Analyst: Skechers Faces Domestic Challenges But Could See Strong International Growth

Skechers USA Inc (NYSE: SKX) has reached its fair value after falling 17 percent in the last eight trading days, according to Susquehanna.

Analyst Sam Poser upgraded the footwear manufacturer from Negative to Neutral on Monday and maintains a $25 price target.

The company faces near-term domestic wholesale challenges but has opportunities in international markets, Poser said.

“We believe Skechers is being ‘crowded out’ at key domestic wholesale accounts by hot brands such as adidas AG (ADR) (OTC: ADDYY), Puma and Nike Inc (NYSE: NKE), as well as expanding Under Armour distribution,” Poser said in Monday’s note.

Susquehanna’s research indicates domestic retail store growth may be negatively impacting wholesale growth at Skechers “for the first time,” according to the firm. Susquehanna is forecasting 2.5 percent revenue growth in domestic wholesale for Skechers in fiscal 2017.

Strong International Numbers

Skechers’ overseas business stands in contrast to its U.S. domestic wholesale numbers: Susquehanna is forecasting 21 percent growth in the company’s international wholesale revenue in fiscal 2017 and 15 percent in fiscal 2018.

“The outlook for SKX’s [direct-to-consumer] business is also favorable as SKX’s issue in FY17 is mainly with key domestic wholesale accounts squeezing the company out of their growth plans,” Poser said, an issue that applies to end consumers “to a much lesser degree.”

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