Skechers (NYSE:SKX) executed a 3-for-1 stock split on Oct. 16. Every shareholder received two additional shares with the stock dropping to a third of its previous price. It was a zero-sum game. There was an unintentional 3-for-2 stock split a week later after the athletic footwear maker posted disappointing quarterly results, but investors didn’t receive any more stock.
Yes, that’s a lighthearted way to describe the gloomy aftermath following Skechers’ rough quarter last week. The stock shed nearly a third of its value on Oct. 23 as growth decelerated, particularly at its domestic wholesale division that was rolling at a torrid pace before last week’s letdown. The market had been spoiled in previous quarters.
The stock’s 31.5% hit in a single day hurts — that’s no joking matter — but it’s hard for longtime investors to complain. The stock has nearly tripled since the start of last year even after accounting for the post-earnings hit.
Skechers is in a good place. Its brand isn’t as widely celebrated as Nike (NYSE:NKE), but it has grown to command half of the U.S. walking footwear market. It’s a distant second to Nike in the meatier realm of sports footwear, but at least it’s still a silver medalist.
Skechers has been getting aggressive with its celebrity endorsements, and unlike Nike that has historically flocked to top athletes, Skechers isn’t afraid to go pop with Demi Lovato, retired with Joe Montana, or even controversial with Pete Rose.
Even Ringo Starr has gotten in on the promotional fun with Skechers, promoting its Relaxed Fit shoes earlier this year. You’re unlikely to see Nike courting any 1960s rock stars anytime soon.
Skechers expects to have about 1,250 namesake retail stores around the world by the end of the year, and same-store sales have been strong. Comps clocked in at 10.6% last year, and have continued to hold up in the low double digits, even during last week’s poorly received third quarter where same-store sales rose a respectable 10.4%.
The fundamentals are still holding up their end of the bargain. The quarter that the market deemed horrific because it failed to live up to expectations still found Skechers clocking in with $856.2 million in revenue, 27% ahead of where it was a year earlier. Earnings from operations rose 29% to $95.6 million.
Skechers isn’t Nike, but it’s still growing a lot faster than the sultan of swoosh despite trading at a much lower trailing earnings multiple. Last week’s hit wasn’t pretty, but laces still come undone on good shoes.