SKX is down again today, and Igor asks:
Can you please comment on SKX drop today in light of SCVL earnings? Was there something mentioned on that call to spook investors of SKX?
As I conveyed yesterday, my read of what SCVL said was positive. They moved a lot of shoes, albeit at lower prices. They said that this remains an important category and that new product with enhanced features is moving well and at higher prices.
NKE is getting slammed today, and that is what is pressuring SKX in my opinion. For some perspective, I attempted to "catch the falling knife" on SKX when they reported in early November. I have stated that this isn't a quick fix, but I am hopeful that investors start to understand the misvaluation sooner rather than later. It's been disappointing, but the story remains the same. They will work through the inventory and come out with high earnings and high growth potential.
P.S. While I will never make a guarantee about what I will choose to do in the model in the future, I view the current position as too low at 5%. My target remains 30 or so a year out. This would be 1.5X TBV, but I can get there with 2012 earnings of about $2 with a market PE (and that's before consideration of what will likely be a huge amount of net cash on the balance sheet).
Comments
You can follow this conversation by subscribing to the comment feed for this post.