Skechers (NYSE: SKX) shines while Nike (NYSE: NKE) suffers
In business, one company’s woes are often another company’s opportunities.
That’s the case with No. 1 footwear company Nike (NYSE: NKE), which has stumbled over the past two years, thanks largely to self-inflicted wounds, and No. 3 Skechers (NYSE: SKX), which has thrived with its less expensive, more comfortable offerings.
Since Jan. 31, 2022, Skechers stock has climbed 69%, compared to a 51% loss for Nike. No. 2 Adidas (CBOE: ADS) has slid 10%.
Skechers’ sweet spot is slip-on shoes priced at $50-$100, while Nike focuses on high-performance athletic shoes often priced above $100.
Nike cut back partnerships with retailers like Dick Sporting Goods (NYSE: DKS) and Foot Locker (NYSE: FL) in recent years, seeking to sell its shoes directly to consumers. Meanwhile, Skechers has about 5,300 of its own stores globally and has built relationships with partners too.
The company saw its sales surge 16% in the third quarter from a year earlier to a record $2.35 billion. And earnings per share grew 36%.
Big-name endorsers
Skechers has entered the performance athletic category and signed on celebrity endorsers, which it largely avoided previously. Its spokespeople include basketball superstar Joel Embiid and soccer stalwart Harry Kane.
The company does carry some expensive shoes. Its Joel Embiid-endorsed basketball line ranges in price from $80 to $185.
Skechers’ strategy isn’t to compete directly with the big boys for its celebrities. “You get them because the marketplace didn’t take care of them,” Skechers Chief Operating Officer David Weinberg told The Wall Street Journal.
About two-thirds of the company’s sales come overseas, compared to 47% for Nike. Skechers says its sales in India exceed those of Nike. It caters to a less wealthy customer base than its bigger competitor.
Wall Street is bullish
Wall street analysts have noted Skechers’ success. Many of them have buy ratings on Skechers, though keep in mind that analysts are notoriously over-bullish.
UBS is one of the enthusiasts, seeing Skechers on track to meet its 2026 revenue goal of $10 billion. Revenue registered $8.7 billion in the 12 months through September.
UBS predicts 16% compound annual growth for Skechers’ earnings over the next five years.
“Our view is the market significantly underappreciates the strength of the Skechers brand name and the company’s revenue growth potential,” said UBS, as cited by MT Newswires.
The author owns shares of Nike.
