SKECHERS USA, Inc. (NYSE:SKX), a global footwear leader, today
announced financial results for the second quarter ended June 30,
2018.
Second Quarter
Highlights
- Record sales of $1.134 billion, an
increase of 10.6 percent
- Record quarter gross margins of 49.4
percent
- International wholesale sales
increased 24.9 percent; total international wholesale and retail
sales combined represented 51.6 percent of total sales
- Company-owned global retail sales
increased 12.8 percent, with a comparable same store sales increase
of 4.5 percent worldwide
“The financial accomplishments in the second quarter are the
result of our product and marketing, as well as our on-going
efforts to seek out global opportunities,” began Robert Greenberg,
Skechers chief executive officer. “With the resurgence of retro
looks and Skechers D’Lites, we are the originator of one of the
hottest trends in footwear. At the core of this chunky look is
comfort, which runs through every one of our divisions—from Relaxed
Fit to Skechers Sport to our sandal collections. The excitement
over Skechers D’Lites has allowed us to broaden our distribution
and marketing to reach savvy millennial consumers. With
chart-topping Camila Cabello in Skechers D’lites, we have a global
ambassador who resonates with this audience. Add to that, the
campaigns for our wide demographic appeal and vast footwear
offering—including those with ambassadors, Tony Romo, Howie Long
and David Ortiz—enable us to meet the footwear needs of men, women
and children in the United States and around the world. With the
right product and marketing, we believe there is significant
opportunity to further grow our brand and continue to take market
share. We are investing in our international business—both in newer
and established markets as we continue to experience strong growth
overseas. We’re looking forward to the back-to-school season, and
the remainder of the year as we deliver more new styles backed by
impactful marketing.”
“We achieved another record sales quarter and continued to see
significant growth in our subsidiary and joint venture businesses,
which resulted in record sales of $2.38 billion over the first six
months of the year,” stated David Weinberg, chief operating officer
of Skechers. “Our largest international markets—Canada, China,
South Korea, Germany, India, and the United Kingdom, achieved
double-digit sales growth in the second quarter, a testament to our
global strategy. Additionally, China shipped approximately 5.6
million pairs in the period, a new quarterly record. As expected,
our domestic wholesale had single-digit decreases in the quarter
though much of our business within our core accounts remained
solid. Our international distributor business also had single-digit
decreases, but performed better than originally anticipated.
Looking forward, we believe both of our domestic wholesale and
international distributor businesses will be positive in the second
half of the year. Our focus for the balance of 2018 is to continue
to grow our international business while maintaining our strength
in the United States.”
Second Quarter 2018 Financial
Results($ in millions, except per share data)
For the three-months ended
June 30, Change
2018
2017
$
%
Sales $1,134.8 $1,025.9
$108.9
10.6% Gross Profit 561.0 488.3 72.7 14.9% Gross Margin 49.4% 47.6%
SG&A Expenses 484.9 405.2 79.7 19.7% As a % of Sales 42.7%
39.5% Earnings from Operations 81.4 86.3 -4.9 -5.7% Operating
Margin 7.2% 8.4% Net Earnings 45.3 59.5 -14.2 -23.9% Diluted
Earnings per Share $0.29 $0.38 -$0.09 -23.7%
Sales grew 10.6 percent as a result of a 24.9 percent increase
in the Company’s international wholesale business, and 12.8
percent increase in its Company-owned global retail
business. Second quarter comparable same store sales in
Company-owned stores worldwide increased 4.5 percent, including a
2.2 percent in the United States and a 11.3 percent
internationally. The growth in the second quarter was partially
offset by a 7.0 percent decrease in the Company’s domestic
wholesale business and a 6.1 percent decrease in the Company’s
international distributor business.
Gross margins increased due to strength in the Company’s
international wholesale and Company-owned international retail
businesses.
SG&A expenses increased 19.7 percent in the
quarter, including an increase in selling expenses of
$14.1 million due to higher international advertising. General
and administrative expenses increased by $65.6 million as the
Company continued to build its international brand presence and
direct-to-consumer channels. General and administrative expenses in
China grew $29.4 million to support continued expansion, including
support for the upcoming Single’s Day, and $11.7 million associated
with operating 54 additional Company-owned Skechers stores
worldwide, of which 12 opened in the second quarter. The G&A
expenses also included $19.8 million related to corporate and
domestic expenses, of which $7.0 million was for increased domestic
warehouse and distribution costs and $6.2 million was for legal
costs.
Earnings from operations decreased $4.9 million, or 5.7
percent.
Net earnings were $45.3 million and diluted earnings
per share were $0.29. In the second quarter, the Company’s
income tax rate was 18.8 percent reflecting its continued
assessment of the impact of the recently enacted tax reform
legislation. The Company’s net earnings for the second quarter were
negatively impacted by adverse foreign exchange impacts of $7.0
million and legal costs of $6.2 million.
Six months 2018 Financial
Results($ in millions, except per share data)
For the six-months ended
June 30, Change
2018
2017
$
%
Sales $2,384.9 $2,098.7
$286.2
13.6% Gross Profit 1,144.1 964.8 179.3 18.6% Gross Margin 48.0%
46.0% SG&A Expenses 924.8 761.5 163.3 21.4% As a % of Sales
38.8% 36.3% Earnings from Operations 230.1 210.7 19.4 9.2%
Operating Margin 9.7% 10.0% Net Earnings 162.9 153.5 9.4 6.1%
Diluted Earnings per Share $1.04 $0.98 $0.06 6.1%
Sales grew 13.6 percent as a result of a 22.9 percent increase
in the Company’s international wholesale business, and a
15.5 percent increase in its Company-owned global retail
business. For the six-month period, the Company’s domestic
wholesale business increased 1.0 percent compared to the same
prior year period.
Gross margins increased due to strength in the Company’s
international wholesale and Company-owned international retail
businesses.
SG&A expenses increased 21.4 percent. This
increase was due to an additional $138.5 million in general
and administrative expenses. Selling
expenses increased by $24.7 million.
Earnings from operations increased $19.4 million, or 9.2
percent.
Net earnings were $162.9 million and diluted earnings
per share were $1.04.
Balance Sheet
At quarter-end, cash, cash equivalents and
short-term investments totaled $887.7 million, an
increase of $151.3 million, or 20.5 percent from December 31, 2017,
and an increase of $136.2 million, or 18.1 percent, over June 30,
2017.
Total inventory, including inventory in transit, was
$822.4 million, a $50.6 million decrease from December 31, 2017,
and a $152.7 million increase over June 30, 2017. The majority of
the year-over-year inventory increase was attributable to
international wholesale and retail, particularly in China.
Working capital was $1.6 billion at June 30, 2018, a
$134.7 million increase over December 31, 2017, and a $282.9
million increase over June 30, 2017.
“In the second quarter, we continued to invest in building the
Skechers brand worldwide,” began John Vandemore, chief financial
officer of Skechers. “This included an expanded direct-to-consumer
presence in retail and online. We also diligently managed our
balance sheet, driving cash conversion and matching inventory
growth with anticipated sales volumes. At the same time, we
continued to allocate capital in line with our stated philosophy,
returning cash to shareholders directly through approximately $15.0
million of open market share repurchases.”
Share Repurchase
During the three months ended June 30, 2018, the Company
repurchased approximately 510,000 shares of its Class A common
stock at a cost of $15.0 million under its existing share
repurchase program. At June 30, 2018, approximately $132.0 million
remained available under the Company’s share repurchase
program.
Outlook
For the third quarter of 2018, the Company believes it will
achieve sales in the range of $1.200
billion to $1.225 billion, and diluted earnings per share
of $0.50 to $0.55. The guidance is based on continued strong
performance within the Company’s international subsidiaries and
joint venture businesses, and the Company-owned Skechers retail
stores, as well as growth in the Company’s international
distributor and domestic wholesale businesses in the back half of
the year. The Company expects that its effective tax rate for the
year will be at the top of or slightly higher than the previously
announced guidance of 12 to 17 percent.
Second Quarter 2018 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 2018 financial
results. The call can be accessed on the Investor Relations section
of the Company’s website at https://investors.skechers.com/. For
those unable to participate during the live broadcast, a replay
will be available beginning July 19, 2018, at 7:30 p.m. ET, through
August 2, 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: 13681233.
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 170 countries and territories worldwide via department and
specialty stores, 2,715 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, 2017, and its quarterly report
on Form 10-Q for the three months ended March 31, 2018. 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, 2018 2017 ASSETS
Current Assets: Cash and cash equivalents $ 844,847 $ 736,431
Short-term investments 42,895 - Trade accounts receivable, net
547,497 405,921 Other receivables 26,938
27,083 Total receivables 574,435 433,004 Inventories 822,423
873,016 Prepaid expenses and other current assets 77,290
62,573 Total current assets 2,361,890 2,105,024
Property, plant and equipment, net 553,574 541,601 Deferred tax
assets 26,209 29,922 Long-term investments 23,954 17,396 Other
assets 40,038 41,139 Total non-current assets
643,775 630,058 TOTAL ASSETS
$
3,005,665 $ 2,735,082
LIABILITIES AND EQUITY Current Liabilities:
Current installments of long-term borrowings $ 1,810 $ 1,801
Accounts payable 577,783 505,334 Short-term borrowings 11,179 8,011
Accrued expenses 128,783 82,202 Total current
liabilities 719,555 597,348 Long-term borrowings, net of current
installments 70,181 71,103 Deferred tax liabilities 161 161 Other
long-term liabilities 102,306 118,259 Total
non-current liabilities 172,648 189,523 Total
liabilities 892,203 786,871 Stockholders’ equity: Skechers U.S.A.,
Inc. equity 1,971,084 1,829,064 Noncontrolling interests
142,378 119,147 Total equity 2,113,462
1,948,211 TOTAL LIABILITIES AND EQUITY
$
3,005,665 $ 2,735,082
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,
2018
2017
2018
2017
Net sales $ 1,134,797 $ 1,025,934 $ 2,384,875 $ 2,098,742 Cost of
sales 573,840 537,613
1,240,815 1,133,923 Gross profit
560,957 488,321 1,144,060 964,819 Royalty income 5,350
3,221 10,872
7,451 566,307
491,542 1,154,932 972,270
Operating expenses: Selling 114,022 99,950 198,468 173,759
General and administrative 370,927
305,283 726,308 587,779
484,949 405,233
924,776 761,538 Earnings from
operations 81,358 86,309 230,156 210,732 Other income (expense):
Interest, net 1,054 (1,464 ) 731 (2,540 ) Other, net (7,473
) 2,664 (4,070 )
3,359 (6,419 ) 1,200
(3,339 ) 819 Earnings before income tax
expense 74,939 87,509 226,817 211,551 Income tax expense
14,080 14,109 28,700
31,516 Net earnings 60,859 73,400
198,117 180,035 Less: Net earnings attributable to noncontrolling
interests 15,575 13,865
35,181 26,505 Net earnings
attributable to Skechers U.S.A., Inc. $ 45,284 $
59,535 $ 162,936 $ 153,530
Net earnings per share attributable to Skechers
U.S.A., Inc.: Basic $ 0.29 $ 0.38 $
1.04 $ 0.99 Diluted $ 0.29 $
0.38 $ 1.04 $ 0.98
Weighted average shares used in
calculating earnings per share attributable to Skechers U.S.A.,
Inc.:
Basic 156,518 155,579
156,476 155,340 Diluted
157,091 156,174 157,366
156,016
View source
version on businesswire.com: https://www.businesswire.com/news/home/20180719005801/en/
Company Contact:David WeinbergChief Operating OfficerJohn
VandemoreChief Financial OfficerSKECHERS USA, Inc.(310)
318-3100orInvestor Relations:Andrew GreenebaumAddo Investor
Relations(310) 829-5400orPress:Jennifer ClayVice President,
Corporate CommunicationsSKECHERS USA, Inc.(310) 318-3100
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