SKECHERS Announces First Billion-Dollar-Plus Quarter
SKECHERS USA, Inc. (SKX), a global footwear leader, today announced
financial results for the first quarter 2017.
First Quarter Highlights
Record net sales of $1.073 billion, an increase of 9.6 percent
Diluted earnings per share of $0.60
"First quarter 2017 net sales represent a new quarterly record and the
first time we exceeded $1 billion in quarterly sales. We are
particularly proud of the growth in the quarter considering the tough
comparison to 2016, which included the benefit of an additional day in
February and Easter falling in March," began David Weinberg, chief
operating officer and chief financial officer. "The growth was the
result of double-digit increases in both our international distributor
and subsidiary/joint venture businesses, as well as in our global
Company-owned Skechers retail business. Further, in our domestic
wholesale business, we shipped 4.5 percent more pairs than in the first
quarter of 2016 but average price per pair decreased by 4.8 percent
primarily due to stronger sales in our lower-priced lines including BOBS
from Skechers and our sandal business."
First Quarter Financial Results
Quarterly net sales increased 9.6 percent to $1.073 billion
compared to first quarter 2016. The growth was the result of a 16.8
percent increase in the Companys international wholesale business and a
12.8 percent increase in its Company-owned global retail business which
included comparable same store sales increases of 2.9 percent. Additionally,
the negative currency translation impact on its gross margins in its
international wholesale and international Company-owned retail
businesses for the first quarter was $6.1 million. The Companys
domestic wholesale net sales were relatively flat compared to the first
quarter of last year.
Gross profit for the first quarter was $476.5 million, or 44.4
percent of net sales, compared to $432.2 million, or 44.2 percent of net
sales, for the first quarter of last year.
First quarter selling expenses increased $19.9 million to $73.8
million, or 6.9 percent of sales, compared to $53.9 million, or 5.5
percent of sales, in the first quarter of the prior year. The increase
was primarily due to increased international advertising and selling
General and administrative expenses for the first quarter
increased $40.1 million to $282.5 million, or 26.3 percent of sales,
compared to $242.3 million, or 24.8 percent of sales, in the prior year.
The year-over-year quarterly increase was primarily due to Skechers
focus on long-term global growth, including $13.2 million associated
with the Companys 59 additional domestic and international retail
stores, and $18.3 million to support its international growth, of which
$9.3 million was due to increased costs in China, $3.4 million for the
transition of its South Korean distributor to a joint venture, $1.7
million in support of its new Latin America subsidiary, and $3.4 million
in Japan. Domestic wholesale general and administrative expenses in the
first quarter increased $8.6 million year-over-year primarily due to
increased headcount in the United States to support its brand worldwide.
"Skechers international business, including retail, grew to 51.3
percent of our total sales in the first quarter due to the strength of
our brand in numerous markets," added Mr. Weinberg. "While we see
opportunities in the United States to increase our business, we believe
international markets continue to present the strongest opportunity for
growth. To meet this growth in our international business, we continue
to invest in our infrastructure and marketing to support the current and
planned global expansion."
Earnings from operations were $124.4 million, a decrease of 10.2
percent over the first quarter of 2016.
Net earnings decreased 3.7 percent to $94.0 million, and diluted
net earnings per share were $0.60. The Companys quarterly effective
tax rate in the first quarter was 14.0 percent compared to 21.8 percent
over the first quarter of 2016. The Company expects its effective tax
rate to be between 14 percent and 19 percent in 2017. In addition, the
Companys gross margins were negatively impacted by approximately $6.1
million due to negative foreign currency translations and approximately
$900,000 in pre-tax expenses related to foreign currency transaction
losses during the first quarter of 2017. The Companys operations in the
United Kingdom were significantly impacted by currency headwinds as its
wholesale sales were up 6.1 percent for the first quarter in local
currency but down 8.2 percent in U.S. dollars.
Robert Greenberg, SKECHERS chief executive officer, commented: "In 2005,
we surpassed $1 billion in annual sales, and now less than 12 years
later, we had our first $1 billion plus in quarterly sales. The key to
our success then and now is the drive, dedication and talent of the many
people behind this great brand. We look very good from a product
standpoint--with innovative, comfortable and beautiful footwear and now
apparel--and in our marketing as well--with lifestyle campaigns featuring
Rob Lowe, Meghan Trainor, Joe Montana, Howie Long, Sugar Ray Leonard,
Brooke Burke-Charvet and Kelly Brook. Our success in performance
footwear can be seen in our title sponsorship of the Skechers
Performance Los Angeles Marathon, in the Pan-European Ironman where we
are the footwear sponsor, and in our many pro golfers, including
American medalist Matt Kucher, Canadian Brooke Henderson, Scotlands
Russell Knox, Spaniard Belen Mozo, and American Wesley Bryan, who just
earned his first PGA Tour victory."
Mr. Greenberg continued: "Our global footprint continues to grow with
our ongoing success in Canada, Chile and China as well as in India,
Australia and Turkey, and many other markets. This success is in part
due to the expansion of Skechers retail stores around the world. At
quarter end, there were 2,055 Skechers retail stores, including 1,471
third-party-owned locations, of which 551 are in China alone. Weve come
a long way since our first billion dollar year, and our first retail
store in Manhattan Beach, but we plan to accomplish much more in product
design, marketing and distribution. In the United States, we are the No.
1 Casual, Work, and Walking brand and the No. 2 All Footwear for Women*,
and we believe we can reach these coveted positions in numerous other
countries around the world. As weve begun showing our Spring 2018 lines
to accounts this week, Im looking forward to delivering our
back-to-school product in June and July, and continuing to profitably
grow Skechers this year and in the coming years."
At year end, cash and cash equivalents was $607.8 million, an
increase of $164.0 million, or 37.0 percent over March 31, 2016.
Total inventory, including inventory in transit, was $585.8
million, an increase of $84.0 million or 16.7 percent over March 31,
2016, and a decrease of $114.7 million or 16.4 percent over December 31,
2016. The increase over last year is primarily due to international and
is in line with the Companys backlogs, and growing retail and
international wholesale business.
Working capital was $1.32 billion at March 31, 2017 versus $1.07
billion at March 31, 2016.
Mr. Weinberg continued: "We ended the first quarter with low
double-digit increases in backlog on a worldwide basis, with all of our
business units up a minimum of mid-single digits. Already in April,
weve achieved high-single digit comps in our Company-owned retail
stores, which benefited from Easter falling in April, and successfully
launched YOU by Skechers in our stores and on skechers.com."
Based on these key indicators, the Company believes it will achieve net
sales in the second quarter in the range of $950 million to $975
million, which would be a second quarter sales record, and earnings per
share of $0.42 to $0.47. This projection includes flat to slightly
positive sales increases in the Companys domestic wholesale business,
and increases in its international business and Company-owned retail
The Company expects its ongoing capital expenditures for 2017 to
be approximately $40 million to $45 million, which includes corporate
office upgrades and an additional 50 to 75 Company-owned retail store
openings and several store remodels, as well as an additional $25
million for infrastructure primarily in its China joint venture.
First 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 first quarter 2017 financial results.
The call can be accessed on the Investor Relations section of the
Companys the website at www.skx.com.
For those unable to participate during the live broadcast, a replay will
be available beginning April 20, 2017, at 7:30 p.m. ET, through May 4,
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: 13658499.
*SportsOneSource, April 1, 2017
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,
more than 2,055 SKECHERS Company-owned and third-party-owned retail
stores, and the Companys 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, the Companys 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 the Companys annual report
on Form 10-K for the year ended December 31, 2016. The risks included
here are not exhaustive. The Company 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
Cash and cash equivalents
Trade accounts receivable, net
Prepaid expenses and other current assets
Total current assets
Property, plant and equipment, net
Deferred tax assets
Total non-current assets
Current installments of long-term borrowings
Total current liabilities
Long-term borrowings, net of current installments
Deferred tax liabilities
Other long-term liabilities
Total non-current liabilities
Skechers U.S.A., Inc. equity
TOTAL LIABILITIES AND EQUITY
SKECHERS U.S.A., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share data)
Three Months Ended March 31,
Cost of sales
General and administrative
Earnings from operations
Earnings before income tax expense
Income tax expense
Less: Net earnings attributable to noncontrolling interests
Net earnings attributable to Skechers U.S.A., Inc.
Net earnings per share attributable to Skechers U.S.A., Inc.:
Weighted average shares used in calculating earnings per share
attributable to Skechers U.S.A., Inc.:
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SOURCE: SKECHERS USA, Inc.