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Can Skechers Bounce Back After Last Week's 10% Drop?

One of last week's biggest losers was Skechers (NYSE: SKX), slipping 9.7% on the week, even though there was no major company-specific news this past week. Skechers stock has has now closed lower for eight consecutive trading days, surrendering 17.1% of its value in that time. 

An analyst downgrade triggered the start of that eight-day slide a week earlier. Sam Poser at Susquehanna lowered his rating on the footwear giant's stock, making a rare two-notch move by going from "positive" all the way to "negative". Poser thinks new lines from Skechers are losing out to the kicks that trendier rivals are putting out. His industry sources claim that retailers are allocating more of their inventory to Skechers' competitors. Poser is hearing that Skechers' Energy Lights line is holding up well, but not enough to meet overall revenue expectations. 

Image source: Skechers.

Laces come undone

Shares of Skechers are still trading marginally higher in 2017 despite the 17%-plus slide over the past week and change since Susquehanna's double downgrade. The big push up came in mid-February after Skechers posted well-received quarterly results

Net sales climbed 6% to $764.3 million, well ahead of its earlier guidance. A 12% decline in its domestic wholesale business -- a sticking point in recent quarters and a continuing point of concern in Poser's downgrade -- was more than offset by a 17% increase in international wholesale and a 14% uptick in company-owned retail stores.

The domestic wholesale climate is going through a rough patch, and Poser slashed his domestic wholesale growth targets for fiscal 2017 as well as next year. Things are holding up better overseas, particularly in China this past quarter, where wholesale sales soared a hearty 49%. Skechers is also faring better with its own stores where it will naturally stock its own lines. Comps rose 3.6% in its latest quarter, a strong showing given the weakness we saw at many traditional retailers over the holidays.

Margin and profitability have been an issue. Earnings fell short of expectations last time out, and Skechers' own guidance for the current quarter may call for accelerating top-line growth -- up between 7% and 10% -- but it's also forecasting a lower profit than it posted a year earlier.

Shares of Skechers have been as mobile as the company's footwear. The stock had shed more than half of its value since peaking two summers ago, but it's closed higher in four of the past five years. And as noted, it's still trading higher so far this year despite the recent weakness. There's going to be a lot to digest when Skechers reports its first-quarter results later this month, and investor can only hope by then it will be long past this recent nasty streak of lower closing prices.  

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Rick Munarriz has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Skechers. The Motley Fool has a disclosure policy.