Shares of shoe company Skechers (NYSE: SKX) dropped like a rock on Friday after the company reported financial results for the fourth quarter of 2024. As of 3:45 p.m. ET, Skechers stock was down about 13%.
In Q4, Skechers had sales of $2.21 billion, which was up 13% year over year and toward the high end of management’s guidance but slightly below expectations. On the bottom line, things were a little more troubling. Management expected Q4 earnings per share (EPS) of $0.70 to $0.75, but the business only mustered EPS of $0.65.
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To be clear, Skechers grew by double digits in 2024 and hit all-time sales records. And in 2025, it expects to grow at least another 8% to $9.7 billion. That’s still good growth. But it is slowing.
Moreover, Skechers expects EPS of $4.30 to $4.50 in 2025, which would only be a 3% to 8% year-over-year increase. In other words, the guidance implies a slowdown in growth and a slight contraction of its profit margin, which is upsetting investors and explains why this shoe stock is down today.
The reality is that shoe stocks often trade at bargain valuations, and the valuation for Skechers is now coming down — it trades at around 15 times forward earnings, which is fair. And the good news with a lower valuation is that the company is authorized to repurchase nearly $800 million in stock, which goes further with a low share price.
Considering sales were up in 2024 and are expected to keep rising in 2025, I don’t necessarily see a brand problem here — it doesn’t seem like it is coming under competitive pressures. It simply seems like shoe sales are slowing down, which happens from time to time.
Skechers stock still looks like a good business for long-term investors to me. But there can be ups and downs in this space, and 2025 could be a tougher year. So it might take time for shares to bounce back, underscoring the need for patience.
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Jon Quast has no position in any of the stocks mentioned. The Motley Fool recommends Skechers U.s.a. The Motley Fool has a disclosure policy.
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