SKECHERS USA, Inc. (NYSE:SKX), a global footwear leader, today
announced financial results for the fourth quarter and year ended
December 31, 2016.
Quarterly and Fiscal Year
Highlights
- Record fourth quarter net sales of
$764.3 million, an increase of 5.8 percent, and record annual net
sales of $3.56 billion, an increase of 13.2 percent
- Earnings from operations of $28.3
million for the fourth quarter and $370.5 million for the
year
- Net earnings of $6.7 million for the
fourth quarter and $243.5 million for the year
- Diluted earnings per share of $0.04
for the fourth quarter and $1.57 for the year
“Skechers achieved new fourth quarter and full-year net sales
records, exceeding our fourth quarter guidance range of $710
million to $735 million,” began David Weinberg, chief operating
officer and chief financial officer. “The strong quarterly growth
was primarily the result of a 17.1 percent increase in our
international wholesale business, led by China with an increase of
48.5 percent. In addition, our global Company-owned retail business
grew 13.9 percent on a store base of 571 at year-end. Combined with
our third-party owned stores, we had 2,012 Skechers stores
worldwide at year-end, creating a global network that includes more
than 500 locations in China, more than 60 in each of India, Mexico
and Saudi Arabia, and over 50 in each of Australia, Malaysia, South
Korea and Taiwan.”
Fourth Quarter Financial
Results
Quarterly net sales increased 5.8 percent to $764.3
million compared to fourth quarter 2015. The growth was the result
of a 17.1 percent increase in the Company’s international wholesale
business and a 13.9 percent increase in its Company-owned global
retail business which included comparable same store sales
increases of 3.6 percent. Additionally, the negative currency
translation impact on its gross margins in its international
wholesale and international Company-owned retail businesses for the
fourth quarter was $18.4 million. The net sales increases were
offset by a decrease of 11.8 percent in the Company’s domestic
wholesale business, which included a 4.6 percent decrease due to
the launch of the Star Wars footwear collection in the fourth
quarter of 2015.
Gross profit for the fourth quarter was $356.2 million,
or 46.6 percent of net sales, compared to $329.9 million, or 45.6
percent of net sales, for the fourth quarter of last year.
Historically, gross margins for its retail segment are the highest,
followed by gross margins for international subsidiary sales and
then domestic wholesale sales, with gross margins for its
international distributor sales being the lowest. The slightly
higher gross margin during the quarter was due to a combination of
increased international subsidiary revenues and margins, reduced
domestic wholesale and international distributor sales and margins,
which were offset by lower retail margins.
Fourth quarter selling expenses increased $1.6 million to
$59.5 million, or 7.8 percent of sales, compared to $57.9 million,
or 8.0 percent of sales, in the fourth quarter of the prior year.
The increase was primarily due to increased international
advertising expenses.
General and administrative expenses for the fourth
quarter increased $52.3 million to $273.4 million, or 35.8 percent
of sales, compared to $221.1 million, or 30.6 percent of sales, in
the prior year. The year-over-year quarterly increase was primarily
due to Skechers’ focus on long-term global growth, including $15.3
million associated with the Company’s 53 additional domestic and
international retail stores, and $27.0 million to support its
international growth, of which $19.0 million was due to increased
costs in China, $2.8 million for the transition of its South Korean
distributor to a joint venture, $2.3 million in support of its new
Latin America subsidiary, and $3.2 million in Japan. Domestic
wholesale general and administrative expenses increased $10.0
million during the fourth quarter primarily due to increased
headcount in the United States to support its brand worldwide.
“We are in our 25th year of business, have a well-established
brand and prominent position in the United States, and have grown
our international business to 46.1 percent of our 2016 sales,”
added Mr. Weinberg. “As we plan for our international business to
grow to 50 percent of our total sales in the near future, we
transitioned several of our international distributors to joint
ventures or subsidiaries in key regions in 2016 and the few years
prior, and have been investing in the infrastructure and marketing
to support the current and planned growth. In the fourth quarter,
these investments were primarily in China, Korea Japan and Latin
America, which are regions that we believe will represent great
growth opportunities.”
Earnings from operations were $28.3 million, a decrease
of 48.3 percent over the fourth quarter of 2015.
Net earnings decreased 77.4 percent to $6.7 million,
while diluted net earnings per share for the fourth quarter
were $0.04, compared with $0.19 for the fourth quarter in the prior
year. The Company’s annual effective tax rate for 2016 increased to
20.6 percent from 19.9 percent as of September 30, 2016, which
increased its fourth quarter 2016 effective tax rate to 31.5
percent and reduced its earnings per share by $0.02. In
addition, the Company’s gross margins were negatively impacted by
approximately $18.4 million due to negative foreign currency
translations and an additional $4.6 million in pre-tax expenses
related to foreign currency transaction losses during the fourth
quarter of 2016. Further, the Company’s business in the United
Kingdom was significantly impacted by currency headwinds as its
wholesale sales were flat during the fourth quarter in local
currency but down 17.9 percent in U.S. dollars.
2016 Financial Results
Net sales were $3.56 billion, gross profit was $1.63 billion or
45.9 percent of net sales, and earnings from operations were $370.5
million or 10.4 percent of net sales. Net earnings were $243.5
million and diluted net earnings per share were $1.57 per
share.
Robert Greenberg, SKECHERS chief executive officer, commented:
“With record annual sales of over $3.56 billion, 2016 was another
significant growth year for Skechers. We remained the number two
sport footwear brand in the United States, and the number one
walking brand, work brand, and dress/comfort casual brand*, and
received the 2016 Plus Award for Children’s Design from Footwear
Plus. We believe we are continuing to increase market share around
the globe as we experience the strongest growth coming from our
international businesses. Our continued growth and strong market
position is due to aggressively revamping our product lines to
include more youthful, relevant and innovative styles, while still
creating comfort footwear that our broad consumer base finds
appealing. We expect that 2017, Skechers’ 25th year of business,
will be an even more remarkable in terms of product and sales. Our
speed to market and ability to react and deliver as trends arise
gives us the flexibility to pivot as necessary. When it comes to
design, we are focused on the domestic market as well as our
international markets as we provide a product offering that
resonates around the world. We are looking forward to delivering
our new collections across all our divisions for men, women and
kids—included lighted footwear, a new line from our Skechers
Performance Division, and a new product line perfect for the
Millennials and Post-Millennials—and believe that we will remain a
leading global footwear company.”
Balance Sheet
At year end, cash and cash equivalents was $718.5
million, an increase of $210.5 million, or 41.4 percent over last
year.
Total inventory, including inventory in transit, was
$700.5 million, an $80.3 million increase, or 12.9 percent, over
December 31, 2015, in line with the Company’s incoming order rate,
backlogs, and growing retail and wholesale business.
Working capital was $1.2 billion versus $971.2 million at
December 31, 2015.
Mr. Weinberg continued: “We ended 2016 with positive domestic
and international backlogs, and the highest incoming order rate for
our domestic wholesale, subsidiary and distributor businesses in
our history for both the fourth quarter and full year. Already in
2017, we’ve achieved mid-single-digit comps in January and high
single-digit comps for the first week of February in our
Company-owned retail stores on a worldwide basis. Based on these
key indicators, combined with the many new products delivering
later this year—including the domestic launch of You by Skechers in
the second quarter—we believe the remainder of the year is on a
favorable growth track, and we are well positioned for another
record year.”
Outlook
Despite an all-time net sales record in the first quarter of
2016 and Easter falling into the second quarter in 2017, the
Company believes it will achieve flat to slightly positive sales in
its domestic wholesale business, and increases in its international
business and Company-owned retail stores. The Company expects net
sales in the range of $1.050 billion to $1.075
billion and earnings per share of $0.50 to $0.55 for the first
quarter of 2017.
The Company expects its ongoing capital expenditures for
2017 to be approximately $50 million to $55 million, which includes
corporate office upgrades and an additional 70 to 90 Company-owned
retail store openings and several store remodels, and an additional
$25 million for infrastructure primarily in its China joint
venture.
Fourth Quarter and Full Year 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 fourth quarter and full year
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 February 9, 2017, at 7:30 p.m. ET,
through February 23, 2017, at 11:59 p.m. ET. To access the replay,
dial 844-512-2921 (U.S.) or 412-317-6671 (International) and use
passcode: 13652980.
*SportsOneSource, January 5, 2017
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 2,012 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 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; 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, especially in the highly competitive performance
footwear market; 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 September 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) December 31,
2016
December 31,
2015
ASSETS Current Assets: Cash and cash equivalents $ 718,536 $
507,991 Trade accounts receivable, net 326,844 343,930 Other
receivables 19,191 18,661 Total receivables
346,035 362,591 Inventories 700,515 620,247 Prepaid expenses and
other current assets 62,680 57,363 Total
current assets 1,827,766 1,548,192 Property, plant and equipment,
net 494,473 435,907 Deferred tax assets 26,043 17,825 Other assets
45,388 37,954 Total non-current assets
565,904 491,686 TOTAL ASSETS
$
2,393,670 $ 2,039,878
LIABILITIES AND EQUITY Current Liabilities: Current
installments of long-term borrowings $ 1,783 $ 15,653 Accounts
payable 520,437 473,983 Short-term borrowings 6,086 59 Accrued
expenses 93,424 87,318 Total current
liabilities 621,730 577,013 Long-term borrowings, net of current
installments 67,159 68,942 Deferred tax liabilities 412 8,507 Other
long-term liabilities 18,855 9,682 Total
non-current liabilities 86,426 87,131 Total
liabilities 708,156 664,144 Stockholders’ equity: Skechers U.S.A.,
Inc. equity 1,603,633 1,327,556 Noncontrolling interests
81,881 48,178 Total equity 1,685,514
1,375,734 TOTAL LIABILITIES AND EQUITY
$
2,393,670 $ 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 December 31, Twelve
Months Ended December 31,
2016
2015
2016
2015
Net sales $ 764,290 $ 722,683 $ 3,563,311 $ 3,147,323 Cost of sales
408,078 392,829
1,928,715 1,723,315 Gross profit
356,212 329,854 1,634,596 1,424,008 Royalty income 4,983
3,921 13,885
11,745 361,195
333,775 1,648,481
1,435,753 Operating expenses: Selling 59,502 57,934 257,129
235,586 General and administrative 273,431
221,133 1,020,834
849,343 332,933 279,067
1,277,963 1,084,929
Earnings from operations 28,262 54,708 370,518 350,824 Other
expense: Interest, net (1,472 ) (1,969 ) (5,084 ) (10,006 ) Other,
net (4,640 ) (2,141 ) (5,950 )
(7,321 ) (6,112 ) (4,110 )
(11,034 ) (17,327 ) Earnings before
income tax expense 22,150 50,598 359,484 333,497 Income tax expense
6,981 12,108
74,125 72,450 Net earnings 15,169
38,490 285,359 261,047 Less: Net earnings attributable to
noncontrolling interests 8,505 9,042
41,866 29,135 Net
earnings attributable to Skechers U.S.A., Inc. $ 6,664
$ 29,448 $ 243,493 $ 231,912
Net earnings per share attributable to
Skechers U.S.A., Inc.: Basic $ 0.04 $ 0.19
$ 1.58 $ 1.52 Diluted $ 0.04
$ 0.19 $ 1.57 $ 1.50
Weighted average shares used in calculating earnings per
share attributable to Skechers U.S.A., Inc.: Basic 154,658
153,346 154,169
152,847 Diluted 155,405
154,570 155,084
154,200
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version on businesswire.com: http://www.businesswire.com/news/home/20170209006068/en/
Company Contact:SKECHERS USA, Inc.David WeinbergChief Operating
Officer,Chief Financial Officer310-318-3100orInvestor
Relations:Addo Investor RelationsAndrew Greenebaum,
310-829-5400
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