Skechers U.S.A., Inc.

▲ Bull Case

• ◆International compounding has 5–8 years of runway. International revenue was 62% of FY2024 total and growing 13%+ vs. domestic 5%. EMEA Q2 2025 +48.5%; India entering main expansion phase; APAC ex-China taking share. At 8.5% blended CAGR, international alone delivers ~85% of total revenue growth.
• ◆Operating leverage from a fixed G&A base. FY24 SG&A was 43% of revenue — primarily fixed. From FY2022 to FY2024, revenue grew 20.5% while operating income grew 65.4%. Operating margin expanding from 10.1% (FY2024) to 12.5% (FY2029E).
• ◆The 3G Capital acquisition implicitly priced 6–7 years of above-WACC ROIC. At 7.7x trailing EV/EBITDA, the deal was below SKX's historical range (8–12x) and well below peer median (~15x), implying deep value constrained primarily by required PE IRR cushion.

▼ Bear Case

• ◆Tariff structural headwind on ~80% of sourcing. China sourcing (~40%) at 145% tariff + Vietnam (~40%) at 25%+ creates $0.50–0.80/share permanent EPS headwind if fully borne — 12–20% of FY2024 EPS. Pricing pass-through limited by value-positioning consumer demographic.
• ◆3G Capital LBO leverage creates equity-risk asymmetry. $9.4B deal financed via 3G equity + JPMorgan-committed debt; if EBITDA growth disappoints, debt service crowds out brand/marketing investment — accelerating competitive erosion.
• ◆Competitive encirclement above and below. On Running, Hoka, and New Balance taking premium performance share above Skechers, while Shein/Temu expand ultra-cheap footwear below. The value-comfort middle is increasingly crowded; pricing power limited (FY24 ASP –0.4% YoY despite +13.7% volume growth).

“The four-axis pre-deal debate: (1) International optionality vs. tariff/FX risk — Bulls won as Q2 2025 EMEA +48.5% proved optionality real. (2) Margin expansion durability vs. OpEx creep — Bulls won as FY2022–FY2024 operating income grew 65% on 20% revenue growth. (3) Market share momentum vs. competitive disruption — Bulls won at topline, bears won at brand-premium axis. (4) Governance discount vs. founder alignment — 3G's bid monetized the governance discount and removed it as future debate. The deal validated the bull case directionally while leaving public shareholders with only consensus near-term value, not variant operating-leverage upside.”

• ◆3G Capital take-private at $63/share in September 2025 — set the public-market valuation floor
• ◆3G operational playbook execution — 200–400 bps EBITDA margin expansion; $1.8–2.0B EBITDA in 3 years vs. ~$1.2B at deal
• ◆India market milestone — first disclosed India revenue $500M+ would validate next major international leg
• ◆DTC mix crossing 47–50% — would validate channel-mix margin uplift
• ◆Potential re-IPO or secondary at expanded EBITDA multiple — 5–7 year time horizon

• ◆U.S.–China tariffs persistent — $0.40–0.80/share EPS headwind if borne; 12–20% of FY2024 EPS
• ◆OECD Pillar Two ETR increase — ETR rising 17%→22–23%; enacted legislation
• ◆China JV operational disruption — $300M+ revenue at risk if partner issues arise
• ◆Consumer discretionary softness — revenue growth –3–5 percentage points
• ◆FX headwind (USD strength) — revenue translation –1–3%
• ◆3G Capital over-leverage post-deal — brand/marketing investment crowding; equity risk asymmetry
• ◆Competitive encirclement (On/Hoka/Nike) — DTC ASP pressure in value-comfort tier