Skechers U.S.A., Inc. reported record sales for the fourth quarter and full year 2023. Management said a new annual sales record of $8.00 billion was the result of the broad acceptance of their products worldwide, their loyal and growing consumer base, the cultivated relationships with their partner network, and their determined and dedicated team.

Fourth quarter sales increased 4.4 percent as a result of a 6.9 percent increase internationally and a 0.3 percent increase domestically. Direct-to-consumer (DTC)increased 20.3 percent and Wholesale decreased 8.3 percent. On a constant-currency basis, sales increased 2.8 percent.

Wholesale sales declined $86.6 million, or 8.3 percent, including decreases in EMEA of 19.5 percent and AMER of 7.4 percent, partially offset by an increase in APAC of 7.1 percent. Wholesale volume decreased 9.5 percent and average selling price increased 1.2 percent.

DTC sales grew $168.7 million, or 20.3 percent, in the fourth quarter, including increases in APAC of 21.2 percent, AMER of 14.6 percent, and EMEA of 53.1 percent. DTC volume increased 11.8 percent and average selling price increased 7.7 percent.

Gross margin was 53.1 percent, an increase of 470 basis points, primarily due to higher average selling prices, a higher proportion of DTC sales, and lower costs per unit, driven by lower freight costs.

Operating expenses increased $88.1 million, or 10.7 percent, and as a percentage of sales increased 270 basis points to 46.5 percent.

Selling expenses increased $25.0 million, or 15.8 percent, and as a percentage of sales increased 90 basis points to 9.3 percent. The increase was due to higher brand demand creation expenditures.

General and administrative expenses increased $63.1 million, or 9.5 percent, and as a percentage of sales increased 170 basis points to 37.1 percent. Increased expenses were primarily driven by increased facility costs, including rent and depreciation, and labor. These were said to be partially offset by decreases in volume-driven labor and warehouse and distribution expenses from the supply chain and logistical challenges in the prior year.

Earnings from operations increased $43.7 million, or 50.4 percent, to $130.3 million, resulting in an operating margin of 6.6 percent.

Net earnings were $87.2 million and diluted earnings per share were 56 cents, compared with prior-year Q4 net earnings of $75.5 million and diluted earnings per share of 48 cents a share.

In the fourth quarter, the company’s effective income tax rate was 20.3 percent.

“Skechers’ record sales and earnings demonstrate the strong global position of our brand, compelling product assortment, and worldwide execution capabilities,” said John Vandemore, CFO of Skechers. “2023 was a dynamic year full of challenges, which the Skechers team faced with outstanding determination and agility. We are optimistic about 2024, where we will continue to execute against our long-term growth strategy of expanding internationally and deepening our Direct-to-Consumer relationships, and we remain confident in our sales goal of $10 billion by 2026.”

Full Year Results

  • Full-year sales increased 7.5 percent, reflecting a 13.3 percent increase internationally and a 0.8 percent decrease domestically. DTC revenue increased 24.3 percent and Wholesale decreased 2.8 percent. On a constant-currency basis, sales increased 7.9 percent.
  • Wholesale sales decreased $127.6 million, or 2.8 percent, due to a decrease in AMER of 10.6 percent, partially offset by increases in APAC of 12.6 percent and EMEA of 0.1 percent. Wholesale volume decreased 8.7 percent and average selling price increased 6.3 percent.
  • DTC sales grew $683.4 million, or 24.3 percent, due to increases in AMER of 21.5 percent, APAC of 22.0 percent, and EMEA of 49.2 percent. Direct-to-consumer volume increased 19.6 percent and average selling price increased 4.0 percent.
  • Gross margin was 51.9 percent of sales, an increase of 470 basis points, primarily driven by higher average selling prices and a higher proportion of DTC sales.
  • Operating expenses increased $398.9 million or 13.4 percent. As a percentage of sales, operating expenses increased 220 basis points to 42.1 percent.
  • Selling expenses increased $93.3 million or 16.0 percent, primarily due to higher global demand creation expenditures.
  • General and administrative expenses increased $305.7 million or 12.8 percent, primarily driven by labor, and facility costs, including rent and depreciation. These were partially offset by decreases in volume-driven labor and warehouse and distribution expenses from the supply chain and logistical challenges in the prior year.
  • Earnings from operations increased $238.1 million to $784.8 million, resulting in an operating margin of 9.8 percent.
  • Net earnings were $545.8 million and diluted earnings per share were $3.49, an increase of 46.6 percent over the prior year.
  • The company’s effective income tax rate was 18.8 percent.

Balance Sheet

  • Cash, cash equivalents and investments totaled $1.39 billion at year-end, an increase of $598.1 million, or 75.9 percent from December 31, 2022, due to increased earnings and favorable changes in working capital, primarily inventory.
  • Increases were partially offset by capital expenditures of $323.7 million, $160.1 million of share repurchases, and payments of $70.4 million, net of cash acquired, related to the acquisition of our Scandinavian distributor.
  • Inventory was $1.53 billion at year-end, a decrease of $292.6 million, or 16.1 percent from December 31, 2022.

Share Repurchase
During the fourth quarter, the company repurchased 1.1 million shares of its Class A common stock for $60.0 million. In 2023, the company repurchased 3.2 million shares of its Class A common stock for $160.1 million. As of December 31, 2023, approximately $265.7 million remained available under the Company’s share repurchase program.

Outlook
For the fiscal year 2024, the company believes it will achieve sales between $8.60 billion and $8.80 billion and diluted earnings per share between $3.65 and $3.85 a share. The company believes that for the first quarter of 2024, it will achieve sales between $2.175 and $2.225 billion and diluted earnings per share between $1.05 and $1.10 a share. Further, the company said it believes that total capital expenditures will be between $350 and $400 million in 2024, inclusive of the construction of the company’s second distribution center in China.

Image courtesy Skechers