With its lifestyle, performance and kids’ footwear all cooking with gas, Skechers USA Inc. reported sales rose 40.5 percent in its first quarter, to $768 million, marking the highest quarterly revenues in the company’s history.
Net earnings vaulted 81.0 percent to $56.1 million, or $1.10 a share, easily eclipsing Wall Street’s consensus estimate of $1.01 a share.
On a conference call with analysts, David Weinberg, COO and CFO, said the strong performance came despite numerous headwinds, including the stronger U.S. dollar, the slow down at the West Coast ports, unseasonably cold weather in certain key markets and less efficient operations than originally anticipated at its European distribution center, due to the transition to a new automated system.
Double-digit increases were seen in its domestic and international wholesale and company-owned retail businesses while single-digit increases came in its domestic e-commerce business.
“All of these factors are a testament to the continued strong demand for our brand and product,” said Weinberg.
Domestic wholesale sales expanded 38.2 percent in the quarter with a 30.5 percent increase in pairs shipped and a 5.9 percent increase in average price per pair. Triple-digit increases were seen in its women's Sport Active and Women's USA lines; as well as double-digit increases in its men's and women's Skechers Sport, Skechers GO and Skechers Work, Men's USA, Mark Nason, as well as Women's Active, Cali and On The Go line.
Weinberg said the domestic wholesale performance benefited from several marketing pushes. These included its sponsorship of the Houston Marathon with advertisements plastered across the city featuring elite runners Meb Keflezighi and Kara Goucher, as well as its Relaxed Fit Super Bowl commercial starring Pete Rose.
Other campaigns supporting the gains included one with Brooke Burke-Charvet supporting Stretch Fit, Kelly Brook for Skechers Memory Foam and pro golfer Matt Kuchar for GO Gulf. It also brought out its first sandal campaign in many years for GOwalk 3. Planned separate campaigns with Ringo Starr and Sugar Ray Leonard for Relaxed Fit are expected to support the men’s business and international growth.
Kids saw renewed growth driven by its newer light weight sport footwear lines; the new Game Kicks line that features a built-in memory game, and updates to its Twinkle Toes, Hot Lights and Z-Strap offerings. A co-branded Star Wars line for boys launches this fall.
“Based in our domestic wholesale backlog, our continued focus on delivering innovative product and relevant marketing and spring sell-throughs, we believe we will continue to achieve strong gains in 2015,” said Weinberg on the segment.
Total international wholesale and distributor sales increased 59.5 percent in the quarter. Subsidiary and joint venture sales improved 58.5 percent while distributor sales lifted 62.7 percent. The gains came despite particularly strong currency headwinds in Europe and Canada.
Skechers wholly-owned subsidiary’s sales increased 42 percent for the quarter. Its European subsidiaries saw increases of 58.1 percent, with the biggest dollar gains coming in its two largest subsidiaries, Germany and the U.K. Only Canada was down with a slight decline, due to the currency challenges, although the region delivered a 15 percent increase in pairs shipped. In Central Eastern Europe, 14 countries including Croatia, the Czech Republic, Hungary, Romania and Serbia are being converted from distributors to a wholly-owned subsidiary with positive contributions expected in 2016.
Skechers’ Joint ventures in Asia businesses grew 136.9 percent with triple-digit increases in Singapore, India and China. China is expected to be a standalone $100 million business in 2015. Its international distributor grew 62.7 percent as a result of triple-digit growth in Scandinavia, Turkey and the United Arab Emirates, and double-digit growth in Australia/New Zealand, Indonesia, South Korea, the Philippines and Taiwan.
Beyond product, international is like the U.S. benefiting from marketing campaigns and an expanding retail presence. At the quarter's end, it had 610 Skechers branded stores owned and operated by ventures, franchisees and distributors outside of the U.S. International is expected to reach 50 percent of its total sales in the next three to four years, up from just over 37 percent currently.
Worldwide sales in its company-owned retail stores increased 19.9 percent for the quarter, with domestic sales growing 18.1 percent and international sales by 28.5 percent. Comps grew 8.3 percent domestically and 14.8 percent internationally for a total 9.3 percent global gain. Domestic e-commerce sales increased 7.9 percent and currently comprise less than 1 percent of its total sales.
Weinberg said that given its record first quarter and a strong start to April in terms of revenues and backlogs, its accelerated growth trend is projected to continue through the second quarter and into the back half of 2015. Said Weinberg, “Based on the reaction by key accounts during our interim meetings this month in our corporate offices, we believe the strength of our brand and product has not slowed.”
