SKX Skechers USA

Record Net Sales of $587.1 Million, an Increase of 37.1 Percent

Earnings from Operations of $53.8 Million

Diluted Earnings per Share of $0.68

SKECHERS USA, Inc. (NYSE:SKX), a global leader in footwear, today announced financial results for the second quarter ended June 30, 2014.

Second quarter 2014 net sales were $587.1 million compared to $428.2 million for the second quarter of 2013. Gross profit for the second quarter of 2014 was $269.4 million or 45.9 percent of net sales compared to $194.9 million or 45.5 percent of net sales for the second quarter of last year. Earnings from operations for the second quarter of 2014 were $53.8 million compared to net earnings from operations of $17.2 million for the second quarter of 2013. Due to Easter falling later in Spring, the Company shifted a portion of its advertising expenses to the second quarter of 2014; even with the shift, advertising expenses on a percentage basis were flat versus the second quarter of 2013.

“The strength of our new product combined with the power of our marketing and diverse distribution resulted in a 37.1 percent sales increase over last year’s second quarter and the highest quarterly revenues in the Company’s 22-year history. These results followed a record first quarter, resulting in a 28.8 percent net sales increase for the first six months of 2014,” began David Weinberg, chief operating officer and chief financial officer. “The strong sales are attributable to fresh styles across our lifestyle, performance and kids’ categories, and the demand for our product resulted in a positive shift of our Back-to-School domestic wholesale and international subsidiary shipments originally scheduled for July into June. We achieved double-digit increases in our domestic wholesale business, which included a four percent increase in average price per pair; double-digit increases in our international wholesale business, with some markets up triple digits; and double-digit growth in our Company-owned retail stores, which achieved a 13.9 percent comparable quarter net sales increase. We are pleased with our financial achievements in our businesses worldwide as is evidenced by our operating margin of 9.2 percent for the second quarter.”

Net earnings in the second quarter of 2014 were $34.8 million compared to net earnings of $7.1 million for the second quarter of 2013. Diluted net earnings per share in the second quarter of 2014 were $0.68 based on 50,914,000 weighted average shares outstanding compared to diluted net earnings per share of $0.14 based on 50,497,000 weighted average shares outstanding for the same period last year.

For the six months ended June 30, 2014, net sales were $1.134 billion compared to net sales of $879.9 million in the first six months of 2013. Gross profit for the first six months of 2014 was $509.8 million or 45.0 percent of net sales, compared to $387.6 million or 44.1 percent of net sales for the first six months of 2013. Earnings from operations for the first six months of 2014 were $101.9 million, compared to net earnings from operations of $32.5 million for the same period last year.

Net earnings in the first six months of 2014 were $65.8 million compared to net earnings of $13.8 million in the same period last year. Diluted net earnings per share were $1.29 based on 50,879,000 weighted average common shares outstanding compared to diluted net earnings per share of $0.27 based on 50,494,000 weighted average common shares outstanding for the first six months of 2013.

Robert Greenberg, SKECHERS chief executive officer, commented: “For the months of both April and June, the Princeton Retail Analysis called Skechers the ‘hottest major footwear brand,’ noting our overall sales growth in several categories including casual and walking shoes. Many of our key accounts visiting our corporate offices this month and our international distribution partners who spent four days reviewing our collections last month are echoing the same sentiment due to our multiple new product initiatives for men, women and kids. The innovations with our Spring 2014 product resulted in successes from every division, including triple digit growth in some categories. As always, we supported our extensive product offering with targeted animated, lifestyle and celebrity focused television campaigns, including a new commercial starring Joe Montana, and the continuation of our Meb spot supporting the Olympian’s incredible win at the Boston Marathon. We have expanded our team of Skechers ambassadors with the addition of sports legends Pete Rose and Joe Namath for our Relaxed Fit from Skechers line, professional golfer Matt Kuchar and Olympic runner Kara Goucher for our Skechers Performance Division, and we recently signed superstar singer and actress Demi Lovato and one of Britain’s top models Kelly Brook for our women’s lines—all of whom will appear in marketing campaigns this year and next. Looking for unique marketing opportunities, we capitalized on the fame of California Chrome by sponsoring the horse racing triple-crown hopeful, resulting in a windfall of press. We believe our marketing and footwear is resonating with consumers globally. We ended 2013 with our second highest annual sales ever, started the year with record first quarter sales, and have just achieved a new record sales quarter with growth across all our distribution channels. In addition, in the second quarter we received Best Lifestyle Brand of the Year from the Sports Trade Awards in the UK, and two product awards from Competitor magazine. Given the broad product acceptance we achieved through the first half of 2014, we believe the momentum will continue through the second half of 2014. We are looking forward to delivering the remainder of our Back-to-School footwear, and continuing to introduce new innovative product.”

Mr. Weinberg continued: "From a product, marketing and distribution standpoint, the Company has never been better positioned. The record first half of 2014 along with continued increased backlogs at the end of June, incoming order rate and revenues in July leads us to believe that our record quarterly sales trend will continue for the balance of the year. Further evidence is our position in the market as reported by SportScanInfo: for the week of July 12, Skechers held the number two position in Women’s Sport footwear sold in the United States. We believe the demand for our product is universal based on our sales growth across a number of continents. With $414.8 million in cash, 40 to 50 Company-owned Skechers stores planned to open later this year, in addition to the 16 that opened in the second quarter and the two that have already opened this month, and another 60 to 65 Skechers stores planned to open through our distributors and franchise partners, as well as the expansion and automation plans for our European Distribution Center, we believe we are in a great position for continued growth. We remain comfortable with the analysts’ current consensus estimates for the third quarter even though we are up against a tougher comparison and there was a pull forward of domestic and international wholesale volume from the third quarter to the second quarter of 2014.”

About SKECHERS USA, Inc.

SKECHERS USA, Inc., based in Manhattan Beach, California, designs, develops and markets a diverse range of lifestyle footwear for men, women and children, as well as performance footwear for men and women. SKECHERS footwear is available in the United States via department and specialty stores, Company-owned SKECHERS retail stores and its e-commerce website, and in over 100 countries and territories through the Company’s international network of subsidiaries in Canada, Brazil, Chile, Japan, and across Europe, as well as through joint ventures in Asia and distributors around the world. For more information, please visit www.skechers.com, and follow us on Facebook (www.facebook.com/SKECHERS) and Twitter (twitter.com/SKECHERSUSA).

This announcement contains forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, without limitation, the Company’s future growth, financial results and operations, its development of new products, future demand for its products and growth opportunities, its planned opening of new stores, advertising and marketing initiatives, and the expansion and automation plans for the Company’s European Distribution Center. Forward-looking statements can be identified by the use of forward looking language such as “believe,” “anticipate,” “expect,” “estimate,” “intend,” “plan,” “project,” “will be,” “will continue,” “will result,” “could,” “may,” “might,” or any variations of such words with similar meanings. Any such statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected in forward-looking statements. Factors that might cause or contribute to such differences include the resignation of the Company’s former independent registered public accounting firm, and its withdrawal of its audit reports with respect to certain of the Company’s historical financial statements; international, national and local general economic, political and market conditions including the ongoing global economic slowdown and market instability; entry into the highly competitive performance footwear market; sustaining, managing and forecasting costs and proper inventory levels; losing any significant customers, decreased demand by industry retailers and cancellation of order commitments due to the lack of popularity of particular designs and/or categories of products; maintaining brand image and intense competition among sellers of footwear for consumers; anticipating, identifying, interpreting or forecasting changes in fashion trends, consumer demand for the products and the various market factors described above; sales levels during the spring, back-to-school and holiday selling seasons; and other factors referenced or incorporated by reference in the Company’s annual report on Form 10-K for the year ended December 31, 2013, and its Form 10-Q for the quarter ended March 31, 2014. The risks included here are not exhaustive. The Company operates in a very competitive and rapidly changing environment. New risks emerge from time to time and the companies cannot predict all such risk factors, nor can the companies assess the impact of all such risk factors on their respective businesses or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, you should not place undue reliance on forward-looking statements as a prediction of actual results. Moreover, reported results should not be considered an indication of future performance.

    SKECHERS U.S.A., INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands)   June 30,

2014

  December 31,

2013

ASSETS Current Assets: Cash and cash equivalents $ 414,808 $ 372,011 Trade accounts receivable, net 318,460 225,941 Other receivables   10,667     10,599 Total receivables 329,127 236,540 Inventories 360,491 358,168 Prepaid expenses and other current assets 37,094 26,094 Deferred tax assets   22,115     22,115 Total current assets 1,163,635 1,014,928 Property, plant and equipment, at cost, less accumulated depreciation and amortization

364,746

361,755

Goodwill and other intangible assets, less applicable amortization 1,910 2,377 Deferred tax assets 1,624 9,950 Other assets, at cost   19,420     19,560 Total non-current assets   387,700     393,642 TOTAL ASSETS $ 1,551,335   $ 1,408,570   LIABILITIES AND EQUITY Current Liabilities: Current installments of long-term borrowings $ 12,218 $ 12,028 Short-term borrowings 184 87 Accounts payable 314,196 258,183 Accrued expenses   44,283     40,124 Total current liabilities 370,881 310,422 Long-term borrowings, excluding current installments 110,331 116,488 Other long-term liabilities   15,081     1,740 Total non-current liabilities   125,412     118,228 Total liabilities 496,293 428,650 Stockholders’ equity: Skechers U.S.A., Inc. equity 1,001,817 930,322 Noncontrolling interests   53,225     49,598 Total equity   1,055,042     979,920 TOTAL LIABILITIES AND EQUITY $ 1,551,335   $ 1,408,570       SKECHERS U.S.A., INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands, except per share data)   Three Months Ended June 30, Six Months Ended June 30,   2014       2013     2014       2013   Net sales $ 587,051 $ 428,247 $ 1,133,569 $ 879,868 Cost of sales   317,676       233,353       623,791       492,242   Gross profit 269,375 194,894 509,778 387,626 Royalty income   1,836       1,424       4,858       3,194     271,211       196,318       514,636       390,820   Operating expenses: Selling 53,839 42,088 90,581 79,784 General and administrative   163,616       137,066       322,139       278,534     217,455       179,154       412,720       358,318   Income from operations 53,756 17,164 101,916 32,502 Other income (expense): Interest, net (3,459 ) (2,991 ) (6,052 ) (5,540 ) Other, net   148       (695 )     (934 )     (3,618 )   (3,311 )     (3,686 )     (6,986 )     (9,158 ) Earnings before income taxes 50,445 13,478 94,930 23,344 Income tax expense   12,232       4,632       23,669       6,910   Net earnings 38,213 8,846 71,261 16,434 Less: Net earnings attributable to noncontrolling interests   3,411       1,752       5,494       2,660   Net earnings attributable to Skechers U.S.A., Inc. $ 34,802     $ 7,094     $ 65,767     $ 13,774       Net earnings per share attributable to Skechers U.S.A., Inc.: Basic $ 0.69     $ 0.14     $ 1.30     $ 0.27   Diluted $ 0.68     $ 0.14     $ 1.29     $ 0.27     Weighted average shares used in calculating earnings per share attributable to Skechers U.S.A., Inc.: Basic   50,565       50,298       50,562       50,297   Diluted   50,914       50,497       50,879       50,494  

Company Contact:SKECHERS USA, Inc.David WeinbergChief Operating OfficerChief Financial Officer(310) 318-3100orInvestor Relations:Andrew Greenebaum(310) 829-5400