SKECHERS USA, Inc. net sales for the second quarter of 2007 rose 20.5% to $352.2 million compared to $292.2 million in the second quarter of 2006. Net earnings for the quarter were down 15.3% to $14.9 million from $17.6 million in the second quarter of 2006. Net earnings per diluted share were 32 cents versus diluted earnings per share of 40 cents for the second quarter of 2006.
“Our second quarter revenues of more than $352 million represent the highest quarterly revenues in the Company's history,” stated David Weinberg, chief operating officer of SKECHERS. “We believe this growth is a validation of the continued demand for our brands in the U.S. as well as in the global marketplace where we experienced significant increases.”
“While we are pleased with our top-line increases, our profitability was below our previous guidance,” stated Fred Schneider, chief financial officer. “This is due to a combination of several factors: including an increase in sales support merchandise incurred in connection with the launch of the new Cali Gear by SKECHERS product; increased general and administrative expenses incurred to develop the new Cali Gear by SKECHERS product as well as some of our newer brands; increased warehousing, distribution and personnel costs associated with both our international and domestic wholesale and retail growth and the need to add the additional domestic distribution facility; and the acceleration of our new store growth. We believe that many of the expenses we are incurring now will benefit us in the short and long term as we build for growth.”
For the six months ended June 30, 2007, net sales were $697.1 million compared to net sales of $569.7 million in the first six months of 2006. Net earnings were $38.8 million, compared to net earnings of $34.2 million in the first six months of 2006. Net earnings per diluted share in the first six months of 2007 were 84 cents per share on 46.8 million diluted shares outstanding versus 77 cents per share on 45.8 million diluted shares outstanding for the same period last year.
Gross profit for the second quarter of 2007 was $152.0 million compared to $130.7 million in the second quarter of 2006. Gross margin was 43.2% compared to 44.7% in the second quarter of 2006. Gross profit for the first six months of 2007 reached $301.1 million, or 43.2% of net sales versus $249.1 million, or 43.7% of net sales in the first six months of 2006.
Robert Greenberg, chief executive officer of SKECHERS, said: “Fifteen years ago we launched a business with one style – the logger boot. Today we have a diverse portfolio of brands, each targeted at a specific demographic that meets the footwear needs of men, women and kids around the world. Our strategy of developing trend-right products for markets around the world has allowed us the flexibility to grow our business without overextending any one brand. This year we added new brands to our fold – Cali Gear by SKECHERS – and saw the continued growth of our key SKECHERS and fashion lines – including SKECHERS Cali and Zoo York, which both started shipping last year. We are pleased with the position of many of our brands and feel the product and marketing are on the mark. All of our 10 brands are supported by multiple marketing mediums – from outdoor to in-store and print to television – and many are backed by the power of brand relevant celebrities – Ashlee Simpson, JoJo and NaS, among others. We believe our marketing spend in the second quarter had a positive impact on our sales and that it will have continued momentum throughout the year. We are excited about our product and marketing, and believe that our continued focus will result in continued record sales.”
“Strong sales in our existing brands, significant improvements in our international business, new product lines, and an additional store base of 32 over last year have resulted in record sales – including a new six-month high of nearly $700 million,” continued Mr. Weinberg. “Our backlog, comp store sales and our July pre-line meetings with key accounts lead us to believe that our positive trend will continue. We see many opportunities in the domestic and international marketplaces to propel the SKECHERS brand and look forward to further growing our brands.”
The company now expects net sales for the third quarter of 2007 to be in the range of $380 million to $390 million and net earnings per diluted share of 43 cents to 48 cents. 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 in net sales, 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. Additionally, management believes media spend will be approximately 10 percent more than the third quarter of 2006.
SKECHERS U.S.A., INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(In thousands, except per share data)Three Months Ended Six Months Ended
June 30, June 30,
2007 2006 2007 2006
——— ——— ——— ———Net sales $352,211 $292,183 $697,107 $569,748
Cost of sales 200,183 161,448 396,040 320,638
——— ——— ——— ———
Gross profit 152,028 130,735 301,067 249,110
Royalty income 1,193 559 2,394 1,553
——— ——— ——— ———
153,221 131,294 303,461 250,663
——— ——— ——— ———
Operating expenses:
Selling 40,950 31,061 67,791 51,248
General and administrative 90,473 72,803 176,457 144,736
——— ——— ——— ———
131,423 103,864 244,248 195,984
——— ——— ——— ———
Earnings from operations 21,798 27,430 59,213 54,679
——— ——— ——— ———Other income (expense):
Interest, net 1,286 (85) 2,133 (544)
Other, net (147) 53 (169) 259
——— ——— ——— ———
1,139 (32) 1,964 (285)
——— ——— ——— ———
Earnings before income taxes 22,937 27,398 61,177 54,394
Income tax expense 7,989 9,782 22,329 20,180
——— ——— ——— ———
Net earnings $ 14,948 $ 17,616 $ 38,848 $ 34,214
========= ========= ========= =========Net earnings per share:
Basic $ 0.33 $ 0.43 $ 0.87 $ 0.84
========= ========= ========= =========
Diluted $ 0.32 $ 0.40 $ 0.84 $ 0.77
========= ========= ========= =========Weighted average shares:
Basic 45,576 41,077 44,777 40,687
========= ========= ========= =========
Diluted 46,808 46,146 46,809 45,802
========= ========= ========= =========
