Skechers Warns of Fourth Quarter Loss as Margins Contract

February 9, 2009
SGB Update

Skechers USA, Inc. said its fourth quarter 2008 results are expected to be significantly below the range of its previous outlook. For the fourth quarter of 2008, the company now expects net sales to be in the range of $290 million to $300 million and a net loss per diluted share of 45 cents to 50 cents. SKX had previously forecast Q4 sales in the range of $305 million to $320 million, and EPS in a range of 15 cents to 23 cents a share.


Management said the shortfall in earnings versus its previous outlook is primarily due to a roughly 1,000 basis point decrease in gross margins versus the comp period last year.


SKX said the gross margin decline is a result of the extremely weak retail climate, which caused the company to go off price to move goods and, as a result, SKX said it expects to increase its reserves for inventory and accounts receivable by over $15 million.


Skechers said its sales and margins were adversely impacted in the fourth quarter due to U.S. retailers’ comps being down significantly and a number of both retail bankruptcies and going out of business sales.
The company believes it will continue to be negatively impacted by these factors in 2009. Management expects that buying plans for many key retail partners may be down approximately 7% to 20% across all categories of merchandise, including footwear, in the first half of 2009 versus the prior year.


While many of these same accounts are also planning to close some stores, potentially creating further reductions in their buying patterns, the company believes it remains one of the key footwear brands with its retail partners.


The company’s international business continues to perform well.  Bookings across South America, Europe, and key areas in Asia are equivalent to the prior year. Skechers is beginning to see a benefit from its new subsidiary in Brazil and its recent joint ventures in China and Hong Kong. However, the company does expect to see some margin compression in its international business due to worsening economic conditions in many of these regions.


The company’s retail business experienced mid-single digit declines in the fourth quarter and does not see any near term catalysts that would change its retail performance over the coming months. In response to the weakness at retail, Skechers has pared back store openings where possible, deferred store re-models, and is attempting to renegotiate rents in certain locations.

Skechers Warns of Fourth Quarter Loss as Margins Contract

February 5, 2009
SGB Update

Skechers USA, Inc. said its fourth quarter 2008 results are expected to be significantly below the range of its previous outlook. For the fourth quarter of 2008, the company now expects net sales to be in the range of $290 million to $300 million and a net loss per diluted share of 45 cents to 50 cents. SKX had previously forecast Q4 sales in the range of $305 million to $320 million, and EPS in a range of 15 cents to 23 cents a share.


Representatives said the shortfall in earnings versus its previous outlook is primarily due to a decrease in gross margin of approximately 1,000 basis points from the same period last year.


The decrease in gross margin is a result of the extremely weak retail climate, which caused the company to manage its inventory levels down at reduced prices and, as a result, the company said it expects to increase its reserves for inventory and accounts receivable by over $15 million.

 

The company said its sales and margins were adversely impacted in the fourth quarter due to U.S. retailers’ comps being down significantly and a number of both retail bankruptcies and going out of business sales.

 

The company believes it will continue to be negatively impacted by these factors in 2009. The company expects that buying plans for many of the Company’s key retail partners may be down approximately 7% to 20% across all categories of merchandise, including footwear, in the first half of 2009 versus the prior year.

 

While many of these same accounts are also planning to close some stores, potentially creating further reductions in their buying patterns, the company believes it remains one of the key footwear brands with its retail partners.

The company’s international business continues to perform well. Bookings across South America, Europe, and key areas in Asia are equivalent to the prior year. SKX is beginning to see a benefit from its new subsidiary in Brazil and its recent joint ventures in China and Hong Kong. However, the company does expect to see some margin compression in its international business due to worsening economic conditions in many of these regions.


The company’s retail business experienced mid-single digit declines in the fourth quarter and does not see any near term catalysts that would change its retail performance over the coming months. In response to the weakness at retail, it has pared back store openings where possible, deferred store re-models, and is attempting to renegotiate rents in certain locations.

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