Record Annual Sales Achieved with New Fourth
Quarter Record of $970.6 Million; Company’s Board of Directors
Authorizes $150 Million Stock Repurchase Program
SKECHERS USA, Inc. (NYSE:SKX), a global footwear leader, today
announced financial results for the fourth quarter and year ended
December 31, 2017.
Fourth Quarter
Highlights
- Record sales of $970.6 million, an
increase of 27.0 percent
- Earnings from operations of $55.7
million, an increase of 96.9 percent
- GAAP diluted loss per share of $0.43
due to a $0.64 one-time tax expense attributable to the Tax Cuts
& Jobs Act, adjusted diluted earnings per share of
$0.21
- International wholesale sales
increased 40.2 percent; total international wholesale and retail
sales combined represented 52.6 percent of total sales
- Domestic wholesale sales increased
11.6 percent
- Company-owned global retail sales
increased 25.8 percent, with a comparable same store sales increase
of 12.0 percent globally
“2017 was a monumental year for Skechers as we achieved sales of
more than $4 billion for the first time in our 25-year history,”
began Robert Greenberg, Skechers chief executive officer. “This
growth is due to our continued focus on efficiencies and
infrastructure as well as innovation, comfort, and relevancy within
our product design. In the United States, we remained the No. 1
walking, work, casual lifestyle, and casual dress footwear brand,
and the No. 2 casual athletic footwear brand*. Our team of
legendary athletes and international celebrities, including the
chart-topping singer Camila Cabello, drove worldwide appeal in
marketing campaigns that represent our diverse product
offering—from our heritage retro styling to the innovation and
comfort that have become hallmarks of Skechers footwear.
Furthermore, we grew our Skechers store base to 2,570 locations at
year-end and saw impressive growth across the globe—including
record sales on Single’s Day in China. As we look ahead, with fresh
styles shipping for Spring, we believe we will remain a leader in
the lifestyle footwear channel in the United States, selectively
expand our retail footprint, and continue our global growth as we
see our international business becoming an increasingly larger
piece of our total business.”
“With three months of strong sales, a robust holiday selling
season that included increased demand for our innovative lighted
children’s footwear and comfortable adult styles, and double-digit
growth in each of our three distribution channels, we achieved a
new fourth quarter sales record of $970.6 million,” stated David
Weinberg, chief operating officer of Skechers. “The four record
sales quarters in 2017 resulted in a new annual sales record of
$4.16 billion, an increase of over $600 million from the previous
year’s sales. This growth is a testament to the worldwide strength
and relevance of our product, marketing and brand.”
Fourth Quarter
Financial Results
($ in millions, except per share data)
For the three months ended December 31,
Change 2017 2016
$ % Sales $
970.6 $ 764.3 $ 206.3 27.0 % Gross Profit 454.1 356.2 97.9
27.5 % Gross Margin 46.8 % 46.6 % SG&A Expenses 404.7
332.9 71.8 21.6 % As a % of Sales 41.7 % 43.6 % Earnings
from Operations 55.7 28.3 27.4 96.9 % Operating Margin 5.7 % 3.7 %
Net Earnings (Loss) (66.7 ) 6.7 (73.4 ) NM GAAP
Diluted Earnings Per Share ($0.43 ) $ 0.04 ($0.47 ) NM
Adjusted Diluted Earnings Per Share $ 0.21 $ 0.04 $ 0.17 425.0 %
Sales grew 27.0 percent as a result of a 40.2 percent increase
in the Company’s international wholesale business, an 11.6
percent increase in the Company’s domestic wholesale
business, and a 25.8 percent increase in its Company-owned global
retail business. Comparable same store sales in
Company-owned stores increased 12.0 percent, including a domestic
increase of 10.5 percent and an international increase of 16.5
percent.
Gross margins increased due to strength in the Company’s
international retail business and increased sales in the Company’s
international subsidiary business.
SG&A expenses increased 21.6 percent. This
increase was driven by $67.4 million in general and
administrative expenses, including $37.8 million to support
international growth in the Company’s joint venture and subsidiary
businesses, and $20.1 million associated with operating 75
additional Company-owned Skechers stores, of which 22 were opened
in the fourth quarter. Selling expenses increased
by $4.4 million primarily due to higher international advertising
expenses as well as $1.5 million in increased sales commissions in
its South Korea joint-venture business.
Earnings from operations increased 96.9 percent primarily
due to sales growth.
Net loss was $66.7 million and diluted loss per
share was $0.43 per share. However, after adjusting for the
impact of Tax Cuts & Jobs Act (“TCJA”), adjusted net
earnings were $33.3 million and adjusted diluted earnings
per share were $0.21.
Income Taxes
The enactment of the Tax Cuts and Jobs Act in December 2017
resulted in a provisional additional income tax expense of $99.9
million in the fourth quarter, or an impact of $0.64 per diluted
share. The additional expense encompasses several elements,
including a one-time tax on accumulated overseas profits and the
revaluation of deferred tax assets and liabilities. As a result,
the Company’s reported tax rate was 194.4 percent for the fourth
quarter, and 38.8 percent for the full year. Excluding the
additional expense, the Company’s tax rate would have been 12.2
percent for the fourth quarter and 12.8 percent for the full year.
The Company will continue to analyze the impact of the TCJA to
determine its full effects. However, based on current expectations,
the Company’s 2018 annual tax rate is estimated to be in the range
of 12 percent to 17 percent.
Full-Year 2017
Financial Results
($ in millions, except per share data)
For the year ended December 31, Change
2017 2016
$ % Sales $ 4,164.2 $
3,563.3 $ 600.9 16.9 % Gross Profit 1,938.9 1,634.6 304.3
18.6 % Gross Margin 46.6 % 45.9 % SG&A Expenses 1,572.7
1,278.0 294.7 23.1 % As a % of Sales 37.8 % 35.9 % Earnings
from Operations 382.9 370.5 12.4 3.3 % Operating Margin 9.2 % 10.4
% Net Earnings (Loss) 179.2 243.5 (64.3 ) (26.4 %)
GAAP Diluted Earnings Per Share $ 1.14 $ 1.57 ($0.43 ) (27.4 %)
Adjusted Diluted Earnings Per Share $ 1.78 $ 1.57 $ 0.21
13.4 %
Full-year sales growth was the result of a 24.3 percent increase
in the Company’s international wholesale business, a 21.9
percent increase in the Company’s global retail business,
and a 4.1 percent increase in the Company’s domestic
wholesale business. Comparable same store sales in
Company-owned stores increased 7.2 percent, including a domestic
increase of 6.4 percent and an international increase of 10.1
percent.
Gross margins improved due to the sale of more in-line
product in 2017 and a stronger Company-owned retail and
international business.
SG&A expenses increased 23.1 percent including
an increase in selling expenses of $70.1 million
primarily to support growth in its international markets. It also
included an increase of 22.0 percent in general and
administrative expenses principally due to $73.7 million
in new store operating costs associated with 75 additional
Company-owned stores opened in the year and $109.5 million to
support growth in the Company’s international joint venture and
subsidiary businesses.
Earnings from operations increased 3.3 percent primarily
from increased sales growth.
Net earnings were $179.2 million and diluted
earnings per share were $1.14 per share. However, after
adjusting for the impact of TCJA, adjusted net earnings were
$279.1 million and adjusted diluted earnings per share were
$1.78.
Balance Sheet
At year-end 2017, cash and cash equivalents were $736.4
million, an increase of $17.9 million, or 2.5 percent over last
year.
Total inventory, including inventory in transit, was
$873.0 million, a $172.5 million increase, or 24.6 percent, over
December 31, 2016, and in line with the Company’s incoming order
rate, as well as the Company’s growing retail and wholesale
businesses.
Working capital was $1.5 billion versus $1.2 billion at
December 31, 2016, primarily reflecting increased investment in
inventory for 2018.
“Our relevant and affordable products are resonating with
consumers across the globe. This, combined with the investments and
efficiencies we have made in our global infrastructure, directly
contributed to our record sales performance in 2017. It also
uniquely positions us for success in 2018 and beyond,” said John
Vandemore, chief financial officer of Skechers. “In addition, our
strong balance sheet and significant free cash flow allows us to
fully execute our capital allocation strategy by continuing to make
high-growth investments and to return cash directly to stockholders
in the form of a stock repurchase.”
Share Repurchase
In February 2018, the Board of Directors authorized a stock
repurchase program, under which the Company plans to repurchase up
to $150 million of its Class A common stock through February
8, 2021 in the open market at prevailing prices.
Under the repurchase program, repurchases can be made from time
to time using a variety of methods, which may include open market
purchases, privately negotiated transactions or otherwise, all in
accordance with the United States Securities and Exchange
Commission and other applicable legal requirements. The specific
timing, price and size of purchases will depend on prevailing stock
prices, general economic and market conditions, and other
considerations. The repurchase program does not obligate the
Company to acquire any particular amount of Class A common stock,
and the repurchase program may be suspended or discontinued at any
time at the Company’s discretion.
Outlook
For the first quarter of 2018, the Company believes it will
achieve sales in the range of $1.175
billion to $1.200 billion, and diluted earnings per share
of $0.70 to $0.75.
Fourth Quarter and Full Year 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 fourth quarter and full year
2017 financial results. The call can be accessed on the Investor
Relations section of the Company’s website at www.skx.com. For
those unable to participate during the live broadcast, a replay
will be available beginning February 8, 2018, at 7:30 p.m. ET,
through February 22, 2018, at 11:59 p.m. ET. To access the replay,
dial 844-512-2921 (U.S.) or 412-317-6671 (International) and use
passcode: 13655455.
Non-GAAP Financial
Measures
References in this press release to “Sales” refers to the
Company’s net sales reported under generally accepted accounting
principles in the United States (“GAAP”). To supplement its
financial results presented in accordance with GAAP, the Company
presents certain non-GAAP financial measures within the meaning of
Regulation G promulgated by the SEC. “Income Tax Expense,” “Net
Earnings (Loss),” “Basic and Diluted Earnings (Loss) Per Share” and
the “Effective Tax Rate” are all measures for which the Company
provides the reported GAAP measures and adjusted non-GAAP measures.
References to “Adjusted Basic and Diluted Earnings Per Share”
refers to GAAP reported Basic and Diluted Earnings Per Share
adjusted for certain discrete or one-time items, including the
impact of the recently enacted Tax Cuts & Jobs Act.
Reconciliations of the non-GAAP financial measures with the
comparable GAAP financial measures are described in the table and
related disclosure below.
*SportsOneSource, January 9, 2018
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, 2,570 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 challenging consumer retail markets
in the United States; 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, 2016 and its quarterly report
on Form 10-Q for the nine months ended September 30, 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) December 31,
2017
December 31,
2016
ASSETS Current Assets: Cash and cash equivalents $ 736,431 $
718,536 Trade accounts receivable, net 405,921 326,844 Other
receivables 27,083 19,191 Total receivables
433,004 346,035 Inventories 873,016 700,515 Prepaid expenses and
other current assets 62,573 62,680 Total
current assets 2,105,024 1,827,766 Property, plant and equipment,
net 541,601 494,473 Deferred tax assets 29,922 26,043 Other assets
58,535 45,388 Total non-current assets
630,058 565,904 TOTAL ASSETS
$
2,735,082 $ 2,393,670
LIABILITIES AND EQUITY Current Liabilities: Current
installments of long-term borrowings $ 1,801 $ 1,783 Accounts
payable 505,334 520,437 Short-term borrowings 8,011 6,086 Accrued
expenses 82,202 93,424 Total current
liabilities 597,348 621,730 Long-term borrowings, net of current
installments 71,103 67,159 Deferred tax liabilities 161 412 Other
long-term liabilities 118,259 18,855 Total
non-current liabilities 189,523 86,426 Total
liabilities 786,871 708,156 Stockholders’ equity: Skechers U.S.A.,
Inc. equity 1,829,064 1,603,633 Noncontrolling interests
119,147 81,881 Total equity 1,948,211
1,685,514 TOTAL LIABILITIES AND EQUITY
$
2,735,082 $ 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 December 31, Twelve Months
Ended December 31,
2017
2016
2017
2016
Net sales $ 970,589 $ 764,290 $ 4,164,160 $ 3,563,311 Cost of sales
516,506 408,078
2,225,271 1,928,715 Gross profit
454,083 356,212 1,938,889 1,634,596 Royalty income 6,297
4,983 16,666
13,885 460,380
361,195 1,955,555
1,648,481 Operating expenses: Selling 63,883 59,502 327,201
257,129 General and administrative 340,843
273,431 1,245,474
1,020,834 404,726 332,933
1,572,675 1,277,963
Earnings from operations 55,654 28,262 382,880 370,518 Other income
(expense): Interest, net (937 ) (1,472 ) (4,257 ) (5,084 ) Other,
net 131 (4,640 ) 5,637
(5,950 ) (806 ) (6,112 )
1,380 (11,034 ) Earnings before
income tax expense 54,848 22,150 384,260 359,484 Income tax expense
106,609 6,981
149,156 74,125 Net (loss) earnings
(51,761 ) 15,169 235,104 285,359 Less: Net earnings attributable to
non-controlling interests 14,889 8,505
55,914 41,866 Net
(loss) earnings attributable to Skechers U.S.A., Inc. $ (66,650 )
$ 6,664 $ 179,190 $ 243,493
Net (loss) earnings per share attributable to
Skechers U.S.A., Inc.: Basic $ (0.43 ) $ 0.04
$ 1.15 $ 1.58 Diluted $ (0.43 ) $ 0.04
$ 1.14 $ 1.57 Weighted
average shares used in calculating (loss) earnings per share
attributable to Skechers U.S.A., Inc.: Basic 156,098
154,658 155,651
154,169 Diluted 156,098
155,405 156,523 155,084
SKECHERS U.S.A., INC. AND SUBSIDIARIES
SUPPLEMENTAL FINANCIAL INFORMATION NON-GAAP MEASURES
(unaudited) (In thousands, except per share data)
Three months ended December 31,
Adjusted
earnings, net (loss) earnings per share and effective tax
rate
2017 2016
ReportedGAAPMeasure
AdjustmentFor TCJA
Adjusted forNon GAAPMeasure (1)
ReportedGAAPMeasure Earnings before income tax expense $ 54,848 -
$
54,848
$ 22,150 Income tax expense 106,609 $ (99,937 )
6,672
6,981 Net (loss) earnings (51,761 ) 99,937
48,176
15,169 Less: Net earnings attributable to non-controlling interests
14,889 -
14,889
8,505
Net (loss) earnings attributable to
Skechers U.S.A., Inc
$ (66,650 ) $ 99,937
$
33,287
$ 6,664 Effective tax rate 194.4 % -
12.2
% 31.5 % Net (loss) earnings per share attributable to
Skechers U.S.A., Inc.: Basic $ (0.43 ) $ 0.64
$
0.21
$ 0.04 Diluted $ (0.43 ) $ 0.64
$
0.21
$ 0.04
Twelve months ended December
31,
Adjusted
earnings, net earnings per share and effective tax
rate
2017 2016
ReportedGAAPMeasure
AdjustmentFor TCJA
Adjusted forNon GAAPMeasure (1)
ReportedGAAPMeasure Earnings before income tax expense $ 384,260
-
$ 384,260 $ 359,484 Income tax expense 149,156
$
(99,937
) 49,219 74,125 Net earnings 235,104
99,937
335,041 285,359 Less: Net earnings attributable to non-controlling
interests 55,914
-
55,914 41,866 Net earnings
attributable to Skechers U.S.A., Inc $
179,190
$
99,937
$ 279,127 $ 243,493 Effective tax rate
38.8 %
-
12.8 % 20.6 % Net earnings per share attributable to
Skechers U.S.A., Inc.: Basic $ 1.15
$
0.64
$ 1.79 $ 1.58 Diluted $ 1.14
$
0.64
$ 1.78 $ 1.57
(1) During the fourth quarter of 2017, the Company recorded a
net tax expense of $99.9 million related to the enactment of the
Tax Cuts and Jobs Act. The expense is primarily related to the
TCJA’s transition tax on previously unremitted earnings of non-U.S.
subsidiaries and is net of remeasurement of Skechers’ deferred tax
assets and liabilities considering the TCJA’s newly enacted tax
rates. This provisional amount is subject to adjustment during the
measurement period of up to one year following the December 2017
enactment of the TCJA, as provided by recent SEC guidance. In
addition to reporting financial results in accordance with U.S.
GAAP, the Company also provides non-GAAP measures that adjust for
the net impact of enactment of the TCJA. This item represents a
significant charge that impacted the Company’s financial results.
Net earnings (loss), income tax expense, basic and diluted earnings
(loss) per share, and the effective tax rate are all measures for
which the Company provides the reported GAAP measure and an
adjusted measure. The adjusted measures are not in accordance with,
nor are they a substitute for, GAAP measures. The Company considers
these non-GAAP measures in evaluating and managing the Company’s
operations. The Company believes that discussion of results
adjusted for this item is meaningful to investors as it provides a
useful analysis of ongoing underlying operating trends. The
determination of this item may not be comparable to similarly
titled measures used by other companies.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20180208006337/en/
Company Contact:SKECHERS USA, Inc.David WeinbergChief Operating
OfficerJohn VandemoreChief Financial Officer(310)
318-3100orPress:Jennifer ClayVice President,Corporate
Communications(310) 318-3100orInvestor Relations:Addo Investor
RelationsAndrew Greenebaum(310) 829-5400
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