On Monday, Barclays initiated coverage on shares of Skechers USA (NYSE:SKX), assigning a favorable Overweight rating and setting a price target of $71.00. The firm's optimism toward the footwear company is grounded in several key factors, including an anticipated improvement in the U.S. wholesale channel, marked by inventory replenishment.
The analyst at Barclays highlighted the brand's consistent and stable operating performance, which is expected to continue as the company reinvests in its business. This strategy is aimed at driving future profitable growth while maintaining an underlying low-teens operating margin. Additionally, Skechers' command over the market segments focused on comfort and affordability, especially among the older demographic, has been reinforced by proprietary surveys.
The analysis also pointed to a strategic shift in channel and geographic distribution, with direct-to-consumer (DTC) and international growth being pivotal areas. These elements are accompanied by product expansion possibilities, notably with the introduction of Hands Free Slip-ins technology and new forays into basketball and football product lines.
The report concluded with a positive outlook on Skechers' inventory returns, which are improving alongside the company's lease-adjusted return on invested capital (ROIC). Cleaner wholesale inventories are also expected to support earnings and provide potential for multiple expansion in the stock's valuation.
InvestingPro Insights
Barclays' bullish stance on Skechers USA (NYSE:SKX) is further supported by key financial metrics and market performance data. As per InvestingPro, Skechers is trading at a compelling P/E ratio of 17.16, suggesting that the stock may be undervalued relative to its near-term earnings growth potential. Additionally, the company's PEG ratio stands at an attractive 0.37, indicating that investors could be looking at a favorable growth-to-price scenario.
InvestingPro Tips highlight that Skechers operates with a moderate level of debt and has liquid assets that exceed its short-term obligations. This financial prudence, coupled with a gross profit margin of 51.9% over the last twelve months as of Q1 2023, underscores the company's efficient operations and potential for profitability, which is also anticipated by analysts.
Investors interested in Skechers may also note the company's significant price appreciation, with a 25.15% total return over the last six months, signaling strong market confidence. For those seeking more insights, there are additional InvestingPro Tips available, offering a deeper dive into Skechers' financial health and market prospects. To access these tips and benefit from a comprehensive investment analysis, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
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