Skechers U.S.A., Inc. (SKX) on Q2 2021 Results - Earnings Call Transcript
Operator: Greetings. Welcome to the Skechers Second Quarter 2021 Earnings Conference Call. At this time all participants are in a listen-only mode. Please note this conference is being recorded. I would now turn the conference over to Skechers. Please go ahead. Unidentified Company Representative: Thank you everyone for joining us on Skechers conference call today. I will now read the Safe Harbor statement. Certain statements contained herein, including without limitation, statements addressing the beliefs, plans, objectives, estimates or expectations of the company or future results or events may constitute forward-looking statements that involve risks and uncertainties, specifically the COVID-19 pandemic has had and is currently having a significant impact on the company’s business, financial conditions, cash flow and results of operations. Such forward-looking statements with respect to the COVID-19 pandemic include without limitation, the company’s plans in response to the pandemic. David Weinberg: Thank you for joining us today for our second quarter conference call. I hope you, your colleagues and loved ones are healthy as the COVID pandemic continues to be a global challenge. We appreciate the resiliency of the Skechers organization over the past 18 months, and hope that those facing the ongoing COVID-related challenges are staying safe. Skechers’ second quarter financial results exceeded expectations as we achieved record quarterly sales of $1.66 billion, a 127% increase over 2020, and a 32% increase over 2019. This marks the first time our quarterly sales have exceeded $1.6 billion and together with our first quarter yields a new six months record of over $3 billion. We also achieve the record gross margin of 51.2%, record quarterly diluted earnings per share of $0.88, and exceptionally strong operating margins of 12.1%. Our record revenues were the result of increases of 147% in our domestic business, and 114% in our international business, and both businesses increased over 30% compared to 2019. International sales comprised 56% of our total sales in the quarter. This growth a result of increases across all reportable segments is reflective of higher average selling prices on significantly more units sold, less promotional activity during the period, and consumers embracing our comfort technology in our seasonal, athletic and casual footwear lines, in addition to our apparel offering. John Vandemore: Thank you, David. And good afternoon everyone, Skechers second quarter results were remarkable and even exceeded our internal targets for the period. They clearly illustrate the strength of our comfort technology, product portfolio, resonant brand, and the focused execution of our global growth strategy. And we deliver these results despite lingering obstacles posed by the pandemic, including supply chain challenges, continued store closures and operating restrictions, primarily in some international markets. Now, let’s turn to our second quarter results where we will provide comparisons to both prior year and 2019. Since the prior year is heavily influenced by the impact of the pandemic and numerous lockdowns, I will largely focus my commentary on the comparisons to 2019, because we believe it is a more meaningful period against which to assess our performance. Sales in the quarter achieved a new record totaling $1.66 billion, an increase of $928.3 million or 127% from the prior year, and a 32% increase over the second quarter of 2019 with both our domestic and international businesses growing over 30%. On a constant currency basis, sales increased $857 million or 118% from the prior year. David Weinberg: Thank you, John. Our second quarter performance exceeded expectations with three new records, quarterly revenues of more than $1.6 billion, gross margins of 51.2% and diluted earnings per share of $0.88. Our innovative comfort product resonated with consumers around the world conversions in foot traffic improved in many of our retail stores, opened during the period and our e-commerce business continued to perform well. Although, we remain in a fluid situation with various government responses to COVID globally, given our performance in the first half of the year, the strength of our brand and our product. We believe our momentum will continue in the back half of the year and into next year. We remain focused on driving sales by managing our inventory flow, developing and delivering fresh new innovative product and communicating our message to consumers. That Skechers is the comfort technology company. Now, I’d like to turn the call over to the operator for questions. Operator: Thank you. Our first question comes from Jay Sole with UBS. Please proceed with your question. Jay Sole: Great, thank you so much. I want to ask about the Domestic Wholesale business, just because up 31% versus 2019 obviously, an exceptional result. Can you just give us maybe elaborate a little bit more on what you saw by channel; whether it’s family channel, off price clubs, the online , maybe just give us a sense of, maybe what you saw in some of the different parts of that business? And then secondly, if you can talk about if the growth was really market share gains? Is it sort of restocking based on really good sell-through last year and right inventory levels or are you seeing, really strong comps, in those stores across the channel that would be helpful. Thank you. John Vandemore: I think it’s all of the above, we’re actually performing better in all the channels that we’re in. Family channel, the clubs, we have a product that resonates that’s higher priced. So, we were able to move people to a higher price point, keep the lower price points. They weren’t on sale and so often, we had a lot of replenishment and we’ve done relatively well although it’s very difficult in replenishing them to a higher degree than they probably had planned when we went into the quarter. So, if you take the higher price points, the availability of product, our performance against competitive brands that are out there and then not being on sale and getting more margin for it they’ve replaced all the time. So, we’ve got it on all cylinders. So product resonates. We have higher price points, we’ve kept our traditional price points, and we’ve delivered relatively on time. Operator: Thank you. Our next question comes from Kimberly Greenberger with Morgan Stanley. Please proceed with your question. AlexStraton: Hi, this is Alex Straton on for Kimberly Greenberger. I have a quick question on ASP invoices you’re seeing, I think you said that the direct-to-consumer ASP is grew 17% year-over-year in the prepared remarks. Could you just talk about your pricing strategy? Or how you think through strategic price increases? Is it on a market-by-market basis? Or could you see even more increases throughout the year? Just more on the strategy there would be helpful? Thank you. John Vandemore: Yes, I think Alex, our approach is to deliver great product, and then, receive fair value for that. And I think what you’re seeing is that our product, as David mentioned, is performing exceedingly well. It’s infused with comfort technology, and that’s resonating with consumers. And as a result, we believe that we’ve seen, that we’re able to charge more for that product, in addition to part of that ASP is clearly a more favorable, promotional environment across the board. We certainly benefited from that, as did our wholesale partners. And we see that in our sell-through and ASP, we see that and their sell-through and ASPs. And I think you’ll continue to see us, where appropriate, take advantage of the value our technology is delivering at the consumer level. On top of that, obviously, we watch input costs, and that’s something we adjust for occasionally. But I’d say the predominant driver right now is getting value for the tremendous product we’re delivering in the marketplace. David Weinberg: Yes, I think it’s important to note that it wasn’t like and across the board, just price increase that we’re taking more price, what we’ve done is increased the performance and the features in our footwear, to make it a higher price and seen as a higher price product in the marketplace not only raising prices of existing. I mean, we now are received as a technical company with great comfort and it’s worth more in the marketplace. AlexStraton: Great, thanks so much. Operator: Thank you. Our next question comes from Gabby Carbone with Deutsche Bank. Please proceed with your question. Gabby Carbone: Hi, congratulations on a great quarter. So kind of like a follow-up on Jays question on domestic wholesale, really nice results there. Just as wondering if you could dig into your thoughts around, the opportunity to take shelf space, as some of your competitors, pull out of certain retailers, maybe what you think that channel could grow, on a more normalized basis from here? John Vandemore: Yes, I mean, I think, to add on to David’s comment earlier, in response to Jay, I mean, we’re seeing really good sell-through of the product, it’s driving higher prices for our wholesale partners, there absolutely is an opportunity to gain shelf space as, shelf space becomes available, but I would say independent of that our product is tremendously effective for our partners. And again, we see this in our own data as well. I’d like to tell you that I think forever, we can grow domestic wholesale, at a 200% or 30% clip, but I think, probably an opportunity short-term to grow above trend. And then as we’ve said, before, we’ve – we believe long-term, there’s no reason why domestic wholesale can’t, for us, at least grow above market, because we believe we’re exceedingly well positioned with key retailers and in categories and with technologies that consumers value. But certainly growing, above the market in the domestic wholesale marketplace long-term is absolutely achievable as well. Gabby Carbone: Got it and just a quick follow-up, on your gross margin performance was really impressive in the retail segment; believe up about 800 basis points from 2019, what are the biggest drivers there and like what kind of performance, could it be expect in the back half? Like what should kind of hold here and, maybe some kind of pressures we should think about? John Vandemore: Well, the drivers as we mentioned, I think it was pricing. That was the most significant driver. And our intention is to have that pricing modality continue in the back half of the year. Now, as I said, also a contributing factor was the promotional environment. We’re certainly eager to see this environment remain steady. And I think most indications are that’s what you’ll see. But certainly, it’s also a competitive landscape. So, we need to be cognizant of what others are going to do. I don’t want to get into, segments specific margin guidance other than to say, the guide we gave relative to the back half of the year is certainly heavily influenced by what we’ve seen in the direct-to-consumer channel. That’s been a very big wind at our backs, and we expect that to continue. Gabby Carbone: Okay, great. Thank you so much. David Weinberg: Thanks, Gabby. Operator: Thank you. Our next question comes from Jim Duffy with Stifel. Please proceed with your question. Jim Duffy: Thanks. Hi, John. Hi, David. Hope you guys are doing well? John Vandemore: Hi, Jim. Jim Duffy: Yes, indeed. I wanted to get an update on China business trends. Can you just talk about what you’re seeing in retail stores there, relative productivity vis-à-vis 2019 or what you saw during the 618 holiday period, and maybe just comment on throughput through the new distribution center, how that’s working for you and things to watch for with respect to that? John Vandemore: Well, I think the first thing to start off with is China performed exceedingly well, yet again, is kind of the norm, we’ve come to expect that of China, but it’s anything but normal. It was propelled in large part by the e-commerce channel, which has been a characteristic of that market for a few years now. We did see better trends than we had been seeing certainly over the last part of 2020. In the physical stores, I wouldn’t say it’s fully recovered, but I think it’s getting better, which is a good sign. That all being said, I mean, e-commerce is going to continue to be the propellant behind growth in that marketplace. Overall, again, very healthy for us, we didn’t see any negative ramifications from some of the other challenges brands saw, in the period, we think we did an exceptionally good job at continuing to grow the brand in the marketplace, and then adding the capabilities at the distribution center, which is our first company owned distribution footprint in the market has gone, really well, given the challenges we face, getting it up and running with COVID and the travel restrictions in market. And we’re very pleased with it. The point is that at the moment, but there’s also plenty of opportunity to continue to improve. And we’re eager to see that. Obviously, we remain incredibly optimistic about China’s long-term trends for our brand. Jim Duffy: Great, John, you reference some of the backlash for other brands, has there been any detectable change in the promotional environment that you’ve seen in the China marketplace? John Vandemore: Not for our brand, I mean, around some of the holiday selling periods 6/18 and 11/11 , you do see a little bit more intense promotionality? I wouldn’t say it was extraordinary or noteworthy above and beyond what we’d normally come to expect in those periods. And most importantly, for our brand, we felt very good about the environment both through 618 and around the balance of the quarter. Jim Duffy: Thank you very much, guys. John Vandemore: Thanks, Jim. Operator: Thank you. Our next question comes from Omar Saad with Evercore ISI. Please proceed with your question. Omar Saad: Thanks for taking my question. Great quarter. I wanted to ask about the e-com versus stores dynamic. I mean, clearly, stores are coming racing back even relative to 2019 levels. I think domestically, you said stores were up 2022. But e-com was down in the 20s. So you’re kind of seeing that traffic really decline on the e-commerce side as stores come back. Is that something? I mean, it’s clear support for the importance of stores in the equation, but is that something you’ve seen in other markets in China as well? When the store is reopened and the traffic comes back to the e-com suffers? And when do you think e-com can, will start to grow again? Thanks. John Vandemore: Yes, I think this quarter is an anomaly Omar to be completely blunt. I mean, last year, at this time, e-commerce was the only business in town. It’s all we had. And I think you’d look you need to look no further than the growth rate on kind of a two-year stack basis to 337%. I mean, that’s not too bad of a number. Our expectation is that, this quarter is a bit of an anomaly in the grand landscape of continuing to see e-commerce grow as a business. It was just a very difficult comparison, given the in particular the domestic dynamics on the international side, even before we’ve completed the rollout with the new platform globally, and several other technology solutions that will be going into place over the next year or two, we saw very decent growth in international e-commerce where we operated directly. And then obviously, we talked about China being propelled by e-commerce. So, I would just take it in context, a 300% to your stack growth rate is nothing to be disappointed. And we continue to be very optimistic about the long-term opportunity for e-commerce to add to our solution at the consumer level. Omar Saad: Got it. That’s really helpful context, John. And then a quick follow-up on the comfort trend, you guys are talking about a lot, talking about comfort technology, what gives you confidence that it’s sticky. And that we don’t necessarily go back to dress, shoes or other maybe less comfortable shoes, when life returns, people go back to work, and any sneak peeks that key comfort products and technologies in the pipeline too please? Thanks. David Weinberg: Well, we always have a significant amount in the pipeline. And we certainly try not to go and let everybody know in advance of bringing them in the first time, especially with what’s going on around the world. But this is growing around the world. And it seems it, there are no surveys. But I think it’s common thought process, that comfort is here to stay more people are working from home, people are more comfortable when they go to work. They love the technology that we present, and they can wear it in multiple styles. It’s not that we’re only selling a technology in an item. We sell our technology through all the items that fit everybody’s lifestyle. So, we hit it on both fronts. And we think that’s absolutely going to continue on we’ll continue to develop for it. John Vandemore: I would just add Omar, I think it’s also when you think about comfort, I would also bring into your perspective health. I mean, being comfortable as part of being healthy. And you certainly can’t argue against the general trend of focusing on health and well being. It’s not, there’s nothing good about standing on a pair of shoes that aren’t Skechers and being uncomfortable or having your feet hurt. Comfort to us is also tantamount with a health benefit to the consumer. And I would definitely echo David’s comment; I have a pair of dress, shoes from Skechers and our mark needs in line. And they’re the most comfortable dress, shoes I own. So it’s not limited just to our core casual and athletic, we infuse that technology across the product portfolio. Omar Saad: Thank you. Operator: Thank you. Our next question comes from Laurent Vasilescu with Exane BNP Paribas. Please proceed with your question. Laurent Vasilescu: Good afternoon. Hi, David. Hi, John. John Vandemore: Hi, Laurent. Laurent Vasilescu: I’ve got a question for you John with regards to the guidance, your second quarter top-line growth was up 32% to your stack that focused the third quarter guide implied 22% growth and then the fourth quarter low double-digits on the two-year stack. Is it due to conservatism or other factors that we should consider I think universe to shift from U.S. wholesale 2Q from 1Q any other factors we should consider with regards to the overall top-line? John Vandemore: Well, I think you hit on the two I mean, one is there certainly is a tremendous amount of uncertainty in the marketplace remaining. I mean, even as we sit here today, I don’t think we would have forecast, as much of an impact from the pandemic continuing, at this point in time, what I think is remarkable about the quarter we just delivered, is we delivered in spite of several those challenges. So, there’s still some unknowns we’re baking into, the probability weighted outcome we look at relative to the balance of the year. There are also a few unique costs coming into play in the near term as we get China and that distribution center up and running. As we bring online distribution footprint in the UK, we’ve been talking about more fully. And as we bring back, more, more labor into the picture as stores improve. I’d also know, we’re taking steps like many retailers to ensure that we’re attracting and retaining the best and brightest. So we’re making some adjustments to our part time labor rates and labor rates in our retail business where, today as we look at it, we’re paying about on average over 40% of prevailing minimum wage in each of the markets in which we sell today. And that has an impact, which one we absolutely can absorb. And we think it’s beneficial for the long-term. I would also just note, as you look at the stores, it wasn’t as if all the stores were working at full capacity, we saw tremendous strength in our Big-box neighborhood stores. The outlet stores did much better than before, but I wouldn’t characterize as fully recovered. And then we have some of our concept stores, particularly those in high tourism locations and mall based properties that are still suffering from restrictions or limited traffic flow that aren’t yet fully back to, peak efficiency. And when those come back, that we believe delivers another leg of assistance from a leverage perspective. So all that being said, it’s a variety of factors. We’ve baked into the back half guidance, but we’ll also want to look at that again next quarter and see if there’s further clarity we can lend. Laurent Vasilescu: That’s very helpful, John. And then second question on a supply chain obviously, a lot of dynamics at play this year, West Coast, but obviously in the headlines, Vietnam, that’s called for shutdowns look like shutdowns, reminded by thinking in your 10-K says the majority of your manufacturing – manufacturers in China and Vietnam. Can just remind us, how big is your Vietnam sourcing is at 40% of overall revenues? And if there’s a two week shutdown, could you manage that? Or when does it become problematic? Is it like a four to six week shutdown? Any color on that would be very helpful. David Weinberg: That’s one piece of – many pieces you’re talking about. And I think we should just point out here that the numbers you throw out was Vietnam as a whole. And the issue today for the closure seems to be South Vietnam, which is a smaller piece of our overall Vietnam business to begin with. And two weeks, we could certainly handle, I don’t know at what point it becomes catastrophic, it has to become part of the overall of what happening everyplace sales, and the supply chain in general. Right now, we seem to be doing as well as anyone, we’re bringing in and we’re meeting our shipping, but it certainly could be faster. So, South Vietnam is not as important to us as Vietnam is the whole, and it will depend on the overall supply chain, and availability of containers and shipments and getting it delivered at the port. Laurent Vasilescu: Very helpful. If I could squeeze one more in Europe, subsidiary wholesale was up 85% on to your stack. John, David, could you guys give us any context of just how big this businesses? And where do you think it goes into 2H21? John Vandemore: Look, it’s one of our bigger regions. And I say it’s – it’s a meaningful contributor. And I think what’s noteworthy about the growth is it. It was really in every market, almost every single market in Europe for us on a two-year stack basis grew by double-digit sum by triple-digit. So, I probably don’t want to put a specific size on it, other than to say, it’s obviously one of our significant contributors in the subsidiary line. Laurent Vasilescu: Okay, thank you very much, and best of luck. David Weinberg: Thank you. Operator: Thank you. Our next question comes from Brian McNamara with Berenberg Capital Markets. Please proceed with your question. Brian McNamara: Hey congratulations on the strong results and guidance. So, your full-year guidance supplies a flow through of your better Q2 a better Q3 than expected and then some. So, I’m curious, what has been the biggest surprise over the last 90 days? Is it simply a function of conservatism given it was your first full-year guide in a while? Or has the strength surprise you relative to your prior expectations? John Vandemore: I think we were positively surprised by the durability of some of the trends we saw in late Q1 in the direct-to-consumer channel in particular. We’re optimistic that some of the markets that have been closed over the last quarter comeback online and we work some of that into the situation. And then the pricing held and the promotions held. And I think that is something we were again, cautiously optimistic would be durable throughout the balance of the year and now we’re increasingly comfortable that that’s more likely than not. Again still keeping some little bit of dry powder in case we experience unexpected consequences from COVID or now floods in Europe and other events that we’ve had to navigate through. But overall, I say increasing confidence that the actions we’ve taken, the results we’ve seen are a bit more durable than we had believed coming into the quarter. Brian McNamara: Any update on India and kind of an obviously, that’s been a big area of COVID concern. Any update there? David Weinberg: So far, they are starting to open up. We have more stores open, traffic still hasn’t returned. I think they still have a ways to go. But they continue to make progress every month, especially in somewhat less densely populated if you can call anything in India that areas around. So, we’re making progress. They are open. We are doing business there past to close down stage for the time being, and continue to make progress. Brian McNamara: Great, thanks very much. David Weinberg: Thanks, Brian. Operator: Thank you. Our next question comes from Susan Anderson with B. Riley FBR. Please proceed with your question. Susan Anderson: Hi, good evening, nice job on the quarter. I’m curious, just your comfort levels around your inventory. Did you feel like you had enough inventory in the quarter? Or do you feel like there’s still kind of some stocking to do particularly within the wholesale channel to satisfy the demand there? David Weinberg: I think truth be known is, we certainly could have sold more had we gotten it here. It’s a very, was a very difficult transition from slowing down through the pandemic and then having this explosive consumer purchasing program that’s going on. So, I think we managed it very well. Like I said, we were somewhat surprised how well it held up, and how well their promotional cadence held up. So, we were able to bring in more stores than we did in 2019, even with the supply chain issues, and fill that pipeline, we certainly could have done some more. But demand hasn’t waned. So, we will pick that up in Q3. So there’s still a lot of work to be done, and a lot of things to happen. But we’re still trying to get in as much inventory as we can. And I can pick up the pace, that’s one of the conservative items is we’re not sure how fast the supply chain picks up and if we get significantly further along than we are today. I’m sure if we could get it here faster, we could sell it faster and move it out. I think what it’s taught us is that we can be very reactive to inventory needs, and we can’t bring it in and when we do it continues to sell a whole price. So those were the two big positive surprises for the quarter. And I think they continue to this quarter. Susan Anderson: Okay, great. That sounds good. And then just to follow-up on the marketing for the second half, should we expect increased marketing for the second half again, similar to what we saw in this quarter? John Vandemore: I think you should expect it to be relatively steady, kind of on a percentage of sales basis to what we’ve traditionally done, maybe a little bit more, depending on whether or not we have the intuitive, David mentioned to be able to satisfy the demand. What we’ve seen this year, so far as the marketing we’ve put in place has been extremely effective in driving top-line. So, asking kind of timing differences that come at the end of the year normally, I think you can expect it to be a relatively consistent rate for what we – what we traditionally observed. But with some dexterity at our disposal, should we feel the opportunity to drive sales. Susan Anderson: Okay, great. And can I just add one more. I’m curious just on the work shoe business. And if that’s come back significantly, as some of particularly the leisure and hospitality workers get back to work have you seen a big pickup in that type of business? David Weinberg: Yes, I don’t think that business ever went away. I said something like that came back very quickly. It’s a very core business for us. It’s done well and has continued to grow. So, we continue with it and we will expect it will continue. John Vandemore: Yes. It’s been an extremely strong division for us throughout for real time, but even during the pandemic. Susan Anderson: Yes. Okay, great. Thanks so much. Good luck the rest of year. David Weinberg: Thank you. Operator: Thank you. Our next question comes from John Kernan with Cowen. Please proceed with your question. John Kernan: Hey, good afternoon and congrats on the great results, guys. David Weinberg: Thanks, John. John Kernan: Why don’t we go to gross margin? You talked about it being up in the back half. I think there’s a scenario you’ll be north of 49% for the year. Where do you think gross margin can go over time it feels like you’re getting price. Retail as a mix shift is seems like you can be a benefit over time. Just curious, how we should think about the gross margin line as it relates to your long-term margin, operating margin overall? John Vandemore: Yes, I mean, less than a portion of that is going to be heavily influenced by mix. So, you got to keep mix in the picture. That being said, our long-term algorithm for gross margin performance has been pretty consistent, which is we’ll continue to mix up toward direct-to-consumer and international businesses and given normalized growth rates on the domestic side of things that will continue to accrete margins, and call it 25 bps to 50 bps range annually. Again, I think you got to be cognizant, though, that we outgrow kind of a normal rate and domestic wholesale, it may not have the accretive margin impact, we want to create more gross profit dollars, which is absolutely something we’ll take. We’re encouraged by what we’ve seen in pricing. We got to maintain vigilance on the marketplace. And we are cognizant there still are input cost pressures out there that the whole industry is dealing with in shipping, few raw material side of things, some tariffs, that exclusions that have expired. So part of it is also adjusting to that environment, but again, the long-term profile for growth is continued to benefit our mix towards international, and direct-to-consumer. And that’s certainly something we think has significant legs for the business. John Kernan: Got it. I guess, one more just on – there were some earlier questions on the guidance for the back half of the year versus 2019. Does indicate a deceleration and did indicate that there’s still a lot of uncertainty, I’m just curious for North America, particularly the U.S., like, how you’re viewing the opportunity for back to school and holiday does look like fourth quarter implied revenue guidance seems another deceleration off in 2019. So any comments on how you see back to school and holiday shaping up to be great. John Vandemore: I think, we’re cautiously optimistic on back to school. I mean, I think you have to keep in mind whether or not a back to school happens is dependent upon how schools and school districts behave. We – I think their plan for a reasonable recurrence of back to school, similar to what we saw pre-pandemic, but probably not a full throttle return at this juncture. We’re also dealing with the challenges we’ve mentioned, the supply chain, so making sure we have the product at the right time is going to be a criticality, we’ve got to be mindful of in light of this environment. But I’d also point out that as you look relative to 2020 you are starting to see early recovery in the pandemic world in those quarters. So, those are also very healthy quarters for us overall. That all being said, again we remain extremely optimistic about the balance of the year and into 2022, we’re planning for some maneuverability, should things change, because we’re certainly in the habit of seeing some pretty dynamic forces in the marketplace. But we also think the guidance we’ve rolled through reflects that confidence, and is a fairly healthy improvement on what we previously discussed. And that’s good. And also, just keep in mind, when you’re looking at EPS, you’ve got to keep in mind the tax rate differentials, if you look back the last couple of years, 20% we’re in some instances, 500 basis points higher on a tax rate. And so if you adjust for that, I think you look at the guide, relative to Q3 in particular that adds another 10 percentage points of growth into that number. So, please do keep that in mind. John Kernan: Excellent. Thank you. David Weinberg: Thanks, John. Operator: Thank you. Our final question comes from Sam Poser from Williams Trading. Please proceed with your question. Sam Poser: Thank you guys for taking my questions. I’ve got three. Could you – are you seeing given that your inventory while you could sell more, it looks like it’s in pretty good shape relative to others? Did you shift – are there orders shifting forward, because you have availability of trucks? And do you anticipate that continues to go on in slow and continue to go on. And while you could have more inventory, if there is a problem with Vietnam and other places? When do you think that might would have – when would you see an effect of that? Is that something that would be a spring effect or late Q4, just given the way you move product through? John Vandemore: I don’t think there’s any shift in there. I mean, what we’re seeing is fantastic sell-through and very strong ASPs at the wholesale partner level. There’s no evidence in our analysis that this is a shift and I gave it that we could have sold more if we had more, because the demand is strong for the product. David Weinberg: Yes, when you employ shift, you think things are moving and people are stocking more and it slows down. Sam Poser: No, no, I mean, they have open – they have dollars available for your product, you had orders before they everything just moving. And also to smooth it out because – ground transportation problems here in the U.S. specifically. David Weinberg: Yes, but I don’t know that it’s, our stock to sales positions and across the board, as far as our wholesale business is concerned, and even our own retail business is still way down. So there’s plenty of place to go, that doesn’t preclude a shift that just means we haven’t filled the whole demand yet. I think that was philosophy . Sam Poser: And then, two other questions. You said, can you identify sort of the increase in your marketing spend, and sort of what kind of return on investment you saw with that. And then lastly, you mentioned about having diligence you just said a diligence in the marketplace, can you give me –give us some more color as to what you mean by that? John Vandemore: On the marketing spend, I mean, I would just – I’m not going to give you anything at a detailed level, other than to say, I think the sales trajectory, both in the quarter, and what we’ve implied for the balance of the year clearly reflects the power that marketing many markets have, which are just restarting marketing coming out of the kind of post pandemic lockdown period as the primary lockdown period. So, you’re seeing good trajectory there. And I think that’s – that is certainly driven by the efficiency in our marketing. And I’d also point out, if you look back in Q1, we are a little bit lighter on marketing. So, some of that is a little bit of a catch up. I’m not entirely sure what your second question relates to Sam. So maybe you can clarify a bit, that’d be helpful. Sam Poser: Well, it was really about, I think it was in the context of what you – that the marketplace was very clean of an inventory and holding these high ASPs, and there’s not a lot of promotions that I think one of you mentioned that you would have diligence on the marketplace to make, I guess, to make sure it doesn’t go back to more promotional. And I just wondered what that meant, and how you would go about doing that? John Vandemore: I think we control that, I think people see, well, it sells and I think most retailers understand now that there’s no requirement for that promotional cadence it sounds well, they get the higher ASPs, and a higher margin. So, I think everybody’s just doing just common sense type of business going forward. We’re not – we haven’t have begun to anybody’s head and tell them they can’t promote. This is not worth it now. David Weinberg: But we do monitor – we monitor ASPs, we monitor sell-through rates and inventory levels, and all of our key wholesale partner. So, we’re watching it carefully. We watched that to help them plan inventory levels. And we watch it for us to see how the product is performing. And then we have also the benefit of our retail business where we can see on an overall market environment, how ASPs and sell through rates are performing and that we watch very carefully. Sam Poser: And one last thing, do you have any – can you give us any color on any today an update on July’s direct-to-consumer, same-store sales quarter-to-date? John Vandemore: I would generally say the trends have been consistent with what we’ve seen when you kind of adjust for holidays and timings of days and weekends and things like that. But the general pattern of what we’ve seen remains healthy and consistent. Sam Poser: All right. Thank you very much on continued success. John Vandemore: Thanks, Sam. Operator: Thank you. Ladies and gentlemen, we have reached the end of the question-and-answer session. This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful evening.SKX Ratings Summary
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UBS Reiterates Buy Rating on Skechers, Cites Potential for Earnings Surprises and Growth
UBS analysts reaffirmed their Buy rating on Skechers USA (NYSE:SKX), maintaining a price target of $88 on the stock. The analysts highlighted the potential for Skechers to exceed earnings expectations over the next twelve months, which could drive the stock higher. They believe Skechers is on track to reach $10 billion in revenue by 2026, solidifying its position as the world's third-largest footwear company. According to the analysts, the market currently undervalues the strength of the Skechers brand and its growth potential.
A recent meeting with Skechers management strengthened the analysts' confidence in their outlook. They project that Skechers will achieve an approximate 15% compound annual growth rate (CAGR) in EPS over the next five years. This level of growth could result in multiple positive earnings surprises in the near term, potentially pushing the stock toward the $88 price target.
Skechers USA Drops 6% on Weak Guidance
Skechers USA (NYSE:SKX) saw its stock plummet by more than 6% intra-day today following the announcement of its first-quarter sales, which did not meet expectations.
The company reported earnings per share (EPS) of $0.56, marginally surpassing the forecasted $0.55. Nevertheless, Skechers' quarterly revenue of $1.96 billion was below the consensus estimate of $2.04 billion.
For the full year, Skechers USA set its EPS forecast in the range of $3.65 to $3.85, significantly under the consensus of $4.18. The company also anticipates its annual revenue to fall between $8.6 billion and $8.8 billion, which is less than the expected $8.94 billion.
Looking into the first quarter, Skechers expects sales to range from $2.175 billion to $2.225 billion, compared to the consensus of $2.19 billion. The projected EPS for the quarter is between $1.05 and $1.10, below the anticipated $1.20.
Additionally, Skechers USA detailed its capital expenditure forecast for the year, estimating total investments to be between $350 million and $400 million.
Skechers USA Drops 6% on Weak Guidance
Skechers USA (NYSE:SKX) saw its stock plummet by more than 6% intra-day today following the announcement of its first-quarter sales, which did not meet expectations.
The company reported earnings per share (EPS) of $0.56, marginally surpassing the forecasted $0.55. Nevertheless, Skechers' quarterly revenue of $1.96 billion was below the consensus estimate of $2.04 billion.
For the full year, Skechers USA set its EPS forecast in the range of $3.65 to $3.85, significantly under the consensus of $4.18. The company also anticipates its annual revenue to fall between $8.6 billion and $8.8 billion, which is less than the expected $8.94 billion.
Looking into the first quarter, Skechers expects sales to range from $2.175 billion to $2.225 billion, compared to the consensus of $2.19 billion. The projected EPS for the quarter is between $1.05 and $1.10, below the anticipated $1.20.
Additionally, Skechers USA detailed its capital expenditure forecast for the year, estimating total investments to be between $350 million and $400 million.
Skechers Stock Upgraded to Overweight at Piper Sandler
Skechers USA (NYSE:SKX) received an upgrade from Piper Sandler analysts, who shifted the stock rating from Neutral to Overweight and raised the price target to $59 per share.
The analysts are more positive about Skechers' international business and believe it has the potential for medium-term earnings growth in the mid-teens.
Despite challenges in the U.S. wholesale market, strong direct-to-consumer trends indicate robust demand, which is expected to drive restocking. Additionally, Skechers is set to improve its gross margins, making it an appealing investment choice.
Skechers Stock Upgraded to Overweight at Piper Sandler
Skechers USA (NYSE:SKX) received an upgrade from Piper Sandler analysts, who shifted the stock rating from Neutral to Overweight and raised the price target to $59 per share.
The analysts are more positive about Skechers' international business and believe it has the potential for medium-term earnings growth in the mid-teens.
Despite challenges in the U.S. wholesale market, strong direct-to-consumer trends indicate robust demand, which is expected to drive restocking. Additionally, Skechers is set to improve its gross margins, making it an appealing investment choice.
Skechers USA Reports Q4 Beat, Shares Down 9% on Weak Guidance
Skechers USA (NYSE:SKX) shares fell more than 9% on Friday despite the company reporting its Q4 results, with EPS of $0.48 coming in better than the Street estimate of $0.36. Revenue increased 13.5% year-over-year to $1.88 billion, beating the Street estimate of $1.77 billion. Wholesale revenue increased by 15.7% and Direct-to-Consumer revenue increased by 10.8%.
Logistical challenges once again led to a miss in operating income, which came in at $87 million, compared to the Street estimate of $96 million. Management expects the company to incur some additional logistics costs over the next two quarters but to a much lesser extent than in fiscal 2022 (approximately $90 million). For Q1/23, the company expects revenue in the range of $1.80-$1.85 billion and diluted EPS in the range of $0.55-$0.60, significantly worse than the Street estimate of $0.86.
For fiscal 2023, the company expects revenue in the range of $7.75-$8.0 billion and diluted EPS of $2.80-$3.00.
Skechers Shares Plunge 9% on Q3 EPS Miss & Weak Guidance
Skechers USA (NYSE:SKX) shares dropped more than 9% today following the company’s reported Q3 results, with EPS of $0.64 coming in worse than the Street estimate of $0.73. Revenue was $1.88 billion, above the Street estimate of $1.81 billion.
The EPS miss was driven by an incremental $50 million from logistics costs (approximately $0.25 impact to EPS) in addition to FX headwinds ($106 million vs. its modeled $90 million) and COVID-related challenges in APAC, particularly China. Significant improvements in transit times along with strong demand led to capacity challenges and ultimately higher costs as the company worked to mitigate the impact to customers. This involved adding more labor and capacity to fulfill orders.
The company provided its Q4 outlook, expecting revenue to be in the range of $1.73-1.78 billion, worse than the Street estimate of $1.79 billion.
