Skechers U.S.A., Inc. saw 2020 fourth-quarter sales decrease 0.5 percent as a result of a 2.8 percent decrease in the company’s domestic sales partially offset by a 1.1 percent increase internationally. Domestic declines were driven by lower retail sales partially offset by the growth of 142.7 percent in e-commerce and growth in the wholesale channel. Increases in international sales were driven by wholesale partially offset by declines in retail.

“For Skechers, 2020 began with positive momentum following a year of record sales, but the global pandemic put us to the test, began Robert Greenberg, CEO of Skechers. “This past year, we were forced to act and react faster and continue to do so given the on-going health crisis. In the fourth quarter, we nearly drove our sales to a new fourth-quarter record. Our consumers want comfort and familiarity, especially those working from home and essential workers. We are a natural and trusted choice as comfort is the cornerstone of our product. The enhanced comfort and technology features offered within our athletic and casual footwear, including the boot and work collections, delivered what consumers needed. We have a history of delivering quality and value, and athletic lifestyle footwear is one of our leading product categories. In the fourth quarter, we also expanded efforts to communicate our comfort messaging across numerous digital channels as well as through more traditional advertising methods. Remaining authentic was paramount in 2020, but the challenges we faced last year and are still facing in 2021, have created an even more agile and focused company—one with products that will remain in-demand during the ongoing crisis and beyond.”

“In the face of the continuing global pandemic, Skechers experienced sales down only half a percent from the record fourth-quarter sales of 2019, a significant accomplishment during this challenging time and a testament to the strength and relevance of our brand,” stated David Weinberg, Chief Operating Officer of Skechers. “Skechers has always been quick to market and able to pivot. We effectively managed the flow of our inventory to open markets, fulfilling demand as we delivered must-have products to consumers. We saw our athletic lifestyle, walking and work footwear products for men and women drive Domestic Wholesale growth. Our International Wholesale business achieved 2.5 percent sales growth led by a 29.7 percent increase in China, as well as double-digit increases in Chile, United Kingdom, Germany, and Spain, among others. Though our Direct-to-Consumer sales decreased 6.4 percent, primarily due to the temporary closures and reduced operating hours of stores, we experienced triple-digit growth in our domestic e-commerce sales. New Skechers stores opened in select domestic and international markets, including our first dedicated golf store, located at the premier Mission Hills resort in China. While we understand the economic recovery from the COVID-19 pandemic will not be quick and many regions are still being impacted, Skechers remains a desired brand. As we plan for future success, we continue to invest in our long-term growth potential, including improving our supply chain in the United States, Asia and Europe and other select markets, scaling innovation within our operations, and further enhancing our digital capabilities with the planned roll-out of e-commerce platforms around the world.”

The company’s Domestic Wholesale sales increased 1.2 percent in the fourth quarter, International Wholesale sales increased 2.5 percent and its Direct-to-Consumer (DTC) sales decreased 6.4 percent. Increases in the company’s International Wholesale segment were driven by growth in its international wholesale subsidiaries and joint ventures, led by increases of 29.7 percent in China and 22.9 percent in Europe partially offset by a decline of 57.9 percent in its distributor sales. DTC comparable same-store sales decreased 13.4 percent, including decreases of 9.8 percent domestically and 21.7 percent internationally.

Gross margin increased 102 basis points to 48.9 percent, rising in all segments, driven by a favorable mix of international and e-commerce sales and average selling price increases in Domestic Wholesale.

SG&A expenses increased $47.4 million, or 8.6 percent in the quarter. Selling expenses increased by $9.2 million, or 10.4 percent, primarily due to higher domestic marketing expenses. General and administrative expenses increased by $38.1 million, or 8.3 percent. The increase was primarily the result of increases in warehouse and distribution expenses globally.

Earnings from operations decreased $36.4 million, or 38.7 percent, to $57.7 million.

Net earnings were $53.3 million, or 34 cents per diluted share. Net earnings include a one-time tax benefit of $15.9 million resulting from changes in the tax structure of operations and related benefits provided by the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act. Excluding the effects of this one-time tax benefit, adjusted diluted earnings per share were 24 cents.

In the fourth quarter, the company’s effective income tax rate was a negative 14.0 percent primarily driven by the aforementioned global restructuring.

“2020 was an extremely challenging year and the fourth quarter was no exception. Multiple markets experienced temporary store closures and significantly restricted operating environments; a situation we expect to continue through the first half of 2021. Despite this, the Skechers brand continued to perform exceptionally well with strong sell-through and gross margins, and the Skechers organization continued to manage effectively for today while also investing for the future,” stated, John Vandemore, Chief Financial Officer. “We believe that the strength of our financial position, the prudent investments in our infrastructure around the globe, and the focus on enhancing our digital capabilities, will position Skechers for meaningful long-term growth and shareholder value creation.”

Full-year sales decreased 11.9 percent, reflecting the impact of the global pandemic on the company’s businesses worldwide.

Gross margin of 47.6 percent was relatively flat to the prior year with increases of 160 basis points in Domestic Wholesale and 101 basis points in Direct-to-Consumer offset by a decrease of 71 basis points in International Wholesale.

SG&A expenses increased by $76.9 million or 3.9 percent. Selling expenses decreased by $51.8 million or 14.0 percent, primarily due to lower advertising and marketing expenses. General and administrative expenses increased by $128.7 million or 7.9 percent, primarily driven by increased domestic and international warehouse and distribution expenses, increased depreciation and amortization, including the Skechers Mexico acquisition, and a one-time, non-cash compensation charge related to the cancellation of restricted share grants in the third quarter.

Earnings from operations decreased $384.7 million, or 74.2 percent, to $133.7 million.

Net earnings were $98.6 million and diluted earnings per share were $0.64. Adjusted to exclude the one-time effects of the third quarter non-cash compensation charge and fourth quarter tax benefit, adjusted diluted earnings per share were $0.65.

Balance Sheet
Cash and cash equivalents totaled $1.37 billion, an increase of $545.9 million, or 66.2 percent from December 31, 2019. The increase primarily reflects the company’s outstanding borrowings of $452.5 million against its senior unsecured credit facility.

Total inventory was $1.02 billion at year-end, a decrease of $53.1 million or 5.0 percent from December 31, 2019. Strong inventory management resulted in decreased inventory levels in the company’s Domestic Wholesale and DTC segments offset by increased inventory in International Wholesale, primarily to support sales growth in China.

Outlook
The company is not providing further financial guidance at this time given the ongoing business disruption and substantial uncertainty surrounding the impact of the COVID-19 pandemic on its business globally.

Photo courtesy Skechers