Skechers U.S.A., Inc. reported net earnings rose 22.6 percent in the first quarter as sales ran up 26.8 percent, driven by 33 percent wholesale growth. Results topped guidance and Skechers lifted its outlook for the year.

First Quarter Highlights

  • Record quarterly sales of $1.82 billion, a year-over-year increase of 26.8 percent;
  • Wholesale sales grew 32.7 percent;
  • Direct-to-consumer sales grew 15.7 percent;
  • Diluted earnings per share of $0.77, a year-over-year increase of 22.2 percent; and
  • Repurchased $25 million of common stock.

“First quarter sales of over $1.8 billion are a new quarterly sales record for Skechers and reflect our broad-based global appeal and our team’s focus on successfully navigating supply chain constraints,” began David Weinberg, chief operating officer. “The sales achievement was driven by increases of 33 percent in our Wholesale and 16 percent in our direct-to-consumer segments. By region, the growth was the result of increases of 31 percent in the Americas, driven by double-digit growth in the United States; 49 percent in EMEA, driven by strong growth across Europe; and 4 percent in APAC, led by 9 percent growth in China. Several key APAC markets faced increasing COVID-related restrictions as the quarter evolved including China. Despite the ongoing pandemic and other macroeconomic headwinds, we are especially encouraged by the phenomenal growth we experienced. We believe this momentum will continue as we strive towards our goal of $10 billion by 2026.”

“As we mark our third decade in business, we couldn’t be more excited about our future. In the first quarter, we achieved a new quarterly sales record, delivered the most innovative, stylish and comfortable product yet, and supported it with impactful marketing,” said Robert Greenberg, chief executive officer. “Our position as the third-largest footwear brand in the world is the result of exceptional global partnerships and the strong consumer demand for our products. To drive awareness, we began the year with two Skechers commercials airing around the Super Bowl featuring Willie Nelson, including one with his hit song ‘On the Road Again.’ We launched a new workout walking collection with two campaigns starring Brooke Burke and former NFL star Cris Carter, who joined our roster of legends, including Rusty Wallace, Tony Romo and Howie Long. We also launched Skechers campaigns featuring two powerful female brand ambassadors, Amanda Kloots and Martha Stewart. With a talented team determined to ensure our success, we believe our strategy of communicating the uniqueness of Skechers’ comfort technology, style, innovation and quality products globally will continue to deliver record sales in 2022.”

First Quarter 2022 Financial Results
First-quarter sales increased 26.8 percent to $1.82 billion due to a 28.7 percent increase in domestic sales and a 25.5 percent increase in international sales, primarily driven by strength in wholesale sales. Both segments experienced increases, with Wholesale increasing 32.7 percent and Direct-to-Consumer increasing 15.7 percent. On a constant currency basis, sales increased 28.7 percent.

Wholesale sales growth of $308.2 million, or 32.7 percent, was led by increases in AMER of 41.6 percent and EMEA of 42.0 percent. Wholesale volume increased 22.7 percent and average selling price increased 8.6 percent.

Direct-to-Consumer sales growth of $76.9 million, or 15.7 percent, was led by increases in EMEA of 157.3 percent, which lapped COVID restrictions in the prior year, AMER of 11.2 percent and APAC of 8.5 percent. Direct-to-Consumer average selling price increased 15.1 percent, resulting from reduced promotions and higher prices.

Gross margin was 45.3 percent, a decrease of 250 basis points, driven by higher per unit freight costs partially offset by average selling price increases.

Operating expenses increased $120.3 million, or 22.8 percent, but as a percentage of sales, improved 120 basis points to 35.6 percent from 36.8 percent in the prior year. Selling expenses increased $16.9 million, or 18.5 percent, due to higher global demand creation expenditures. General and administrative expenses increased $103.4 million, or 23.7 percent, due to increased volume-driven labor, and warehouse and distribution expenses.

Earnings from operations increased $18.2 million, or 11.6 percent, to $175.9 million.

Net earnings were $121.2 million, and diluted earnings per share were $0.77, an increase of 22.2 percent over the prior year.

In the first quarter, the company’s effective income tax rate was essentially flat year-over-year at 20.0 percent.

Sales at $1.82 billion easily topped guidance in the range of $1.675 billion and $1.725 billion. EPS of 77 cents per share surpassed guidance in the range of 70 to 75 cents.

“Skechers once again delivered exceptional results, with record first-quarter sales and earnings, despite continuing challenges from the COVID pandemic,” stated John Vandemore, chief financial officer. “The strength of our brand, coupled with our continued focus on investing and executing against our global growth strategy, gives us abundant confidence that achieving $10 billion in sales by 2026 remains an achievable objective and valuable means to drive shareholder value.”

Balance Sheet
Cash, cash equivalents and investments totaled $819.9 million, a decrease of $220.6 million, or 21.2 percent from December 31, 2021, primarily reflecting increased accounts receivable from wholesale sales, particularly in the Americas.

Inventory was $1.45 billion, a decrease of $21.5 million or 1.5 percent from December 31, 2021. The slight decrease in inventory reflects lower merchandise in transit levels due to the improvement of some supply chain constraints.

Share Repurchase
During the first quarter, Skechers repurchased approximately 652,000 shares of its Class A common stock for $25.0 million. At March 31, 2022, approximately $475.0 million remained available under the company’s share repurchase program.

Outlook
For the second quarter of 2022, the company believes it will achieve sales between $1.75 billion and $1.80 billion and diluted earnings per share of between $0.50 and $0.55. Further, the company believes that for the fiscal year 2022, it will achieve sales between $7.2 billion and $7.4 billion and diluted earnings per share of between $2.75 and $2.95.

Previously, Skechers expected to achieve sales between $7.0 billion and $7.2 billion and diluted earnings per share of between $2.70 and $2.90.

Photo courtesy Skechers/Martha Stewart