SKECHERS USA, Inc. (NYSE:SKX), a global footwear leader, today
announced financial results for the second quarter ended June 30,
2020.
Second Quarter Results
- Sales of $729.5 million, a 42.0 percent decrease
- Company-owned e-commerce sales grew 428.2 percent
- China sales grew 11.5 percent
- Diluted loss per share was $0.44
- Cash, cash equivalents and investments were $1.56
billion
“Skechers, like most businesses around the world, has never
faced a more challenging time than during the pandemic, which
caused the closing of nearly every market worldwide,” stated Robert
Greenberg, chief executive officer of Skechers. “COVID-19 continues
to be a serious concern globally, and the health and welfare of our
team, partners and customers remain our number one priority. In the
face of this on-going challenge, I am extremely proud of our
company. We are a resilient organization driven by a dedicated and
flexible team determined to do what it takes to not only survive
but position ourselves for a return to profitability. Now, with
more than 90 percent of our Skechers stores safely re-opened and
some markets in the early stages of recovery, we believe that we
will remain a brand consumers and retailers trust to deliver
comfort, quality, and style. We are hopeful that global economies
will continue to improve, and as they do, we will continue to
operate efficiently and judiciously during this pandemic.”
“The impact of COVID-19 to Skechers’ business was significant in
the second quarter as we saw much of the world outside Asia shutter
nearly all businesses,” began David Weinberg, chief operating
officer of Skechers. “However, we remain optimistic about the early
signs of recovery we witnessed during the quarter, including a
return to growth in China, consistent improvement each month in
some markets outside of China, and record shattering growth of over
400 percent in our Company-owned e-commerce business. While every
country’s recovery has been unique, we began to see a similar
recovery trend, first reflected in China and now extending into
other markets globally including Australia, Germany, South Korea
and Taiwan. We believe the positive sales trends in markets that
have re-opened, as well as the efficiency with which we addressed
the pandemic challenges, are strong indicators that when the global
health crisis stabilizes, Skechers will remain a global footwear
leader.”
Second Quarter
2020 Financial Results
(Dollars in millions, except per share
data)
Three months ended
June 30,
Change
2020
2019
$
%
Sales
$
729.5
$
1,258.6
$
(529.1
)
-42.0
%
Gross Profit
368.6
609.8
(241.2
)
-39.6
%
Gross Margin
50.5
%
48.5
%
SG&A Expenses
432.1
505.1
(73.0
)
-14.5
%
As a % of Sales
59.2
%
40.1
%
Earnings / (loss) from Operations
(61.0
)
111.1
(172.1
)
-154.9
%
Operating Margin
(8.4
)
%
8.8
%
Net Earnings / (loss)
(68.1
)
75.2
(143.3
)
-190.6
%
Diluted Earnings / (loss) per Share
$
(0.44
)
$
0.49
$
(0.93
)
-189.8
%
Sales decreased 42.0 percent as a result of a 37.8
percent decrease in its international business and a 47.3
percent decrease in the Company’s domestic business,
reflecting the impact of the global pandemic. The Company’s
international sales declines were partially offset by an 11.5
percent increase in China sales. The Company’s international
wholesale business decreased 29.9 percent and its domestic
wholesale business decreased 57.2 percent. With nearly all its
Skechers stores closed at some point in the quarter, its
direct-to-consumer business decreased 47.1 percent, which
includes a 428.2 percent increase in its e-commerce business.
Comparable same store sales in its direct-to-consumer
business decreased 45.6 percent, including a decrease of 35.9
percent in the United States and 66.9 percent internationally.
Gross margins increased by approximately 210 basis points
as a result of a favorable mix of online and international
sales.
SG&A expenses decreased $73.0 million, or 14.5
percent in the quarter. Selling expenses decreased by $53.3
million, or 46.9 percent, primarily due to lower advertising and
marketing expenses globally. General and administrative
expenses decreased by $19.7 million, or 5.0 percent, despite
the inclusion of an incremental $10.2 million in bad debt expense,
due predominately to the impact of COVID-19 on wholesale customers
across the globe. The decrease was primarily the result of a
reduction in compensation related expenses due to the temporary
closure of its retail stores and the furlough of select corporate
staff.
Earnings (loss) from operations decreased $172.1 million,
or 154.9 percent, to a loss of $61.0 million.
Net loss was $68.1 million and diluted loss per
share was $0.44.
In the second quarter, the Company’s effective income tax
rate was 7.2 percent, resulting in a net tax benefit of $4.3
million.
“Despite the challenges of the second quarter, we are optimistic
about the early-stage recovery we are seeing in much of our
business, including a return to growth in China and the explosive
growth of our e-commerce channel,” said John Vandemore, chief
financial officer of Skechers. “We ended the second quarter in a
position of significant financial strength, having grown our cash
balances sequentially by more than $175 million through prudent
inventory, working capital and operating expense management. We
remain confident in our ability to manage through this crisis and
are extremely optimistic about the long-term future of the Skechers
brand.”
Six Months 2020
Financial Results
(Dollars in millions, except per share
data)
Six Months ended
June 30,
Change
2020
2019
$
%
Sales
$
1,971.8
$
2,535.3
$
(563.5
)
-22.2
%
Gross Profit
916.2
1,200.3
(284.1
)
-23.7
%
Gross Margin
46.5
%
47.3
%
SG&A Expenses
940.2
934.9
5.3
0.6
%
As a % of Sales
47.7
%
36.9
%
Earnings / (loss) from Operations
(16.2
)
276.9
(293.1
)
-105.9
%
Operating Margin
(0.8
)
%
10.9
%
Net Earnings / (loss)
(19.0
)
183.9
(202.9
)
-110.3
%
Diluted Earnings / (loss) per Share
$
(0.12
)
$
1.19
$
(1.31
)
-110.1
%
For the first six months, sales decreased 22.2 percent,
reflecting the impact of the global pandemic on our businesses
worldwide.
Gross margins decreased slightly due to lower
international gross margins, including the impact of a one-time,
non-cash purchase price adjustment related to the acquisition of
the Company’s interest in the Mexico joint venture in 2019 of $8.0
million.
For the first six months, SG&A expenses increased by
0.6 percent or $5.3 million. Selling expenses decreased by
26.9 percent or $49.4 million, primarily due to lower advertising
and marketing expenses globally. General and administrative
expenses increased by 7.3 percent or $54.7 million, reflecting
the inclusion of Mexico operations and a net increase in new
Company-owned Skechers stores.
Earnings (loss) from operations decreased $293.1 million,
or 105.9 percent, to a loss of $16.2 million.
Net loss was $19.0 million and diluted loss per
share was $0.12.
Balance Sheet
At quarter-end, cash, cash equivalents and
investments totaled $1.56 billion, an increase of $524.5
million, or 50.9 percent from December 31, 2019, and an increase of
$583.0 million, or 59.9 percent, over June 30, 2019. The increase
primarily reflects the drawdown of $490 million from the Company’s
senior unsecured credit facility in the first quarter.
Total inventory, including inventory in transit,
was $1.03 billion, a decrease of $42.1 million or 3.9 percent from
December 31, 2019, and an increase of $172.1 million or 20.1
percent over June 30, 2019. The higher year-over-year inventory
levels reflect lower wholesale shipping and decreased retail
activity associated with the global pandemic.
Outlook
The Company is not providing further financial guidance at this
time given the ongoing business disruption and substantial
uncertainty surrounding the impact of the pandemic on its business
globally.
Store
Count
Number of Store Locations as
of
Number of Store Locations as
of
March 31, 2020
Opened
Closed(1)
June 30, 2020
Company-owned domestic stores
508
3
(1
)
510
Company-owned international stores
304
4
-
308
Joint-venture stores
377
21
(8
)
390
Distributor, licensee and franchise
stores
2,386
81
(60
)
2,407
Total Skechers stores
3,575
109
(69
)
3,615
(1) Does not reflect temporary closures due to the COVID-19
pandemic.
Second Quarter 2020 Conference
Call
The Company will host a conference call today at 1:30 p.m.
Pacific Time / 4:30 p.m. Eastern Time to discuss its second quarter
2020 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 July 23, 2020
at 7:30 p.m. ET, through August 6, 2020, at 11:59 p.m. ET. To
access the replay, dial 844-512-2921 (U.S.) or 412-317-6671
(International) and use passcode: 13706218.
About SKECHERS USA, Inc.
Based in Manhattan Beach, California, Skechers 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 3,615 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 generally accepted accounting principles
in the United States. This announcement also 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 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; 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, 2019, and its quarterly report on Form 10-Q for the
three-months ended March 31, 2020. More specifically, the COVID-19
pandemic has had and is currently having 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 contract manufacturers 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 COVID-19 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, dollars in
thousands)
June 30,
December 31,
2020
2019
ASSETS
Current assets:
Cash and cash equivalents
$
1,352,120
$
824,876
Short-term investments
105,677
112,037
Trade accounts receivable, net
478,011
645,303
Other receivables
68,104
53,932
Total receivables
546,115
699,235
Inventories
1,027,735
1,069,863
Prepaid expenses and other current
assets
105,141
113,580
Total current assets
3,136,788
2,819,591
Property, plant and equipment, net
833,103
738,925
Operating lease right-of-use assets
1,102,885
1,073,660
Deferred tax assets
49,198
49,088
Long-term investments
98,236
94,589
Goodwill
93,497
71,412
Other assets, net
94,339
45,678
Total non-current assets
2,271,258
2,073,352
TOTAL ASSETS
$
5,408,046
$
4,892,943
LIABILITIES AND EQUITY
Current liabilities:
Current installments of long-term
borrowings
$
69,359
$
66,234
Short-term borrowings
13,870
5,789
Accounts payable
621,142
764,844
Operating lease liabilities
194,508
191,129
Accrued expenses
177,907
210,235
Total current liabilities
1,076,786
1,238,231
Long-term borrowings, excluding current
installments
680,109
49,183
Long-term operating lease liabilities
1,099,798
966,011
Deferred tax liabilities
12,435
322
Other long-term liabilities
101,774
103,089
Total non-current liabilities
1,894,116
1,118,605
Total liabilities
2,970,902
2,356,836
Stockholders’ equity:
Skechers U.S.A., Inc. equity
2,224,715
2,314,665
Non-controlling interests
212,429
221,442
Total stockholders' equity
2,437,144
2,536,107
TOTAL LIABILITIES AND EQUITY
$
5,408,046
$
4,892,943
SKECHERS U.S.A., INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF EARNINGS
(Unaudited, dollars in
thousands except per share data)
Three Months Ended
Six Months Ended
June 30,
June 30,
2020
2019
2020
2019
Sales
$
729,472
$
1,258,565
$
1,971,817
$
2,535,321
Cost of sales
360,906
648,730
1,055,583
1,334,977
Gross profit
368,566
609,835
916,234
1,200,344
Royalty income
2,596
6,341
7,844
11,542
371,162
616,176
924,078
1,211,886
Operating expenses:
Selling
60,240
113,507
134,295
183,721
General and administrative
371,893
391,588
805,944
751,220
432,133
505,095
940,239
934,941
Earnings / (loss) from operations
(60,971
)
111,081
(16,161
)
276,945
Other income / (expense):
Interest income
1,547
3,067
3,854
6,209
Interest expense
(4,804
)
(1,905
)
(6,785
)
(3,182
)
Other, net
4,704
553
8,157
(4,433
)
Total other income / (expense)
1,447
1,715
5,226
(1,406
)
Earnings (loss) before income tax
expense
(59,524
)
112,796
(10,935
)
275,539
Income tax expense / (benefit)
(4,307
)
20,798
3,122
52,522
Net earnings / (loss)
(55,217
)
91,998
(14,057
)
223,017
Less: Net earnings attributable to
non-controlling interests
12,880
16,818
4,939
39,079
Net earnings / (loss) attributable to
Skechers U.S.A., Inc.
$
(68,097
)
$
75,180
$
(18,996
)
$
183,938
Net earnings / (loss) per share
attributable to Skechers U.S.A., Inc.:
Basic
$
(0.44
)
$
0.49
$
(0.12
)
$
1.20
Diluted
$
(0.44
)
$
0.49
$
(0.12
)
$
1.19
Weighted average shares used in
calculating net earnings / (loss) per share attributable to
Skechers U.S.A, Inc.:
Basic
154,138
153,413
153,849
153,446
Diluted
154,138
153,912
153,849
154,051
SKECHERS U.S.A., INC. AND
SUBSIDIARIES
SUPPLEMENTAL FINANCIAL
INFORMATION
(Unaudited, dollars in
thousands)
Three Months ended
June 30,
Change
2020
2019
$
%
Sales:
Domestic wholesale
$
130,738
$
305,307
$
(174,569)
-57.2%
International wholesale
385,181
549,551
(164,370)
-29.9%
Direct-to-consumer
213,553
403,707
(190,154)
-47.1%
Total
$
729,472
$
1,258,565
$
(529,093)
-42.0%
Gross profit:
Domestic wholesale
$
50,426
$
116,643
$
(66,217)
-56.8%
International wholesale
180,449
249,939
(69,490)
-27.8%
Direct-to-consumer
137,691
243,253
(105,562)
-43.4%
Total
$
368,566
$
609,835
$
(241,269)
-39.6%
Gross margin percentage:
Domestic wholesale
38.6%
38.2%
International wholesale
46.8%
45.5%
Direct-to-consumer
64.5%
60.3%
Total gross margin percentage
50.5%
48.5%
Six Months ended
June 30,
Change
2020
2019
$
%
Sales:
Domestic wholesale
$
508,700
$
652,001
$
(143,301)
-22.0%
International wholesale
960,380
1,177,619
(217,239)
-18.4%
Direct-to-consumer
502,737
705,701
(202,964)
-28.8%
Total
$
1,971,817
$
2,535,321
$
(563,504)
-22.2%
Gross profit:
Domestic wholesale
$
195,703
$
243,094
$
(47,391)
-19.5%
International wholesale
420,924
538,668
(117,744)
-21.9%
Direct-to-consumer
299,607
418,582
(118,975)
-28.4%
Total
$
916,234
$
1,200,344
$
(284,110)
-23.7%
Gross margin percentage:
Domestic wholesale
38.5%
37.3%
International wholesale
43.8%
45.7%
Direct-to-consumer
59.6%
59.3%
Total gross margin percentage
46.5%
47.3%
RECONCILIATION OF GAAP
EARNINGS FINANCIAL MEASURES TO CORRESPONDING
NON-GAAP FINANCIAL
MEASURES
(Unaudited, dollars in
thousands except per share data)
Three months ended June
30,
2020
2019
Change
Reported GAAP Measure
Constant Currency
Adjustment(1)
Adjusted for Non-GAAP
Measure
Reported GAAP Measure
$
%
Sales
$
729,472
$
12,904
$
742,376
$
1,258,565
$
(516,189
)
-41.0%
Cost of sales
360,906
7,395
368,301
648,730
(280,429
)
-43.2%
Gross profit
$
368,566
$
5,509
$
374,075
$
609,835
$
(235,760
)
-38.7%
Royalty income
2,596
145
2,741
6,341
(3,600
)
-56.8%
SG&A expenses
432,133
6,652
438,785
505,095
(66,310
)
-13.1%
Earnings / (loss) from operations
$
(60,971
)
$
(998
)
$
(61,969
)
$
111,081
$
(173,050
)
-155.8%
Other income / (expense)
1,447
(5,208
)
(3,761
)
1,715
(5,476
)
-319.3%
Income tax expense / (benefit)
(4,307
)
71
(4,236
)
20,798
(25,034
)
-120.4%
Less: Non-controlling interests
12,880
127
13,007
16,818
(3,811
)
-22.7%
Net earnings / (loss)
$
(68,097
)
$
(6,404
)
$
(74,501
)
$
75,180
$
(149,681
)
-199.1%
Diluted earnings / (loss) per share
$
(0.44
)
$
(0.04
)
$
(0.48
)
$
0.49
$
(0.97
)
-198.0%
Six months ended June
30,
2020
2019
Change
Reported GAAP Measure
Constant Currency
Adjustment(1)
Adjusted for Non-GAAP
Measure
Reported GAAP Measure
$
%
Sales
$
1,971,817
$
32,428
$
2,004,245
$
2,535,321
$
(531,076
)
-20.9%
Cost of sales
1,055,583
20,201
1,075,784
1,334,977
(259,193
)
-19.4%
Gross profit
$
916,234
$
12,227
$
928,461
$
1,200,344
$
(271,883
)
-22.7%
Royalty income
7,844
(150
)
7,694
11,542
(3,848
)
-33.3%
SG&A expenses
940,239
14,504
954,743
934,941
19,802
2.1%
Earnings / (loss) from operations
$
(16,161
)
$
(2,427
)
$
(18,588
)
$
276,945
$
(295,533
)
-106.7%
Other income / (expense)
5,226
4,796
10,022
(1,406
)
11,428
-812.8%
Income tax expense
3,122
298
3,420
52,522
(49,102
)
-93.5%
Less: Non-controlling interests
4,939
(411
)
4,528
39,079
(34,551
)
-88.4%
Net earnings / (loss)
$
(18,996
)
$
2,482
$
(16,514
)
$
183,938
$
(200,452
)
-109.0%
Diluted earnings / (loss) per share
$
(0.12
)
$
0.02
$
(0.10
)
$
1.19
$
(1.29
)
-108.4%
Constant Currency Adjustment and Acquisition Related Charges
(1)
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.
Certain Non-GAAP Measures
We use the non-GAAP financial measures presented above to
evaluate our results of operations, financial condition, liquidity
and indebtedness. We believe that these non-GAAP measures provides
useful information to investors regarding financial and business
trends related to our results of operations, cash flows and
indebtedness and that when this non-GAAP financial information is
viewed with our GAAP financial information, investors are provided
with 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 operating performance and liquidity. In
addition, these non-GAAP measures address questions the company
routinely receives from analysts and investors and, in order to
assure that all investors have access to similar data the company
has determined that it is appropriate to make this data available
to all investors. None of the non-GAAP measures presented should be
considered as an alternative to net income or loss, operating
income, cash flows from operating activities, total indebtedness or
any other measures of operating performance and financial
condition, liquidity or indebtedness derived in accordance with
GAAP. These non-GAAP measures have important limitations as
analytical tools and should not be considered in isolation or as
substitutes for an analysis of our results as reported under GAAP.
Our use of these terms may vary from the use of similarly-titled
measures by others in our industry due to the potential
inconsistencies in the method of calculation and differences due to
items subject to interpretation.
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version on businesswire.com: https://www.businesswire.com/news/home/20200723005887/en/
Company Contact:
David Weinberg Chief Operating Officer John Vandemore Chief
Financial Officer SKECHERS USA, Inc. (310) 318-3100
Investor Relations:
Andrew Greenebaum Addo Investor Relations (310) 829-5400
Press:
Jennifer Clay Vice President, Corporate Communications SKECHERS
USA, Inc. (310) 318-3100
Skechers USA (NYSE:SKX)
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