Skechers net sales for the third quarter of 2005 rose 5.9% to $272.8 million compared to $257.7 million for the same period in 2004. Third quarter 2005 net earnings were $12.6 million versus net earnings of $6.0 million in the third quarter of the prior year. For the third quarter 2005, the diluted earnings per share were 30 cents compared to 15 cents per share in the prior year.
“Our 2005 third quarter marks the seventh consecutive quarter of year-over-year top-line increases, and the sixth consecutive quarter of year-over-year bottom-line increases, a testament to the continued strength of our brands,” began David Weinberg, chief financial officer of Skechers USA, Inc. “This strong quarter combined with record first and second quarter 2005 revenues resulted in the highest reported nine month revenues in the Company's history.”
For the nine-month period ended September 30, 2005, net sales rose 9.7 percent to $783.0 million compared to net sales of $713.9 million in the first nine months of 2004. Net earnings for the first nine months of 2005 were $38.8 million versus $21.4 million in the first nine months of 2004. Diluted earnings per share for the first nine months of 2005 were 92 cents per share on 44,459,000 diluted shares outstanding versus 53 cents per share on 43,119,000 diluted shares outstanding.
Gross profit for the third quarter of 2005 was $115.5 million or 42.3% of sales compared to $103.9 million or 40.3% of sales in the third quarter of last year. Gross profit for the first nine months of 2005 was $327.4 or 41.8% of sales versus $288.9 million or 40.5% of sales in the first nine months of the prior year.
Mr. Weinberg continued: “Our improved third quarter net sales, operating profit and net earnings were the result of a combination of growth in our domestic wholesale, international direct and Skechers-owned retail stores as well as continued cost management on the expense and operational side of business. The revenue improvements were primarily led by an increased demand for Skechers' denim friendly styles for men and women, as well as significant growth from our recently launched designer and lifestyle lines, which are becoming profitable stand-alone businesses. Gross margins improved for the quarter due to a combination of an increased demand for in-line product and stronger sell-throughs. We believe that we will end the year with record net sales and continue to see growth as we head into 2006 due to the continued strength of our domestic wholesale and retail businesses.”
Robert Greenberg, Skechers' chief executive officer, said: “The first nine months of 2005 were strong from a product, marketing, sales and brand acceptance stand point. We've hit our stride and are gaining ground through a steady flow of fresh Skechers' products and brands including Michelle K, Mark Nason, 310 Motoring and Marc Ecko, which are all retailing well. With two new marketing campaigns that include recent American Idol winner and rising star Carrie Underwood wearing Skechers footwear and global hip-hop superstar The Game in support of the launch of his signature 310 sneaker, we believe the momentum we have experienced in 2005 will continue into 2006. We remain focused in our approach to product design and marketing, and are dedicated to running a profitable company with longevity and relevance.”
The Company now expects fourth quarter sales to be in the range of $210 million to $220 million and earnings per share of between 2 cents and 7 cents.
“Historically, Skechers' first three quarters have been stronger than the fourth,” added Mr. Weinberg. “While we expect this trend to continue, we believe fourth quarter sales will increase above the same period last year and we forecast gross margins of approximately 40% to 41%, which we feel is appropriate for our business. Also, in line with our quarterly sales trend and based on our key indicators, we expect first quarter 2006 sales to increase over first quarter 2005.”
SKECHERS U.S.A., INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(In thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
2005 2004 2005 2004
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Net sales $272,836 $257,658 $782,983 $713,850
Cost of sales 157,363 153,720 455,538 424,968
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Gross profit 115,473 103,938 327,445 288,882
Royalty income 1,998 1,726 5,072 4,385
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117,471 105,664 332,517 293,267
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Operating expenses:
Selling 27,190 24,139 66,336 60,968
General and administrative 68,840 64,576 200,452 184,897
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96,030 88,715 266,788 245,865
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Earnings from operations 21,441 16,949 65,729 47,402
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Other income (expense):
Interest, net (912) (1,986) (4,109) (6,295)
Other, net 251 (248) 1,598 (530)
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(661) (2,234) (2,511) (6,825)
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Earnings before income taxes 20,780 14,715 63,218 40,577
Income tax expense 8,148 8,678 24,402 19,152
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Net earnings $12,632 $6,037 $38,816 $21,425
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Net earnings per share:
Basic $0.32 $0.16 $0.98 $0.56
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Diluted $0.30 $0.15 $0.92 $0.53
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Weighted average shares:
Basic 39,822 38,809 39,596 38,463
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Diluted 44,845 43,695 44,459 43,119
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