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Skechers Announces Record First Quarter 2021 Financial Results

Published : Thursday, April 22, 2021, 1:05 pm
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LOS ANGELES--(BUSINESS WIRE)--SKECHERS U.S.A., Inc. (“Skechers” or the “Company”) (NYSE:SKX), a global footwear leader, today announced financial results for the first quarter ended March 31, 2021.


First Quarter Highlights

  • Sales of $1.43 billion, an increase of 15.0% and quarterly record
  • International Wholesale sales grew 23.8%
  • Direct-to-Consumer sales grew 18.1%
  • Diluted earnings per share were $0.63
  • Cash, cash equivalents and investments were $1.51 billion

“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, Chief Executive Officer of 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% over the same period in 2020, and an exceptional 12% increase over the first quarter of 2019. This resulted in the Company’s first quarterly sales of over $1.4 billion,” stated David Weinberg, Chief Operating Officer of Skechers. “The positive results were due to a 20.2% increase in our international business and an 8.5% increase in domestic sales compared to 2020. Driving the quarterly growth was a 23.8% increase in our International Wholesale, led by triple-digit growth in China, an 18.1% improvement in our direct-to-consumer business, with March being the strongest sales month, and a 143.0% increase in domestic e-commerce. Domestic Wholesale decreased 0.9% 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 2021 Financial Results

 

 

Three Months Ended

 

 

 

 

 

 

 

 

 

 

 

March 31,

 

 

Change

 

(in millions, except per share data)

 

2021

 

 

2020

 

 

$

 

 

%

 

Sales

 

$

1,428.4

 

 

$

1,242.3

 

 

$

186.1

 

 

 

15.0

%

Gross profit

 

 

679.6

 

 

 

547.7

 

 

 

131.9

 

 

 

24.1

%

Gross margin

 

 

47.6

%

 

44.1

%

 

 

 

 

 

350

bps

SG&A expenses

 

 

528.0

 

 

 

508.1

 

 

 

19.9

 

 

 

3.9

%

As a % of sales

 

 

37.0

%

 

40.9

%

 

 

 

 

 

(394

)bps

Earnings from operations

 

 

157.7

 

 

 

44.8

 

 

 

112.9

 

 

 

252.0

%

Operating margin

 

 

11.0

%

 

3.6

%

 

 

 

 

 

743

bps

Net earnings

 

 

98.6

 

 

 

49.1

 

 

 

49.5

 

 

 

100.8

%

Diluted earnings per share

 

$

0.63

 

 

$

0.32

 

 

$

0.31

 

 

 

96.9

%

First quarter sales increased 15.0% as a result of a 20.2% increase in the Company’s international sales and an 8.5% increase in domestic sales. Increases in international sales were driven by wholesale. Domestic sales increases were driven by direct-to-consumer, including e-commerce growth of 143.0%, partially offset by a slight decline in wholesale. On a constant currency basis, the Company’s total sales increased 11.7%.

The Company’s International Wholesale sales increased 23.8% and Direct-to-Consumer sales increased 18.1%, offset by a Domestic Wholesale sales decrease of 0.9%. Increases in the Company’s International Wholesale segment were driven by growth in China of 174.4%, partially offset by declines in Europe of 8.1% and a 6.5% decline in distributor sales. Direct-to-Consumer comparable same store sales increased 10.2%, driven by an increase of 25.7% domestically, partially offset by a decrease of 27.4% internationally.

Gross margin increased 350 basis points to 47.6% 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%. Selling expenses increased by $11.2 million, or 15.2%, primarily due to higher domestic marketing expenses. General and administrative expenses increased by $8.6 million, or 2.0%. 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%, to $157.7 million.

Net earnings were $98.6 million and diluted earnings per share were $0.63.

In the first quarter, the Company’s effective income tax rate was 20.2% 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, Chief Financial Officer of 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.”

Balance Sheet

Cash, cash equivalents and investments totaled $1.51 billion, a decrease of $65.1 million, or 4.1% from December 31, 2020.

Total inventory was $1.07 billion, an increase of $50.7 million or 5.0% from December 31, 2020. Increased inventory levels primarily reflect growth in the International Wholesale segment.

Outlook

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 $0.40 and $0.50.

Store Count

 

 

Number of Store Locations as of

 

 

 

 

 

 

 

 

 

 

Number of Store Locations as of

 

 

 

December 31, 2020

 

 

Opened

 

 

Closed(1)

 

 

March 31, 2021

 

Domestic stores

 

 

523

 

 

 

6

 

 

 

(17

)

 

 

512

 

International stores

 

 

331

 

 

 

6

 

 

 

(3

)

 

 

334

 

Joint venture stores

 

 

467

 

 

 

37

 

 

 

(25

)

 

 

479

 

Distributor, licensee and franchise stores

 

 

2,570

 

 

 

146

 

 

 

(52

)

 

 

2,664

 

Total Skechers stores

 

 

3,891

 

 

 

195

 

 

 

(97

)

 

 

3,989

 

(1) Does not reflect temporary closures due to the COVID-19 pandemic.

Certain Non-GAAP Measures

To supplement our unaudited condensed consolidated financial statements presented under generally accepted accounting principles in the United States (“GAAP”), we use the non-GAAP financial measures presented above to evaluate our results of operations, financial condition, liquidity and indebtedness. We believe that these non-GAAP measures provide useful information to investors regarding financial and business trends related to our results of operations, cash flows and indebtedness and that when this non-GAAP financial information is viewed with our GAAP financial information, investors are provided with valuable supplemental information regarding our results of operations, thereby facilitating period-to-period comparisons of our business performance consistent with how management evaluates the Company’s operating performance and liquidity. In addition, these non-GAAP measures address questions the Company routinely receives from analysts and investors and, in order to assure that all investors have access to similar data the Company has determined that it is appropriate to make this data available to all investors. None of the non-GAAP measures presented should be considered as an alternative to net income or loss, operating income, cash flows from operating activities, total indebtedness or any other measures of operating performance and financial condition, liquidity or indebtedness derived in accordance with GAAP. These non-GAAP measures have important limitations as analytical tools and should not be considered in isolation or as substitutes for an analysis of our results as reported under GAAP. Our use of these terms may vary from the use of similarly-titled measures by others in our industry due to the potential inconsistencies in the method of calculation and differences due to items subject to interpretation. Reconciliations of these non-GAAP financial measures to the most nearly comparable GAAP financial measures are presented below.

First Quarter 2021 Conference Call

The Company will host a conference call today at 1:30 p.m. Pacific Time / 4:30 p.m. Eastern Time to discuss its first quarter 2021 financial results. The call can be accessed on the Investor Relations section of the Company’s website at investors.skechers.com. For those unable to participate during the live broadcast, a replay will be available beginning April 22, 2021 at 7:30 p.m. ET, through May 6, 2021, at 11:59 p.m. ET. To access the replay, dial 844-512-2921 (U.S.) or 412-317-6671 (International) and use passcode: 13718661.

About SKECHERS U.S.A., Inc.

Based in Southern California, Skechers designs, develops and markets a diverse range of lifestyle and performance footwear, apparel and accessories for men, women and children. The Company’s collections are available in the United States and over 170 countries and territories via department and specialty stores, and direct to consumers through 3,989 Company and third-party-owned retail stores and e-commerce websites. The Company manages its international business through a network of global distributors, joint venture partners in Asia, Israel and Mexico, and wholly-owned subsidiaries in Canada, Japan, India, Europe and Latin America. For more information, please visit about.skechers.com and follow us on Facebook, Instagram, Twitter, and TikTok.

Reference in this press release to “Sales” refers to Skechers’ net sales reported under GAAP. This announcement contains forward-looking statements that are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements may include, without limitation, Skechers’ future domestic and international growth, financial results and operations including expected net sales and earnings, its development of new products, future demand for its products, its planned domestic and international expansion, opening of new stores and additional expenditures, and advertising and marketing initiatives. Forward-looking statements can be identified by the use of forward-looking language such as “believe,” “anticipate,” “expect,” “estimate,” “intend,” “plan,” “project,” “will be,” “will continue,” “will result,” “could,” “may,” “might,” or any variations of such words with similar meanings. Any such statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected in forward-looking statements. Factors that might cause or contribute to such differences include the disruption of business and operations due to the COVID-19 pandemic; international economic, political and market conditions including the challenging consumer retail markets in the United States; sustaining, managing and forecasting costs and proper inventory levels; losing any significant customers; decreased demand by industry retailers and cancellation of order commitments due to the lack of popularity of particular designs and/or categories of products; maintaining brand image and intense competition among sellers of footwear for consumers, especially in the highly competitive performance footwear market; anticipating, identifying, interpreting or forecasting changes in fashion trends, consumer demand for the products and the various market factors described above; sales levels during the spring, back-to-school and holiday selling seasons; and other factors referenced or incorporated by reference in Skechers’ annual report on Form 10-K for the year ended December 31, 2020. More specifically, the COVID-19 pandemic has had and may continue to have a significant impact on Skechers’ business, financial conditions, cash flow and results of operations. Forward-looking statements with respect to the COVID-19 pandemic include, without limitation, Skechers’ plans in response to this pandemic. At this time, there is significant uncertainty about the COVID-19 pandemic, including without limitation, (i) the duration and extent of the impact of the pandemic, (ii) governmental responses to the pandemic, including how such responses could impact Skechers’ business and operations, as well as the operations of its factories and other business partners, (iii) the effectiveness of Skechers’ actions taken in response to these risks, and (iv) Skechers’ ability to effectively and timely adjust its plans in response to the rapidly changing retail and economic environment. Taking these and other risk factors associated with the COVID-19 pandemic into consideration, the dynamic nature of these circumstances means that what is stated in this press release could change at any time, and as a result, actual results could differ materially from those contemplated by such forward-looking statements. The risks included here are not exhaustive. Skechers operates in a very competitive and rapidly changing environment. New risks emerge from time to time and we cannot predict all such risk factors, nor can we assess the impact of all such risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, you should not place undue reliance on forward-looking statements as a prediction of actual results. Moreover, reported results should not be considered an indication of future performance.

SKECHERS U.S.A., INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

 

As of March 31,

 

 

As of December 31,

 

(in thousands)

 

2021

 

 

2020

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

1,284,540

 

 

$

1,370,826

 

Short-term investments

 

 

106,028

 

 

 

100,767

 

Trade accounts receivable, net

 

 

798,836

 

 

 

619,800

 

Other receivables

 

 

70,758

 

 

 

69,222

 

Total receivables

 

 

869,594

 

 

 

689,022

 

Inventory

 

 

1,067,437

 

 

 

1,016,774

 

Prepaid expenses and other current assets

 

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