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No. of Recommendations: 4
Skechers (SKX)
Price $13.98
Dow 12,801.23
SP500 1342.64
Gold 1725
Oil 99.05
Silver 33.59
Copper 3.863
Cotton 0.8333




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
** Trading range between February 16, 2010 and the present was
** Gross margins were 40.5% down from 48.7%
** Cash flow was negative ($129.7 million) 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
** Trading range between July 27, 21011 and October 26, 2011 was $12.81 to $17.88
** 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 2, 2012 was $11.21 to $15.42


3Q:2011 Notes:


Sales for the quarter were $412.2 million down 25.7% from $554.6 million last year. TTM sales were $1.77 billion or $35.78 per share down from $1.95 billion or $39.64 last year.

Domestic wholesale revenues were $162.516 million down from $312.319 million last year. International wholesale segment reported revenues of $133.792 million up from $124.623 million last year. Ecommerce sales were $4.391 million down from $5.859 million.

Domestic gross margins were 35.1% while International gross margins were 40.4%. Their e-commerce sales had gross margins of 47.9%. Consolidated gross margins were 42.5% down from 45.6% last year.

The Company now has 272 domestic retail stores and 47 International retail stores. This segment had 55.68% gross margins on $111.484 million in sales. This segment makes up 27.05% of total sales.

Domestic wholesale revenues took the biggest hit reporting a drop of 48% to $162.5 million. I am sure it is no surprise that lower sales of men and women’s toning products drove the decreases. The average selling price of shoes going into this channel was $22.04 down from $25.87 last year. They sold 7.4 million shoes down from 12.1 million last year through their domestic wholesale channel.

The one bright point of the report was from the International wholesale segment. Sales were up 7.4% to $133.8 million.

Cash flow for the quarter was negative ($1.727 million) up from a negative ($28.649 million) last year. They spent $114.3 million in capital expenditures up significantly from $65.6 million last year. They spent $41 million on development costs for their new distribution center, $44.2 million in warehouse equipment upgrades and $20.5 million for new store openings and remodels.

They have $247.974 million in cash and only $138.316 million in debt. Total net cash was $110 million down from $214 million last year. Diluted share count was 49.399 million up slightly from 49.176 million last year. During the next six months, they will receive about $78.2 million in cash receipts which includes about a $61.1 million tax refund.

The Company has reached a tentative agreement to sell its distribution facility in Ontario, California. The sale is expected to close in the fourth quarter of 2011 and will result in a pre-tax gain of approximately $9.9 million.

The Company has inventory of $238.36 million down from $398.588 million last year.

ThompsonFn estimates November 22, 2011
4Q:2011 ($0.13)
Fiscal 2011 negative ($0.38)
1Q:2012 $0.25
Fiscal 2012 $0.80

thompsonFN estimates February 5, 2012
4Q:2011 ($0.23)
Fiscal 2011 ($0.45)
1Q:2012 $0.19
Fiscal 2012 $0.46

Conclusion:

The toning shoe sales are down and I doubt if they will make any significant rebound. However, Skecher’s isn’t just toning shoes. They have some really nice tennis shoes which I like and they are reasonably price and durable.

However, their earnings and cash flow are now negative. I did lighten, at a loss, which is something I don't like to do but I was pretty sure they were going lower and I could get some around $12. And I have a fairly large position in them. And then I forgot to buy back.

I think they have a good track record for coming up with new shoe lines. Like Best Buys, this is one where my record has been dismal. And yet I still own a fair share of both at much higher prices. I would buy another position if it dropped below $12 again. I thought I had already done that, but I must have forgotten since my records shows I didn't.

I think they have a good retail store plan which should serve them well in the future. This year will be a transition year. But one will have to patient. I wanted to increase my position under $12, but my position size is at a comfortable size and any shares I purchased under $12, would be a trading position, to support a much larger long-term position.

When earnings and cash flow go negative, I am more cautious. It is riskier to invest, even so, under $12 I would buy back those lightened shares. But then I would wait. Buying too much of a company, no matter how much you believe in them, when cash flow and earnings are negative is riskier. I am sure that guided my decision to lighten and bring the position down to more comfortable levels. Long-term I believe they will turn themselves around, so I am still holding the majority of my shares. But to mitigate some of the risk, I plan on trading them within a narrow range between under $12 to over $14 within my IRA.

That wasn't the only reason I lightened. I also believed the market was likely to go down than up, so I was positioning my cash for that possibility. That too, didn't work out right, since the market is doing quite well now. Cash generated is being put to work in my stronger companies and those I am most confident in. My SKX position is now a bit smaller, but well within my comfort zone.

They will report on February 15, 2012. I am really interested in the cash flow numbers. As soon as I get them I will be glad to report back on the boards. They have good International potential and as the build their retail store base, I think they will do well. But unfortunately I will have to wait longer than I thought, now that the toning lines are doing as well.



That will teach me to rely on memory and refer back to my notes.

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