A top-five investor in Skechers USA Inc. is calling for the footwear company to make changes that it believes could create billions of dollars in value for investors.
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Tremblant Capital Group, which owns more than 5% of Skechers, wrote to the company s board Wednesday urging them to collapse Skechers dual-class share structure, pay dividends and improve communication with investors. In early trading Wednesday, the shares of Skechers rose 2.1% in New York.
While New York-based Tremblant praised the controlling Greenberg family's management of the brand, it raised concerns about whether the family's interests are fully aligned with shareholders, a mismatch that it said contributes to Skecher's shares trading at a significant discount to peers.
Tremblant urged Skechers to return some of the $1.18 billion in cash and cash equivalents it had at the end of the third quarter to shareholders.
The letter, signed by Austin Stephen and Bryan Walsh, states that shareholders will likely feel so aligned with management and the Greenberg family that unease around the founding family dynamics will cause the multiple to go up, and create tremendous value for shareholders, as stated by Tremblant Chief Executive Officer Brett Barakett. Shares of skechers have gained about 25% this year. The company had a market value of about $7 billion when they closed Tuesday at $44.92 each, down 3.4% on the day.
A representative for Skechers wasn't available for comment.
Manhattan Beach, California-based Skechers, which designs and markets casual and sporty footwear and clothing, has annual sales of $4.6 billion and shipped 163 million pairs of shoes, according to its website. Its first product, a men's logger boot, was launched at the height of the grunge trend in 1992.
Despite the fact that despite the lack of a dividend or capital markets days, Tremblant has lingering concerns about volatile costs, and said that the lack of a dividend, buyback or any capital markets days drags on the stock. The firm also recommended that Skechers hire an internal investor relations professional.
Tremblant said that if its suggestions were implemented, they could add $4 billion in incremental value to the $1.1 billion stake of Greenberg over the next decade. The family has more than 60% of the voting power in Skechers.
The company wants to buy back 40% of its stock over the next decade, and Tremblant said that the largest overhang on the Skechers stock is its dual-class share structure. The firm said that it could provide a 60% increase on earnings per share in 2030 and is more attractive than any potential acquisitions.
The trio wrote in the letter that it created an opportunity to generate many billions of dollars in value for the Greenberg family and other shareholders through thoughtful capital allocation that focuses on long-term shareholder value.
In October, Bloomberg News reported that Skechers is considering strategic options for its Asia business, including an initial public offering that could raise $1.5 billion.
Tremblant, with more than $3 billion in assets under management, prefers to keep its discussions with the companies it invests in behind closed doors, because of the fact that it has more than $3 billion in assets under management. Barakett founded the global asset manager in 2001.
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