Starting its 30th year in business, Skechers U.S.A., Inc. reported sales grew 26.8 percent in the first quarter ended March 31 to a new quarterly sales record, boosted by a resurgence in its U.S. wholesale business as product deliveries recovered.

Both earnings and sales in the quarter surpassed guidance, prompting Skechers to raise guidance for the year.

“Our product offering and the enthusiasm for the Skechers brand have never been stronger,” said David Weinberg, COO, on a conference call with analysts. “This is clear in the Skechers stores from London to Los Angeles and Munich to Mumbai and displays in shops-in-shop at retailers worldwide. It is also apparent in our marketing campaigns, whether it’s alongside major events, like commercials with Willie Nelson surrounding the Super Bowl, or being the official footwear sponsor at this month’s U.S. Open Pickleball Championships and the LPGA’s LA Open here in Los Angeles or on screens in-home, on phones in the mall and city streets. Skechers is truly everywhere. And as consumers continue to embrace comfort and an active lifestyle, we remain a leading choice as a comfort technology company.”

In the quarter, sales grew 26.8 percent to $1.82 billion, easily topping company guidance in the range of $1.675 billion and $1.725 billion. Wall Street’s consensus estimate had been $1.69 billion.

Net earnings rose 22.6 percent to $121.2 million, or 77 cents, exceeding company guidance in the range of 70 to 75 cents. Wall Street’s consensus estimate had been 72 cents.

The quarter marked the first since Skechers changed its segment reporting structure. The changes include reporting segment results for wholesale and direct-to-consumer (DTC) operations, including joint venture entities. It also includes enhanced geographic sales reporting.

The revenue gains reflect domestic growth of 29 percent and international growth of 26 percent. The international business now comprises 57 percent of sales.

Wholesale Sales Expand 33 Percent
Wholesale sales increased 33 percent year over year to $1.25 billion, led by 43 percent growth domestically and 26 percent growth internationally. wholesale sales were driven by a 23 percent increase in units shipped and an 8.6 percent increase in average price per unit.

Wholesale growth benefited from significant improvements in the pace of receipts and as a result, shipments to domestic wholesale accounts improved, in addition to strong sell-through and higher average selling prices.

Said Weinberg, “Of particular note in the quarter, our U.S. wholesale performance increased markedly due to double-digit improvements across genders and most categories, reflecting strong consumer demand and sell-through at retail, as well as improved availability of products and our ability to receive and process additional inventory.”

The over 40 percent growth in U.S. wholesale follows a gain of 5 percent in the fourth quarter.

EMEA also saw wholesale growth of over 40 percent, increasing across all of Europe.

Asia Pacific wholesale sales in the quarter were essentially flat year over year due to the weakness in the region where COVID continued to negatively impact our ability to operate. China grew over 9 percent, lower than Skechers’ long-term targets due to constraints in the quarter. Said Weinberg, “We expect continued market challenges in APAC throughout the second quarter as governments contend with the impacts of the pandemic. We are confident in return to historical growth patterns and the long-term growth prospects for the Skechers brand in this region.”

Direct-to-consumer (DTC) sales increased 16 percent year over year to $568.3 million, supported by growth in domestic and international markets of 5 percent and 25 percent, respectively.

Several markets saw significant traffic improvement as compared to last year’s COVID closures. E-commerce delivered mid-teens growth globally.

Americas And EMEA Pace Regional Gains
In the Americas, overall sales for the quarter increased 31 percent to $946.9 million. John Vandemore, CFO, said, “Strong brand resonance and a significant improvement in the pace of our inbound receipts and outbound shipments to wholesale customers drove the results, particularly in the United States, which accounted for over three-quarters of the growth.”

In EMEA, sales increased 49 percent to $441.2 million, with a recovery in many markets impacted by the pandemic last year. Sales to Russia and Ukraine, sold via distributors, represented less than 1 percent of sales in 2021 and remain suspended. Said Vandemore, “We continue to monitor events in EMEA closely but have yet to see a material change in consumer discretionary spending patterns in the region.”

In APAC, sales in the quarter increased 4 percent to $431.5 million, led by 9 percent growth in China, partially offset by COVID-induced weakness in several adjacent markets. Said Vandemore, “The Skechers brand and our products continue to resonate well in China, where growth was driven by strong e-commerce performance in January and February. However, beginning in March and continuing into April, slower retail traffic patterns and operational limitations have emerged as China continues to feel the negative effects of the COVID pandemic. We remain optimistic about the long-term health of our brand in the APAC region, but we are adopting a cautious view relative to expected performance over the next few quarters.”

First-quarter gross margins decreased 250 basis points year-over-year to 45.3 percent, primarily due to increased freight costs and an unfavorable mix impact from higher wholesale sales. These pressures were partially offset by higher average selling prices.

Operating expenses were reduced 120 basis points as a percentage of sales year over year to 35.6 percent. The improvement reflects domestic selling expenses leveraging meaningfully against higher sales and the return of expense leverage to its international DTC business after last year’s COVID-related closures. 

Full-Year Guidance Raised
Skechers said it now expects to achieve sales between $7.2 billion and $7.4 billion and EPS between $2.75 and $2.95 for the year. Previously, Skechers expected to achieve sales between $7.0 billion and $7.2 billion and diluted earnings per share of between $2.70 and $2.90. In 2021, earnings reached $2.59 on sales of $6.29 billion.

For the second quarter, earnings are expected in the range of 50 cents to 55 cents on sales in the range of $1.75 billion and $1.80 billion. In the year-ago period, earnings reached 88 cents on sales of $1.66 billion.

Vandemore said, ‘We remain confident in our growth strategy. But because of external pressures, including recent COVID-related shutdowns in China, geopolitical unrest, escalating inflationary pressures on both our business and our consumers, as well as ongoing supply chain disruptions, we are incorporating a more conservative outlook into our guidance, particularly in the second quarter until we have more certainty around the length and severity of these external headwinds.”