Deutsche Bank analyst Gabriella Carbone trimmed her targets for both Skechers ( NYSE: SKX ) and VF Corp. ( NYSE: VFC ) on Monday as foreign exchange impacts and constrained sales in China stand to hamper earnings results.
In a note to clients previewing earnings or both retail names, she indicated that lockdowns in China and adverse foreign exchange movements necessitate tempered estimates ahead of the print. As such, she cut her price target for VF Corp. ( VFC ) from $67 to $59 and Skechers USA ( SKX ) from $64 to $51.
Carbone added, however, that the “real focus” will be on how each can navigate persistent supply chain problems, manage inventory levels, and deal with slowing consumer demand.
“On Skechers ( SKX ) specifically, while we see the potential for management to lower its FY22 EPS guidance, we believe the company's underlying momentum should continue with trends potentially accelerating in the back half as COVID-19 related lockdowns/restrictions in China have eased, supply catches up with demand, and price increases in the company's wholesale channel begin to take effect,” she advised.
For VF Corp. ( VFC ), Carbone expects weakness in Vans to be reflected in the earnings report while understood challenges in China and in foreign exchange add to negativity. However, she indicated that VF Corp.’s higher-income consumers, history of limited promotional activity, and competent management team should buoy the stock into the second half of 2022.
“Buy” ratings were maintained on both names as a result of the longer term prospects despite the near term price trimming. Earnings reports are expected on Tuesday from Skechers and Thursday from VF Corp .
For further details see:
Deutsche Bank cautious on Skechers, VF Corp. ahead of earnings