Skechers reported solid results for third quarter, swinging to a profit versus a year-ago loss, but the company missed analysts expectations by 25%, forcing Wall Street to pull the plug and sending SKX shares down 11.4% for the week to close at $11.04 on Friday. The company had given previous earnings guidance of 15 cents per share for the quarter, but analysts were looking for 20 cents.
Net earnings for the quarter were $6.0 million, or 15 cents per diluted share, versus a net loss of $5.9 million, or a loss of 15 cents per diluted share, in the year-ago period. CFO David Weinberg said that earnings for Q3 “were reduced by the effective tax rate of 60%.” Gross margins improved 510 basis points to 40.6% of sales versus 35.5% in Q3 last year.
Third quarter 2004 sales increased 16.2% to $257.7 million, above guidance of $235 million to $245 million.
Domestic wholesale sales increased more than 5%, helped by the launch of 310 Motoring, and the Rhino collections. Average unit prices increased in the quarter.
International wholesale business increased to approximately 19% of total sales, with sales the strongest in Germany and the United Kingdom. Company-owned domestic and international retail stores comped positively, “well into the double digits.”
Inventories declined 1.8% to $148.0 million at quarter-end from$150.7 million for the year-ago period.
SKX now expects a Q4 loss per share in the 7 cents to 12 cents per share range on sales between $175 million and $185 million. For the full year, sales are expected to be between $888 million and $898 million and EPS are seen in the 45 cents to 50 cents per share range.
Management anticipates the positive trend to continue in 2005 with higher Q1 sales. Weinberg noted that backlog is “close to 22% to 23% ahead of last year,” with most of the orders weighted to first quarter.
