Skechers USA saw shares plunge 18.4% for the week after the company surprised the market – and the industry – with projections for Q1, which show a dramatic slowdown to their business.

While FY results were relatively in line with 2001, Q4 sales were down 15% from LY and earnings took a $10.6 million nosedive, swinging a small profit in Q4 LY to a big loss in this year’s quarter. However, it was management’s pessimistic prediction of a 15% – 20% sales drop in Q1 that sent investors for the exits. By the end of Thursday’s trading, the stock price was down nearly 25%. It closed the week at $6.20, down almost 75% from its 52-week high of $24.40.

FY 2002 net sales declined 1.8% to $943.6 million, compared to sales of $960.4 million in 2001. Earnings for 2002 were fairly flat at $47.0 million versus $47.3 million LY. EPS came in at $1.20 versus $1.24 in 2001.

SKX 2002 Q4 sales were $180.8 million compared to $214.1 million in Q4 2001. The net loss for the quarter was $8.6 million versus net earnings of $2.0 million in 2001. Net loss per share in Q4 was $0.23 compared to EPS of $0.05 in 2001. The consensus estimate was a loss of 21 cents.

Gross margin in Q4 2002 dipped 120 bps to 38.5% versus 39.7% in the prior year quarter. Management blamed the west coast dock strike and a reserve against the failed roller skate venture as primary reasons for the margin shortfall.
CFO David Weinberg gave this guidance for Q1:

  • Sales down 15% to 20%
  • Backlog down 8%
  • EPS projected at $0.05 – $0.10 vs. $0.53 LY

Management was more optimistic about H2, citing retailer response to pre-lines and WSA. However, they refused to offer any guidance beyond Q1.


  • Inventory was down 6%, but described as “current and on plan”
  • Accounts receivable was down 19%
  • Company has $125 million in cash
  • Owned retail is now 13% of the total business. 20-25 new stores are planned for 2003
  • Int’l is now 11% of sales and could reach 25-30%

>>> When a company is based on test-and-react, they live and die on re-orders. Based on the pessimistic predictions, SKX must be in the “die” phase right now…

>>> Retailers are very negative on business right now. It’s going to take a lot to turn this one around…