Skechers USA reported an earnings decline for the second quarter as continued strength overseas wasnt enough to offset declines in the U.S. business. Costs to open their own stores also dented the bottom line. Results were slightly below a forecast in late April calling for revenues between $350 million and $365 million and EPS in the range of 30 cents to 38 cents.
On the positive side, Skechers highlighted high-double digit growth and backlogs internationally, improving domestic backlogs, and a 120 basis point hike in gross margins.
Domestic wholesale sales decreased 8%, although company COO David Weinberg, in a conference call with analysts, called results “slightly stronger than anticipated, which we feel is meaningful, given the current soft retail environment.” Skechers remains “very strong” domestically as incoming orders received in Q2 increased double-digits over last year, leading to improved mid-single domestic backlogs. Continued growth was seen in Women’s Sport, Men’s U.S.A., and Work lines, and Kids had a strong performance. Fashion fell in total due to the discontinuance of lines last year, but both kid’s fashion and 310 performed well.
Weinberg said Skechers still sees demand for low profile silhouettes, noting strong pre-lines reactions in its Sport, Delight and new Active Bottom categories. Asked if some athletic brands were taking shelf space from Skechers at core accounts like Famous Footwear and JC Penney, Weinberg said SKX continues to maintain market share.
“Whatever has slowed down or has become a steady reorder business for us has certainly been made up by the new product that is coming into the market,” said Weinberg.
In its owned-retail segment, sales increased nearly 4% as a net 40-store increase offset a 8% domestic comp store sales decrease.
International wholesale sales grew 30%, led by a 54% gain in subsidiary business. Spain, Benelux, Italy, and Switzerland had triple-digit growth, while Canada, the U.K., and Germany grew in double-digits.
Looking ahead, Q308 sales are expected to range between $425 and $440 million, and EPS, 57 and 65 cents. In the year-ago quarter, Skechers earned 53 cents a share on sales of $395 million.
