Wedbush analyst Tom Nikic reiterated an Outperform rating on the shares of Skechers USA Inc (NYSE:SKX) with a price target of $68.

Nike Inc (NYSE:NKE) and Levi Strauss & Co (NYSE:LEVI) recently reported February-quarter results and both saw worsening EMEA trends sequentially, noted the analyst.

At over 20% of sales, Europe is a meaningful part of SKX's business, and though the management has counted it in a conservative guidance, the macro challenges in Europe likely limit upside to the quarter and guidance, noted the analyst.

According to the analyst, strong demand trends, particularly among the new Slip-In innovation, 1H23 was an exceptionally strong period for the U.S. DTC.

With the trends moderating in 2H23, the analyst sees further normalization to mid-single-digit growth in the first quarter and the rest of the year.

Based on the strengthening of the U.S. dollar since SKX reported fourth-quarter results, the analyst estimates a net EPS headwind of $0.10-$0.15.

Though the near-term story looks challenging, compelling points for a bullish stance include a strong product-innovation-and-marketing engine, momentum in Asia, which is larger than Europe for SKX, recovery potential in the U.S. wholesale channel and a strong balance sheet.

Given a tougher macro environment, the analyst guesses a reiteration of guidance is the most likely scenario.

Price Action: SKX shares are trading lower by 0.33% at $56.67 on the last check Friday.

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