Skechers USA Inc. reported record third-quarter sales of $403.2 million for the three months ended Sept. 30. The company said that based on its high, single-digit backlog increase and reports by retailers, it appears well positioned to weather any economic downturn. Earnings, however were essentially flat due to a 100 point decline in gross margins.

The shoe maker reported net sales for the third quarter of 2008 were $403.2 million compared to $395.0 million in the third quarter of 2007. Net earnings for the quarter were $28.3 million versus net earnings of $24.7 million in the third quarter of 2007. Net earnings per diluted share were 60 cents on 46.8 million diluted shares outstanding, versus diluted earnings per share of 53 cents on 46.7 million diluted shares outstanding for the third quarter of 2007.

Earnings for the third quarter of 2008 reflect a tax benefit resulting from an advance pricing agreement reached with the Internal Revenue Service during the quarter, which will lower the company’s ongoing effective annual tax rate from 34% to 27%.

“Skechers broke its quarterly sales record with its first $400 million-plus quarter, an achievement made during a soft retail environment,” stated CFO Fred Schneider. “Although we achieved record revenues, we did not grow quite to the degree that we had expected in our domestic, international and retail businesses due to the economic climate. However, based on our high single-digit backlog increase and reports from our key retailers, we believe that our product is well-positioned in the marketplace and will withstand the current economic challenges.”

Gross profit for the third quarter of 2008 was $171.5 million compared to $171.7 million in the third quarter of 2007. Gross margin was 42.5% for the third quarter of 2008 compared to 43.5% in the third quarter of 2007.

Nine month results

For the nine months ended Sept. 30, 2008, net sales were $1.143 billion compared to net sales of $1.092 billion in the first nine months of 2007.

Net earnings for the first nine months were $75.8 million compared to net earnings of $63.6 million in the first nine months of 2007. Net earnings per diluted share in the first nine months of 2008 were $1.62 per share on 46.8 million diluted shares outstanding, versus $1.37 per share on 46.8 million diluted shares outstanding for the same period last year.

Gross profit for the first nine months of 2008 reached $500.9 million, or 43.8% of net sales versus $472.7 million, or 43.3% of net sales in the first nine months of 2007.

“Our first $400 million-plus sales quarter is a reflection of the strength of our back-to-school and fall collections supported by our advertising efforts,” said Robert Greenberg, CEO of Skechers. “The incredible diversity of our product offerings and our affordable price points has allowed us to maintain our position in the market during this very difficult environment. Our core Skechers product lines remain solid, and our fashion lines have shown double-digit growth.”

“The addition of Punkrose and Public Royalty has broadened our offering with a junior sneaker business for women and men,” he continued. “Our product is in place and we’re supporting it with a multi-level marketing campaign that also utilizes the power of American Idol winner David Cook for Skechers and High School Musical star Vanessa Hudgens for Red by Marc Ecko.”

“We believe our image and product resonates with consumers globally, and we are continuing to experience growth in international markets around the world. We are particularly pleased with our position in Europe, as well as in Brazil where we launched last year, and in China and Hong Kong, both of which we are now joint ventures. We will continue to build great product that is relevant for the global footwear market, and believe that our current focused product offering and marketing will drive sales through this year and the coming year.”

David Weinberg, Skechers’ COO, stated, “Despite the challenging economic environment, Skechers has been able to maintain a strong position in the market and further improve its balance sheet. We remain financially solid with cash, cash equivalents and long-term investments of over $239 million, representing in excess of $5 per share, and are continuing plans for measured growth in the United States and abroad. We are cautious about the remainder of the year given the soft global economic environment, but we remain confident that the company is well positioned for sustainable long-term profitability and to continue to increase its share of the global footwear market.”

The company now expects net sales for the fourth quarter of 2008 to be in the range of $305 million to $320 million and net earnings per diluted share of 15 cents to 23 cents.

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SKECHERS U.S.A., INC.

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(Unaudited)

(In thousands, except per share data)

Three Months Ended September 30,

Nine Months Ended September 30,

2008

2007

2008

2007

Net sales

$

403,159

$

395,033

$

1,142,656

$

1,092,140

Cost of sales

231,628

223,363

641,760

619,403

Gross profit

171,531

171,670

500,896

472,737

Royalty income

591

998

1,660

3,392

172,122

172,668

502,556

476,129

Operating expenses:

Selling

40,911

37,657

105,037

105,448

General and administrative

106,462

98,431

304,540

274,888

147,373

136,088

409,577

380,336

Other income (expense):

Interest, net

354

1,710

2,295

3,843

Other, net

(828

)

298

(81

)

129

(474

)

2,008

2,214

3,972

Earnings before income taxes and minority interest

24,275

38,588

95,193

99,765

Income tax expense

(3,639

)

13,844

20,175

36,173

Minority interest in loss of consolidated subsidiary

(375

)

–

(756

)

–

Net earnings

$

28,289

$

24,744

$

75,774

$

63,592

Net earnings per share:

Basic

$

0.61

$

0.54

$

1.65