SKECHERS Achieves New Quarterly Sales Record in Its Third Quarter 2017
•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. (SKX), a global footwear leader, today announced
financial results for the third quarter and nine months ended September
"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 Companys 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
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 years 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 years 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
Companys 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 Companys 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. Its 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
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."
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."
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
Companys 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:
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 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, 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
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 September 30,
Nine Months Ended September 30,
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.
Andrew Greenebaum, (310) 829-5400