Skechers USA, Inc. reported that net sales for the third quarter of 2011 were $412.2 million, compared to $554.6 million in the third quarter of 2010, and income from operations was $2.3 million, compared to $55.6 million in the third quarter of 2010.
Net earnings for the quarter were $8.3 million compared to net earnings of $36.4 million in the third quarter of 2010. Net earnings for the third quarter include a $4.6 million tax benefit related to certain research and development tax credits. Net earnings per diluted share were $0.17 on 49.4 million diluted shares outstanding, compared to net earnings per diluted share of $0.74 on 49.2 million diluted shares outstanding for the third quarter of 2010.
“Third quarter 2011 net sales were down 25.7 percent, while our gross margins returned to our historical norm,” began David Weinberg, chief operating officer and chief financial officer. “The decrease in revenues is primarily attributable to a combination of comparisons against a record third quarter 2010, the decline in higher priced toning footwear, and lower than expected sales across many of our other Skechers footwear lines. We are pleased that we continued to experience growth across much of our international business and that our domestic and international retail sales volume remained fairly constant. The significantly improved gross margin from the previous quarter of this year is a reflection of our reduced inventory levels and more in-line product levels, as well as a normalized flow of our product.”
Gross margin was 42.5 percent for the third quarter of 2011, compared to 45.6 percent in the third quarter of 2010. Gross profit for the first nine months of 2011 was $511.1 million, or 38.6 percent of net sales, compared to $727.7 million, or 46.9 percent of net sales, in the first nine months of 2010.
For the nine months ended September 30, 2011, net sales were $1.323 billion compared to net sales of $1.552 billion in the first nine months of 2010. Net loss for the first nine months of 2011 was $9.8 million, which includes a tax benefit of $4.6 million related to certain research and development tax credits, compared to net earnings of $132.9 million in the first nine months of 2010. Net loss per diluted share in the first nine months of 2011 was $0.20 per share on 48.3 million diluted shares outstanding, compared to net earnings of $2.71 per share on 49.0 million diluted shares outstanding for the same period last year.
Robert Greenberg, Skechers chief executive officer, commented: “Last year we were experiencing record sales growth as the leaders of an explosive new category. This year we are leveraging that learning both in product development and distribution. We created many new offerings in our Fitness division, which delivered earlier this year, and have our first true performance footwear line delivering to our accounts this quarter. Early reads on this line in our own retail stores has been strong, and we believe this performance product will also experience solid sell throughs in our key accounts. Inspired by our fitness footwear, we are developing fresh looks in our classic athletic lifestyle footwear as well as in our Skechers Kids lines, with commercials to support this business for Spring 2012. We have created substantial buzz with consumers thanks to the star power of Kim Kardashian, and are looking forward to growing our relationship with Dancing with the Stars host Brooke Burke, who is appearing in Skechers Fitness print and television campaigns around the world. The signing of elite runner Meb Keflezighi for our Skechers GOrun footwear has helped us to elevate the profile of this performance line. He will be competing in our footwear in the New York Marathon next week. While we develop and market new product, we are continuing to look for new opportunities to grow our business, including in the international arena where we are in the process of transitioning one of our largest distributors to a subsidiary. We are looking forward to international growth, opening new retail stores around the world, and to delivering fresh product to the market this quarter and next year.”
Mr. Weinberg added: “We believe that we will continue to face challenges in the fourth quarter of 2011, but we are pleased with the strides we have made to better position our business for 2012. These include significantly reducing our selling expenses, consolidating our North American distribution facilities into one building and reducing excess inventory. We are also evaluating our overhead to better control spending while seeking new expansion opportunities in product development, as well as international and retail sales. As we look forward to 2012, we believe Skechers continues to be a relevant brand globally, and there are many opportunities to grow our business in the future.”
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SKECHERS U.S.A., INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
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| Three Months Ended September 30, | |||||||||||||
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2011
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2010
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| Net sales | $ | 412,183 | $ | 554,626 | |||||||||
| Cost of sales | 236,988 | 301,975 | |||||||||||
| Gross profit | 175,195 | 252,651 | |||||||||||
| Royalty income | 1,406 | 1,888 | |||||||||||
| 176,601 | 254,539 | ||||||||||||
| Operating expenses: | |||||||||||||
| Selling | 37,943 | 59,516 | |||||||||||
| General and administrative | 136,364 | 139,455 | |||||||||||
| 174,307 | 198,971 | ||||||||||||
| Income (loss) from operations | 2,294 | 55,568 | |||||||||||
| Other income (expense): | |||||||||||||
| Interest, net | (986 | ) | 484 | ||||||||||
| Other, net | 395 | (3,143 | ) | ||||||||||
| (591 | ) | (2,659 | ) | ||||||||||
| Earnings (loss) before income taxes | 1,703 | 52,909 | |||||||||||
| Income tax expense (benefit) | (6,653 | ) | 16,330 | ||||||||||
| Net income (loss) | 8,356 | 36,579 | |||||||||||
| Less: Net income (loss) attributable to noncontrolling interest | 71 | &nbs | |||||||||||
