Skechers U.S.A., Inc. saw its earnings double in the fourth quarter as sales grew 15.0 percent. International Wholesale sales grew 23.8 percent while direct-to-consumer (DTC) sales jumped 18.1 percent. The company also predicted sales would advance about 26 percent in 2021.
“Skechers new sales record in the first quarter is a remarkable achievement, especially given the lockdown measures in many key countries, including across Europe,” began Robert Greenberg, CEO, Skechers. “This significant growth is the result of continued demand for Skechers product as consumers desire comfort and quality in their footwear and walking remains a top COVID-19 pandemic activity. With warmer weather and increased vaccination rates around the world, traffic is improving in many of our retail stores, and our digital business continues to be a very strong growth driver. In the first quarter, we increased our marketing efforts in the United States and supported many open international markets, including the airing of new campaigns with football coach, Jon Gruden and sports analyst, Howie Long—both for Arch Fit shoes, and a Super Bowl spot with commentator, Tony Romo, for Max Cushioning footwear. In addition, we ran Brooke Burke Arch Fit and Skechers apparel commercials, and multiple campaigns, on traditional and digital platforms. As a comfort technology company, Skechers received several product awards for our sport, running and golf shoes, and we were named company of the Year from leading industry trade publication Footwear Plus. Despite the ongoing challenges related to the pandemic, we are pleased with our exceptional start to 2021 and believe our growth is a testament to our execution and the relevance of the Skechers brand.”
“The momentum we experienced in the second half of 2020 continued into the first quarter as we achieved revenue growth of 15.0 percent over the same period in 2020, and an exceptional 12 percent increase over the first quarter of 2019. This resulted in the company’s first quarterly sales of over $1.4 billion,” stated David Weinberg, COO, Skechers. “The positive results were due to a 20.2 percent increase in our international business and an 8.5 percent increase in domestic sales compared to 2020. Driving the quarterly growth was a 23.8 percent increase in our International Wholesale, led by triple-digit growth in China, an 18.1 percent improvement in our direct-to-consumer business, with March being the strongest sales month, and a 143.0 percent increase in domestic e-commerce. Domestic Wholesale decreased 0.9 percent due to timing of shipments. Nonetheless, we saw strength across customer types and encouraging sell-through in multiple categories. The momentum in our direct-to-consumer business along with continuing demand for our comfort product, leads us to believe that Skechers’ remains on a positive trajectory.”
First quarter sales increased 15.0 percent as a result of a 20.2 percent increase in the company’s international sales and an 8.5 percent increase in domestic sales. Increases in international sales were driven by wholesale. Domestic sales increases were driven by DTC, including e-commerce growth of 143.0 percent, partially offset by a slight decline in wholesale. On a constant-currency basis, the company’s total sales increased 11.7 percent.
The company’s International Wholesale sales increased 23.8 percent and Direct-to-Consumer sales increased 18.1 percent, offset by a Domestic Wholesale sales decrease of 0.9 percent. Increases in the company’s International Wholesale segment were driven by growth in China of 174.4 percent, partially offset by declines in Europe of 8.1 percent and a 6.5 percent decline in distributor sales. Direct-to-Consumer comparable same store sales increased 10.2 percent, driven by an increase of 25.7 percent domestically, partially offset by a decrease of 27.4 percent internationally.
Gross margin increased 350 basis points to 47.6 percent as a result of increased margins in both the International Wholesale and Direct-to-Consumer segments. The strong margin performance was driven by an increase in selling price across all channels and a favorable mix of e-commerce sales.
SG&A expenses increased $19.9 million, or 3.9 percent. Selling expenses increased by $11.2 million, or 15.2 percent, primarily due to higher domestic marketing expenses. General and administrative expenses increased by $8.6 million, or 2.0 percent. The increase was primarily the result of higher global warehouse and distribution expenses, partially offset by reduced retail labor.
Earnings from operations increased $112.9 million, or 252.0 percent, to $157.7 million.
Net earnings were $98.6 million and diluted earnings per share were 63 cents a share, from $49.1 million, or 32 cents, a year ago. Results easily topped Wall Street’s consensus estimate of 49 cents a share.
In the first quarter, the company’s effective income tax rate was 20.2 percent driven by profitability in higher tax jurisdictions such as the U.S. and China.
“Skechers record setting first quarter, in the midst of a global pandemic, is a reflection of the strength of our brand and product offering, combined with outstanding execution,” stated John Vandemore, CFO, Skechers. “Despite headwinds across the globe, we achieved triple-digit growth in e-commerce and China, and resurgent growth in domestic retail, all of which we believe are evidence of the potential for our brand. Additionally, our continued investments to support our growth initiatives are on track to provide long-term value to the business and for shareholders.”
Cash, cash equivalents and investments totaled $1.51 billion, a decrease of $65.1 million, or 4.1 percent from December 31, 2020. Total inventory was $1.07 billion, an increase of $50.7 million or 5.0 percent from December 31, 2020. Increased inventory levels primarily reflect growth in the International Wholesale segment.
For the fiscal year 2021, the company believes it will achieve sales between $5.8 billion and $5.9 billion and diluted earnings per share of between $1.80 and $2.00. Further, the company believes that for the second quarter of 2021, it will achieve sales between $1.45 billion and $1.50 billion and diluted earnings per share of between 40 cents and 50 cents. In 2020, earnings came to 64 cents a share on sales of $4.6 billion. In the second quarter of 2020, the loss came to 44 cents a share on sales of $729.5 million.
Photo courtesy Skechers