Skechers U.S.A., Inc. SKX
Skechers is a governance-rotten, family-run 'fast follower' whose China growth is collapsing and inventory is bloating — 30%-50% downside to $18.60-$26.00.
Thesis
Spruce Point is short Skechers after a forensic review of the family-controlled footwear 'fast follower,' arguing the stock carries 30%-50% downside to $18.60-$26.00. On-the-ground China channel checks show sales down -20% to -30% YoY versus Street expectations of +7% growth, with Skechers the second-worst performer in the June Dragon Boat Festival (-28% GMV) while peers posted double- and triple-digit gains. Inventory days sit at a 10-year high of 169, and open purchase commitments with foreign manufacturers rose 82% to $2 billion — 51% above pre-COVID averages and 64% higher than peers — setting up a third inventory blow-up after 2015 (-46%) and 2018 (-28%). The Greenberg family controls 42.9% of the vote, continues to pay SEC-sanctioned LA Gear inventory-fraud advisor Gil Schwartzberg, and has reduced 10-K disclosures while Spruce Point-adjusted operating cash flow runs 62% below headline.
SCQA
Skechers is a family-run 'fast follower' footwear company that rode a 27% China CAGR to $6.3bn revenue and near-universal Street love — 92% Buy ratings, zero Sells, and a $58.67 consensus target implying 58% upside.
Proprietary China channel checks show sales down -20% to -30% YoY, inventory days at a 10-year high of 169, and purchase commitments up 82% to $2B, while SEC-sanctioned LA Gear inventory-fraud advisor Schwartzberg remains paid.
Investors should sell or avoid SKX: Spruce Point is short and expects a third inventory blow-up (after 2015's -46% and 2018's -28%) as China growth collapses into a bloated cost base.
30% to 50% downside to $18.60-$26.00 by applying a 9x P/E (vs. Street's assumed multiple and premium shoe peers) to reduced 2022E earnings on -25% Asia-Pacific revenue contraction.
The three reasons
- 1
China channel checks show sales down -20% to -30% YoY vs. Street expecting +7% growth
- 2
Inventory days at 10-year high of 169; purchase commitments up 82% to $2B — third inventory blow-up looming
- 3
Family-controlled governance with SEC-charged LA Gear inventory-fraud advisor still on payroll
Primary demands
- Sell or avoid SKX shares — Strong Sell opinion
- Scrutinize inventory accounting and purchase commitment buildup
- Question Greenberg family governance, nepotism, and related-party transactions
- Investigate continued use of SEC-sanctioned advisor Gil Schwartzberg
KPIs cited
Pattern membership
Precedents cited
- LA Gear 1990 inventory fraud (SEC v. Schwartzberg, 1995)
- Skechers Q3 2015 inventory miss (-46% stock decline, Steamfitters shareholder lawsuit)
- Skechers Q2 2018 inventory miss (-28% stock decline, Laborers shareholder lawsuit)
- Spruce Point's own Oatly short (-88%), WD-40, Church & Dwight prior consumer calls
- ZST Digital Networks Chinese stock scam (Schwartzberg investor link)
Composition what's on the 34 slides
Slide gallery ·
Notes
Classic Spruce Point short report template (teal/grey palette, red-box callouts, yellow highlight boxes). Memorable cover: clown shoes surrounded by rats with 'A Skechy Investment' tag. Thesis built on five pillars: (1) governance rot / 'Skechy Characters', (2) China revenue slowdown via proprietary channel checks, (3) inventory aging and purchase commitment buildup, (4) declining cash flow quality and disclosure transparency, (5) multiple derating to $17.92-$25.83. No single named human author — institutional firm attribution only (Ben Axler is founder but not credited on document). Short report: SCPM discloses short position in disclaimer but does not quantify stake — stake_disclosed_pct left null per guidance. Heavy use of peer-gap tables (Dragon Boat Festival, purchase commitments, comparable companies). Page 3 shows Spruce Point's own prior track record (Oatly -88%, WD-40, Church & Dwight) as credibility anchor — a genre-specific pattern for short sellers. Thesis_types: fraud_exposure (Schwartzberg/inventory concerns), governance_board (family control, board red flags), multiple_rerating (argues premium P/E should compress to 9x).