Shares of shoe company Skechers (SKX -0.58%) skyrocketed to an all-time high Friday after the company announced record financial results for the first quarter. As of 10:20 a.m. ET, Skechers stock was up almost 17%.
A record start to the new year
In Q1, Skechers' sales surged by nearly 13% to $2.25 billion. The bigger growth driver was its direct-to-consumer sales channel. That's significant because direct-to-consumer sales are considerably higher-margin than wholesale.
Boosted by the combination of a higher-margin sales mix and operational discipline, Skechers earned roughly $300 million in operating income in the quarter, up a little more than 13% from the prior-year period.
In short, Skechers is benefiting from a high level of consumer awareness, which is boosting its direct sales and padding profit margins. And that's what investors were celebrating today.
Still reasonably priced at all-time highs
For the second quarter, management expects the shoe company's sales to grow by another 9% to $2.2 billion (at the midpoint of its guidance range). One key component of its ongoing growth is international expansion -- Europe, with 17% growth, was its fastest-growing region in Q1. International sales now account for 65% of the company's total revenues.
Overseas markets will play a key role in Skechers' plan to reach $10 billion in annual revenue in 2026.
Assuming it can keep its profit margins up, Skechers stock could still be a good buy even at its current level. Its market cap is only around $10.5 billion. If the company can hit its 2026 sales goal and keep operating margins over 10%, then it could have over $1 billion in annual profit by that year.
That would be a big profit relative to Skechers' current market cap, which points to the possibility of significant future growth in the share price.
