Meb Keflezighi ran out to an early lead in last month’s Boston Marathon and became the first American to win the race since 1985. But his primary sponsor, Manhattan Beach shoemaker Skechers USA Inc., had been setting the pace even before.
One day after Keflezighi’s big win, Skechers reported earnings of 61 cents a share, nearly doubling the consensus analyst estimate of 33 cents. Revenue grew 21 percent compared with the same period last year and net income more than tripled, from $6.9 million to $31 million.
Shares of Skechers have been sprinting along since, moving up 6 percent during the week ended April 30 to close at $40.99, making it one of the top gainers on the LABJ Stock Index for the second consecutive week. (See page 40.) The stock is up 25 percent year to date and 96 percent for the last 52 weeks.
“The record first quarter sales are evidence that our product initiatives are working and our ongoing efforts to elevate our product offering with fresh innovative footwear styles is resonating with consumers,” Skechers Chief Executive Robert Greenberg said when the earnings were released April 22.
The company refused to speak to the Business Journal for this article.
Jeff Van Sinderen, an analyst who covers the company for West L.A. investment bank B. Riley & Co., said the company’s new line of performance shoes was a major driver of its strength. The company produced 10 of the top-selling 250 models of athletic shoes last year, according to industry tracker SportsOneSource in Boulder, Colo.
However, compared with the big names such as Nike and Adidas, the company isn’t a big player in the $7 billion performance running shoe market.
Skechers introduced a line of performance running sneakers in 2011. It was initially met with skepticism because the company wasn’t known for making that type of footwear. However, the line now gets respectable mentions on running blogs and just received a huge shot in the arm with Keflezighi’s win.
“They’re executing very well on product, their business has momentum and I think they’re well-positioned,” Van Sinderen said.
Greenberg previously founded L.A. sneaker company LA Gear, which became hugely popular in the early 1990s, in large part by tying itself to celebrity endorsers including Kareem Abdul-Jabbar, Joe Montana, Wayne Gretzky, Paula Abdul and the late Michael Jackson.
At Skechers, Greenberg has made use of that same strategy over the years, calling on Montana and Gretzky and supplementing them with a new generation of famous faces, such as Kim Kardashian and Robert Downey Jr.
But Keflezighi, a UCLA grad and Olympic silver medalist, might turn into the company’s best salesman yet.
Skechers currently has a line of Keflezighi-branded sneakers, called GOmeb, and is featuring them prominently in company ads. The Boston Marathon victory will likely boost sales of GOmeb and perhaps the rest of Skechers’ running shoes.
“It could have a very positive impact on their performance business,” Van Sinderen said.
Skechers had been running a round road until this year. It settled a class-action lawsuit related to its Shape-Ups sneakers in 2013 for $40 million. The sneakers, which had a rounded sole the company claimed would help people lose weight and tone their bodies, were widely criticized. Kardashian endorsed the shoes in a 2011 Super Bowl commercial. The Federal Trade Commission said the company made false claims about the product, leading to the settlement. The company then had to clear the inventory of the shoes, which hurt profits.
In his April 23 report on the company, Van Sinderen wrote that Skechers should continue to perform well over the rest of the year. He noted that it was one of the few companies in the footwear space that has strong momentum and growth, in what he called the “challenging retail environment” of the first quarter of 2014.
Van Sinderen, who raised his price target on the company from $45 to $49 a share, also mentioned Skechers’ strong backlog – the company’s sales orders that are yet to be filled. The backlog has grown 35 percent compared with the same period a year earlier.
“We believe that Skechers is well-positioned to profitably grow the business in 2014,” he wrote.
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