Consumers aren't only hot for sport utility vehicles, they're also running out to buy sport utility shoes.
Skechers USA Inc., the Manhattan Beach-based shoemaker popular with skateboarders and surfers, is reporting that sales of its so-called SUSs are climbing, and that's bolstering its bottom line.
Last week the company reported that net income for the first quarter ended March 31 was $6.7 million (19 cents per diluted share), about triple the pro forma net income of $2.1 million (7 cents a share) in the year-ago period.
Revenues for the quarter were $133.3 million, up almost 40 percent from $95.7 million in the first quarter of 1999.
Despite the strong results, Skechers' stock price dipped to $10.56 a share on May 3, the day earnings were released, down from $11.19 a day earlier. But analysts attributed that modest selloff to broader market weakness and the fact that Skechers' strong results had been expected and, therefore, were already reflected in its stock price.
"It was an ugly day in the market," said Deutsche Bank analyst Marcia Aaron, after the May 3 market close. "You'll notice a lot of the footwear stocks were down today, as well as a lot of apparel stocks."
Nonetheless, Aaron maintains her "buy" recommendation on the Skechers stock.
Harry Katica, an analyst with Prudential Securities in Atlanta, is even more bullish having issued a "strong buy" recommendation.
"They're doing great," he said of Skechers. "They're constantly introducing new styles and new products. In the last 12 months they've introduced all kinds of new styles in the jogger category, also in the sandal area and hiking shoes."
The company designs and markets contemporary casual footwear for men, women and children. The shoes sell in Skechers' own stores, as well as in department stores like Nordstrom and Macy's, and specialty retailers like Famous Footwear.
Sales of footwear products are seasonal in nature and the shoe industry is a trendy one, vulnerable to seasonal and stylistic fluctuations. The strongest sales are generally seen in the third and fourth quarters.
So how was Skechers able to buck that trend and report strong first-quarter sales?
"We've broadened our mix of product," said David Weinberg, Skechers' chief financial officer and executive vice president. "We have a lot more sandals now, and more sneakers."
Weinberg also credits the company's recent flurry of new retail store openings, including the March opening of its Universal Studios CityWalk store and its soon-to-open outlet on 34th Street in Midtown Manhattan.
The Midtown store will be the 43rd store in Skechers' chain, a dramatic surge from 26 stores a year ago.
In addition, recent media reports have stated that the company might expand into clothing as early as next year, offering a line of activewear. Weinberg declined to confirm or deny those reports, saying only: "We have no licensees right now, but we always have our eyes and ears open."
Skechers was founded in 1992 by CEO Robert Greenberg, who also founded L.A. Gear in 1979. That earlier shoemaker ultimately folded, falling victim to a California recession and a limited product line. Greenberg seems to have learned from his mistakes and now offers more than 600 different styles.
"(Greenberg) absolutely learned from that lesson," said Aaron. "L.A. Gear was too narrow in their assortment. They didn't broaden their appeal, and they didn't have enough new exciting products."
To avoid repeating that mistake, Greenberg has positioned Skechers to appeal to surfers and skateboarders, with its target market being the 12- to 25-year-old set. But the company's shoes have also caught on with the slightly older Gen-X adults, and even not-so-young professionals.
"A lot of (Skechers customers) may not want to be in that 12-to-25 target, but they want to buy into that youthful culture," said analyst Aaron.
The shoes run from $45 to $130 a pair for the four main styles Sport Utility, Hikers, Classics and Utility which include sandals, sneakers, hiking shoes and casual workplace styles.
Since going public last June at $11 a share, Skechers' stock has experienced its share of gyrations. After hitting its all-time low of $3.25 a share on Jan. 18, the stock began an upward surge in early February that has taken it back to near its IPO price.
"Their success is really due to the strength of the brand and the marketing they've done of the brand," Aaron said. "(But) they're still on the small side, given how broad the appeal is. Both in customers and styles, this company could be far greater in size."
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