1 NYSE:SKX Jiaqi (Tommy) Jiang, Mengxi (Vivian) Wang, Le Huong Hoang, Ziqi (Kay) Mai December 3rd, 2015

Team Introduction Jiaqi Jiang Investment Manager Masters of Finance Le Huong Hoang Investment Manager Masters of Finance Mengxi Wang Investment Manager B.S. in Finance and Accountancy Ziqi Mai Investment Manager Masters of Finance

3 Agenda Screening procedure & Company Overview Macroeconomic Overview Financial Analysis Comparable Companies Financial Projections Valuation Recommendation

Screening Procedure Capital IQ We narrowed down to SKX stock through the above screening criteria Primarily listed in major exchanges P/E<20 Annual Total Revenue growth >20% Net Income growth>10% Annual Leveraged Free Cash Flow growth>10% Gross margin>30% Interest Coverage Ratio>5 Industry Diversification Skechers

Company Overview Introduction SKX K pg. 2-5 We based our projection based on the key operating risks of the 4 reportable segments Incorporated in California in 1992 and reincorporated in Delaware in 1999 Design and market lifestyle fashionable footwear for men, women and children and performance footwear 4 reportable segments: domestic wholesale, international wholesale, retail and E-commerce Shoes sold to over 160 countries with increasing international footprint Ability to remain competitive among sellers of footwear for consumers, including in the highly competitive performance footwear market; SKX Relies on independent contract manufacturers and, as a result, are exposed to potential disruptions in product supply; International economic, political and market conditions including the uncertainty of sustained recovery in our European markets; The loss of any significant customers, decreased demand by industry retailers and the cancellation of order commitments. About the business Key Operating Risks

Company Overview Product Lines Products Lifestyle brands Skechers USA Active and Sport Active Skechers Sport BOBS Performance brands Skechers GOrun Skechers GOwalk Skechers Gobionic Skechers GOtrain Skechers GOgolf Skechers Kids Skechers Work SKX K pg. 2-5 Women’s GO, Woman’s USA, Women’s Active, Men’s USA and Men’s Sport divisions are key growth drivers

Company Overview Skechers in News Jim Cramer’s talk with COO and CFO David Weinberg “We are feeling pretty good, and we think we have great opportunity both in this quarter, in the first quarter of next year, and still think we can double the business in the next five years," Weinberg said. The 2014 Korean Craze: Skecher’s D’Lites Sketchers D’lites Golden Panda series, boasting to be versatile, comfortable, and best of all a secret boost of height. When the sneakers first launched in Korea, they created a craze with queues and pre-orders. Korean craze usually hit soon in Hong Kong and then the Asian market overall. General news Management is optimistic about the business and the shoe style is favored by customers

Company Overview Distribution Channels SKX K pg There are 4 distribution channels for Skechers

Company Overview Segmental and Geographical Sales The segmental sales are increasing year over year; the primary sales-driven market is the USA SKX K Note 13

Company Overview Store count The growth of the number of stores for retail and international wholesale segments is promising SKX has covered most of the domestic market by 2015/9/30 and will open stores in the last quarter International wholesale segment is growing consistently and it will continue to expand international footprint SKX 2013, K and Q

Company Overview SWOT Analysis >Strengths - Brand name - Skecher D’Lite - Cost advantage: allow price to be low - Size advantage: large firm, sales efficiency > Weakness - Copying designs, not very fashionable- looking -No own production, depends on suppliers from Asia > Opportunities - Expanding international footprint in emerging markets - Acquisitions and e-commerce > Threats - Intensifying competition (too many firms produce similar products) - Customer tastes change fast - Uncertainty in future revenue growth SWOT Analysis Investment Team

Industry Overview Porter’s Five Forces Investment Team Threat of New Entrants *Medium to High Threat of Substitutes *Low Supplier’s Bargaining Power *Medium Buyer’s Bargaining Power *Medium Rivalry *High

Macroeconomic Overview Gross Domestic Product IBISWorld The GDP growth rate in the U.S. and the world will increase until 2018 then decrease slightly in 2019

Industry Overview Shoe Store IBIS World Demand peaks in 2018 and decreases slightly afterward

Industry Overview Online Shoe IBIS World Even though online shoe revenue growth rate declines, its expected annual growth from is still high at 7.7%

Macroeconomic Overview Rubber Price IBIS World Price of rubber is forecasted to have annual growth rate of -5.9% during period

Financial Analysis Profitability Source: SKX 10-K & 10-Q reports and Capital IQ

Financial Analysis Turnover and Management Source: SKX 10-K & 10-Q reports and Capital IQ

Financial Analysis Liquidity and Solvency Source: SKX 10-K & 10-Q reports and Capital IQ

Financial Analysis Dupont Analysis Source: SKX 10-K & 10-Q reports and Capital IQ

Financial Analysis Greenblatt Analysis Source: SKX 10-K & 10-Q reports and Capital IQ

Financial Analysis Greenblatt Analysis

Comparable Companies Descriptions CompetitorsDescription Wolverine World Wide, Inc. Wolverine World Wide, Inc. designs, manufactures, sources, markets, licenses, and distributes footwear, apparel, and accessories. The company operates through Lifestyle Group, Performance Group, and Heritage Group segments. DSW Inc. DSW Inc., offers dresses, casual and athletic footwear, and accessories under various brands for women, men, and kids. Deckers Outdoor Deckers Outdoor Corporation offers luxurious comfort footwear, handbags, apparel, home, and cold weather accessories. Genesco Inc. Genesco Inc. engages in the retail and wholesale of footwear, apparel, and accessories. Steven Madden Steven Madden, Ltd. designs, sources, and sells fashion-forward name brand and private label footwear for women, men, and children. Finish Line Inc. Finish Line, Inc., operates as a specialty retailer of athletic shoes, apparel, and accessories in the United States. Columbia Columbia Sportswear Company provides apparel, accessories, and equipment for men, women, and youth under the Columbia, Mountain Hardwear, and prAna brands. Caleres, Inc. Caleres, Inc., operates through two segments, Famous Footwear and Brand Portfolio. It offers licensed, branded, and private-label casual, dress, and athletic footwear products to women, men, and children. Under Armour Under Armour, Inc., offers its apparel in compression, fitted, and loose types to be worn in hot, cold, and in between the extremes. Capital IQ These comparable companies were narrowed down by business description and industry and are competitors with Skechers

Comparable Analysis Ratio Analysis Bloomberg Skechers has average ratio among its competitors

Comparable Companies Analysis Capital IQ Median multiples were selected and the price ratios were weighted more heavily

Discount Rate Weighted Average Cost of Capital Bloomberg The selected WACC is 11% with 1.07% risk premium added

Revenue Projection SKX K and Q Expansion of international market will drive the sales of international wholesale segment and the retail segment 2015 initiatives for international wholesale SKX intend to further increase their share of the international footwear market by heightening their marketing in emerging countries 2015 last quarter initiatives for retail: SKX have established their precence in what they believe to be most of major domestic retail markets. SKX will grow business internationally SKX will open another stores during the last quarter 2015

DCF Analysis With a discount rate of 11% and a long-term growth rate of 3%, our DCF analysis concludes a price of $30.41 SKX K and Q

Relevant Stock prospect Yahoo Finance The price drop in November is due to overly optimism of analysts’ expectation

Recommendation Reason we select the stock: price does not reflect its recent fast growth, oversold in November. During recent 2 weeks, price rises from $26.36 to $32.26 closed 12/2/15 DCF Valuation: $30.41 Comparable Valuation: $20.73 Estimated Valuation: $28.47 Lower than current price Recommendation: Put into Watch list Investment Team We suggest putting the SKX stock into the portfolio watchlist