With all three of its businesses – Domestic, International and Retail – banging out double-digit growth, Skechers USA Inc. reported the highest quarterly sales in its 23-year history and earnings that handily topped Wall Street’s target.
Revenues in the second quarter zoomed ahead 36.3 percent to $800.5 million. Earnings jumped 129.2 percent to $79.8 million, or $1.55, crushing the Street’s consensus estimate of $1.01.
“The second quarter benefited from both pent-up demand resulting from U.S. port issues in the first quarter, as well as a shift in back-to-school shipments due to increased demand in both domestic and international markets,” said David Weinberg, COO and CFO, on a conference call with analysts. “This continued strong demand for our product worldwide also led to record net sales, earnings from operations, net earnings, and earnings per share in the second quarter.
Highlighting its progress in the U.S., Weinberg noted that SportsOneSource reported during the quarter that Skechers is now the number one work brand and the number one walking brand. In May, numerous media outlets reported that Skechers had surpassed several leading athletic footwear companies to become the number two brand in the U.S. athletic footwear market.
In its domestic wholesale business, sales grew 31.9 percent, or $82 million. The growth was the result of a 21 percent increase in pairs shipped, a 9 percent increase in average price per pair, and double-digit increases in its men's and women's footwear, as well as single-digit gains in kids.
The highest dollar gains came within our Skechers USA men's collections which features Relaxed Fit footwear, Skechers Sport for women with its lightweight footwear, and its women's Skechers GO line. Said Weinberg, “Every major product category showed increased volume and increased gross margins for the quarter.”
Most divisions and product lines also benefited from marketing pushes, including Ringo Starr and Pete Rose for Relaxed Fit, Brooke Burke-Charvet for Stretch Fit, Kelly Brook as well as Demi Lovato for Skechers Sport, and pro golfer Matt Kuchar for Skechers GO Golf. The brand also launched its first sandal commercial in many years.
Sugar Ray Leonard commercials supporting Relaxed Fit break in the third quarter and multi-platinum artist Meghan Trainor was just signed as another brand ambassador. Its first Star Wars line for boys and men will be introduced in the second half. Bobs, its one-for-one shoe line mimicking Toms, also continues to sell well, reaching the 12-million-pair donation mark during the quarter.
“To better prepare for continued growth, we recently completed capacity and efficiency upgrades to our domestic distribution center and believe we are well-positioned for increased shipments and demand,” said Weinberg. “Based on our domestic wholesale backlog, our continued focus one delivering innovative product and relevant marketing, including our increased team of Skechers brand ambassadors, strong sell-throughs for spring and early feedback on our fall products, we believe we will continue our sales momentum through the back half of 2015.”
Total international wholesale and distributor sales expanded 60.1 percent. Subsidiary and joint venture sales improved 64 percent, and its distributor sales advanced 51.5 percent. Several countries shipped more than a million pairs in the quarter including China, the U.K. and the UAE. Said Weinberg, ”We are pleased with the continued growth in our international business despite foreign currency headwinds in several markets.”
Skechers’ wholly-owned subsidiary saw sales increases of 64 percent for the quarter, led by Canada, Germany, and the U.K. Its joint ventures in Asia surged 116.8 percent, led by a triple-digit increase in China. International distributor growth was boosted by triple-digit growth in Indonesia, Scandinavia, Taiwan, and the UAE, and double-digit growth in Australia and New Zealand, South Korea and Turkey.
Weinberg attributed the international gains to Skechers’ “innovative and diverse product range,” key ambassadors such as Ringo Starr, Kelly Brook and Demi Lovato resonating with consumers overseas, and its expanded store presence. At quarter end, there were 665 Skechers branded stores owned and operated by its joint ventures, franchisees and distributors outside of the U.S. Said Weinberg, “Now with 30 percent of our total sales, we expect international to grow at a faster rate than domestic wholesale and retail and become 50 percent of our total business in the next three to four years.”
Worldwide sales in its company-owned retail stores increased 23.7 percent for the quarter, with domestic sales growing 21 percent and international sales by 35 percent. This included positive comp store sales of 13.1 percent domestically and 11.8 percent internationally for a total of 12.9 percent comp increase worldwide. At the end of the quarter, Skechers had 461 company-owned stores around the world, of which 95 are in international markets.
Weinberg said that along with double-digit backlogs, “strong July incoming order rates, and spring 2016 buy meetings with our key accounts in our corporate offices this month gives us confidence that the strength and demand for our brand will continue throughout the year and into 2016. We remain comfortable with the analysts current consensus estimates for the back half of 2015.”
