In the first quarter, Sketchers reported net sales of $768 million, compared to $546.5 million a year earlier, an increase of 40%. The company outran the strong dollar, the harsh Northeast winter and the West Coast port slowdown to post the highest quarterly revenues in the company's history.
The second quarter should be equally impressive. Revenue is expected to hit $736.3 million, up 25%. The company is expected to earn $1.01 on a 44.5% gross margin. Revenue is being driven by strong sales in the domestic and international wholesale business, and high-single-digit same-store sales in its retail locations.
During the year, Skechers is planning to open 50 to 60 additional stores and probably will open a similar number next year.
But the real excitement doesn't happen until the third quarter, when back-to-school results hit the tape. Third-quarter revenue is forecasted to increase 28.6% to $867 million.
Sketchers has gained market share because it succeeds in areas where the large footwear brands fail. Shoemakers likeNike (NKE) - Get Report go after the athletic market, but completely miss the casual footwear and walking market. Sketchers are especially popular with children and teens. Parents like Sketchers because they cost about half the price of Nike sneakers.
Last year, the company grew revenue by 29%, and this year investors are expecting 28% growth. For the first time, revenue could exceed $3 billion. In 2013, the company had just $1.8 billion in revenue.
But revenue growth is only part of the story. Sketchers should begin to see a significant increase in operating margins, which look ready to expand 100 basis points next year from the 10.6% modeled for 2015. Since its shoes are so popular, the company has taken fewer markdowns; e-commerce sales are picking up and it's getting higher-margin sales from a larger store base.
Analysts forecast earnings per share of $4.19 in 2015 and $5.28 in 2016. Even though the stock is up 120% year-to-date, I think it can keep running way from the competition.
This article is commentary by an independent contributor. At the time of publication, the author held no position in the stocks mentioned.