Record Quarterly Net Sales of $1.095 Billion
and $3.194 Billion for the Nine Months
Diluted Earnings per Share of $0.59 for the
Third Quarter and $1.57 for the Nine Months
Gross Margins of 47.5 Percent for the Third
Quarter and 46.5 Percent for the Nine Months
SKECHERS USA, Inc. (NYSE:SKX), a global footwear leader, today
announced financial results for the third quarter and nine months
ended September 30, 2017.
“Third quarter net sales of $1.095 billion set a new quarterly
record for the Company, surpassing our previous record in the first
quarter earlier this year by $22 million, and resulted in a new
nine month record with sales exceeding $3 billion,” stated 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 Skechers retail
business worldwide and our international subsidiary and joint
venture businesses, as well as a single-digit increase in our
international distributor and domestic wholesale businesses. The
strong international growth, including the continued strength in
China, the resurgence of the United Kingdom and growth across all
of Europe combined with our strong international retail business,
resulted in international wholesale and retail representing 53
percent of our total sales in the third quarter.”
Third Quarter Financial
Results
Quarterly net sales increased 16.2 percent to $1.095
billion compared to third quarter 2016. The growth was the result
of a 25.7 percent increase in the Company’s international wholesale
business, a 1.4 percent increase in its domestic wholesale
business, and an 18.6 percent increase in its Company-owned global
retail business with total comp store sales increases of 4.4
percent. The increase in its Company-owned retail business, which
included sales growth of 9.5 percent in its domestic channel and a
domestic comp store sales increase of 3.1 percent, came despite
temporary store closures in Texas and Florida, and continued store
closures in Puerto Rico due to the recent hurricanes. The Company
reported net sales last year of $1.5 million for the days
corresponding to the days closed this year due to the
hurricanes.
Gross profit for the third quarter of 2017 was $520.0
million, or 47.5 percent of net sales, compared to $430.0 million,
or 45.6 percent of net sales, for the third quarter of 2016.
Third quarter selling expenses increased $21.8 million to
$89.6 million, or 8.2 percent of sales, compared to $67.8 million,
or 7.2 percent of sales, in the prior year’s third quarter. The
increase was primarily due to increased advertising expenses of
$17.2 million, including $3.6 million to support our international
subsidiary business, and an additional $3.5 million in selling
commissions from its joint venture in South Korea.
General and administrative expenses were $316.9
million, or 28.9 percent of sales, compared to $261.8 million, or
27.8 percent of sales, in the prior year’s third quarter. The
year-over-year quarterly increase was primarily due to Skechers’
focus on long-term global growth. The increases included $18.1
million associated with the Company’s 67 additional domestic and
international retail stores—13 of which were opened in the third
quarter, and $27.2 million to support its international growth in
its joint venture and subsidiary businesses. Domestic wholesale
general and administrative expenses in the third quarter increased
$9.7 million year-over-year primarily due to increased headcount in
the United States to support its brand worldwide, and improvements
in its digital operations, as well as the expansion into new
categories and brands.
Mr. Weinberg added: “We remain committed to investing in the
brand, product, infrastructure, and all areas that will drive
further growth opportunities. Our international business continues
to have the highest growth potential—both with emerging
international markets such as those in South America as well as
India, and our established business across Asia. To further build
our brand globally, we grew our Company-owned store base worldwide
to 623 locations, including 187 international stores. Combined with
the third-party Skechers stores, there were 2,428 Skechers stores
around the world at quarter end.”
Earnings from operations were $116.5 million or 10.6
percent of net sales, which was an increase of $13.1 million or
12.7 percent over the third quarter of 2016.
Net earnings increased 41.8 percent to $92.3
million, and diluted net earnings per share for
the third quarter were $0.59, compared with $0.42 in the prior
year. The Company’s effective tax rate for the third quarter was
9.4 percent compared to 24.2 percent over the third quarter of
2016. The Company expects its effective tax rate for fiscal 2017 to
be approximately 13 percent, which is lower than the expected rate
of 15 percent at the end of the second quarter. The 9.4 percent tax
rate for the quarter is primarily a result of this lower estimate
in the expected tax rate for fiscal 2017.
Nine Month Financial
Results
Net sales were $3.19 billion, a new nine-month record. Gross
profit was $1.48 billion or 46.5 percent of net sales, and earnings
from operations were $327.2 million. Net earnings were $245.8
million and diluted net earnings per share were $1.57 per
share.
“From day one we have been driven, determined and focused on
building a successful company,” began Robert Greenberg, SKECHERS
chief executive officer. “Twenty-five years later, the same is
true. With innovation and commitment at the forefront of our
efforts, we are supporting our teams and their growth in the United
States and around the world. It’s those teams that set us apart,
working behind the scenes and on the front lines to deliver product
rich in style and comfort to our customers. Achieving three record
quarters of net sales in 2017, as well as annual record net sales
in 2016, is a testament to the power of our team and the
brand.”
Mr. Greenberg continued: “Now, more so than ever before, we are
approaching our business from a global perspective, developing
product that will resonate with consumers in the Americas, across
Europe, throughout Asia, and the rest of the world. Domestically,
the highlight of the third quarter was our back-to-school business,
which was led by double-digit sales increases in our Skechers Kids
footwear. As with our adult offering, we focused on innovation,
comfort and lightweight features, creating a collection that
resonated with kids and their parents. The success of our product
was most evident in the continued growth of our international
business as we achieved strong double-digit growth in the majority
of our subsidiary and joint venture managed countries in the third
quarter. Further, we are focusing on marketing campaigns that
resonate globally—including the signing of singing sensation Camila
Cabello, who is known by young women around the world. We believe
that with our focus on product, marketing and logistics from a
domestic and international perspective, we will continue to see
strong growth on a global scale.”
Balance Sheet
At quarter end, cash and cash equivalents was $802.9
million, an increase of $137.6 million, or 20.7 percent over
September 30, 2016.
Total inventory, including inventory in transit, was
$697.7 million, a $174.3 million increase, or 33.3 percent over
September 30, 2016, and a decrease of $2.9 million or 0.4 percent
when compared to December 31, 2016.
Working capital was $1.48 billion versus $1.23 billion at
September 30, 2016.
Mr. Weinberg continued: “Three consecutive record quarters in
2017 and continued growth across our three distribution channels,
including double-digit gains in international and an additional ten
stores opened in the fourth quarter to date, are a testament to the
strength of our brand. With the investments we have made in our
infrastructure, our strong cash position, healthy low double-digit
increases in backlog on a worldwide basis, and new product
delivering for holiday as well as Spring 2018, we believe the
momentum we are experiencing will continue this year and in the
coming year.”
Outlook
Based on these key indicators, the Company believes it will
achieve net sales in the fourth quarter in the range of $860
million to $885 million, and diluted earnings per share
of $0.09 to $0.14.
The Company expects its capital expenditures for the
fourth quarter to be approximately $20.0 million to $25.0 million,
which includes corporate office upgrades and an additional 12 to 15
Company-owned retail store openings and several store remodels.
Third 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 third 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 October 19, 2017, at 7:30 p.m. ET, through November 2,
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:
13671505.
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, 2,438 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 six months ended June 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)
September 30,
2017
December 31,
2016
ASSETS Current Assets: Cash and cash equivalents $ 802,932 $
718,536 Trade accounts receivable, net 485,277 326,844 Other
receivables 23,184 19,191 Total receivables 508,461
346,035 Inventories 697,659 700,515 Prepaid expenses and other
current assets 65,306 62,680 Total current assets
2,074,358 1,827,766 Property, plant and equipment, net 532,482
494,473 Deferred tax assets 30,744 26,043 Other assets
55,676 45,388 Total non-current assets 618,902
565,904 TOTAL ASSETS
$ 2,693,260
$ 2,393,670 LIABILITIES AND EQUITY
Current Liabilities: Current installments of long-term borrowings $
1,797 $ 1,783 Accounts payable 501,332 520,437 Short-term
borrowings 10,629 6,086 Accrued expenses 85,224
93,424 Total current liabilities 598,982 621,730 Long-term
borrowings, net of current installments 71,390 67,159 Deferred tax
liabilities 418 412 Other long-term liabilities 22,773
18,855 Total non-current liabilities 94,581
86,426 Total liabilities 693,563 708,156 Stockholders’ equity:
Skechers U.S.A., Inc. equity 1,882,804 1,603,633 Noncontrolling
interests 116,893 81,881 Total equity
1,999,697 1,685,514 TOTAL LIABILITIES AND EQUITY
$ 2,693,260 $
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 September 30, Nine Months Ended
September 30,
2017
2016
2017
2016
Net sales $ 1,094,829 $ 942,417 $ 3,193,571 $ 2,799,021 Cost of
sales 574,842 512,439 1,708,765
1,520,637 Gross profit 519,987 429,978
1,484,806 1,278,384 Royalty income 2,917 2,970
10,368 8,902 522,904
432,948 1,495,174
1,287,286 Operating expenses: Selling 89,559 67,782 263,318
197,627 General and administrative 316,852
261,815 904,631 747,403
406,411 329,597 1,167,949
945,030 Earnings from operations 116,493 103,351 327,225
342,256 Other income (expense): Interest, net (780 ) (948 ) (3,321
) (3,612 ) Other, net 2,147 (1,485 )
5,507 (1,310 ) 1,367 (2,433 )
2,186 (4,922 ) Earnings before income tax
expense 117,860 100,918 329,411 337,334 Income tax expense
11,030 24,376 42,546
67,144 Net earnings 106,830 76,542 286,865 270,190 Less: Net
earnings attributable to noncontrolling interests 14,520
11,432 41,025 33,361
Net earnings attributable to Skechers U.S.A., Inc. $ 92,310
$ 65,110 $ 245,840 $ 236,829
Net earnings per share attributable to Skechers U.S.A.,
Inc.: Basic $ 0.59 $ 0.42 $ 1.58 $ 1.54
Diluted $ 0.59 $ 0.42 $ 1.57 $ 1.53
Weighted average shares used in calculating earnings per
share attributable to Skechers U.S.A., Inc.: Basic 155,824
154,211 155,502 154,006
Diluted 156,741 155,203
156,276 154,999
View source
version on businesswire.com: http://www.businesswire.com/news/home/20171019006391/en/
SKECHERS USA, Inc.David WeinbergChief Operating Officer,Chief
Financial Officer(310) 318-3100orInvestor Relations:Addo Investor
RelationsAndrew Greenebaum, (310) 829-5400
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