Skechers USA, Inc. recorded a first quarter jump in net sales of 24.3% to $344.9 million from $277.6 million for the first quarter of 2006. Net earnings for the quarter were $23.9 million, up from $16.6 million for the first quarter of 2006. Diluted earnings per share were 52 cents on 46,803,000 weighted average shares outstanding versus diluted earnings per share of 38 cents on 45,395,000 weighted average shares outstanding for the first quarter of 2006.
“We are very pleased with our first quarter 2007 top-line results of more than $344 million in net sales, which represent the highest quarterly revenues in our 15-year history,” stated Fred Schneider, chief financial officer of Skechers. “We are also pleased with our record net earnings, which improved by 44 percent for the quarter, and believe we can further capitalize on our momentum in the marketplace to continue to show improvements in our quarterly earnings for the balance of the year.”
Gross profit for the first quarter of 2007 was $149.0 million compared to $118.4 million for the first quarter of last year. Gross margin was 43.2% for the first quarter of 2007 up approximately 50 basis points compared to 42.7% for the first quarter of 2006.
“Our company's record first quarter net sales are a result of double-digit sales increases across all of our revenue channels: domestic wholesale, domestic and international retail, our international subsidiaries and distributors, and e-commerce,” began David Weinberg, SKECHERS' chief operating officer. “The sales were driven by the continued strength of our trend-right SKECHERS product, and the growth of our fashion and street brands domestically and the launch of these brands overseas.”
Robert Greenberg, the company's chief executive officer, commented: “SKECHERS was built on our mantra of 'unseen, untold, unsold.' Through a combination of consistent and pervasive advertising, designing and developing trend-right product, and then following up with more marketing support, we have developed a globally recognized brand, and grown to be a billion dollar-plus lifestyle company. We are pleased that these efforts have resulted in our key SKECHERS lines continuing to grow globally, and our fashion and street brands gaining a stronger foothold in the U.S. Our new SKECHERS and fashion and street lines were also embraced by consumers: SKECHERS Cali and Zoo York, both of which were introduced late last year, had strong sell-throughs in the first quarter. Additionally, Cali Gear by SKECHERS and Avirex both launched in the first quarter and saw strong acceptance in the market. We are also pleased with the initial acceptance of our fashion and street lines internationally as they have begun selling abroad. All of our 10 brands are supported with multiple marketing mediums – which may include print, outdoor and television advertising, and are positively impacted by the power of celebrities – including Ashlee Simpson, JoJo, Terrence Howard and NaS. SKECHERS is already a global brand, but we feel there is potential to further grow its presence and penetrate additional markets around the world. And with our fashion and street brands, we are just scratching the surface. As a product and marketing driven company, we plan to continue to support our brands with increased advertising in the second quarter to capitalize on our growth and position us well for the third quarter when we plan on taking a more moderate approach to increasing our advertising spend. We believe there is much more to be seen, told and sold.”
Mr. Weinberg added: “We believe the sales momentum we are seeing will continue into the second quarter based on key indicators including our double-digit backlog and strong retail comp sales. While we are projecting our second quarter sales to be a new quarterly record and are encouraged by our key indicators as well as strong shipments in April, we do believe the greater opportunity is in the third quarter when our back-to-school shipments may shift from June into July as they have done previously. We are gearing up for our continued growth with improvements in our infrastructure, additional marketing and fresh product.”
The company now expects second quarter 2007 net sales to be in the range of $350 million to $360 million and diluted earnings per share in the range of 41 cents to 46 cents. It is important to note, however, that historically Skechers' back-to-school shipping period occurs in June and July over both its second and third quarters, which has caused sales to shift between the two quarters; the timing of when goods ship is determined by the delivery schedules set by the company's wholesale accounts. The company would also like to note that embedded in its guidance are some important assumptions regarding expenses. As previously discussed, when the company approaches $1.3 billion to $1.4 billion, it expected it would need to make necessary investments in its infrastructure to support its increased scale. These investments are in a variety of areas such as warehousing and distribution, retail due to accelerated store openings, research and development in China, sourcing, personnel, and other areas. Also a factor is the company's selling expenses for the second quarter; management believes advertising expense will be up approximately $8 million over last year's second quarter.
SKECHERS U.S.A., INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(In thousands, except per share data)
Three Months Ended March 31,
2007 2006
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Net sales $344,896 $277,565
Cost of sales 195,857 159,190
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Gross profit 149,039 118,375
Royalty income, net 1,201 994
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150,240 119,369
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Operating expenses:
Selling 26,841 20,187
General and administrative 85,984 71,933
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112,825 92,120
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Earnings from operations 37,415 27,249
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Other income (expense):
Interest, net 847 (459)
Other, net (22) 206
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825 (253)
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Earnings before income taxes 38,240 26,996
Income tax expense 14,340 10,398
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Net earnings $23,900 $16,598
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Net earnings per share:
Basic $0.54 $0.41
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Diluted $0.52 $0.38
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Weighted average shares:
Basic 43,951 40,306
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Diluted 46,803 45,395
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