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No. of Recommendations: 10
Skechers (SKX)
Price $12.62
Dow 12,922.02
S&P500 1370.87
Gold 1711.50
Oil $107.4
Silver 34.175
Copper 107.4
Cotton $0.82

The present price is $12.62: PS ratio is .38: Cash flow yield was 6.89%


February 21, 2007 4Q:2007 earnings’ highlights:
** Revenues were $1.205 billion up from $1 billion
** Earnings $1.59 up from $1.06
** Cash flow for the year negative ($1.5 million) down from positive cash flow $61.869 million, but they made about $8 million for the fourth quarter.

February 12, 2008 4Q:2008 earnings highlights:
** Fiscal 2007 sales were $1.394 billion up from $1.205 billion
** Earnings per $1.63
** Diluted share count 46.741 million
** Cash flow was $70.18 million
** Cash $304 million: Debt $16.899 million

Through time to:

February 18, 2009
** 4Q:revenues were $298.088 million down from $302.041 million
** fiscal 2008 revenues were $1.44 billion up 3% from $1.394 million
** TTM sales were $1.44 billion or $31.22
** Loss ($0.44)* down from $0.26 last year
** fiscal 2009 earnings were $1.19 down from $1.63
** Diluted share count 46.123 million
** Cash $196.9 million: debt $16.76 million
** Cash flow for the year was negative ($94.29 million)
** Trading range between February 18, 2009 and April 29, 2009 was $5.20 (March 12, 2009) to $9.72: PE ratio range was 4.37 to 8.17: PS ratio range was .17 to .31

April 29, 2009 1Q:2009 earnings’ highlights:
** Revenues were $343.5 million down from $384.922 million
** TTM revenues were $1.4 billion or $30.10
** Earnings per share $0.18 down from $0.70
** TTM earnings were $0.67
** Diluted share count 46.467 million
** Cash flow for the quarter negative ($44.624 million) down from negative ($42.8 million)
** Trading range between April 29, 2009 and July 22, 2009 was $8.77 to $12.56: PE ratio range was 13.09 to 18.77: PS ratio range was .29 to .42
** Special note: the stock moved up over $2.00 after the report.

July 22, 2009 2Q:2009 earnings’ highlights:
** Revenues were $298.976 million down from $354.574 million
** TTM revenues were $1.34 billion or $29.05
** Earnings per share were loss ($0.13) down from $0.31
** TTM earnings were $0.23
** Diluted share count 46.282 million
** Cash $257 million: Debt $17.1 million
** Cash flow for six months $41.5 million up from negative ($64.4 million)
** Cash flow for the quarter $86.1 million
** Trading range between July 22, 2009 and October 21, 2009 was $12.16 to $23.39: PE Ratio range was 52.87 to 101: PS ratio range was .42 to .81

October 21, 2009 3Q:2009 earnings highlights:
** Revenues were $405.374 million up from $403.159 million
** TTM revenues were $1.34 billion or $28.50
** Earnings per share were $0.52 down from $0.60
** TTM Earnings were $0.15
** Diluted share count 47.095 million
** Cash $276.54 million: Debt $16.9 million
** Cash flow for nine months $59 million
** Cash flow for the quarter $17.5 million
** Trading range between October 21, 2009 and February 17, 2010 was $21.62 to $31.62: PE ratio range was 144 to 210: PS Ratio range was .76 to 1.11

February 17, 2010 4Q:2009 earnings’ highlights:
** Fiscal 2009 revenues were $1.436 billion down from $1.442 billion
** 4Q revenues were $388.62 million up from $298.088 million
** TTM Revenues were $1.436 billion or $29.70
** Fiscal 2009 earnings were $1.16 down from $1.19
** 4Q earnings were $0.58 up from loss ($0.44)
** TTM earnings $1.16
** Diluted share count 48.344 million
** Cash flow for the year $79.768 million
** Cash flow for the quarter $20.77 million
** Cash $295.675 million: Debt $18.2 million
** TTM cash flow $79.768 million or $1.65
** Trading range between February 17, 2010 and April 28, 2010 was $28.86 to $42.40: PE ratio range 24.88 to 36.55: PS Ratio range was .97 to 1.43: Cash flow yield was 3.9% to 5.7%

April 28, 2010 1Q:2010 earnings highlights:
** Revenues were $492.764 million up from $343.47 million
** TTM Revenues were $1.59 billion or $32.62
** Earnings per share were $1.15 up from $0.18
** TTM earnings were $2.13
** Diluted share count 48.742 million
** Cash flow $17.7 million up from $11.81 million
** TTM cash flow was $85.68 million $1.76
** Trading range between April 28, 2010 and July 28, 2010 was $31.63 to $44.90: PE ratio range was $14.85 to 21.08: PS ratio range .97 to 1.38

July 28, 2010 2Q:2010 earnings highlights:
** Revenues were $504.859 million up from $298.976 million
** TTM revenues $1.8 billion or $36.64
** Earnings $0.82 up from a loss of ($0.13)
** TTM Earnings $3.08
** Diluted share count 49.13 million
** Cash $273.266 million: Debt $32.4 million
** Cash flow for six months negative ($37.691 million) down from $41.474 million
** Cash flow for the quarter was Negative ($55.91 million) down from $29.66 million
** TTM Cash flow $603,000 or $0.01 per share
** Trading range between July 28, 2010 and October 27, 2010 was $21.22 to 38.92. PE ratio range was 6.89 to 12.64: PS ratio range was .58 to 1.06

October 27, 2010 3Q:2010 earnings’ highlights:
** Revenues were $554.626 million up 36.8% $405.374 million
** TTM revenues were $1.95 billion or $39.64
** Earnings were $0.74 up from $0.52
** TTM earnings were $3.30
** Diluted share count 49.176 million
** Cash $248.828 million: Debt $33.9 million
** Cash flow for nine months negative ($66.34 million) down a lot from $59 million
** Cash flow for the quarter negative ($28.7 million) down from $17.5 million
** Trading range between October 27, 2010 and January 28, 2011 was $19.00 to $23.75: PE ratio range was 5.76 to 7.20

February 16, 2011 4Q:2010 earnings’ highlights:
** 4Q sales were $454.619 million up from $388.62 million
** Fiscal 2010 sales were $2 billion up from $1.436 billion
** TTM revenues were $2 billion or $40.67 per share
** Diluted share count was 49.152 million up from 48.344 million
** 4Q earnings were $0.07 down $0.58
** Fiscal 2010 earnings were $2.78 up from $1.16
** Cash $233.6 million: Debt $81.98 million
** Gross margins were 40.5% down from 48.7%
** Cash flow was negative down from $97.8 million
** Cash flow for the quarter was negative ($63.36 million)
** Stores 288
** Trading range between February 16, 2011 and April 27, 2011 was $17.86 to 23.25: PE ratio range was 6.42 to 8.36

April 27, 2011 1Q:2011 earnings’ highlights:
** Revenues were $476.234 million down 3.4% from $492.764 million
** TTM revenues were $1.98 billion or $40.62
** Earnings per share $0.24 down from $1.15
** TTM earnings were $1.87
** Diluted share count 48.742 million
** Cash $197.9 million: debt $89.916 million: Net cash $108 million
** Book value $19.63 at the end of the quarter
** Gross margins 40.4% down from 48.2%: Operating margins 3.1% down from 16.4%
** Stores 291
** Cash flow negative ($45.4 million) down from positive cash flow of $17.7 million
** Trading range between April 27, 2011 and July 27, 2011 was 13.29 to $20.73: PE Ratio range was 7.11 to 11.09

July 27, 2011 2Q:2011 earnings’ highlights:
** Revenues were $434.351 million down from $504.859 million
** TTM revenues were $1.91 billion or $39.50 per share
** Cash $250.782 million: Debt $127.2 million: Net cash $123.6 million
** Earnings Loss ($0.62) down from $0.82
** Diluted share count 48.341 million
** Cash flow was negative ($40.814 million) down from negative ($37.691 million)
** TTM cash flow was negative ($132.82 million)
** Trading range between July 27, 21011 and October 26, 2011 was $12.81 to $17.88: PS ratio range was .32 to .45
** Special note: The stock moved up $2.65 to close at $16.95 per share a day after the report (July 28, 2011)

October 26, 2011 3Q:2011 earnings’ highlights:
** Revenues were $412.183 million down 25.7% from $554.626 million
** TTM revenues were $1.77 billion or $35.78 per share
** Earnings were $0.17 down from $0.74
** TTM earnings were negative ($0.13)
** Diluted share count 49.399 million
** Cash $247.974 million: debt $138.316 million (net cash $110 million)
** Cash flow for nine months was negative ($42.541 million) up from negative ($66.34) million last year
** Cash flow for the quarter was negative ($1.727 million) up from Negative ($28.649 million)
** TTM cash flow was negative ($105.901 million)
** Stores 319
** Trading range between October 26, 2011 and February 15, 2012 was $11.21 to $15.42: PS ratio range was .31 to .43

February 15, 2012 4Q:2011 earnings’ highlights:
** 4Q revenues were $283.248 million down from $454.619 million
** Fiscal 2011 Revenues were $1.61 billion down from $2 billion
** TTM revenues were $1.61 billion or $32.90
** 4Q earnings were Loss ($1.18) down from a gain of $0.07
** Fiscal 2011 earnings loss ($1.39) down from a gain of $2.78
** Diluted share count 48.931 million
** Cash $351 million: Debt $127 million: Net cash $224 million
** Cash flow for the year was $42.68 million or $0.87 per share
** Cash flow for the quarter was $85.222 million
** Stores 329
** 4Q Gross margins 39.8% down from 40.5%
** Trading range between February 15, 2012 and the present was $11.97 to $13.57: PS ratio range was .36 to .41: Cash flow yield range was 6.4% to 7.3%


4Q:2011 Notes:

Sales for the fourth quarter were down 37.69% to $283.248 million from $454.619 million last year. For fiscal 2011, sales were down 19.97% to $1.606 billion. Gross margins were 39.8% of sales down from 40.5%. Gross margins were hurt by lower sales volume and lower average selling prices.

They reported a decrease of 39.2% in sales from their domestic wholesale business to $688.2 million down from $1.13 billion last year. The weakest part of this business was from both men’s and women’s toning divisions. Average selling prices decreased to $20.46 per pair in 2011 down from $24.33 per pair in 2010. Volume sales were down 27.8% to 33.6 million pairs from 46.5 million pairs last year.

Their International business is faring better. They reported $487.296 million in sales outside the U.S up 11.6% from $436.637 million.

Now their retail business. For the year, retail segment sales fell $0.2 million or 0.1% to $410.5 million in 2011 compared to $410.7 million in 2010. The decrease was driven by negative same store sales offset by an addition of 37 domestic stores. Domestic same store sales fell 11.9% while International stores same store sales fell 2.1%. Their e-commerce sales fell 27.2% to $20.1% million. The Company operates 330 stores globally, including 120 U.S concept stores, 107 U.S factory outlet stores and 54 U.S warehouse outlet stores and 33 concept stores and 16 factor outlets internationally.

They reported a net loss of $57.661 million down from a gain of $3.237 million reported in the fourth quarter last year. Fiscal 2011 loss was $67.484 million ($1.18) down from a gain of $136.148 million last year or $2.78 per share.

Cash flow for fiscal 2011 was $42.68 million or $0.87 per share up from negative cash flow of ($129.7 million) last year. Capital expenditures also increased significantly rising to $122.238 million up 48.59% from $82.269 million last year. The Company reported cash flow of $85.222 million for the fourth quarter. Capital expenditures for the fourth quarter were $7.94 million down from $16.65 million, so they slowed things down in the fourth quarter of 2011.

The positive cash flow year, helped improve their balance sheet sending net cash to $224 million up from net cash of $151 million last year. Today they have $48.931million diluted share down from $49.152 million last year.


thompsonFn estimates: March 11, 2012
1Q:2012 ($0.25)
2Q:2012 ($0.14)
Fiscal 2012 ($0.05)
Fiscal 2013 $0.60



November 1, 2011 it was announced that Skechers would enter the performance footwear market with the Holiday 2011 launch of Skechers GOrun, a new minimalistic lightweight running shoe with mid-foot strike technology and GOimpulse sensors to enhance sensory feedback. Meb Keflezighi, an elite Olympic runner, ran his personal best time while winning the Olympic marathon trials in January while wearing a pair of custom Skechers GOrun footwear.

The Company expressed high hopes for their business in Japan after transitioning their business there from a third party distributor to a wholly-owned subsidiary. They believe they can double their business there in the next three to five years making Japan one of their largest subsidiaries.

The company has reduced inventories by $172 million to $226.407 million. The Company has inventory of $238.36 million down from $398.588 million last year. This level of inventory is about where it was before the toning shoes were launched at that time inventory averaged about $202 million.

They will also be getting a $52 million tax refund to be paid to them in the first or second quarter of 2012.


Conclusion:

I am not a big fan of book value as a metric; however, their book value is about $17.45 per share. They have $224 million in cash net of debt or $4.58 per share. They will get another $52 million in the form of a tax refund in the first half of 2012 or $1.06 per share. So their balance sheet is very strong.

They will probably have to pay a fine to the FTC for claims about the health benefit of the toning shoes. Adidas which had 42% of the market had to pay about $25 million, so I don't think SKX with 48% of the market will have to pay too much more.

They produced $42.68 million in cash flow for the year or $0.87 per share. This gives them a cash flow yield of 6.9%. Their cash flow for the holiday quarter was $85.222 million. Reduction of inventory drove cash flow. Their inventory levels now stand at about $226 million which is not too far off their levels before the toning shoes were introduced.

Their concept stores had positive same store sales in January which is encouraging because their retail business is very important to their future growth. The decline in toning shoes sales came at a bad time when the Company was gearing up for the holiday season that didn’t work out for them as toning shoes sales plummeted. So earnings, sales and cash flow have suffered by comparison to 2010 peaks. So now we need to think in terms of whether today’s price is a good one.

The Company is selling at very low price to sales ratios. Today the price to sales ratio is .36. The cash flow yield is 6.89%. The problem using these metrics we can’t be sure if sales and cash flow won’t continue to drop. They have a very strong retail strategy which I think will work for them going forward. It is still in its early stages of growth. Their stores have 56.48% gross margins better than any other part of their business. As a comparison their domestic wholesale and international whole sales divisions have grow margins of 27% and 40.27% respectively. Now we see why they are spending to build out their store base. It is also the reason I think, they are a fairly good speculation.

This is why I feel they are a good value here. I think the toning shoes sales declined surprised them and they were caught with a lot of inventory. They have worked through a lot of that inventory and by the third quarter of 2012, generally their strongest quarter; they may give investors a pleasant surprise. Or at least I hope so. They also launched their new GOrun lines of performance shoes which should sell better when warmer weather arrives. In other words because of the nature of the shoes, they aren’t really good holiday cold weather sales products. I am hoping for good things from this line in the third quarter.

tom e

thomas engle.
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No. of Recommendations: 1
Tom,

How do you feel about SKX now? I'm trying to decide between SKX and Blue Nile (NILE), as to which one to sell to satisfy my Required Minimum Distribution in my IRA's. Your quick thoughts, if possible, would be greatly appreciated, as I have to sell by tomorrow, Friday Dec. 21st, to comfortably make the deadline.
Sorry for last minute.

Jim (SB) (Foolish Procrastinator)
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No. of Recommendations: 4
Hi Jim,

When ever I am faced with a decision of either/or, I think in terms of selling half of both. This way I can keep my portfolio dynamics less changed. That is always an option too.

These are my thoughts on the two companies based on my updated notes.

Blue Nile price is up considerably from its 52 week low of $22.94, but there earnings aren't much better. They are taking less stock based compensation, but they are in my opinion still over paid. Their performance has been pretty bad. They blame input costs and I can sure understand that, but that problem isn't likely to go away soon. The holidays are approaching, so they should generate some good cash flow. But all the good news that I can imagine happening is in my opinion reflected in the present stock price. Their earnings of $0.14 for the latest quarter was good compared to their first quarter disaster, but it is only higher than last year, because they reduced stock based compensation by $0.02 and reduced the number of shares they had outstanding. They actually made less money in their latest quarter than last year, but the earnings per share was $0.01 higher. NILE is making $0.55 per share now. Since they purchased shares, htey have picked up a little debt not much and reduced cash to about $30 million. They still have a strong balance sheet, but I don't see them buying back too many more shares without a very strong holiday quarter. Last year, they made $45 million in cash flow for the fourth quarter. For the entire year, NILE made $10 million in cash flow.

SKX last quarter earnings were $0.22 up from $0.17, so they are reporting much better numbers. That could follow over well during the holidays. Presently I like SKX better at the present price $18.47 with the holidays coming up than I do NILE with the holidays coming up. SKX is also up considerably from their 52 week lows, but I think they can run up more, but that is just an opinion. I also own SKX and I haven't yet purchased NILE, but it has been on my wish list.

I would be an owner of NILE today if stock based compensation was lower. Or if they could continue to grow earnings even if just slightly each year.

You could lighten both stocks, in this way no matter which one does well or does badly you are only 50% exposed one way or the other. I tend to lighten stocks rather than sell entire positions.

But if you are asking my personal thoughts on which stock I think can run the most by their holiday report, I would go with SKX this time. Long-term it is very hard to say. I really believe NILE will continue to grow over the decades and take market share from brick and mortar jewelry stores, but perhaps Amazon might be hurting them too. I will continue to study NILE, but my preference this year is SKX. I believe it will go up over $20 again and if the holidays report is a good one as the third quarter was good, they might go over $25.

SKX cash flow last year was pretty good even as earnings crashed.
Last year, SKX made $42.68 million or $0.87 per share in cash flow, but for the quarter, they made $85.222 million. For the first nine months of this year, SKX has reported negative cash flow of (49 million) compared to negative cash flow ($42.5 million) which is a bit worse than last year. The difference is in inventory. They reduced inventory last year, which helped cash flow, but hurt earnings as that inventory went out at discounts. This year, they have built inventory and I hope that it will sell. Regardless, they should make more cash flow than NILE, yet they are selling for a much lower price than NILE.

Let's say SKX makes $35 million (which would be bad)in cash flow for they year. That would be $0.70 per share for a cash flow yield of 3.77%.

If NILE makes $20 million in cash flow this year which doubles last year's amount, their cash flow per share would be $1.55 which would give them a cash flow yield of 3.88%.

Who will do better? Or who is more likely to succeed this holiday. Can Nile double their cash flow which would give them a yield of 3.88%? Can SKX make just $0.70 which is lower than last year which would give them a cash flow yield of 3.77%. I am leaning toward SKX.

Those are my thoughts and how I look at the two stocks. When I am faced with having to sell two stocks, I tend to lighten both, rather than sell entire positions which I am very slow to do. I hope the information here will help you make a decision. Let us know what you decide to do.


tom e
thomas engle
TMF Coverage Fool
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Tom E,
You are my hero, and I can't thank you enough. An overnight reply, and not just a one or two liner, but a thorough and thoughtful discussion.

I'm still weighing my decision, but I'm leaning toward selling all of my Nile. If I do this, I'll still have to sell some of my SKX to reach my Required Minimum Distribution, but it will still leave me with a substantial position in SKX.

I like the Nile business model a great deal, but I don't like managements' style -- they don't appear to be very concerned with being shareholder friendly and I have lost confidence in their management abilities.

Kudos and thanks for all that you do for we Fools.

Jim
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Thanks Jim,

I like the Nile business model a great deal, but I don't like managements' style -- they don't appear to be very concerned with being shareholder friendly and I have lost confidence in their management abilities.

I agree and I also fear that Amazon is doing a very good job in the Jewelry business and is giving them plenty of competition.

tom e

thomas engle
TMF Coverage Fool
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