SKECHERS U.S.A., Inc. (“Skechers” or the “Company”) (NYSE:SKX),
The Comfort Technology CompanyTM and a global footwear leader,
today announced financial results for the third quarter ended
September 30, 2021.
Third Quarter Highlights
- Sales of $1.55 billion, a year-over-year increase of
19.2%
- Direct-to-Consumer sales grew 44.1% and wholesale sales grew
10.5%
- Diluted earnings per share of $0.66, a year-over-year
increase of 61.0%
- Cash, cash equivalents and investments of $1.18
billion
“Skechers achieved a new third quarter sales record surpassing
$1.5 billion for the period, a remarkable achievement given the
on-going supply chain disruptions,” began David Weinberg, Chief
Operating Officer of Skechers. “The record quarter was the result
of double-digit improvements in both our domestic and international
businesses compared to the third quarter 2020, reflecting the
relevancy of our product globally and a normalizing retail
environment. Traffic increased in our Skechers stores, and we
achieved growth of 44.1% and significantly higher gross margins in
our Direct-to-Consumer business. Our Domestic and International
Wholesale businesses both grew over 10%, an achievement given the
global logistical challenges. The increases in International
Wholesale came largely from double-digit increases in our
Distributor sales, and strong performance in markets like China and
India. As we look to the fourth quarter and into the first half of
2022, we believe supply chain constraints will remain a challenge,
although we are beginning to see progress in key global ports,
especially in Europe and other international markets. Nonetheless,
we are proud of the execution of our global team to deliver our
comfort technology footwear to retail stores and our partners
around the world to meet the strong demand for Skechers
products.”
“Comfort and technology remain at the core of who we are and why
Skechers continues to be a leading global footwear brand. We offer
signature comfort across the entire Skechers catalog, incorporating
innovation, style and quality at a reasonable price. Supply chain
constraints challenged our normal delivery speeds, but our teams
worked tirelessly to move inventory as quickly as possible,
delivering to our stores and partners in an effort to keep up with
the demand,” stated Robert Greenberg, Chief Executive Officer of
Skechers. “While we supported our business with pervasive
advertising campaigns globally, we also focused on developing new
product, creating what we believe is our strongest offering yet.
This includes a growing seasonal collection, with styles comprised
of recycled materials and building on our Fit offerings with
consumers’ comfort in mind. Our accomplishments were many during
the quarter—including remaining the third largest athletic footwear
company in the world and achieving a new quarterly sales record for
the period. That said, we believe the best is yet to come for
Skechers.”
Third Quarter 2021 Financial Results
Three Months Ended
September 30,
Change
(in millions, except per share data)
2021
2020
$
%
Sales
$
1,551.0
$
1,300.9
$
250.1
19.2
Gross profit
769.4
625.1
144.3
23.1
Gross margin
49.6
%
48.1
%
150
bps
Operating expenses
630.7
536.2
94.5
17.6
As a % of sales
40.7
%
41.2
%
(50
)bps
Earnings from operations
146.2
92.1
54.1
58.7
Operating margin
9.4
%
7.1
%
230
bps
Net earnings
103.1
64.3
38.8
60.3
Diluted earnings per share
$
0.66
$
0.41
$
0.25
61.0
Third quarter sales increased 19.2% as a result of a 20.1%
increase in domestic sales and an 18.6% increase in international
sales. Domestic and international growth was driven by increases in
both direct-to-consumer and wholesale, as COVID-19 impacts
continued to ease. On a constant currency basis, the Company’s
total sales increased 17.1%.
Sales grew across all segments with increases to Domestic
Wholesale of 10.1%, International Wholesale of 10.6%, and
Direct-to-Consumer of 44.1%. Improvements in Domestic Wholesale
were the result of higher unit sales volume. International
Wholesale increases were driven by growth of 61.9% in Distributor
sales, 10.0% in China, and 67.5% in India, partially offset by an
11.0% decline in our European subsidiaries. Direct-to-Consumer
sales grew across all channels, led by domestic and international
retail stores, and achieved a double-digit increase in average
selling price from higher prices and lower promotions.
Direct-to-Consumer comparable same store sales increased 31.0%,
driven by an increase of 33.7% domestically and 25.1%
internationally.
Gross margin increased 150 basis points to 49.6% driven by
Direct-to-Consumer gross margin growth, resulting from higher
average selling prices, partially offset by declines in
International Wholesale and Domestic Wholesale, due to higher
average costs per unit.
Operating expenses increased $94.5 million, or 17.6%. Selling
expenses increased by $33.8 million, or 39.4%, due to higher global
advertising costs. General and administrative expenses increased by
$60.7 million, or 13.5%, primarily as a result of higher labor
costs as well as increased rent and warehouse and distribution
expenses.
Earnings from operations increased $54.1 million to $146.2
million, an increase of 58.7%.
Net earnings were $103.1 million and diluted earnings per share
were $0.66.
In the third quarter, the Company’s effective income tax rate
was 15.6%.
“Skechers’ double-digit growth across all segments reflects
continuing strong demand for our comfort technology products,”
stated John Vandemore, Chief Financial Officer of Skechers.
“Despite severe global supply chain challenges, we delivered record
third quarter sales along with robust gross margins and fantastic
earnings growth. Further, our global infrastructure investments
continued, with our China distribution center becoming fully
operational and excellent progress made on many other
infrastructure and technology projects. We remain confident that as
supply chain constraints ease, Skechers’ will be well positioned to
meet the tremendous consumer demand for our products.”
Nine Months 2021 Financial Results
Nine Months Ended
September 30,
Change
(in millions, except per share data)
2021
2020
$
%
Sales
$
4,637.1
$
3,272.7
$
1,364.4
41.7
Gross profit
2,298.6
1,541.4
757.2
49.1
Gross margin
49.6
%
47.1
%
250
bps
Operating expenses
1,811.1
1,476.5
334.6
22.7
As a % of sales
39.1
%
45.1
%
(600
) bps
Earnings from operations
505.1
76.0
429.1
564.6
Operating margin
10.9
%
2.3
%
860
bps
Net earnings
339.1
45.3
293.8
648.6
Diluted earnings per share
$
2.17
$
0.29
$
1.88
648.3
Year-to-date sales increased 41.7% reflecting a 42.4% increase
in domestic sales and a 41.2% increase in international sales with
the largest contribution derived from International Wholesale
growth. On a constant currency basis, the Company’s total sales
increased 37.4%.
Sales grew across all segments with increases to Domestic
Wholesale of 36.0%, International Wholesale of 35.6%, and
Direct-to-Consumer of 58.9%. Improvements in Domestic Wholesale
were the result of higher unit sales volume. International
Wholesale had growth in China of 52.6% and Europe of 16.1%.
Direct-to-Consumer had higher units sold and higher average selling
prices. Direct-to-Consumer comparable same store sales increased
45.0%, driven by an increase of 49.4% domestically and 33.4%
internationally.
Gross margin increased 250 basis points to 49.6% primarily
driven by increased gross margins in the Direct-to-Consumer
segment, which was the result of increased average selling prices
and reduced promotional activity.
Operating expenses increased by $334.6 million or 22.7%. Selling
expenses increased by $117.3 million or 53.3%, primarily due to
higher global advertising costs. General and administrative
expenses increased by $217.3 million or 17.3%, primarily due to
higher labor and incentive compensation costs, global warehouse and
distribution expenses, and rent.
Earnings from operations increased $429.1 million to $505.1
million.
Net earnings were $339.1 million and diluted earnings per share
were $2.17.
The Company’s effective income tax rate was 19.0%.
Balance Sheet
Cash, cash equivalents and investments totaled $1.18 billion, a
decrease of $398.3 million, or 25.2% from December 31, 2020
primarily as a result of repaying $452.5 million on our revolving
credit facility in the second quarter of 2021.
Total inventory was $1.23 billion, an increase of $213.6 million
or 21.0% from December 31, 2020. Increased inventory levels
primarily reflect growth in the International Wholesale segment and
higher merchandise in transit due to supply chain challenges with
shipping and port delays.
Outlook
For the fiscal year 2021, the Company believes it will achieve
sales between $6.15 billion and $6.20 billion and diluted earnings
per share of between $2.45 and $2.50. Further, the Company believes
that for the fourth quarter of 2021, it will achieve sales between
$1.51 billion and $1.56 billion and diluted earnings per share of
between $0.28 and $0.33.
Store Count
Number of Store Locations as
of
Number of Store Locations as
of
December 31, 2020
Opened
Closed(1)
September 30, 2021
Domestic stores
523
16
(23
)
516
International stores
331
19
(6
)
344
Joint venture stores
467
102
(77
)
492
Distributor, licensee and franchise
stores
2,570
422
(174
)
2,818
Total Skechers stores
3,891
559
(280
)
4,170
(1)
Does not reflect temporary closures due to
the COVID-19 pandemic.
Third Quarter 2021 Conference Call
The Company will host a conference call today at 4:30 p.m. ET /
1:30 p.m. PT to discuss its third quarter 2021 financial results.
The call can be accessed on the Investor Relations section of the
Company’s website at investors.skechers.com. For those unable to
participate during the live broadcast, a replay will be available
beginning October 28, 2021 at 7:30 p.m. ET, through November 11,
2021, at 11:59 p.m. ET. To access the replay, dial 844-512-2921
(U.S.) or 412-317-6671 (International) and use passcode:
13723310.
About SKECHERS U.S.A., Inc.
Skechers, The Comfort Technology Company based in Southern
California, designs, develops and markets a diverse range of
lifestyle and performance footwear, apparel and accessories for
men, women and children. The Company’s collections are available in
the United States and over 170 countries and territories via
department and specialty stores, and direct to consumers through
4,170 Company and third-party-owned retail stores and e-commerce
websites. The Company manages its international business through a
network of global distributors, joint venture partners in Asia,
Israel and Mexico, and wholly-owned subsidiaries in Canada, Japan,
India, Europe and Latin America. For more information, please visit
about.skechers.com and follow us on Facebook, Instagram, Twitter,
and TikTok.
Reference in this press release to “Sales” refers to Skechers’
net sales reported under GAAP. This announcement contains
forward-looking statements that are made pursuant to the safe
harbor provisions of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. These forward-looking statements may 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 the disruption of business and
operations due to the COVID-19 pandemic; delays or disruptions in
our supply chain; 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 Skechers’ annual report on Form 10-K
for the year ended December 31, 2020 and its quarterly report on
Form 10-Q for the six months ended June 30, 2021. More
specifically, the COVID-19 pandemic has had and may continue to
have a significant impact on Skechers’ business, financial
conditions, cash flow and results of operations. Forward-looking
statements with respect to the COVID-19 pandemic include, without
limitation, Skechers’ plans in response to this pandemic. At this
time, there is significant uncertainty about the COVID-19 pandemic,
including without limitation, (i) the duration and extent of the
impact of the pandemic, (ii) governmental responses to the
pandemic, including how such responses could impact Skechers’
business and operations, as well as the operations of its factories
and other business partners, (iii) the effectiveness of Skechers’
actions taken in response to these risks, and (iv) Skechers’
ability to effectively and timely adjust its plans in response to
the rapidly changing retail and economic environment. Taking these
and other risk factors associated with the COVID-19 pandemic into
consideration, the dynamic nature of these circumstances means that
what is stated in this press release could change at any time, and
as a result, actual results could differ materially from those
contemplated by such forward-looking statements. 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 we cannot predict all such risk factors, nor can we assess
the impact of all such risk factors on our business 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)
As of September 30,
As of December 31,
(in thousands)
2021
2020
ASSETS
Current assets
Cash and cash equivalents
$
952,076
$
1,370,826
Short-term investments
90,577
100,767
Trade accounts receivable, net
758,713
619,800
Other receivables
81,362
69,222
Total receivables
840,075
689,022
Inventory
1,230,349
1,016,774
Prepaid expenses and other current
assets
189,598
166,962
Total current assets
3,302,675
3,344,351
Property, plant and equipment, net
1,087,183
935,441
Operating lease right-of-use assets
1,130,279
1,171,521
Deferred tax assets
70,353
63,884
Long-term investments
139,052
108,412
Goodwill
93,497
93,497
Other assets, net
78,536
95,263
Total non-current assets
2,598,900
2,468,018
TOTAL ASSETS
$
5,901,575
$
5,812,369
LIABILITIES AND EQUITY
Current liabilities
Accounts payable
$
846,101
$
744,077
Operating lease liabilities
214,192
204,370
Accrued expenses
232,599
208,712
Current installments of long-term
borrowings
43,742
52,250
Short-term borrowings
320
3,297
Total current liabilities
1,336,954
1,212,706
Long-term borrowings, excluding current
installments
282,760
679,415
Long-term operating lease liabilities
1,010,499
1,065,069
Deferred tax liabilities
9,850
11,439
Other long-term liabilities
129,518
118,077
Total non-current liabilities
1,432,627
1,874,000
Total liabilities
2,769,581
3,086,706
Stockholders’ equity
Preferred Stock
—
—
Class A Common Stock
135
134
Class B Common Stock
21
21
Additional paid-in capital
410,376
372,165
Accumulated other comprehensive loss
(44,510
)
(27,285
)
Retained earnings
2,475,481
2,136,400
Skechers U.S.A., Inc. equity
2,841,503
2,481,435
Noncontrolling interests
290,491
244,228
Total stockholders' equity
3,131,994
2,725,663
TOTAL LIABILITIES AND EQUITY
$
5,901,575
$
5,812,369
SKECHERS U.S.A., INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF EARNINGS
(Unaudited)
Three Months Ended
Nine Months Ended
September 30,
September 30,
(in thousands, except per share
data)
2021
2020
2021
2020
Sales
$
1,550,957
$
1,300,886
$
4,637,147
$
3,272,703
Cost of sales
781,513
675,765
2,338,587
1,731,349
Gross profit
769,444
625,121
2,298,560
1,541,354
Royalty income
7,519
3,216
17,654
11,061
776,963
628,337
2,316,214
1,552,415
Operating expenses
Selling
119,775
85,926
337,519
220,222
General and administrative
510,941
450,285
1,473,570
1,256,228
Total operating expenses
630,716
536,211
1,811,089
1,476,450
Earnings from operations
146,247
92,126
505,125
75,965
Other income (expense)
Interest income
813
1,884
2,518
5,739
Interest expense
(3,348
)
(4,643
)
(10,878
)
(11,428
)
Other, net
(5,514
)
7,726
(11,705
)
15,882
Total other income (expense)
(8,049
)
4,967
(20,065
)
10,193
Earnings before income taxes
138,198
97,093
485,060
86,158
Income tax expense
21,497
14,983
92,027
18,104
Net earnings
116,701
82,110
393,033
68,054
Less: Net earnings attributable to
noncontrolling interest
13,562
17,832
53,952
22,771
Net earnings attributable to Skechers
U.S.A. Inc.
$
103,139
$
64,278
$
339,081
$
45,283
Net earnings per share attributable to
Skechers U.S.A. Inc.
Basic
$
0.66
$
0.42
$
2.18
$
0.29
Diluted
$
0.66
$
0.41
$
2.17
$
0.29
Weighted-average shares used in
calculating net earnings per share attributable to Skechers U.S.A.
Inc.
Basic
155,835
154,462
155,413
154,061
Diluted
157,123
154,980
156,590
154,707
SKECHERS U.S.A., INC. AND
SUBSIDIARIES
SUPPLEMENTAL FINANCIAL
INFORMATION
(Unaudited)
Three Months Ended September
30,
Change
(in millions)
2021
2020
$
%
Domestic Wholesale
Sales
$
350.7
$
318.4
32.3
10.1
Gross margin
36.0
%
38.7
%
(270
) bps
International Wholesale
Sales
$
711.9
$
643.4
68.5
10.6
Gross margin
44.9
%
45.9
%
(100
) bps
Direct-to-Consumer
Sales
$
488.4
$
339.1
149.3
44.1
Gross margin
66.3
%
60.9
%
540
bps
Total
Sales
$
1,551.0
$
1,300.9
250.1
19.2
Gross margin
49.6
%
48.1
%
150
bps
Nine Months Ended September
30,
Change
(in millions)
2021
2020
$
%
Domestic Wholesale
Sales
$
1,125.0
$
827.1
297.9
36.0
Gross margin
37.5
%
38.5
%
(100)
bps
International Wholesale
Sales
$
2,174.2
$
1,603.8
570.4
35.6
Gross margin
45.5
%
44.7
%
80
bps
Direct-to-Consumer
Sales
$
1,337.9
$
841.8
496.1
58.9
Gross margin
66.4
%
60.1
%
630
bps
Total
Sales
$
4,637.1
$
3,272.7
1,364.4
41.7
Gross margin
49.6
%
47.1
%
250
bps
SKECHERS U.S.A., INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP EARNINGS FINANCIAL MEASURES TO CORRESPONDING
NON-GAAP FINANCIAL MEASURES (Unaudited)
Constant Currency Adjustment
We evaluate our results of operations on both an as reported and
a constant currency basis. The constant currency presentation,
which is a non-GAAP measure, excludes the impact of
period-over-period fluctuations in foreign currency exchange rates.
We believe providing constant currency information provides
valuable supplemental information regarding our results of
operations, thereby facilitating period-to-period comparisons of
our business performance and is consistent with how management
evaluates the Company’s performance. We calculate constant currency
percentages by converting our current period local currency
financial results using the prior-period exchange rates and
comparing these adjusted amounts to our prior period reported
results.
Three Months Ended September
30,
2021
2020
Change
(in millions,
except per share data)
Reported GAAP Measure
Constant Currency
Adjustment
Adjusted for Non-GAAP
Measures
Reported GAAP Measure
$
%
Sales
$
1,551.0
$
(28.1
)
$
1,522.9
$
1,300.9
222.0
17.1
Cost of sales
781.6
(15.4
)
766.2
675.8
90.4
13.4
Gross profit
$
769.4
$
(12.7
)
$
756.7
$
625.1
131.6
21.1
Royalty income
7.5
(0.3
)
7.2
3.2
4.0
125.0
Operating expenses
630.7
(9.4
)
621.3
536.2
85.1
15.9
Earnings from operations
$
146.2
$
(3.6
)
$
142.6
$
92.1
50.5
54.8
Other income (expense)
(8.0
)
6.0
(2.0
)
5.0
(7.0
)
(140.0
)
Income tax expense
21.5
(0.7
)
20.8
15.0
5.8
38.7
Less: Noncontrolling interests
13.6
(1.0
)
12.6
17.8
(5.2
)
(29.2
)
Net earnings
$
103.1
$
4.1
$
107.2
$
64.3
42.9
66.7
Diluted earnings per share
$
0.66
$
0.02
$
0.68
$
0.41
0.27
65.9
Nine Months Ended September
30,
2021
2020
Change
(in millions,
except per share data)
Reported GAAP Measure
Constant Currency
Adjustment
Adjusted for Non-GAAP
Measures
Reported GAAP Measure
$
%
Sales
$
4,637.1
$
(139.6
)
$
4,497.5
$
3,272.7
1,224.8
37.4
Cost of sales
2,338.5
(77.1
)
2,261.4
1,731.3
530.1
30.6
Gross profit
$
2,298.6
$
(62.5
)
$
2,236.1
$
1,541.4
694.7
45.1
Royalty income
17.6
(1.1
)
16.5
11.1
5.4
48.6
Operating expenses
1,811.1
(43.0
)
1,768.1
1,476.5
291.6
19.7
Earnings from operations
$
505.1
$
(20.6
)
$
484.5
$
76.0
408.5
537.5
Other income (expense)
(20.0
)
11.7
(8.3
)
10.2
(18.5
)
(181.4
)
Income tax expense
92.0
(3.1
)
88.9
18.1
70.8
391.2
Less: Noncontrolling interests
54.0
(4.5
)
49.5
22.8
26.7
117.1
Net earnings
$
339.1
$
(1.3
)
$
337.8
$
45.3
292.5
645.7
Diluted earnings per share
$
2.17
$
(0.01
)
$
2.16
$
0.29
1.87
644.8
View source
version on businesswire.com: https://www.businesswire.com/news/home/20211028006102/en/
Investor Relations: Andrew Greenebaum Addo Investor Relations
investors@skx.com
Press: Jennifer Clay Vice President, Corporate Communications
Skechers U.S.A., Inc. (310) 318-3100
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