SKECHERS USA, Inc. net sales for the first quarter ended March 31, 2009 fell 10.8% $343.5 million compared to $384.9 million in the first quarter of 2008. Net earnings for the first quarter of 2009 were $8.2 million versus net earnings of $32.8 million in the first quarter of 2008, a drop of 75%. Diluted earnings per share were 18 cents compared to net earnings per diluted share of 70 cents in the first quarter of 2008.
“In the first quarter, our focus was on reducing our inventory and expenses while maintaining our strong position in the domestic and international footwear markets with the goal of returning to profitability in the second half of the year,” stated David Weinberg, COO of SKECHERS. “We have made significant improvements in our inventory, shown growth in several key international markets, and had a profitable quarter. We consider these positive achievements to be an indication of the focus of our global team and the strength of our brand. With more opportunities to grow our international business and a portfolio of well-recognized brands, we believe that we will continue to fare well in this difficult environment and that SKECHERS is well-positioned for long-term profitability and growth.”
Gross margins were 36.5% of net sales in Q1 compared to 44.7% of net sales in the first quarter of last year. Included in its diluted earnings per share is a $1.9 million reduction in income tax expense or 4 cents per share adjustment recorded in the first quarter that relates to the prior year. Without this item, the effective tax rate would be approximately 18%.
Robert Greenberg, SKECHERS CEO, commented: “…We are focusing on maintaining our position in the domestic and international markets by offering stylish product at a good value. We are also continuing to invest in our business globally with the launch of a new subsidiary in Chile; further establishing our brand in Brazil, a relatively new market for SKECHERS; continuing to open new points of sale in China and Hong Kong through our joint ventures; and selectively opening SKECHERS stores in the United States and other countries where we directly handle our distribution. We are a company with compelling products, talented people, and dedicated partners, and we are committed to meeting the footwear needs of our accounts and consumers. With an extremely strong balance sheet, strong liquidity, a significant cash position, and a portfolio of diverse, globally recognized brands, we believe we will emerge an even stronger company when the global economy begins to turn.”
“In spite of an extremely weak global retail environment, we were profitable in the first quarter and showed significant improvement over the fourth quarter of 2008. This demonstrates the continued strength and relevance of the SKECHERS brand,” stated Fred Schneider, CFO of SKECHERS. “In the first quarter, our intention was to evaluate our expenses and strengthen our balance sheet. We feel we are on track to achieving these goals that were outlined in our fourth quarter conference call. We are continuing to monitor our expenses and inventory levels to ensure maximum profitability in this soft economic environment, which we believe will continue to negatively impact our business.”
SKECHERS U.S.A., INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands) | ||||||
| March 31, 2009 | December 31, 2008 | ||||
| ASSETS | ||||||
| Current Assets: | ||||||
| Cash and cash equivalents | $ | 73,205 | $ | 114,941 | ||
| Trade accounts receivable, net | 229,877 | 175,064 | ||||
| Other receivables | 9,414 | 7,816 | ||||
| Total receivables | 239,291 | 182,880 | ||||
| Inventories | 172,886 | 261,209 | ||||
| Prepaid expenses and other current assets | 33,398 | 31,022 | ||||
| Deferred tax assets | 11,955 | 11,955 | ||||
| Total current assets | 530,735 | 602,007 | ||||
| Property and equipment, at cost less accumulated depreciation and amortization | 169,798 | 157,757 | ||||
| Intangible assets, less applicable amortization | 5,184 | 5,407 | ||||
| Deferred tax assets | 19,575 | 18,158 | ||||
| Long-term investments | 78,050 | 81,925 | ||||
| Other assets, at cost | 8,737 | 11,062 | ||||
| TOTAL ASSETS | $ | 812,079 | $ | 876,316 | ||
| LIABILITIES AND EQUITY | ||||||
| Current Liabilities: | ||||||
| Current installments of long-term borrowings | $ | 613 | $ | 572 | ||
| Line of credit | 1,145 | – | ||||
| Accounts payable | 101,662 | 164,643 | ||||
| Accrued expenses | 16,418 | 23,021 | ||||
| Total current liabilities | 119,838 | 188,236 | ||||
| Long-term borrowings, excluding current installments | 16,079 | 16,188 | ||||
| Total liabilities | 135,917 | 204,424 | ||||
| Equity: | ||||||
| Skechers U.S.A., Inc. stockholders equity | 671,851 | 668,693 | ||||
| Noncontrolling interest | 4,311 | 3,199 | ||||
| Total equity | 676,162 | 671,892 | ||||
| TOTAL LIABILITIES AND EQUITY | $ | 812,079 | $ | 876,316 | ||
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) (In thousands, except per share data) | ||||||||
| Three Months Ended March 31, | ||||||||
| 2009 | 2008 | |||||||
| Net sales | $ | 343,470 | $ | 384,922 | ||||
| Cost of sales | 218,041 | 212,750 | ||||||
| Gross profit | 125,429 | 172,172 | ||||||
| Royalty income | 272 | 840 | ||||||
| 125,701 | 173,012 | |||||||
| Operating expenses: | ||||||||
| Selling | 21,510 | 25,534 | ||||||
| General and administrative | 98,038 | 99,221 | ||||||
| 119,548 | 124,755 | |||||||
| Other income (expense): | ||||||||
| Interest, net | ||||||||
