1/#Skechers $SKX UBS Conference Notes
$SKX shares have been torpedoed (-22% since mid Feb) along with other international/retail names on the Russia/Ukraine conflict and consumer spending concerns. $SKX just presented at a UBS conference. Below are some quick notes:
$SKX shares have been torpedoed (-22% since mid Feb) along with other international/retail names on the Russia/Ukraine conflict and consumer spending concerns. $SKX just presented at a UBS conference. Below are some quick notes:
2/Exposure
Announced today a suspension of all shipments to Russia, less than 1% of sales are derived from Russia and Ukraine each. Operations in both are distributor businesses with no co. owned stores. $SKX has just 50 distributor stores in each vs. a co. total of 4,306.
Announced today a suspension of all shipments to Russia, less than 1% of sales are derived from Russia and Ukraine each. Operations in both are distributor businesses with no co. owned stores. $SKX has just 50 distributor stores in each vs. a co. total of 4,306.
3/Consumer Impact
So far, $SKX has seen "no evidence of issues or an impact" on total consumer demand. Noted consumers remain "very healthy", spending remains "incredibly robust", and demand characteristics continue to be "consistent" across markets.
So far, $SKX has seen "no evidence of issues or an impact" on total consumer demand. Noted consumers remain "very healthy", spending remains "incredibly robust", and demand characteristics continue to be "consistent" across markets.
4/Inflation
$SKX has not seen a demand impact from inflation either. No knock-on effect to consumer spending (yet). Historically, inflation has not interfered with $SKX ability to grow. In fact, $SKX tends to benefit due to a trade down effect as ASP's are lower than key peers.
$SKX has not seen a demand impact from inflation either. No knock-on effect to consumer spending (yet). Historically, inflation has not interfered with $SKX ability to grow. In fact, $SKX tends to benefit due to a trade down effect as ASP's are lower than key peers.
5/Supply Chain
Flow of product continues to be challenged. Q3'21 remains peak supply chain disruption though with improvement seen into Q4'21 and Q1'22. Unsurprisingly, $SKX has seen degradation in the supply chain in the last couple of weeks, but still not as bad as Q3'21 peak
Flow of product continues to be challenged. Q3'21 remains peak supply chain disruption though with improvement seen into Q4'21 and Q1'22. Unsurprisingly, $SKX has seen degradation in the supply chain in the last couple of weeks, but still not as bad as Q3'21 peak
6/COVID
$SKX still seeing sporadic impact on physical locations, largely in Asia, government protocols remain strict. Expects continued intermittent disruption through '22 but not at '21 scale. At a global level these disruptions are having little effect on business performance
$SKX still seeing sporadic impact on physical locations, largely in Asia, government protocols remain strict. Expects continued intermittent disruption through '22 but not at '21 scale. At a global level these disruptions are having little effect on business performance
7/Foot Locker $FL
$NKE's recent product pull from $FL opens up a large opportunity for $SKX's wholesale business to increase shelf position. Noted "robust dialogue" with many other retail brands due to $NKE DTC focus. Supply chain issues constrain $SKX in the near term though
$NKE's recent product pull from $FL opens up a large opportunity for $SKX's wholesale business to increase shelf position. Noted "robust dialogue" with many other retail brands due to $NKE DTC focus. Supply chain issues constrain $SKX in the near term though
8/India
>$1bln potential, "lots of feet", considers India it's most lucrative long term opportunity. Attractive position, no other 800lb gorilla in the market, large peers have struggled to gain traction. $SKX still very early stage in scaling up. Continues to see rapid growth
>$1bln potential, "lots of feet", considers India it's most lucrative long term opportunity. Attractive position, no other 800lb gorilla in the market, large peers have struggled to gain traction. $SKX still very early stage in scaling up. Continues to see rapid growth
9/Pricing
Sees recent '21 price increases (DTC ~19%) as durable with room to enact more modest price increases in '22 if needed. As supply chain costs abate, $SKX noted they do see potential "value capture" accreting to gross margin but "not banking on it"
Sees recent '21 price increases (DTC ~19%) as durable with room to enact more modest price increases in '22 if needed. As supply chain costs abate, $SKX noted they do see potential "value capture" accreting to gross margin but "not banking on it"
10/Valuation
With $SKX shares off -22% since mid-Feb, $SKX trades at ~11x NTM P/E at the low end of comps over 2015-2022. Trades at a very wide discount to large footwear peers like $NKE and $ADS.GR.
With $SKX shares off -22% since mid-Feb, $SKX trades at ~11x NTM P/E at the low end of comps over 2015-2022. Trades at a very wide discount to large footwear peers like $NKE and $ADS.GR.
11/Conclusion
Overall, $SKX direct exposure to Russia/Ukraine is small (<2%) international is large at ~65% though and is $SKX's main growth driver (drove 80% '15-'21). The sell off in $SKX shares is certainly directionally valid here but has steeply discounted $SKX shares
Overall, $SKX direct exposure to Russia/Ukraine is small (<2%) international is large at ~65% though and is $SKX's main growth driver (drove 80% '15-'21). The sell off in $SKX shares is certainly directionally valid here but has steeply discounted $SKX shares
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