Skechers USA, Inc. once again posted strong top line gains in the second quarter, but received concerned commentary from analysts on the quarterly conference call when those improvements failed to produce year-over-year profit growth.  At the heart of the problem was a larger than expected increase in quarterly expenses as SKX launched new product lines, especially Cali Gear, accelerated new store growth, and increased warehousing costs.  SKX shares were down 28.3% for the week to close at $21.23 on Friday.


Despite the back-end issues that plagued the company’s bottom line, the company looks to be performing well in the marketplace. On the call, management said domestic wholesale net sales increased 12% over last year, with the various versions of the Skechers brand providing much of the growth, but off the 19% growth seen in Q1.  ASPs for the Skechers brand were down approximately 90 cents in Q2.  Of the fashion brands, Marc Ecko and Zoo York provided growth, while Kitson was up, but management “expected it to be up more, and it wasn’t.” The 310 and Michelle K brands both “experienced sales declines.”


Management said that family footwear remains the company’s strongest distribution channel while department stores are second with “great success in companies like Penneys and Kohl’s, if you consider them department stores. However, the athletic channels (viz. Foot Locker and The Finish Line) “remain a struggle.”


Overall retail sales increased 20% for the quarter with a high-singles comp gain. International retail sales grew “more than 23%,” which means domestic retail probably grew in the high-teens. The company opened nine Skechers stores in the quarter, closing one, as well as opening the first SoHo Lab outlet, leaving it with 168 company-owned stores at quarter-end.


SKX now expects Q3 net earnings per diluted share to range between 43 cents and 48 cents on net sales of $380 million to $390 million.