Skechers USA, Inc. reported that net sales for the 2004 fourth quarter increased 17.8% to $206.5 million, compared to $175.3 million in the fourth quarter of 2003. Net earnings for the fourth quarter of 2004 were $2.1 million, or 5 cents per diluted share, versus a net loss of $12.3 million, or a loss of 33 cents per diluted share, in the year-ago quarter.
Fiscal year 2004 net sales were $920.3 million as compared to net sales of $835.0 million in 2003. Net earnings for 2004 were $23.6 million versus a net loss of $11.9 million in 2003. For fiscal year 2004, diluted earnings per share were $0.59 on 39,800,000 weighted average shares outstanding versus a loss per diluted share of $0.31 on 37,840,000 weighted average shares outstanding in the prior year.
As discussed in the earnings release for the third quarter of 2004, the Company’s annualized tax rate is based on projections of its domestic and international operating results for the year, and is highly sensitive to fluctuations in projected international earnings. At the end of the third quarter of 2004, the Company reviewed its domestic and international earnings projections for the year, which resulted in a projected effective tax rate of 47.2 percent at the nine months ended September 30, 2004.
Due to better than projected domestic and international fourth quarter results, as well as changes resulting from a detailed review of its cost structure, the Company recorded an effective tax rate of 39.2 percent for fiscal year 2004. As a result, the Company benefited in the fourth quarter from a $4.0 million tax benefit. For fiscal year 2005, the Company expects an effective tax rate in the range of 40 percent to 43 percent, and will continue to review its existing tax structure and business model for opportunities to lower its overall effective tax rate.
Gross profit for 2004 was $372.2 million compared to $317.7 million in 2003. Gross margin for 2004 was 40.4% versus 38.0% for 2003. Gross profit for the fourth quarter of 2004 was $82.5 million compared to $59.1 million in the fourth quarter of 2003. Gross margin in the fourth quarter 2004 was 39.9% versus 33.7% for the fourth quarter of 2003.
“We are very pleased that we crossed the $900 million mark in 2004 and returned to profitability generating earnings per share of $0.59. This significant improvement in our gross margin and earnings is attributable to the sale of more in-line products, less markdowns and returns, and the careful management of expenses,” stated David Weinberg, the Company’s chief financial officer. “We are also pleased with our balance sheet, which continues to improve with increased cash and a good in-line inventory position, up slightly from the prior year to meet the increased demand we are seeing for our product.”
Robert Greenberg, the Company’s chief executive officer, stated: “We are pleased with the positive response to our product from consumers around the world and the strong reaction from accounts at the country’s largest shoe show — WSA, and the fashion trade show – MAGIC, both in Las Vegas earlier this month. The growth of key SKECHERS divisions — such as men’s and women’s Sport, the better-than-anticipated sales of our new Rhino Unltd., Rhino Red and 310 Motoring fashion lines, and the double digit increases in our international divisions positions us well for 2005. We are already seeing continued momentum with a strong increase year-over-year in pairs ordered at the WSA trade show, which we believe will positively impact sales in the coming year. Our growth to a $900 million global business in 2004 is a testament to the strength of our brand and our ability to deliver trend-right product to the appropriate markets in a timely fashion. Early indicators, like WSA, our continued positive comp sales at our retail stores and strong sell throughs with our domestic and international wholesale accounts, lead us to believe that we will continue to grow profitably and that 2005 will be an even stronger year than 2004.”
The Company now expects first quarter 2005 net sales to be in the range of $235 million to $245 million and diluted earnings per share in the range of $0.21 to $0.26 per share.
SKECHERS U.S.A., INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(In thousands, except per share data)
Three Months Ended Twelve Months Ended
December 31, December 31,
2004 2003 2004 2003
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Net sales $206,473 $175,284 $920,322 $834,976
Cost of sales 123,991 116,149 548,119 517,290
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Gross profit 82,482 59,135 372,203 317,686
Royalty income, net 2,168 2,041 5,714 4,170
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84,650 61,176 377,917 321,856
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Operating expenses:
Selling 18,705 17,569 79,673 84,653
General and administrative 64,102 57,393 248,999 238,550
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82,807 74,962 328,672 323,203
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Earnings (loss) from operations 1,843 (13,786) 49,245 (1,347)
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Other income (expense):
Interest, net (1,678) (2,168) (7,973) (8,839)
Other, net (2,023) 740 (2,552) (187)
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(3,701) (1,428) (10,525) (9,026)
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Earnings (loss) before income
taxes (1,858) (15,214) 38,720 (10,373)
Income tax expense (benefit) (3,986) (2,871) 15,167 1,494
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Net earnings (loss) $2,128 $(12,343) $23,553 $(11,867)
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Net earnings (loss) per share:
Basic $0.05 $(0.33) $0.61 $(0.31)
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Diluted $0.05 $(0.33) $0.59 $(0.31)
