Skechers' (SKX) Strategic Efforts Bode Well: Hold The Stock?

Skechers U.S.A., Inc. (NYSE:SKX) commenced 2016 on a high note backed by a sturdy performance at its international wholesale business. The company delivered first-quarter earnings of 63 cents a share that comfortably beat the Zacks Consensus Estimate of 53 cents and surged from 37 cents earned in the year-ago quarter. In the trailing four quarters, the company outperformed the Zacks Consensus Estimate by an average of 21%.

Following Skechers’ strong performance, the Zacks Consensus Estimate witnessed an uptrend as analysts raised their estimates. Analysts polled by Zacks are convinced about the stock’s upbeat performance in the future. Over the past 60 days, the Zacks Consensus Estimate of $2.11 and $2.53 for 2016 and 2017 has jumped by 4 cents.

With increased focus on the new line of products, cost containment, inventory management, a global distribution platform and sturdy backlogs, the company remains confident of sustaining its growth momentum. Management is focused on product innovation, additional Skechers store openings, and increasing distribution channels by entering into international distribution agreements to boost sales and profitability.

Skechers has been steadily gaining ground by offering stylish and casual shoes at a more compelling price than conventional athletic brands. The company has benefited from the so-called athleisure trend that has been sweeping the retail sector in the U.S. Also, the growing preference for cheaper shoes in the nation is boosting the company’s market share.

Despite these positives, fashion obsolescence remains the main concern for Skechers' business model, which involves a sustained focus on product and design innovation. The company’s pioneering position may be hurt by delays in its product launches. Skechers operates in the highly competitive athletic footwear and apparel segment.

The stock currently carries a Zacks Rank #3 (Hold).

Stocks to Consider

Some better-ranked stocks in the retail sector include Delta Apparel Inc. (NYSE:DLA) , sporting a Zacks Rank #1 (Strong Buy), and The Children's Place, Inc. (NASDAQ:PLCE) and Carter's, Inc. (NYSE:CRI) , both holding a Zacks Rank #2 (Buy).