Shares of Britneys favorite brand plunged 21.4% to close at $6.74 on Friday after the fashion footwear company reported sharp declines in sales in the second quarter and a loss of over $2 million compared to profits of over $21 million in the year-ago period. Sales are down 12.7% for the year.
All this good news was accompanied by the revelation that inventories are 56% higher than they were last year at the end of Q2. SKX said inventory in production was just 2.2% higher than last year.
Units sales were off just 2.0%, but total sales suffered from a 15% decline in average selling price for the brand. SKX said it was “not as successful as anticipated” in selling through excess inventory and that excess inventory “will have a negative impact on margins in the short term”. Gross margin for Q2 was down 210 basis points to 39.1%.
The company spent $24 million, or 40% more than last year, on advertising in the quarter to try to push goods through the system. Advertising and marketing expenses were 10.5% of sales in Q2 vs. 6.7% last year. Second quarter operating expenses were up 1180 BPS to 39.2%.
The outlook for the back half doesnt look much better as the company forecasted third quarter sales to be down 18% – 22% to $205 million to $215 million, with continued downward pressure on GM and operating expenses. The company sees a Q3 per share earnings range from a 5 cents loss to a 5 cents profit, versus a 35 cents per share profit last year.
The company has started to slow the product pipeline quite a bit, indicating that the WIP (work in progress) inventory is down 35% vs. last year at the same time.
Skechers said closeout inventory is less than 10% of “on hand and in production”.
>>> Lets see, 56% more inventory and sales projected to be roughly 20% lower
should make for an interesting WSA show…
>>> Can they compete for closeout dollars against the big guys with goods to sell???
