The biggest news for Skechers over the past year involved the aftermath of the toning-shoe craze, which was based on the idea that wearing certain types of shoes could help you lose weight, build muscle, and generally improve health. Competitors Crocs, Inc. (NASDAQ:CROX) and Collective Brands Inc. (NYSE:PSS) as well as athletic-shoe specialists Reebok and Puma followed suit with their own versions of the shoes, but the Federal Trade Commission ended up calling out Skechers for what it called the shoe company’s “unfounded claims” and settled with Skechers for $40 million for misleading advertising.
After it got its litigation uncertainty behind it, though, Skechers’ stock soared. Even when the company posted a loss in the second quarter of 2012, it was a small enough loss to send shares up strongly, simply because expectations for the company had gotten so low. Now, analysts are getting more optimistic, with upgrades pointing to the potential for Skechers to earn a substantial profit this year.
The big question is whether Skechers can avoid the downward cycle that seems to plague shoemakers. Last year, Deckers Outdoor Corp (NASDAQ:DECK) was on the outs, with its dependence on Uggs making it vulnerable when they fell out of style. But bulls believe that Skechers has broken that cycle, diversifying just like Crocs did and finding more sustainable growth.
For Skechers to improve, it needs to make its way back to profitability. With that appearing increasingly likely this year, Skechers could well make a move closer to perfection in the near future.
The article Has Skechers Become the Perfect Stock? originally appeared on Fool.com and is written by Dan Caplinger.
Fool contributor Dan Caplinger has no position in any stocks mentioned. The Motley Fool owns shares of Crocs and Skechers.
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