up 2% annually to $1.28 billion during the three-month period.

The recovery of Skechers’ shares, after slipping to a two-year low in December 2018, lost momentum recently. The stock has gained 31% in the past twelve months and 48% since the beginning of 2019.

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