One thing that Skechers Inc. and the sport of pickleball have in common: both are expanding their appeal to wider audiences.
Pickleball combines parts of badminton, ping pong and tennis, the USA Pickleball website explains, and can be played by a variety of ages and skill levels. It’s also the fastest growing sport in the U.S. with courts going up all over the country, according to Route Fifty, an outlet focused on issues concerning state, county and municipal governments. (Some of those courts are funded with federal COVID aid, Route Fifty says.)
“Pickleball is quickly becoming a mainstream sport. It is always wise for brands to respond to emerging trends,” Matt Powell, senior sports industry adviser for NPD Group, told MarketWatch in an email.
In addition to its sponsorship of the pickleball tournament, the company is also a sponsor of the Ladies Professional Golf Association’s LA Open. It has enlisted a variety of spokespeople as well, from Willie Nelson, who was featured in a Skechers’ Super Bowl ad, to Martha Stewart and former Rockette and celebrity trainer Amanda Kloots.
“This growing roster of well-known talent and athletes allows us to appeal to an ever-widening consumer base,” said David Weinberg, chief executive of Skechers, on the company’s first-quarter earnings call last week, according to a FactSet transcript.
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Skechers reported first-quarter earnings and sales that beat expectations. Sales reached a record, exceeding $1.8 billion.
Skechers says it’s not just responding to consumers’ active lifestyle needs, but a desire for comfort.
“Investments in product and marketing continue to result in strong global demand for our comfortable and innovative product, ” Weinberg said.
“We introduced several new comfort technology collections in the quarter that enhanced our fit and function offerings.”
According to the latest NPD’s U.S. footwear report on Q1 sales published Wednesday, U.S. sales revenue fell 3% in the period, but performance footwear outdid the overall footwear market, with revenue up slightly. Skechers performance shoes gained by more than one-third.
“As brands discontinued some retailers over the last few years, Skechers seems to have stepped into that void,” said Powell.
And reaching out to older shoppers could be working for Skechers as well.
“While older customers do not consume shoes to the same degree as young ones, we are seeing good growth among older customers,” Powell wrote.
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UBS analysts say that where Skechers may once have been thought of as a “knock-off value brand,” it’s now a brand with enough sales potential to reach the company’s goal of $10 billion in 2026 and continue as the third-largest footwear brand in the world. The company’s current focus on comfort allows it “to sell higher priced goods, attract higher-income consumers, and take market share.”
UBS rates Skechers stock buy with a $67 price target.
“The market is worried about macro risks and we agree the macro outlook isn’t good for Softlines stocks,” UBS analysts said. “However, we believe Skechers will deliver strong growth over the near-term, allowing it to outperform.”
Skechers stock has slumped nearly 11% for the year to date.
Wedbush has an outperform rating on Skechers stock and a $48 price target.
“Considering how many macro factors could have potentially tripped up the company in Q1[…] we’re very encouraged by the company’s ability to beat-and-raise,” analysts said.
And Stifel rates Skechers stock buy with a $61 target price.
“We see Skechers leveraging a speed-to-market advantage and scale advantage to gain share in the global footwear market,” analysts said.
“While investments in growth and FX pressure will mute operating margin expansion in the near term, we believe the business can achieve a low-teens normalized operating margin as the business scales.”