Skechers (SKX) to Ride on E-commerce and Growth Efforts
Skechers U.S.A., Inc. SKX is banking upon digital initiatives including the Buy Online, Pick-Up in Store and Buy Online, Pickup at Curbside capabilities. It has been directing resources to enhance its digital capabilities, which includes re-launching of the websites, mobile application and loyalty program.
We note that the company-owned e-commerce sales soared 428.2% during the second quarter of 2020. This follows an improvement of 70% in the preceding quarter.
Notably, the company has launched a new online-shopping platform in the United States, and plans to roll out the platform across more countries. The company is also focusing on improving in-store point-of-sale systems to better engage with customers, both offline and online.
Additionally, management at its second-quarter earnings call, informed that the company is seeing signs of recovery in some of the markets. It returned to growth in China and cited that it has been witnessing green shoots in other international markets as well. Hence, these markets, with stores reopened, are likely to drive sales and overall performance.
Sales in China jumped 11.5% during the second quarter, which also includes e-commerce growth of 43%. Clearly, Skechers’ international business remains a considerable sales growth driver for the company with Europe and China being the significant markets outside the United States.
Meanwhile, the company has also taken actions to strengthen its business during such unprecedented downturns. It has curtailed non-essential discretionary spending, which includes business travel and lowering of non-digital marketing expenditures. The company also trimmed the headcount, furloughed selected employees and reduced compensation levels. Given the prevailing retail backdrop, the company has prioritized necessary and strategic projects.
We believe that greater emphasis on new line of products, store-remodeling projects, cost-containment efforts, inventory management, and global distribution platform bodes well. Encouragingly, this Zacks Rank #3 (Hold) has gained 17.8% in a three-month span compared with the industry’s 32.2% rally.
Wrapping Up
The footwear designer has been making continuous efforts to maneuver the coronavirus blues. The company is making strategic investments to improve infrastructure worldwide, primarily e-commerce platforms and distribution centers. However, any deleverage in SG&A expenses as well as headwinds related to currency and higher promotional environment cannot be ignored.
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