Skechers USA Inc. shares are down 8.6% in Wednesday trading after a Morgan Stanley downgrade to equal-weight from overweight. The bank cut the footwear company’s price target to $25 from $41. Analyst Jay Sole believes consumers are shifting their preferred athletic footwear style to “pure fashion items,” which is making Skechers adjust its merchandise and causing a delay in orders. The result is “slower-than-expected sales growth and SG&A deleverage,” the Morgan Stanley note said. Skechers is also investing in its global infrastructure at a cost that’s higher than Morgan Stanley previously thought. And Sole believes lower-priced inventory and new fashions from brands like Adidas AG are taking share. Taken together, these factors could push a stock to an under-weight rating, Sole says. “However, Skechers has orchestrated many turnarounds and adapted to many shifts in the past and we see no reason it can’t happen again,” he wrote. Skechers shares are down 54.8% for the past year while the S&P 500 Index is up 9.2% for the same period.
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