Skechers USA looks to be heading in the right direction after posting a sold fourth quarter that benefited from fewer markdowns and close-outs that drove up average selling prices in footwear, as well as tighter controls on everything from selling expenses to marketing spend.

Net sales for the quarter increased 17.8% to $206.5 million, compared to $175.3 million in the year-ago quarter. Gross margin for the period jumped 620 basis points to 39.9% of sales in Q4 versus 33.7% in Q4 last year. The margin gain was due to a better mix of full-price goods, a strong Holiday fill-in business, higher price points in its fashion brands, and a double-digit sales growth in the Retail and International segments.

Selling expenses, as a percentage of sales, declined 90 basis points to 9.1% of sales from 10.0% in Q4 last year. The advertising spend did increase a bit, rising 50 basis points to 6.4% of sales versus 5.9% in Q4 2003. For the year, advertising expenses were down 140 basis points to 6.1% of sales, compared to 7.5% of sales in 2003.

SKX posted net income of $2.1 million, or 5 cents per diluted share, in the fourth quarter, versus a net loss of $12.3 million, or a loss of 33 cents per diluted share, in the year-ago quarter. A $4.0 million tax benefit helped boost profits in the period. Excluding tax benefits in Q4 for both years, SKX posted a $1.9 million loss in Q4 versus a $15.2 million loss in the year-ago period.

At year-end, Skechers had 125 owned-retail stores and another 29 owned and operated by distributors. Of the owned doors, 114 were in the U.S. and 11 were in international markets. Of the domestic doors, 36 are concept stores, 46 are outlet stores, and 32 are designated as warehouse stores. The international stores were described as “predominantly concept”.

Management said the sales growth in Q4 and the year came despite a decline in pairage sold, reflecting a 10% increased average selling price in footwear for the year versus 2003. They also said the gains were from the Skechers brand and not from the addition of the Rhino Unltd., Rhino Red, and 310 Motoring fashion lines in 2004. However, better-than-anticipated sales of those new brands, as well as double-digit domestic and International backlog gains, continued positive comp sales at owned-retail stores, and double-digits sell-through at key accounts has Skechers looking forward to an even stronger 2005.

SKX now expects first quarter 2005 net sales to be in the range of $235 million to $245 million and diluted earnings per share in the range of 21 cents to 26 cents per share.


>>> Looks like 2005 will be the real test to see if the turnaround is really in full swing… Was 2004 good, or was 2003 really bad???