Skechers USA, recently acquired in a $9.4 billion take-private deal with 3G Capital, delivered strong quarterly results, with sales growing 13.1 percent. This growth was led by gains in EMEA, which offset declines in the U.S. and China. Earnings climbed 21.5 percent despite margin pressure from tariffs.

The results came out after the market closed on Friday, June 8.

In the quarter ended June 30, sales rose to $2.44 billion from $2.16 billion a year ago, reflecting a favorable $33.9 million currency exchange impact. On a currency-neutral basis, sales increased 11.5 percent.

Skechers said in its 10Q filing that sales increased overall due to higher sales volume and higher average selling prices.

By channel, wholesale sales grew 15.0 percent to $1.3 billion. Wholesale sales vaulted 58.7 percent in EMEA (Europe, the Middle East & Africa) and 4.0 percent in the Asia Pacific, offsetting a decrease of 5.9 percent in wholesale sales in the Americas region. Wholesale volume increased by 13.7 percent, while the average selling price per unit rose by 1.2 percent.

Wholesale gross margin decreased 250 basis points to 41.4 percent, driven by higher costs per unit, primarily due to increased duties domestically resulting from higher tariff rates.

Direct-to-consumer (DTC) sales improved 11.0 percent to $ 1.14 billion. The gains reflect increases in the Americas of 8.6 percent, the EMEA of 27.8 percent and Asia Pacific of 6.6 percent. DTC volume increased 6.6 percent, and average selling price per unit increased 4.1 percent.

DTC gross margin remained consistent at 67.0 percent. Gross margin in the current period was impacted by higher costs per unit, driven by higher duties domestically as a result of increased tariff rates, partially offset by higher average selling prices compared to the prior year.

By geography, domestic or U.S. sales slid 1.8 percent to $862.1 million. Wholesale domestic sales were down 7.5 percent to $862.1 million, while domestic DTC sales were up 7.6 percent to $448.8 million. International sales grew 22.0 percent to $1.58 billion. International wholesale sales climbed 29.6 percent to $888.1 million, while international DTC sales were up 13.3 percent to $689.8 million.

By region, sales increased 1.1 percent in the quarter to $1.11 billion in the Americas, jumped 48.5 percent to $731.5 9 million in EMEA, and gained 5.5 percent to $595.5 million in APAC. In China, sales fell 8.2 percent to $287.2 million. Distributor sales were up 20.6 percent to 136.1 million.

Net earnings rose 21.5 percent to $170.5 million, or $1.13 a share, up from $149.3 million, or 91 cents, a year ago.

Gross margin declined 160 basis points to 53.3 percent compared to 54.9 percent, due to higher costs per unit, driven by higher duties domestically as a result of higher tariff rates, partially offset by higher average selling prices

Operating expenses increased 15.4 percent, to $1.1 billion, and as a percentage of sales grew 90 basis points to 46.2 percent. Selling expenses increased by $16.0 million, or 6.8 percent, to $251.9 million, primarily due to higher expenditures on demand creation. General and administrative expenses increased $134.3 million, or 18.1 percent, to $876.3 million, driven by increases in labor costs of $53.4 million and facility-related costs of $28.3 million, including rent and depreciation, largely due to global retail expansion, as well as labor costs at its European distribution center. Additionally, distribution costs increased by $24.9 million, primarily due to higher shipping and packaging expenses.

The latest quarter includes $9.3 million in transaction costs in connection with the merger, which is expected to close in the third quarter. Skechers will continue to be led by Chairman and Chief Executive Officer Robert Greenberg, President Michael Greenberg, and Chief Operating Officer David Weinberg

Image courtesy Skechers