While the broad stock market was soaring on interest rate cuts today, Skechers (NYSE: SKX), the casual footwear specialist, was moving in the opposite direction, tumbling after it told investors that China sales were weaker than expected at an industry conference.
As a result, the stock finished down 9.6% on the news.
Image source: Getty Images.
China struggles continue
Skechers is far from the only U.S. consumer-discretionary company that’s struggling in China as Nike, Apple, and Starbucks have all reported weak results in the world’s No. 2 economy, but investors were disappointed by the latest update.
At the Wells Fargo Consumer Conference, Skechers management said it’s facing some challenges in some Asian markets, and “China is having some pretty severe consumer discretionary pressures.” It also called them a “bit worse than anticipated” and said it was focused on resetting its strategy.
Skechers didn’t give specific guidance around the weaker conditions, but investors interpreted the news poorly, believing it meant that second-half results would be worse than expected.
China makes up roughly 15% of its sales, and management alluded to challenges in China in its second-quarter earnings report, saying that results from the June 18 shopping holiday were weaker than expected.
What’s next for Skechers
Considering that China makes up just 15% of the company’s revenue, investors may be overreacting to the news, though the company’s decision to not update guidance could lead investors to believe that the impact will be especially negative.
Skechers has fared reasonably well in a challenging environment in the footwear industry with revenue up 7% in Q2, which should give investors confidence.
Given that the challenges in China aren’t specific to Skechers, this doesn’t look like a reason to sell the stock. Skechers should be fine over the long run.
Should you invest $1,000 in Skechers U.s.a. right now?
Before you buy stock in Skechers U.s.a., consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Skechers U.s.a. wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $694,743!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of September 16, 2024
Wells Fargo is an advertising partner of The Ascent, a Motley Fool company. Jeremy Bowman has positions in Nike, Starbucks, and Wells Fargo. The Motley Fool has positions in and recommends Apple, Nike, Skechers U.s.a., and Starbucks. The Motley Fool has a disclosure policy.
