NEW YORK (
) -- The late trading action in
is a case of where even "record" sales sometimes aren't quite enough.
Shares of the Manhattan Beach, Calif.-based footwear maker were tumbling in extended trading on Wednesday after the company's third-quarter results fell well short of Wall Street's expectations. The company posted sales of $554.6 million for the three months ended Sept. 30, the best quarterly total in its history, Skechers said, but the average view of analysts polled by
was for sales of $572.1 million.
The bottom line was also a disappointment as Skechers' earnings of $36.4 million, or 74 cents a share, missed Wall Street's consensus estimate for a profit of $1.02 a share by almost 28%, breaking a streak of at least five consecutive quarterly EPS beats.
The stock was last quoted at $20.75, down 12.2%, on afterhours volume of more than 760,000, according to
. Based on a regular session close of $23.63, the shares were already down about 18% so far in 2010, and the levels being seen in extended trading point to a break below their 52-week low of $21.20 last November.
The company's ability to sustain the success of its Shape Ups toning models has been the source of much discussion over the past few months as has speculation that the company had seen order cancellations during the quarter. Skechers acknowledged the cancellations had occurred in its press release and said it will be a while before it works through the resulting excess inventory.
"While the demand for our product remains high and we continue to experience growth in many categories, including toning, several accounts over-booked for back to school and cancelled orders, resulting in more inventory than initially planned," said David Weinberg, the company's COO and CFO in a statement. "We expect to strategically work through this newer inventory at reasonable margins over the next six months or so."
In its press release, Skechers said inventories stood at $326.7 million at the end of September, up from $219.4 million on June 30, and $224.1 million as of Dec. 31, 2009.
Weinberg also said the company was "evaluating" its expense structure to keep spending in line with its current sales trend, which he described as "strong and consistent across our wholesale and retail businesses in the United States and overseas," although no outlook was provided for the fourth quarter.
Thursday's session could get particularly ugly for the stock as the third quarter, which includes the back-to-school selling season, is typically a strong one for Skechers. For example, in last year's equivalent period, the company beat Wall Street's EPS expectations by almost 50%, reporting a profit of 52 cents a share vs. a consensus view of 35 cents
Skepticism about the Skechers was building on Wall Street ahead of the report with multiple
calls for caution
on the stock
, which has dropped nearly 50% since hitting its 52-week high of $44.90 on June 21.
Three months ago, none of six analysts covering the stock were below a buy rating on the stock with the majority (4) a notch higher at strong buy. Now the breakdown is three strong buys, one buy and two holds.
Written by Michael Baron in New York.
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