It's been an interesting week of earnings releases -- in fact there have been very few dull moments. On Wednesday, we learned that Skechers (SKX) has not yet "shaped up," at least judging by the latest quarter. The troubled footwear company missed fourth-quarter estimates: Revenue fell 38% from the same quarter last year, to $283.2 million. Of course, a severe drop in revenue was expected, but this was still considerably worse than the $324.3 million consensus estimate.
For the quarter, Skechers lost $57.7 million, or $1.18 per share, which included a reserve for legal settlements, impairment charges, a bad-debt reserve, gain on sale of a facility and a tax benefit -- a veritable cornucopia of items that causes some of us to tear our hair out. Adjusted earnings per share, which were in the range of -$0.48, were still well below consensus estimates of -$0.25. This turnaround, if there actually is one in store, is dragging.
If there was any good news here, it came courtesy of the balance sheet. The company continued to purge inventory, which ended the quarter at $226.4 million, 43% below last year's level. Furthermore, cash grew to $351.1 million, or about $7.18 per share, while total debt stood at $137 million. Overall, Mr. Market was not all that shocked by Skechers' announcement; shares are down about 6% this week. That's what $7 in cash can do for you when you are a $13 stock. I remain long but skeptical. I hope that this was the quarter of the great purge and that all the muck is out on the table. We'll see.
In restaurant land, Denny's (DENN) reported a decent but certainly not great quarter. Revenue was about on par with the consensus at $130.1 million, and the company earned $92 million, but this included an $85 million tax benefit. It appears that adjusted earnings per share were slightly above the $0.08 consensus.
But the good news for Denny's was not this earnings release, in my opinion. It was the continued progress that the company is making in improving the capital structure, moving away from company-owned stores and attempting to reinvigorate the brand. Total debt has been reduced to $218 million, down from $269 million last year and more than $550 million at the end of 2005.
The company continues its re-franchising strategy, reducing the number of company-owned stores and increasing franchises, a much higher-margin business. There is also a growth element here, as Denny's opened 62 new units in 2011, which included the conversion of 23 Flying J Travel Centers. The company is also attempting to brand itself as "America's diner" -- it's too early to claim success on that one, but it is catchy.
I was disappointed that the company opted out of a Super Bowl ad for the second consecutive year. If you really want to get back on consumers' radar, that's one potentially effective, albeit expensive, way to go. But that's management's call, and so far, the current team seems to be delivering.