SKECHERS USA, Inc. (NYSE:SKX), a global footwear leader, today
announced financial results for the third quarter ended September
30, 2016.
Quarterly Highlights
- Record third quarter net sales of
$942.4 million, an increase of 10.1 percent
- Earnings from operations of $103.4
million
- Net earnings of $65.1
million
- Diluted earnings per share of
$0.42
“Skechers achieved a new third quarter sales record for the
period, and the second highest sales quarter in our 24-year
history. This also resulted in a new nine-month sales record of
$2.8 billion,” began David Weinberg, chief operating officer and
chief financial officer. “The quarterly sales increase was
primarily the result of 18.3 percent growth in our international
wholesale business, which now comprises 40.1 percent of our total
sales, or 47.9 percent including international retail. We believe
that our international business represents the greatest growth
opportunity with many countries continuing to show strong growth in
the quarter, including China at just over 50 percent in net sales.
To further grow our business internationally, we have transitioned
certain international distributors to our subsidiary or joint
venture model, including Israel most recently to a joint venture,
and we are in the final stages of South Korea moving to a joint
venture as well. We are also pleased with the 16.0 percent sales
growth in our global retail business with 556 Company-owned
Skechers retail stores, including 150 international locations, at
quarter end. Including third-party-owned stores, there are now
1,716 Skechers stores worldwide.”
Third Quarter Financial
Results
Quarterly net sales rose 10.1 percent to $942.4 million
compared to third quarter 2015. The increase was the result of an
18.3 percent increase in the Company’s international wholesale
business and a 16.0 percent increase in its Company-owned global
retail business with total comp store sales increases of 3.2
percent. Additionally, the negative currency translation impact on
the international wholesale and retail sales for the quarter was
$15.9 million. The Company’s domestic wholesale business decreased
3.4 percent, though the number of pairs shipped increased by 0.6
percent compared to third quarter 2015. The decline in net sales
dollars was due to a $0.97 or 4.0 percent decrease in average
selling price per pair. Impacting the Company’s domestic wholesale
business was the sluggish retail environment in the United States,
which resulted in several retailers either closing doors or ceasing
operations, wide-spread discounting on other normally full-priced
brands, as well as a shorter back-to-school period.
Gross profit for the third quarter was $430.0 million, or
45.6 percent of net sales, compared to $387.0 million, or 45.2
percent of net sales, for the third quarter of last year. The
slightly higher gross margin during the quarter was primarily due
to slightly higher domestic wholesale margins offset by slightly
lower global retail margins, as well as the product sales mix.
Third quarter selling expenses increased $4.1 million to
$67.8 million, or 7.2 percent of sales, compared to $63.7 million,
or 7.4 percent of sales, in the prior year quarter. The increase
was primarily due to increased advertising expenses.
General and administrative expenses were $261.8
million, or 27.8 percent of sales, compared to $230.0 million, or
26.9 percent of sales, in the prior year. The $31.8 million
year-over-year increase was primarily due to Skechers’ focus on
long-term global growth, including $16.3 million associated with
the Company’s 61 additional domestic and international retail
stores and $20.2 million to support its international growth, of
which $9.8 million was due to increased costs in China, $2.6
million in Latin America, and $1.1 million in Japan with new
offices and distribution center. The increased G&A expenses
were offset by reduced domestic wholesale expenses of $4.7
million.
Earnings from operations were $103.4 million, an increase
of 8.1 percent over the third quarter of 2015.
Net earnings decreased 2.2 percent to $65.1 million,
while diluted net earnings per share for the third quarter
were $0.42, compared with $0.43 in the prior year. The Company’s
diluted earnings per share for the third quarter of 2016 were
negatively impacted by foreign currency translation and exchange
losses of approximately $8.1 million, or $0.04 per diluted
share.
The Company’s effective tax rate increased to 24.2
percent in the quarter, and 19.9 percent for the first nine months.
This was compared to a 17.7 percent third quarter effective tax
rate and 21.3 percent nine-month effective tax rate in 2015. The
Company’s quarterly effective tax rate was higher than its previous
projected range of 17 to 22 percent, primarily due to differences
between the actual and the projected mix of domestic and foreign
earnings and (loss) before income taxes.
Nine Month Financial
Results
Net sales were $2.80 billion, gross profit was $1.28 billion or
45.7 percent of net sales, and earnings from operations were $342.3
million. Net earnings were $236.8 million and diluted net earnings
per share were $1.53 per share.
Robert Greenberg, SKECHERS chief executive officer, commented:
“As we look to celebrate our 25th year in business, we continue to
use our creativity, speed and scale to develop new product quickly
that resonates with consumers around the world. Through the last
few years we have seen and supported a natural progression, as
international has become an even larger piece of our total
business. With this global growth we are not only building up the
logistical support and necessary infrastructure to accommodate it,
but also changing our mindset and longer term growth
strategy–including enlisting the power of global celebrities as
well as regional celebrities, and creating campaigns that consider
both trends abroad as well as in the United States. We are able to
capitalize on our shift to international markets through our
product development capabilities and innovation. Our speed to
market lets us react quickly to new trends and gives us the
flexibility to pivot as necessary. As a leading global footwear
company, we can move in virtually any product design direction, due
to our diverse platform and robust design team. Along with updates
to our proven core styles, we have new categories and opportunities
that we have begun presenting to our key North American accounts
this week, and we are looking forward to showcasing our new
offering to our international teams next month.”
Balance Sheet
At quarter end, cash and cash equivalents was $665.3
million, an increase of $154.6 million, or 30.3 percent over the
same period last year.
Total inventory, including inventory in transit, was
$523.3 million, a $23.1 million increase, or 4.6 percent over
September 30, 2015, and a decrease of $96.9 million or 15.6 percent
when compared to December 31, 2015.
Working capital was $1.23 billion versus $995 million on
September 30, 2015.
Mr. Weinberg added: “We believe the domestic market remains
challenging and is continuing to adjust to the changing retail
landscape with retailers managing inventory with more caution and
ordering much closer to season. We are focused on maintaining our
position on the floor with the growth we achieved earlier this year
and last, managing our product flow to accounts, and are poised to
move quickly again as consumers shop not only for what they need,
but also want. We believe the decrease in our wholesale business in
the United States will continue in the fourth quarter, but are
cautiously optimistic about the first quarter. In regard to our
international business, the fourth quarter is typically the
strongest for our distributors which increased 91.6 percent in 2015
over 2014, while the first quarter is stronger for our
international joint ventures and subsidiaries which increased 58
percent in 2016 over 2015. Given the transition of several
distributors to either a joint venture or subsidiary model, and the
major shifts in the structure and timing in revenues for our
international businesses, as well as the significant distributor
and international growth across the fourth and first quarters of
2015 and 2016, respectively, it’s best to look at these growth
drivers over a two to three year period.”
Outlook
For the fourth quarter of 2016, the Company expects net sales in
the range of $710 million and $735 million. This outlook assumes
single-digit increases and comps in its international wholesale
business and total retail business, respectively, as well as a
single-digit decrease in its domestic wholesale business.
The Company expects its ongoing capital expenditures for
the remainder of 2016 to be approximately $5 million to $10
million, which includes an additional 15 to 20 retail store
openings and the completion of its European Distribution Center
automation system.
Third Quarter 2016 Conference
Call
The Company will host a conference call today at 1:30 p.m. PT /
4:30 p.m. Eastern Time to discuss its third quarter 2016 financial
results. The call can be accessed on the Investor Relations section
of the Company’s the website at www.skx.com. For those unable to
participate during the live broadcast, a replay will be available
beginning October 20, 2016, at 7:30 p.m. ET, through November 3,
2016, at 11:59 p.m. ET. To access the replay, dial 844-512-2921
(U.S.) or 412-317-6671 (International) and use passcode:
13646366.
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
and over 160 countries and territories worldwide via department and
specialty stores, more than 1,710 SKECHERS Company-owned and
third-party-owned retail stores, and the Company’s e-commerce
websites. The Company manages its international business through a
network of global distributors, joint venture partners in Asia and
the Middle East, and wholly-owned subsidiaries in Canada, Japan,
throughout Europe and Latin America. For more information, please
visit skechers.com and follow us on Facebook
(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
domestic and international growth, financial results and operations
including expected net sales and earnings, its development of new
products, future demand for its products, its planned domestic and
international expansion and opening of new stores, the completion
of the expansion and upgrade of the Company’s European Distribution
Center, and advertising and marketing initiatives. 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 international
economic, political and market conditions including the uncertainty
of sustained recovery in Europe; 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, 2015 and its
quarterly report on Form 10-Q for the three months ended June 30,
2016. 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) September 30,
December 31, 2016 2015
ASSETS Current Assets: Cash and cash equivalents $
665,291 $ 507,991 Trade accounts receivable, net 426,084 343,930
Other receivables 19,224 18,661 Total
receivables 445,308 362,591 Inventories 523,345 620,247 Prepaid
expenses and other current assets 60,480
57,363 Total current assets 1,694,424 1,548,192 Property, plant and
equipment, net 470,137 435,907 Deferred tax assets 17,748 17,825
Other assets 45,001 37,954 Total non-current
assets 532,886 491,686 TOTAL ASSETS
$ 2,227,310 $
2,039,878 LIABILITIES AND EQUITY
Current Liabilities: Current installments of long-term borrowings $
1,779 $ 15,653 Accounts payable 383,530 473,983 Short-term
borrowings 5,116 59 Accrued expenses 72,354
87,318 Total current liabilities 462,779 577,013 Long-term
borrowings, net of current installments 67,606 68,942 Deferred tax
liabilities 9,224 8,507 Other long-term liabilities 12,897
9,682 Total non-current liabilities 89,727
87,131 Total liabilities 552,506 664,144
Stockholders’ equity: Skechers U.S.A., Inc. equity 1,596,315
1,327,556 Noncontrolling interests 78,489
48,178 Total equity 1,674,804 1,375,734 TOTAL
LIABILITIES AND EQUITY
$ 2,227,310
$ 2,039,878 SKECHERS U.S.A.,
INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF
EARNINGS (Unaudited) (In thousands, except per share
data) Three Months Ended September 30,
Nine Months Ended September 30,
2016
2015
2016
2015
Net sales $ 942,417 $ 856,179 $ 2,799,021 $ 2,424,640 Cost of sales
512,439 469,173
1,520,637 1,330,486 Gross profit
429,978 387,006 1,278,384 1,094,154 Royalty income 2,970
2,312 8,902
7,824 432,948 389,318
1,287,286 1,101,978
Operating expenses: Selling 67,782 63,685 197,627 177,652
General and administrative 261,815
230,048 747,403 628,210
329,597 293,733
945,030 805,862 Earnings from
operations 103,351 95,585 342,256 296,116 Other income (expense):
Interest, net (948 ) (2,503 ) (3,612 ) (8,037 ) Other, net
(1,485 ) (3,409 ) (1,310 )
(5,180 ) (2,433 ) (5,912 )
(4,922 ) (13,217 ) Earnings before income tax
expense 100,918 89,673 337,334 282,899 Income tax expense
24,376 15,839 67,144
60,342 Net earnings 76,542 73,834
270,190 222,557 Less: Net earnings attributable to noncontrolling
interests 11,432 7,232
33,361 20,093 Net earnings
attributable to Skechers U.S.A., Inc. $ 65,110 $
66,602 $ 236,829 $ 202,464
Net earnings per share attributable to Skechers
U.S.A., Inc.: Basic $ 0.42 $ 0.44 $
1.54 $ 1.33 Diluted $ 0.42 $
0.43 $ 1.53 $ 1.31
Weighted average shares used in calculating earnings per share
attributable to Skechers U.S.A., Inc.: Basic 154,211
152,895 154,006
152,677 Diluted 155,203
154,477 154,999 154,073
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version on businesswire.com: http://www.businesswire.com/news/home/20161020006404/en/
Company Contact:SKECHERS USA, Inc.David WeinbergChief Operating
Officer, Chief Financial Officer(310) 318-3100orInvestor
Relations:Addo Investor RelationsAndrew Greenebaum(310)
829-5400
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