Shares of Skechers USA hit a 52-week high last week after the company reported fourth-quarter earnings more than tripled on higher margins and a double-digit revenue gain.
Earnings in the quarter reached $14.2 million, or 28 cents a share, compared to $4.0 million, or 8 cents, a year ago, and easily ahead of Wall Street’s consensus estimate of 16 cents a share. Sales jumped 13.9 percent to $450.7 million, its second highest sales in a fourth quarter in its history.
“The sales momentum we experienced in the fourth quarter was quite an achievement when considering the soft US retail environment in December and the strong growth of 39.7 percent in the fourth quarter of 2012,“ said David Weinberg, Skechers USA’s COO and CFO, on a conference call with analysts.
Skechers also closed the year with an approximately 30 percent increase in its combined worldwide backlogs, and then delivered healthy January 2014 sales, including mid-single-digit comp store sales increases in its worldwide retail stores in spite of the weather impacting a large portion of the U.S.
Gross margins in the quarter improved to 44.5 percent from 42.6 percent a year ago. Operating expenses were 41.3 percent, about flat with 41.2 percent a year ago.
The sales improvements were led by double digit growth in its domestic wholesale and company-owned retail stores, along with single digit growth in its international and e-commerce businesses.
On the call, Weinberg noted that the growth in its domestic business came despite “severe weather that impacted retail in the mid-west and northeast as well as parts of the south.” He attributed the strength to its diverse product offering, including boots and lined footwear for the colder areas, and “our sport product which performed in the unusually warm weather in the west as well as in other regions.”
Its domestic wholesale revenues increased 16 percent, or $26.6 million, helped by newer lines such as GOwalk, BOBS and kids takedowns of GOrun Ride and GOwalk. Domestic pairs shipped grew 19.1 percent in the quarter.
Among its lifestyle lines in the quarter, triple digit growth was seen in women's sport active, and double digit growth in women sport, BOBS, winter boots, and men's work line. In total, BOBS, its one-for-one charitable line, has donated more than 6 million pair of shoes to children in need, including those impacted by the typhoon in the Philippines.
Skechers kids sales were down 10.7 percent for the quarter, but flat for the year. With a healthy backlog, kids is expected to turn positive this spring for both its character-based models and lightweight sports takedowns.
Skechers performance division saw double digit in its women's offering led by GOwalk, and in its men's collection led by running footwear. A new commercial starring Olympic marathon runner, Meb Keflezighi, is running in the current quarter. Keflezighi in January won the half marathon at the Houston Marathon, a race Skechers sponsored for the first time.
Weinberg said demand for Skechers GOwalk and GOwalk 2 footwear “remain strong” with more innovations planned this spring and the GOwalk 2 holiday campaign again running this spring.
Overall, Weinberg said the fourth quarter for its domestic segment “was one of our strongest fourth quarters for incoming orders and the trend continued through January,” with backlogs ahead double-digits.
Skechers’ total international subsidiary joint venture and distributor sales increased 5.6 percent in the quarter. Its subsidiary and joint venture sales improved 16.3 percent, offset by a decline in its distributor sales by 11.5 percent.
Weinberg said Skechers is “seeing some markets, especially in Europe, bouncing back from the economic issues they faced over the last few years and believe our moderately priced product is resonating in these countries.”
The subsidiary growth is attributable to double digit improvements in its European regions, Canada and Brazil, offset by decreases in Chile and Japan. Its southeast Asia joint venture jumped over 50 percent, which includes doubling its business in China.
The decrease in its distributor business was due to ongoing political, currency and economic issues, primarily in South America. On the positive side among distribution partners, triple digit growth was seen in Indonesia, Mexico and Turkey, double-digit growth in Russia, and single digit growth in Australia. Based on backlogs, Skechers expects international overall to be up double digits for 2014.
For the quarter, total sales in its company owned retail business increased 18.6 percent, with domestic sales improving 16 percent, and international sales by 34.2 percent. Domestic comps advanced 13.2 percent, and international comps added 10.8 percent, for a combined increase of 12.8 percent. Overall, Skechers ended the year with more than 390 company-owned stores, and more than 480 partner stores, with plans to add 70 to 80 company-owned stores and 120 to 130 partner stores this year.
For the full year, Skechers’ sales jumped 18.3 percent to $1.85 billion. Earnings reached $54.8 million, or $1.08 a share, up from $9.5 million, or 19 cents, in 2012.
