Skechers: Is it an overlooked company?

Skechers is a global footwear company known for combining comfort technology with value-driven pricing across a wide range of styles. From casual and lifestyle shoes to growing performance categories like running and basketball, the brand serves a broad consumer base through both wholesale and direct-to-consumer channels. With continued investment in innovation, global expansion, and omni-channel growth, the question is: Does this comfort-focused brand deserve a place in your portfolio?

This is not a financial advice. I am not a financial advisor and I only do these post in order to do my own analysis and elaborate about my decisions, especially for my copiers and followers. If you consider investing in any of the ideas I present, you should do your own research or contact a professional financial advisor, as all investing comes with a risk of losing money. You are also more than welcome to copy me.

For full disclosure, I should mention that I do not own any shares in Skechers at the time of writing this analysis. If you would like to copy or view my portfolio, you can find instructions on how to do so here. If you want to purchase shares or fractional shares of Skechers, you can do so through eToro. eToro is a highly user-friendly platform that allows you to get started on investing with as little as $50.

The Business

Skechers U.S.A., is a global footwear company founded in California in 1992. It has grown to become the third-largest athletic footwear brand in the world, offering a wide range of shoes, apparel, and accessories for men, women, and children. The company operates through two main business segments: wholesale and direct-to-consumer. Its wholesale segment includes sales to a global network of partners such as franchise-operated Skechers-branded stores, department stores, specialty retailers, and international distributors. The direct-to-consumer segment includes sales from company-owned stores, Skechers' own e-commerce sites, and third-party digital marketplaces. Skechers has over 5.300 branded stores worldwide and an e-commerce presence across more than 30 markets. The company’s product line includes lifestyle sneakers, athletic performance shoes, work footwear, and children's collections, all centered around Skechers’ reputation for comfort technology. Signature features like memory foam, Arch Fit orthotic support, and lightweight cushioning are integrated throughout its offerings. The brand is built around delivering comfort, innovation, style, and quality at a reasonable price, positioning Skechers as a value-driven alternative to premium athletic brands. Skechers’ competitive moat is based on its unique blend of comfort technology leadership and value-for-money positioning. Its products appeal to a broad and often underserved consumer segment that prioritizes comfort but is sensitive to pricing, setting it apart from performance-focused or fashion-centric competitors. The company’s global scale and omni-channel strategy - spanning retail partners, franchised stores, and digital platforms - provide wide consumer reach and strong negotiating leverage. Its diversified product portfolio, which covers multiple categories and demographics, reduces dependency on any single market trend or segment. Skechers’ global infrastructure and long-term supplier relationships create significant operational advantages, while its ability to quickly interpret lifestyle trends and incorporate them into comfort-driven products has helped it consistently capture market share.

Management

Robert Greenberg is the CEO and founder of Skechers, a company he established in 1992 following his departure from L.A. Gear, a footwear brand he also founded and led as CEO beginning in 1978. With more than four decades of experience in the footwear industry, Robert Greenberg is widely recognized as one of its most influential figures. In 2015, he received the Lifetime Achievement Award from Footwear News for his longstanding contributions to the industry. Under his leadership, Skechers has grown from a small startup into the third-largest athletic footwear brand in the world, generating over $8 billion in annual sales by 2024 and maintaining a presence in more than 180 countries. Robert Greenberg has guided the company through decades of expansion, brand building, and product innovation. In 2022, Skechers was named “Company of the Year” by both Footwear News and Footwear Plus, reflecting the brand’s continued strength under his stewardship. Robert Greenberg is known for his assertive and media-savvy marketing philosophy, summarized by the phrase “Unseen, Untold, Unsold.” This approach underscores the importance he places on brand visibility, storytelling, and positioning Skechers across multiple product categories and demographic segments. It has been instrumental in creating global awareness for the brand’s comfort-focused designs and lifestyle appeal. According to Comparably, Robert Greenberg holds an employee approval rating of 75 out of 100, placing him in the top 15% of CEOs among similarly sized companies. Beyond his credentials and business accomplishments, what sets him apart is his founder mentality - a long-term vision driven by growth, brand equity, and customer value creation. His continued leadership provides a strong foundation for Skechers’ strategic direction, blending entrepreneurial drive with decades of operational experience.

The Numbers

The first number we will look into is the return on invested capital, also known as ROIC. We want to see a 10-year history, with all numbers exceeding 10% in each year. Skechers has managed to deliver a ROIC above 10% in eight out of the last ten years. One of the exceptions was in 2020, which was understandably affected by the pandemic. The other was in 2022, a year shaped by broader macroeconomic pressures. Encouragingly, Skechers reached its highest ROIC since the pandemic in 2024. Management has commented on ROIC, stating: "We measure it pretty carefully. We watch it carefully. I wouldn't say it's the primary driver of our overall kind of financial guidance because what we find is ROIC, particularly if you're not looking at it on a kind of a trended basis, can be a little bit misleading at any given point in time." What they mean is that short-term fluctuations in ROIC are sometimes necessary to support long-term strategic decisions—such as increased capital expenditures to drive future growth. Personally, I appreciate when management pays attention to ROIC, and I also understand that temporary declines are sometimes part of building a stronger foundation for the future. That’s exactly what we’ve seen at Skechers over the past six years, where capital expenditures have been significantly higher than in the previous four years, putting short-term pressure on ROIC. For that reason, I’m not concerned that ROIC hasn’t yet returned to earlier highs - I expect it will recover as capital expenditures begin to normalize.

The next numbers are the book value + dividend. In my old format this was known as the equity growth rate. It was the most important of the four growth rates I used to use in my analyses, which is why I will continue to use it moving forward. As you are used to see the numbers in percentage, I have decided to share both the numbers and the percentage growth year over year. To put it simply, equity is the part of the company that belongs to its shareholders – like the portion of a house you truly own after paying off part of the mortgage. Growing equity over time means the company is becoming more valuable for its owners. So, when we track book value plus dividends, we’re essentially looking at how much value is being built for shareholders year after year. Skechers has almost delivered a textbook example of how you want equity to grow. It has increased every year, with growth rates hovering around 10% annually. Equity plays a key role in the company’s strategy and is frequently referenced in discussions on capital allocation, investment, and maintaining a strong balance sheet. Management’s disciplined approach signals a focus on sustainable value creation and financial resilience, aligning with their long-term growth ambitions.

Finally, we will analyze the free cash flow. Free cash flow, in short, refers to the cash that a company generates after covering its operating expenses and capital expenditures. I use levered free cash flow margin because I believe that margins provide a better understanding of the numbers. Free cash flow yield refers to the amount of free cash flow per share that a company is expected to generate in relation to its market value per share. The free cash flow has been somewhat inconsistent over the past 10 years. One notable trend is that Skechers reported negative free cash flow in both 2021 and 2022. In 2021, operating cash flow came in lower than usual, primarily because the company had to stock up on inventory and manage large volumes of merchandise in transit to meet rising demand. At the same time, capital expenditures increased due to major investments in a new distribution center and corporate office expansion. These combined factors resulted in negative free cash flow for the year. In 2022, free cash flow declined even further. The company continued making large investments in infrastructure while also tying up more cash in inventory and delayed customer payments. In other words, Skechers held more products in storage and waited longer to receive payment from retail partners - both of which limited how much cash was available. These short-term pressures were part of a broader strategy to scale global operations and improve long-term logistics efficiency. Elevated capital expenditures continued into 2024, contributing to another decline in free cash flow. This was largely due to record-high spending on infrastructure, alongside headwinds from foreign exchange. Capital expenditures are expected to reach a new record in 2025 as the company continues to open new stores and expand its distribution footprint in the U.S., Europe, and China. Skechers does not pay dividends but returns capital through share repurchases. Once capital expenditures normalize, investors can likely expect the company to ramp up its buyback activity. Given the volatility in free cash flow over the past few years, it’s difficult to assess valuation based solely on free cash flow yield. However, we will revisit the topic of valuation later in the analysis.

Debt

Another important aspect to consider is the level of debt. It’s crucial to determine whether a business carries manageable debt that could be repaid within a period of three years. To assess this, I divide the total long-term debt by earnings. In the case of Skechers, the calculation shows that the company currently carries no long-term debt. In fact, Skechers has a history of operating with little to no debt, which reflects a conservative financial approach. Based on this, there is no indication that debt will become a concern for Skechers going forward.

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Risks

Competition is a key risk for Skechers. The global footwear industry is intensely competitive, and while Skechers has carved out a strong position with its comfort-focused, value-oriented brand, it does not dominate any single category. Its products compete with a wide array of branded footwear as well as private label offerings, including those sold by its own retail partners. This creates constant pressure to secure shelf space - both in physical stores and on digital platforms - and to differentiate its products in a crowded marketplace. Many of Skechers’ competitors are larger, more established, and better resourced. Brands like Nike and Adidas benefit from greater scale, stronger global recognition, and significantly higher budgets for marketing, innovation, and product development. These advantages make them more capable of reacting quickly to changing consumer preferences, investing in new technologies, and navigating industry downturns without compromising long-term growth. Another factor is the low barrier to entry in the footwear space, due in part to the general availability of contract manufacturing. This makes it relatively easy for new companies to enter the market, adding further competitive pressure and increasing the risk of pricing wars or loss of market share. If Skechers fails to respond effectively to this competitive environment - by staying relevant in its product offerings, maintaining pricing power, and investing in brand strength - it could face reduced margins, slower growth, and increased challenges in generating consistent cash flow. While the company’s comfort and value positioning provides a strong foundation, the intense competition across product categories and channels remains an ongoing risk.

Macroeconomic conditions represent a significant risk for Skechers. As a company that sells primarily discretionary products - footwear, apparel, and accessories—Skechers’ performance is closely tied to the health of the global economy and overall consumer confidence. During periods of economic uncertainty or recession, consumer spending tends to decline, especially on non-essential items, which directly impacts demand for Skechers’ products. When consumer sentiment weakens - due to rising inflation, interest rate hikes, job insecurity, or broader geopolitical instability - shoppers often delay or reduce discretionary purchases. This affects both Skechers’ direct-to-consumer segment, through lower retail and online traffic, and its wholesale partners, who may cut back on inventory orders or increase promotional activity to stimulate demand. Both dynamics can lead to margin pressure and increased earnings volatility. The company also notes that if sales were to decline sharply, it may be difficult to quickly scale down operations or reduce costs. Fixed expenses such as rent, staffing, inventory, and logistics can be slow to adjust, which could negatively affect profitability. Moreover, macroeconomic headwinds may limit Skechers’ ability to expand - whether by opening new stores, growing international operations, or increasing sales to new and existing customers. In a prolonged downturn, these challenges could affect not just top-line growth, but also operational efficiency and returns on investment.

Relying on third-party manufacturers is a risk for Skechers. The company does not own its own factories and instead outsources all production to independent contract manufacturers. In 2024, over 42% of Skechers’ total product purchases came from just five manufacturers, with one alone accounting for more than 20%. While this asset-light model helps control costs and provides flexibility, it also leaves Skechers vulnerable to disruptions in its supply chain. A key concern is that Skechers does not have long-term contracts with its manufacturing partners. These manufacturers can terminate the relationship at any time, which means a sudden loss of a major supplier could interrupt production and delay product availability. While Skechers believes it could find replacements, new manufacturers might offer less favorable terms, including higher prices, longer lead times, reduced capacity, or lower quality standards. The company also competes with other footwear brands for factory space. In times of high demand or global supply chain stress, this competition could make it harder for Skechers to secure the production capacity it needs, especially without guaranteed access. Ultimately, Skechers’ dependence on third parties for manufacturing introduces real operational risks. If key suppliers fail to deliver consistent quality, meet deadlines, or maintain cost efficiency, it could negatively impact Skechers’ margins, customer satisfaction, and financial performance.

Reasons to invest

Performance footwear is a reason to invest in Skechers. The company’s expansion into this category represents a compelling long-term growth opportunity and a strategic evolution beyond its roots in casual and comfort-focused shoes. In recent years, Skechers has made a deliberate push into performance segments such as running, pickleball, golf, soccer, basketball, and most recently, cricket. These initiatives aim to diversify the company’s revenue base, tap into large addressable markets, and broaden its appeal across new consumer segments. Although still in the early stages, the performance division holds significant potential. What makes this initiative particularly promising is Skechers’ ability to differentiate through its core strength: comfort technology. The brand’s positioning around “comfort that performs” blends its proprietary features - such as Arch Fit and Hyper Burst cushioning - with the technical requirements of performance footwear. This gives Skechers an edge over traditional performance brands by offering athletic functionality without compromising comfort, reinforcing its broader brand identity in the process. Importantly, Skechers views performance footwear not just as a new product category, but as a catalyst for brand expansion. These efforts raise awareness, attract younger and more active demographics, and generate a halo effect that can benefit sales across its lifestyle and casual collections. As the company continues to invest in athlete partnerships, innovation, and targeted marketing, performance footwear is well positioned to become a more meaningful contributor to growth over time.

Skechers’ diverse product portfolio and comfort technologies are core strengths that support long-term growth and resilience, making them a compelling reason to invest in the company. Unlike many competitors that focus narrowly on a specific segment, Skechers serves a broad audience with footwear for men, women, and children across a wide range of categories - casual, athletic, dress, and work. This breadth reduces the company’s reliance on any one trend, style, or demographic and helps smooth revenue performance across different consumer cycles. What sets Skechers apart is how it integrates comfort technology across its entire product line. Technologies like memory foam insoles, Arch Fit orthotic support, and lightweight foams are not limited to a single shoe type or target market. Instead, they are embedded across styles and categories—from performance footwear to everyday walking shoes - giving the brand a unique advantage in delivering comfort at scale. This flexibility allows Skechers to innovate consistently while reinforcing its brand promise of “Style, Comfort, Innovation and Quality at a reasonable price.” Among its standout features is Skechers Hands Free Slip-ins, which allows consumers to step into shoes without using their hands - an innovation that has generated strong demand across age groups. Management sees significant runway for this technology, particularly in more integrated versions that are beginning to hit the market. Arch Fit also continues to perform well, driving growth through orthotic-level support embedded in a variety of designs. Importantly, these technologies can be extended to new product lines over time, providing a scalable platform for innovation. By focusing on comfort that can be applied universally, Skechers appeals to a broad, loyal customer base - particularly those seeking functional footwear without paying premium prices. This positioning not only differentiates Skechers from performance-centric rivals but also strengthens its pricing power and brand equity.

Skechers’ multi-channel growth strategy is a strong reason to invest in the company. By balancing the broad reach of wholesale with the higher-margin, brand-building potential of direct-to-consumer (DTC) channels, Skechers has created a flexible and resilient growth engine. On the wholesale side, Skechers continues to deepen relationships with key retail partners and expand into new territories. The company has seen strong momentum both domestically and internationally, supported by growing demand for its comfort-focused product lines and increased shelf space with major retailers. Strategic marketing initiatives, such as in-store brand takeovers and shop-in-shop concepts, have also strengthened the brand's visibility and positioning in wholesale channels. Meanwhile, the direct-to-consumer segment continues to gain importance. Skechers is investing in new concept stores, expanding its global retail footprint, and enhancing the customer experience through upgraded store designs. The company is also expanding its e-commerce presence through localized websites in key international markets and improving its digital capabilities to meet growing online demand. These initiatives help Skechers build stronger relationships with consumers while maintaining control over pricing, brand storytelling, and product presentation. What makes this strategy particularly effective is the complementary nature of the two channels. Wholesale provides scale and efficient distribution, while DTC offers higher margins, better customer data, and more opportunities to engage consumers directly.

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Valuation

Now it is time to calculate the share price. I perform three different calculations that I learned at a Phil Town seminar. If you want to make the calculations yourself for this or other stocks, you can do so through the tools page on my website, where you have access to all three calculators for free.

The first is called the Margin of Safety price, which is calculated based on earnings per share (EPS), estimated future EPS growth, and estimated future price-to-earnings ratio (P/E). The minimum acceptable rate of return is 15%. I chose to use an EPS of 4,16, which is from the year 2024. I have selected a projected future EPS growth rate of 1%. Finbox expects EPS to grow by 11,2% in the next five years. Additionally, I have selected a projected future P/E ratio of 22, which is double the growth rate. This decision is based on Skechers' historically higher price-to-earnings (P/E) ratio. Finally, our minimum acceptable rate of return has already been established at 15%. After performing the calculations, we determined the sticker price (also known as fair value or intrinsic value) to be $64,23. We want to have a margin of safety of 50%, so we will divide it by 2. This means that we want to buy Skechers at a price of $32,12 (or lower, obviously) if we use the Margin of Safety price.

The second calculation is known as the Ten Cap price. The rate of return that a company owner (or stockholder) receives on the purchase price of the company essentially represents its return on investment. The minimum annual return should be at least 10%, which I calculate as follows: The operating cash flow last year was 687, and capital expenditures were 417. I attempted to analyze their annual report to calculate the percentage of capital expenditures allocated to maintenance. I couldn't find it, but as a rule of thumb, you can expect that 70% of the capital expenditures will be allocated to maintenance purposes. This means that we will use 292 in our calculations. The tax provision was 148. We have 151 outstanding shares. Hence, the calculation will be as follows: (687 – 292 + 148) / 151 x 10 = $35,96 in Ten Cap price.

The final calculation is referred to as the Payback Time price. It is a calculation based on the free cash flow per share. With Skechers' free cash flow per share at $1,71 and a growth rate of 11%, if you want to recoup your investment in 8 years, the Payback Time price is $22,51.

Conclusion

I believe that Skechers is a great company with strong management. It has built a moat through its unique blend of comfort technology leadership and value-for-money positioning. ROIC has been lower over the past six years due to elevated investments that should benefit the company in the long run, but it still managed to reach its highest level since the pandemic in 2024. Free cash flow has also been affected by increased capital expenditures, though it is expected to improve once the new distribution centers in the U.S., Europe, and China are completed, which is projected for 2026. Competition is a key risk for Skechers because it operates in a crowded and highly competitive global footwear market, where it must fight for shelf space and consumer attention against larger, better-funded rivals like Nike and Adidas. Without dominant market share in any single category, and with low barriers to entry in the industry, Skechers faces ongoing pressure to maintain pricing power, brand relevance, and long-term growth. Macroeconomic conditions are also a risk, as Skechers relies on consumer discretionary spending, which tends to decline during periods of economic uncertainty. Factors such as inflation, rising interest rates, or geopolitical instability can reduce demand and make it more difficult for the company to manage fixed costs or continue investing in expansion. Relying on third-party manufacturers presents another risk. Skechers has limited control over production and no long-term contracts with its suppliers, making it vulnerable to disruptions or unfavorable terms if a key manufacturer withdraws. On the upside, performance footwear is a compelling reason to invest in Skechers. It offers a long-term growth opportunity that expands the brand beyond its casual roots while leveraging its strength in comfort technology. This segment taps into large, fast-growing markets and enhances brand visibility, supporting broader consumer engagement across product lines. Skechers’ diverse product portfolio and proprietary comfort technologies are also important strengths. They allow the company to serve a wide range of customers across multiple categories while consistently innovating and reinforcing its brand promise. Lastly, Skechers’ multi-channel growth strategy - balancing the scale of wholesale with the profitability and brand control of direct-to-consumer - gives it a flexible and resilient business model well suited for future growth. All in all, I believe there are many things to like about Skechers, and buying shares below the Ten Cap price of $35 could represent a good long-term investment.

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