Skechers Earnings Tumble on Toning Weakness

Skechers USA, Inc. reported first-quarter sales slid 2.0 percent to $476.2 million from $492.8 million a year ago. Operating income tumbled 81.9 percent to $14.7 million compared to $81.0 million in the first quarter of 2010.

Net earnings were $11.8 million, or 24 cents a share, from $56.3 million, or $1.15, a year ago. 

“We view our first quarter 2011 sales of more than $475 million as a solid accomplishment and a testament to the strength of our core business. However, the difficult comparison against a record first quarter 2010, which benefited from strong toning sales, resulted in a 3.4 percent decrease in our first quarter 2011 sales. International wholesale and retail sales improved in the first quarter 2011 by 37 percent and 51 percent respectively, but were offset by weak domestic wholesale and retail sales,” stated David Weinberg, chief operating officer and chief financial officer. “We believe the toning market is stabilizing as we continue to clear inventory and deliver fresh fitness styles. We do expect a difficult comparison to continue as we are again against a record second quarter 2010 especially given international sales are historically stronger in the first quarter.”

Gross profit for the first quarter of 2011 was $192.6 million or 40.4 percent of net sales compared to $237.4 million or 48.2 percent of net sales in the first quarter of last year.

Robert Greenberg, Skechers chief executive officer, commented: “As always, we continue to innovate and develop new product with exciting marketing campaigns to support our efforts for men, women and kids. During this year's Super Bowl, we aired one of our most-talked about television campaigns, which featured Kim Kardashian working out in SKECHERS. We also launched new television and print campaigns with Brooke Burke and Wayne Gretzky, and this month we saw these celebrities along with Ms. Kardashian and Karl Malone appear in print and mall advertisements across America and around the world. We recently shot several new commercials with our female celebrities, which will launch in the second quarter, capitalizing on the power of these stars, who will be appearing in our newest lines. Early reads on our new product is very positive, and we are eager to deliver fresh product for men and women. We also introduced two new lines for girls, and will be supporting them with animated commercials later this quarter. In addition, key accounts are visiting our offices this week and are viewing product that we will launch in Holiday 2011 and Spring 2012. We believe the enthusiasm for our product by both retailers and consumers remains strong, and we are looking forward to the second half of 2011.”

David Weinberg, Skechers chief operating officer and chief financial officer, stated: “Our first quarter 2011 sales and margins are in line with our expectations given the current retail environment, changes in trends and our excess inventory position, which we are continuing to work through. Our inventory increased by approximately $187 million since first quarter 2010, but decreased by $22 million since year-end 2010. We believe both our sales and margins will improve in the second half of the year as we continue to realize the benefits of reducing older inventory and delivering exciting new styles. We are also carefully reviewing our expense structure and expect to reduce costs and achieve significant operating economies over the next several quarters, positioning the company for greater profitability in the future. We plan to strategically open another 25 to 30 company-owned Skechers stores this year, believe international will continue to grow and our brand remains strong, and we expect improvements to profitability in the latter half of the year.”