May 17, 2010 - Skechers USA (SKX-NYSE) engages in the design, development, marketing, and distribution of footwear for men, women, and children in the United States and internationally. The company offers various products including casuals, such as boots, shoes, and sandals for men, and slip-ons, lug outsole and fashion boots, and casual sandals for women; dress casuals; relaxed fit for men; lightweight for men; sandals; and casual fusion under the Skechers USA brand name.

Skechers USA markets its products through department stores, specialty stores, athletic retailers, boutiques, and catalog and Internet retailers, as well as through its own e-commerce Web site and retail stores. As of February 15, 2010, it owned and operated 90 concept stores, 92 factory outlet stores, and 37 warehouse outlet stores in the United States, as well as 22 concept stores and 5 factory outlet stores internationally. The company was founded in 1992 and is headquartered in Manhattan Beach, California.

Here's the scoop: Skechers has one of the hottest shoes on the market: the Shape Ups. The spokesperson: Joe Montana. This shoe does much more than cover the foot. It purportedly: improves posture, strengthens the back, firms buttocks muscles, tones and firms thigh muscles, firms calf muscles, reduces knee joint stress, improves blood circulation, tightens abdominal muscles, firms leg muscles. In the next iteration, maybe it will do the dishes as well. No matter. It's selling almost as fast as Skechers can make it.

Along with sales and earnings increasing was gross margin, up by 12%, thanks to higher product sell through, better pricing and fewer close-out sales. The company blew out stale inventory in the first half of 2009 and started 2010 fresh with few old shoes to move. Also helping profits was better sales at company owned stores where comparable store sales were up 17.4% in the last quarter of 2009. Management will open 25 to 30 new stores this year in the U.S. and certain European markets.

Part of the growth strategy is to penetrate global markets. The company added subsidiaries in South America and new distributors in Mexico and India.

All this good news hasn't been lost on investors. After hitting a low of $5.20 in early 2009, the stock took off with rocket like performance, never stopping in its ascent to a recent high of $42.40. Now it's off a little from that but not by much. Valuations up here get to be a little high if you only look at past performance. Looking ahead, they might look cheap.

Earnings, for example, are forecast to hit $3.16 this year, way above the $1.16 of 2009. Next year, consensus from analysts is for $3.49. That puts the Forward P/E at 12. Nothing expensive about that. Next quarter's earnings should be 41 cents, a nice change from the loss of 13 cents a share in last year's second quarter. For the third period, expect 99 cents, almost double the 52 cents of last year's third.

More numbers: Revenues for the last 12 months were $1.59 billion. Analysts expect $1.93 billion this year, then $2.12 billion next. Market cap is $1.73 billion. Price to book is 2.2. Book value is $17.43. Operating margin is 9.35% for the last 12 months while Profit margin was 6.48%. Reutn on equity was 13.82% while Return on assets was 9.89%. There's $325.88 million in cash for $6.97 a share. Total debt is a miniscule $17.35 million. Current ratio is 3.51. Beta is a high 2.34. The stock is up 313.27% in the last year. There are 46.78 million shares outstanding with a Float of 40.17 million. Insiders own 7.14%. Institutions have 91.70% of the float. There is no dividend.

Skechers' future looks bright. Until a major competitior joins the Shape Ups band wagon, the company will have a powerful driver for future sales and earnings. Even with a competitor, the market for this type of shoe has just been scratched. And international sales have barely started. All investors should like this story and find it worthwhile to find out more.

- Company Web site: www.skechers.com

- Ted Allrich