I originally made Skechers USA, Inc. (SKX) a Long Idea in May 2018 and have reiterated my bullish view on the stock many times. Since my last update, SKX has outperformed as a Long Idea, but most recently, shares plummeted after reporting 4Q24 earnings. This drop begs the question, does Skechers still provide quality risk/reward? As I’ll show below, the answer is yes.
SKX offers favorable Risk/Reward based on the company’s:
- consistent revenue and profit growth,
- domestic and international sales growth,
- rising market share,
- high customer satisfaction, and
- cheap stock valuation.
What’s Working
Quality Fundamentals
Skechers has grown revenue by 14% and net operating profit after-tax (NOPAT) by 15% compounded annually since 2014. See Figure 1.
The company improved its NOPAT margin from 8.1% in 2014 to 8.9% in 2024 while invested capital turns increased from 1.4 to 1.6 over the same time. Rising operational and capital efficiency drive return on invested capital (ROIC) from 11% in 2014 to 14% in 2024.
Additionally, the company’s Core Earnings rose 17% compounded annually from $141 million in 2014 to $654 million in 2024.
Figure 1: Skechers’ Revenue and NOPAT Since 2014
Growth Enhanced by Large Physical Presence Worldwide
Skechers’ business operates through two main segments, wholesale and direct-to-consumer, both of which improved in 2024.
The company’s direct-to-consumer segment boasts a large network of physical stores across the world. At the end of 2024, Skechers owned ~1,800 retail stores worldwide while distributors, licensees, and franchisees operated another ~3,500 stores, which brings Skechers’ total retail locations to ~5,300. For reference, footwear giant Nike (NKE) operates a retail store count of just over 1,000.
With a larger store footprint compared to its most well-known peer, Skechers leverages locations to allow more consumers to experience their footwear in person. In 2024, Skechers grew its direct-to-consumer sales 11% YoY, from $3.5 billion in 2023 to $3.9 billion in 2024.
On the other hand, Skechers’ wholesale sales, which include stores operated by third parties (licensees, franchisees such as sporting goods retailers, department stores, and more), grew 13% YoY, from $4.5 billion in 2023 to $5.1 billion in 2024.
Combined, Skecher’s total sales grew 12% YoY in 2024 and reached a company record $9.0 billion.
Domestic Market Share Growth
Although Skechers is, in its own words, “the third largest footwear company in the world”, it maintains double digit revenue growth rates, a feat that is not always the case as consumer goods companies grow larger.
More importantly, the company has grown revenue faster than the overall market, thereby taking market share in the process. Per Figure 2, Skechers’ market share of U.S. clothing and footwear expenditures rose from 0.41% in 2014 to 0.65% in 2024.
Figure 2: Skechers’ Market Share of Clothing and Footwear Expenditures: 2014 – 2024
Growing Internationally, Too
Skechers currently operates in more than 180 countries, and the company’s international sales accounted for 62% of its total sales in 2024, up from 34% 2014. Since 2014, Skechers’ international sales grew 21% compounded annually. Last year, the company’s international sales grew 12% YoY.
Entering New Sports Markets
Skechers is expanding beyond its traditional lifestyle footwear and into the global sports world, with a focus on international stars rather than only going after those most known in the United States.
Skechers Football (soccer) launched with the 2023/2024 season, when the company signed a lifetime global deal with English national captain and current Bundesliga leading goal scorer Harry Kane. Other ambassadors include Ghana national Mohammed Kudus and La Liga star Isco Alarcon.
Additionally, the company entered the second largest sport in the world, Cricket. Skechers launched Skechers Cricket in 2024, when it signed Mumbai Indian cricketers Ishan Kishan and Yastika Bhatia.
In April 2024, Skechers signed the 2022-2023 season NBA MVP Joel Embiid to a multi-year sneaker deal, making him the face of the company’s basketball division. Other ambassadors include three-time NBA All-Star Julius Randle.
Skechers management believes sports ambassadors enhance brand awareness and drive consumer demand. Importantly, Skechers is expanding its efforts on the global stage, which will support further international sales growth.
High Customer Satisfaction
Skechers has built a strong brand name in the footwear industry. In fact, Skechers is the leading footwear brand when it comes to customer satisfaction. According to the American Customer Satisfaction Index, Skechers tied for the highest score, an 85, among athletic shoes companies in 2024.
Figure 3: Satisfaction Benchmarks by Athletic Shoes Companies: 2023 – 2024
Repurchases Provide Yield, But Better Use of Capital May Exist
Skechers does not pay a dividend, but it does return capital to shareholders through share repurchases. From 2018 through 2024, the company repurchased $694 million (8% of market cap) of shares. The company repurchased $303 million of shares in 2024 alone.
As of December 31, 2024, the company has $790 million of shares available to repurchase under its current authorization. Should the company repurchase shares at its 2024 rate, or $330 million of shares in 2025, the repurchases would represent 3.8% of the current market cap.
However, it’s important to note that share repurchases and dividends may not be the best use of capital, as Skechers has a high ROIC and high NOPAT margin business worthy of additional investment. Given that free cash flow (FCF) has been less than repurchases since 2018, I expect the company to lower repurchases in favor of allocating capital to its thriving business.
Strong Balance Sheet and Credit Rating to Weather Uncertainty
Per Figure 4, Skechers earns an attractive overall Credit Rating and scores an attractive-or-better rating in four of the five credit rating metrics.
Even if economic conditions deteriorate or tariffs hurt U.S. businesses more than expected, the company’s strong financial footing secures its operations for the foreseeable future.
Figure 4: Skechers’ Credit Rating Details
What’s Not Working
Missed Expectations
Skechers’ stock fell 12% when the company’s 2025 guidance came in below consensus expectations during its 4Q24 earnings call. However, this large drop appears to be an overreaction. The 2025 guidance still implies 9% YoY revenue growth and 11% YoY EPS growth.
Additionally, the company remains firm in its expectation to continue its growth and reach $10 billion in revenue in 2026. The stock’s recent drop in price presents a buying opportunity.
Tariff Uncertainty
President Trump’s recent announcement of additional tariffs on China create uncertainty in supply chains for companies operating on an international scale. For instance, Skechers operates a 1.6 million square foot distribution center in China, with ongoing investments to increase its size to 2.3+ million square feet.
Luckily for investors, Skechers’ management is prepared for the ongoing tariff uncertainty, largely because they already experienced it in the first Trump administration.
First, the company already sells a large portion of its products outside of the U.S., in which case, products made elsewhere can be redirected to those international locales. Additionally, management noted on the 4Q24 earnings call that they’re “going to employ the same tactics” as four years ago to “defend these margins.” Specifically, the company will redirect origin and manufacturing relationships and have conversations with vendors in regard to foreign exchange, where a strengthened dollar helps.
Ultimately, the proof is in the financial performance, and Skechers’ management has proven it can effectively manage tariffs. In the pre-COVID years under President Trump’s first administration, when tariffs on China were first implemented, Skechers’ NOPAT margin only rose from 9.2% in 2017 to 9.5% in 2018, and to 9.2% in 2019.
Current Price Implies Profits Will Barely Grow
Below, I use my reverse discounted cash flow (DCF) model to analyze expectations for different stock price scenarios for SKX. Note: Skechers has grown NOPAT by 15% compounded annually over both the last 10- and 25-year periods.
In the first scenario, I quantify the expectations baked into the current price. If I assume:
- NOPAT margin immediately falls to 7% (below five-year average margin of 7.4% and 2024 margin of 8.9%) through 2034, and
- revenue grows at 6% a year through 2034 (compared to 14% compounded annually in the last ten years and 13% compounded annually in the last twenty-five years) then
the stock is worth $58/share today – nearly equal to the current stock price. For reference, the revenue growth in this scenario would be below consensus expectations of 9.6% in 2025 and 8.7% in 2026. In this scenario, SKX’s NOPAT grows 4% compounded annually from 2025 – 2034, which is well below historical growth rates.
Shares Could Go 30%+ Higher at Consensus Growth Rates
If I instead assume:
- NOPAT margin immediately falls to 8% through 2034,
- revenue grows at consensus rates in 2025 (9.6%), 2026 (8.7%), and 2027 (7.5%), and
- revenue grows at 2027 consensus rate (7.5%) each year thereafter through 2034, then
the stock is worth $79/share today – a 30% upside to the current price. In this scenario, SKX’s NOPAT would grow 7% compounded annually from 2025 to 2034.
Should the company’s NOPAT grow more in line with historical levels, the stock has even more upside. Furthermore, I think companies with long track records of strong profit growth deserve premium stock valuations, especially in a market filled with so many underperforming companies.
Figure 5: Skechers’ Historical and Implied NOPAT: DCF Valuation Scenarios
Disclosure: David Trainer, Kyle Guske II, and Hakan Salt receive no compensation to write about any specific stock, sector, style, or theme.
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