Record Second Quarter Net Sales of $1.026
Billion
Record First Six Months Net Sales of $2.099
Billion
SKECHERS USA, Inc. (NYSE:SKX), a global footwear leader, today
announced financial results for the second quarter and six months
ended June 30, 2017.
Second Quarter and Six Month 2017
Highlights
- Record second quarter net sales of
$1.026 billion, an increase of 16.9 percent
- Record six month net sales of $2.099
billion, an increase of 13.0 percent
- Gross margins of 47.6 percent for
the second quarter and 46.0 percent for the six months
“Second quarter net sales exceeded our expectations setting
another record quarter, and making the first half of 2017 a new
record with sales surpassing $2 billion,” began David Weinberg,
chief operating officer and chief financial officer. “The growth
came across our three distribution channels—with double-digit
increases in our Company-owned global Skechers retail business, and
each of our international distributor, subsidiary and joint venture
businesses, as well as a mid-single-digit increase in our domestic
wholesale business. Further, in the second quarter of 2017 in our
domestic wholesale business, we shipped 11.4 percent more pairs
while our average price per pair decreased 4.5 percent.”
Second Quarter Financial
Results
Quarterly net sales increased 16.9 percent to $1.026
billion compared to the second quarter 2016. The growth was the
result of a 6.4 percent increase in the Company’s domestic
wholesale business, an 18.6 percent increase in the Company’s
international wholesale business, and a 28.0 percent increase in
its Company-owned global retail business, which included comparable
same store sales increases of 7.1 percent.
Gross profit for the second quarter was $488.3 million,
or 47.6 percent of net sales, compared to $416.3 million, or 47.4
percent of net sales, for the second quarter of last year.
Second quarter selling expenses increased $24.0 million
to $100.0 million, or 9.7 percent of sales, compared to $76.0
million, or 8.7 percent of sales, in the second quarter of the
prior year. The increase was primarily due to increased domestic
advertising of $5.2 million, additional international advertising
expenses of $6.4 million, primarily to support the growth in its
European subsidiaries as well as increases in Japan and South
Korea, and an additional $4.2 million in selling commissions from
its joint venture in South Korea.
General and administrative expenses for the second
quarter increased $62.1 million to $305.3 million, or 29.8 percent
of sales, compared to $243.2 million, or 27.7 percent of sales, in
the second quarter of the prior year. The year-over-year quarterly
increase was primarily due to Skechers’ focus on long-term global
growth, including $22.3 million associated with the Company’s 68
additional domestic and international retail stores—31 of which
were opened in the second quarter, and $26.2 million to support its
international growth, of which $16.9 million was due to increased
costs in China, $3.6 million for the transition of its South Korean
distributor to a joint venture, and $2.4 million in Japan. Domestic
wholesale general and administrative expenses in the second quarter
increased $13.5 million year-over-year primarily due to increased
headcount in the United States to support its brand worldwide, as
well as the expansion into new categories and brands.
Mr. Weinberg added: “Investing in our brand and business is
critical for both our short-term and long-term growth initiatives.
This is evident in both the expansion of our Company-owned global
retail business, which had the highest net sales dollar and
percentage gain, followed by our international wholesale business.
Given the increases in our international business, which for the
first six months represented 48 percent of our total business, we
believe the greatest opportunity for expansion is internationally,
and we are investing in our infrastructure and marketing to support
this progress.”
Earnings from operations were $86.3 million or 8.4
percent of sales, a decrease of 14.0 percent over the second
quarter of 2016.
Net earnings decreased 19.7 percent to $59.5 million, and
diluted net earnings per share were $0.38. The Company’s
quarterly effective tax rate in the second quarter was 16.1 percent
compared to 12.7 percent over the second quarter of 2016. The
Company expects its effective tax rate to be between 14 percent and
19 percent for fiscal 2017.
Six Month Financial
Results
Net sales were $2.099 billion, gross profit was $964.8 million
or 46.0 percent of net sales, and earnings from operations were
$210.7 million or 10.0 percent of net sales. Net earnings were
$153.5 million and diluted net earnings per share were $0.98 per
share.
Robert Greenberg, SKECHERS chief executive officer, commented:
“Twenty-five years ago in May, we founded Skechers with a single
line of men’s boots available in the United States. Within a year,
we were shipping to several international markets, and planning
expansion into women’s and kids. We’ve come a very long way in a
relatively short period of time—including our present position in
the United States as the leader in walking, work, casual and
comfort footwear, and second in all of footwear combined, and a
leading brand in numerous countries around the world. Our domestic
and international growth in the quarter and in recent years was the
result of our continued focus on developing innovative, comfortable
and stylish footwear; determination to build the brand through
marketing; investment in operations and logistics for the present
and future; and the dedication of our highly talented and creative
team.”
Mr. Greenberg continued: “Domestically in the second quarter, we
introduced a key new product, You by Skechers, delivered more of
our heritage footwear collections, experienced strong sales in our
sandal business, and saw continued strength in our kids’ lighted
footwear. In the international markets, we achieved double-digit
growth in many countries worldwide—including Germany, Chile, India,
China, and Australia. Along with delivering strong product for men,
women and kids to our wholesale partners, our international success
was due to the expansion of Skechers retail stores around the
world, which now includes 1,870 international stores of which 1,691
are third-party-owned locations. At quarter end, our total Skechers
retail store count was 2,305, and included the opening of several
key locations—Tokyo’s popular Shibuya district, the new Century
City Mall in Los Angeles, a super store in Ontario Mills in
Southern California, a store in New York’s SoHo, among others—and
the relocation of our store on San Francisco’s Powell Street, which
now has a much larger sales floor and better visibility. Based on
our global meetings in May and June, and our on-going domestic key
account meetings at our corporate offices, plus our July
sell-throughs, we believe that the record sales we experienced in
the first six months will continue in the second half.”
Balance Sheet
At June 30, 2017, cash and cash equivalents was $751.6
million, an increase of $122.8 million, or 19.5 percent over June
30, 2016.
Total inventory, including inventory in transit, was
$669.7 million, an increase of $79.0 million or 13.4 percent over
June 30, 2016, and a decrease of $30.8 million or 4.4 percent over
December 31, 2016. The increase over last year was primarily due to
the Company’s growth worldwide and is in line with the Company’s
backlogs, and growing retail and international wholesale
business.
Working capital was $1.359 billion at June 30, 2017
versus $1.155 billion at June 30, 2016.
Mr. Weinberg continued: “We ended the quarter with our three
business channels showing continued growth, and low double-digit
increases in backlog on a worldwide basis. With the investments we
have made in our business globally, and our strong cash and
inventory position as well as new product initiatives we are
delivering, we believe we are well positioned for continued growth
in the second half, and in the coming year.”
Outlook
Based on these key indicators, the Company believes it will
achieve net sales in the third quarter in the range of $1.050
billion to $1.075 billion, which would represent a third
quarter sales record, and earnings per share of $0.42 to $0.47.
This projection includes flat sales increases in the Company’s
domestic wholesale business, and double-digit increases in its
international wholesale business, and its global Company-owned
retail stores.
The Company expects its capital expenditures for the
remainder of 2017 to be approximately $35.0 million to $40.0
million, which includes corporate office upgrades and an additional
35 to 40 Company-owned retail store openings and several store
remodels.
Second Quarter 2017 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 second quarter 2017 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 July 20, 2017, at 7:30 p.m. ET, through August 3, 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: 13666029.
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 2,305 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, Skechers’ 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, opening of new stores and additional
expenditures, 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 Skechers’ annual report on Form 10-K
for the year ended December 31, 2016 and its quarterly report on
Form 10-Q for the three months ended March 31, 2017. The risks
included here are not exhaustive. Skechers 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, December
31, 2017 2016 ASSETS Current
Assets: Cash and cash equivalents $ 751,581 $ 718,536 Trade
accounts receivable, net 494,683 326,844 Other receivables
24,884 19,191 Total receivables 519,567 346,035
Inventories 669,741 700,515 Prepaid expenses and other current
assets 54,119 62,680 Total current assets
1,995,008 1,827,766 Property, plant and equipment, net 527,441
494,473 Deferred tax assets 33,517 26,043 Other assets
53,324 45,388 Total non-current assets 614,282
565,904 TOTAL ASSETS
$
2,609,290 $ 2,393,670
LIABILITIES AND EQUITY Current Liabilities:
Current installments of long-term borrowings $ 1,792 $ 1,783
Accounts payable 528,251 520,437 Short-term borrowings 4,049 6,086
Accrued expenses 101,518 93,424 Total current
liabilities 635,610 621,730 Long-term borrowings, net of current
installments 68,271 67,159 Deferred tax liabilities 417 412 Other
long-term liabilities 21,734 18,855 Total
non-current liabilities 90,422 86,426 Total
liabilities 726,032 708,156 Stockholders’ equity: Skechers U.S.A.,
Inc. equity 1,779,097 1,603,633 Noncontrolling interests
104,161 81,881 Total equity 1,883,258
1,685,514 TOTAL LIABILITIES AND EQUITY
$
2,609,290 $ 2,393,670
SKECHERS U.S.A., INC. AND SUBSIDIARIES CONDENSED
CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) (In
thousands, except per share data) Three Months
Ended June 30, Six Months Ended June 30,
2017
2016
2017
2016
Net sales $ 1,025,934 $ 877,810 $ 2,098,742 $ 1,856,604 Cost of
sales 537,613 461,556
1,133,923 1,008,198 Gross profit
488,321 416,254 964,819 848,406 Royalty income 3,221
3,307 7,451
5,932 491,542 419,561
972,270 854,338 Operating
expenses: Selling 99,950 75,966 173,759 129,844 General and
administrative 305,283 243,240
587,779 485,589
405,233 319,206 761,538
615,433 Earnings from operations 86,309
100,355 210,732 238,905 Other income (expense): Interest, net
(1,464 ) (1,542 ) (2,540 ) (2,664 ) Other, net 2,664
(2,604 ) 3,359 175
1,200 (4,146 ) 819
(2,489 ) Earnings before income tax expense
87,509 96,209 211,551 236,416 Income tax expense 14,109
12,200 31,516
42,768 Net earnings 73,400 84,009 180,035
193,648 Less: Net earnings attributable to noncontrolling interests
13,865 9,902
26,505 21,929 Net earnings attributable
to Skechers U.S.A., Inc. $ 59,535 $ 74,107
$ 153,530 $ 171,719 Net
earnings per share attributable to Skechers U.S.A., Inc.: Basic $
0.38 $ 0.48 $ 0.99 $ 1.12
Diluted $ 0.38 $ 0.48 $ 0.98
$ 1.11 Weighted average shares used in
calculating earnings per share attributable to Skechers U.S.A.,
Inc.: Basic 155,579 154,049
155,340 153,901 Diluted
156,174 155,023
156,016 154,912
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170720006216/en/
Company Contact:SKECHERS USA, Inc.David WeinbergChief Operating
OfficerChief Financial Officer(310) 318-3100orInvestor
Relations:Addo Investor RelationsAndrew Greenebaum(310)
829-5400
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