Seeing momentum across its lines, Skechers USA Inc. reported sales grew 30.4% in the fourth quarter to $388.6 million. Backlogs were up 40% as of Dec. 31 and are running even higher so far in the first quarter.
On a conference call with analysts, company COO and CFO David Weinberg said that although its Shape Ups toning collection is doing better than expected, strength is coming across men’s sport, women’s sport, active USA lines. If you look at our current backlogs, there’s not one of them that’s not showing increases or significant increases year-over-year, said Weinberg. So one is only an order of magnitude, and some are more developed business and some not. But I would tell you that the opportunity for us is across the broad spectrum of the whole Skechers family, which makes it so exciting for us right now. Overall, double-digit growth came in its women’s, kid’s and work divisions with single-digit growth in its men’s division.
Domestic wholesale sales jumped 38% in the quarter and decreased 5% for the year. The quarterly improvement reflected strong sales in key Skechers men’s and women’s lines, continuing kids growth, and an average price per pair up 27%.
We saw broad acceptance of key new adult styles, which increased our SKU position in existing doors and resulted in the opening of new accounts, Weinberg added. TV spots led to double-digit gains in boys and girls.
The SKX international wholesale business improved by 8% for the quarter and was down slightly for the year. The subsidiary and joint venture sales improved by 86%, led by the U.K., Germany and Canada. The international distributor business was down 38% due to the transition of Chile from a distributor to a subsidiary, and declining economies in Eastern Europe and Asia.
The domestic and international retail divisions generated high double-digit growth with combined comps ahead 17.4%. SKX ended the year with 246 company-owned Skechers stores and plans to open 25 to 30 this year, including its first airport location in Orlando. E-commerce sales saw high double-digit growth.
Earnings reached $27.9 million, or 58 cents a share, in the quarter, rebounding from a loss of $20.4 million, or 44 cents, in the prior-year quarter. Gross margins jumped to 48.7% of sales from 31.9% of sales in Q4 2008 due to fewer closeout sales, strong product sell-through, and higher initial margins. Also helping was higher prices from the new Shape Ups collection, which average $100, and slightly higher average pricing on other new products.
To accommodate expected growth in 2010, Skechers European distribution center has been expanded by 250,000 square feet. In the U.S., Skechers will transition from 1.6 million square feet of distribution space across five buildings in Ontario, CA to a more efficient single 1.8 million square foot facility in Rancho Belago, CA. The LEED certified building is expected to be operational in 2011.
Regarding Shape Ups, Weinberg said the toning business has been bigger than we anticipated and the category is still beginning, with mens and kids only getting started. Although he was hesitant to gauge its long-term potential this year, he said its too early to worry about other competition in the space.
There’s always competitors, and theyll always have a piece, but we think we are right in the heart of all our product offerings and should do very well over the next six months, commented Weinberg.
