Skechers USA, Inc. reported net sales for the first quarter of 2003 totaled $208.6 million compared to $244.9 million in the first quarter of 2002. Net earnings for the quarter were $8.5 million versus $20.3 million in the first quarter of the prior year. Diluted earnings per share were $0.22 on 41,480,000 diluted shares outstanding compared to $0.53 per diluted share on 38,172,000 diluted shares outstanding in the first quarter of 2002.
Gross profit for the first quarter of 2003 was $90.3 million compared to $102.5 million in the first quarter of last year. Gross margin was 43.3 percent compared to 41.9 percent in the first quarter of 2002. Selling, general and administrative expenses as a percentage of sales were 35.8 percent in the first quarter compared to 27.9 percent in the first quarter of the prior year.
“We took an aggressive inventory stance in late 2002 and early 2003,” stated David Weinberg, chief financial officer of Skechers USA, Inc. “We increased inventory in anticipation of a better retail environment, which would have led to an increased demand for at-once wholesale orders. We also increased our inventory to supply our new subsidiaries and growing number of retail stores, and to support our new product lines. We ended the quarter with inventory levels higher than plan because the anticipated at-once orders did not materialize. We believe that our business continues to be affected by the overall economic and political environment, apprehensive consumer spending and reduced retail activity. We believe that we will be able to work through these inventory levels as the retail environments improve.”
Mr. Weinberg continued: “Our earnings were higher than expected in the first quarter of 2003 because a portion of our advertising shifted to the second quarter as a result of the late Easter holiday. Our advertising expenditures for the first quarter of 2003 were approximately six percent of sales. We believe that the second quarter advertising expenditures should be approximately 10 percent of sales, and the forecast for the first half of 2003 will be approximately the eight to 10 percent of sales that the Company traditionally dedicates to advertising.
“While we realize that the Company faces near term challenges, Skechers is in a solid financial position with $80.6 million in cash, no short-term bank borrowings and working capital of $291.8 million,” added Mr. Weinberg. “We believe that the positive reaction to our new back-to-school product at recent trade shows and sell-throughs in our company-owned retail stores are good indicators for the second half of 2003. We also believe Skechers-branded licensed products available in stores in 2003, our aggressive approach to advertising, and the opening of high-profile flagship stores in key domestic and international locations will result in increased brand exposure, further leveraging Skechers globally.”
Robert Greenberg, Skechers chief executive officer, said: “As we begin our second decade of operations, I am pleased with our position in the global footwear industry. We have made steady strides over the last decade to our present position as a global leader in the lifestyle footwear industry and a brand recognized around the world. Our proven business model has allowed us to successfully export our brand around the world, while building selected areas of our company, including licensing. In 2002, 10 years after we formed the Company, we signed our first license for hosiery. To date, we have signed five licensing agreements, including an international licensee in Japan for men’s, women’s and children’s apparel and accessories. Looking ahead to 2003, we remain driven to gain share of the global footwear market, increase sales and profitability, and reward stockholders over the long term.”
Skechers U.S.A., Inc.CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited)
(In thousands, except per share data)Three Months Ended March 31,
----------------------------
2003 2002
------------ -----------Net sales $ 208,593 $ 244,949
Cost of sales 118,275 142,425
------------ -----------Gross profit 90,318 102,524
Royalty income, net 271 108
------------ -----------90,589 102,632
------------ -----------Operating expenses:
Selling 17,620 18,691
General and administrative 57,086 49,632
------------ -----------
74,706 68,323
------------ -----------Earnings from operations 15,883 34,309
------------ -----------Other income (expense):
Interest (2,097) (2,063)
Other, net (314) 43
------------ -----------
(2,411) (2,020)
------------ -----------Earnings before income
taxes 13,472 32,289Income taxes 5,011 12,011
------------ -----------Net earnings $ 8,461 $ 20,278
