Market Overview

SKECHERS Achieves New Second Quarter 2018 Sales Record


SKECHERS USA, Inc. (NYSE:SKX), a global footwear leader, today announced
financial results for the second quarter ended June 30, 2018.

Second Quarter Highlights

  • Record sales of $1.134 billion, an increase of 10.6 percent
  • Record quarter gross margins of 49.4 percent
  • International wholesale sales increased 24.9 percent; total
    international wholesale and retail sales combined represented 51.6
    percent of total sales
  • Company-owned global retail sales increased 12.8 percent, with a
    comparable same store sales increase of 4.5 percent worldwide

"The financial accomplishments in the second quarter are the result of
our product and marketing, as well as our on-going efforts to seek out
global opportunities," began Robert Greenberg, Skechers chief executive
officer. "With the resurgence of retro looks and Skechers D'Lites, we
are the originator of one of the hottest trends in footwear. At the core
of this chunky look is comfort, which runs through every one of our
divisions—from Relaxed Fit to Skechers Sport to our sandal collections.
The excitement over Skechers D'Lites has allowed us to broaden our
distribution and marketing to reach savvy millennial consumers. With
chart-topping Camila Cabello in Skechers D'lites, we have a global
ambassador who resonates with this audience. Add to that, the campaigns
for our wide demographic appeal and vast footwear offering—including
those with ambassadors, Tony Romo, Howie Long and David Ortiz—enable us
to meet the footwear needs of men, women and children in the United
States and around the world. With the right product and marketing, we
believe there is significant opportunity to further grow our brand and
continue to take market share. We are investing in our international
business—both in newer and established markets as we continue to
experience strong growth overseas. We're looking forward to the
back-to-school season, and the remainder of the year as we deliver more
new styles backed by impactful marketing."

"We achieved another record sales quarter and continued to see
significant growth in our subsidiary and joint venture businesses, which
resulted in record sales of $2.38 billion over the first six months of
the year," stated David Weinberg, chief operating officer of Skechers.
"Our largest international markets—Canada, China, South Korea, Germany,
India, and the United Kingdom, achieved double-digit sales growth in the
second quarter, a testament to our global strategy. Additionally, China
shipped approximately 5.6 million pairs in the period, a new quarterly
record. As expected, our domestic wholesale had single-digit decreases
in the quarter though much of our business within our core accounts
remained solid. Our international distributor business also had
single-digit decreases, but performed better than originally
anticipated. Looking forward, we believe both of our domestic wholesale
and international distributor businesses will be positive in the second
half of the year. Our focus for the balance of 2018 is to continue to
grow our international business while maintaining our strength in the
United States."

Second Quarter 2018 Financial Results
in millions, except per share data)


For the three-months ended



June 30,   Change





Sales $1,134.8 $1,025.9


Gross Profit 561.0 488.3 72.7 14.9%
Gross Margin 49.4% 47.6%
SG&A Expenses 484.9 405.2 79.7 19.7%
As a % of Sales 42.7% 39.5%
Earnings from Operations 81.4 86.3 -4.9 -5.7%
Operating Margin 7.2% 8.4%
Net Earnings 45.3 59.5 -14.2 -23.9%
Diluted Earnings per Share $0.29 $0.38 -$0.09 -23.7%

Sales grew 10.6 percent as a result of a 24.9 percent increase in the
Company's international wholesale business, and 12.8 percent
increase in its Company-owned global retail business. Second
quarter comparable same store sales in Company-owned stores
worldwide increased 4.5 percent, including a 2.2 percent in the United
States and a 11.3 percent internationally. The growth in the second
quarter was partially offset by a 7.0 percent decrease in the Company's domestic
business and a 6.1 percent decrease in the Company's
international distributor business.

Gross margins increased due to strength in the Company's
international wholesale and Company-owned international retail

SG&A expenses increased 19.7 percent in the quarter,
including an increase in selling expenses of $14.1 million due to
higher international advertising. General and administrative expenses
increased by $65.6 million as the Company continued to build its
international brand presence and direct-to-consumer channels. General
and administrative expenses in China grew $29.4 million to support
continued expansion, including support for the upcoming Single's Day,
and $11.7 million associated with operating 54 additional Company-owned
Skechers stores worldwide, of which 12 opened in the second quarter. The
G&A expenses also included $19.8 million related to corporate and
domestic expenses, of which $7.0 million was for increased domestic
warehouse and distribution costs and $6.2 million was for legal costs.

Earnings from operations decreased $4.9 million, or 5.7 percent.

Net earnings were $45.3 million and diluted earnings per share
were $0.29. In the second quarter, the Company's income tax rate was
18.8 percent reflecting its continued assessment of the impact of the
recently enacted tax reform legislation. The Company's net earnings for
the second quarter were negatively impacted by adverse foreign exchange
impacts of $7.0 million and legal costs of $6.2 million.

Six months 2018 Financial Results
in millions, except per share data)

  For the six-months ended    


June 30,   Change





Sales $2,384.9 $2,098.7


Gross Profit 1,144.1 964.8 179.3 18.6%
Gross Margin 48.0% 46.0%
SG&A Expenses 924.8 761.5 163.3 21.4%
As a % of Sales 38.8% 36.3%
Earnings from Operations 230.1 210.7 19.4 9.2%
Operating Margin 9.7% 10.0%
Net Earnings 162.9 153.5 9.4 6.1%
Diluted Earnings per Share $1.04 $0.98 $0.06 6.1%

Sales grew 13.6 percent as a result of a 22.9 percent increase in the
Company's international wholesale business, and a 15.5 percent
increase in its Company-owned global retail business. For the
six-month period, the Company's domestic wholesale business
increased 1.0 percent compared to the same prior year period.

Gross margins increased due to strength in the Company's
international wholesale and Company-owned international retail

SG&A expenses increased 21.4 percent. This increase was
due to an additional $138.5 million in general and
administrative expenses
. Selling expenses increased by
$24.7 million.

Earnings from operations increased $19.4 million, or 9.2 percent.

Net earnings were $162.9 million and diluted earnings per share
were $1.04.

Balance Sheet

At quarter-end, cash, cash equivalents and short-term investments
totaled $887.7 million, an increase of $151.3 million, or 20.5 percent
from December 31, 2017, and an increase of $136.2 million, or 18.1
percent, over June 30, 2017.

Total inventory, including inventory in transit, was $822.4
million, a $50.6 million decrease from December 31, 2017, and a $152.7
million increase over June 30, 2017. The majority of the year-over-year
inventory increase was attributable to international wholesale and
retail, particularly in China.

Working capital was $1.6 billion at June 30, 2018, a $134.7
million increase over December 31, 2017, and a $282.9 million increase
over June 30, 2017.

"In the second quarter, we continued to invest in building the Skechers
brand worldwide," began John Vandemore, chief financial officer of
Skechers. "This included an expanded direct-to-consumer presence in
retail and online. We also diligently managed our balance sheet, driving
cash conversion and matching inventory growth with anticipated sales
volumes. At the same time, we continued to allocate capital in line with
our stated philosophy, returning cash to shareholders directly through
approximately $15.0 million of open market share repurchases."

Share Repurchase

During the three months ended June 30, 2018, the Company repurchased
approximately 510,000 shares of its Class A common stock at a cost of
$15.0 million under its existing share repurchase program. At June 30,
2018, approximately $132.0 million remained available under the
Company's share repurchase program.


For the third quarter of 2018, the Company believes it will achieve
sales in the range of $1.200 billion to $1.225 billion, and diluted
earnings per share of $0.50 to $0.55. The guidance is based on continued
strong performance within the Company's international subsidiaries and
joint venture businesses, and the Company-owned Skechers retail stores,
as well as growth in the Company's international distributor and
domestic wholesale businesses in the back half of the year. The Company
expects that its effective tax rate for the year will be at the top of
or slightly higher than the previously announced guidance of 12 to 17

Second Quarter 2018 Conference Call

The Company will host a conference call today at 1:30 p.m. PT / 4:30
p.m. Eastern Time to discuss its second quarter 2018 financial results.
The call can be accessed on the Investor Relations section of the
Company's website at
For those unable to participate during the live broadcast, a replay will
be available beginning July 19, 2018, at 7:30 p.m. ET, through August 2,
2018, at 11:59 p.m. ET. To access the replay, dial 844-512-2921 (U.S.)
or 412-317-6671 (International) and use passcode: 13681233.


SKECHERS USA, Inc., based in Manhattan Beach, California, designs,
develops and markets a diverse range of lifestyle footwear for men,
women and children, as well as performance footwear for men and women.
SKECHERS footwear is available in the United States and over 170
countries and territories worldwide via department and specialty stores,
2,715 SKECHERS Company-owned and third-party-owned retail stores, and
the Company's e-commerce websites. The Company manages its international
business through a network of global distributors, joint venture
partners in Asia and the Middle East, and wholly-owned subsidiaries in
Canada, Japan, throughout Europe and Latin America. For more
information, please visit and follow us on Facebook
( and Twitter (

This announcement contains forward-looking statements that are made
pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. These forward-looking statements 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 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 the Company's annual report on Form 10-K for the year ended
December 31, 2017, and its quarterly report on Form 10-Q for the three
months ended March 31, 2018. 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 the companies cannot
predict all such risk factors, nor can the companies assess the impact
of all such risk factors on their respective businesses 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.

(In thousands)
  June 30,   December 31,
2018   2017
Current Assets:
Cash and cash equivalents $ 844,847 $ 736,431
Short-term investments 42,895 -
Trade accounts receivable, net 547,497 405,921
Other receivables   26,938     27,083
Total receivables 574,435 433,004
Inventories 822,423 873,016
Prepaid expenses and other current assets   77,290     62,573
Total current assets 2,361,890 2,105,024
Property, plant and equipment, net 553,574 541,601
Deferred tax assets 26,209 29,922
Long-term investments 23,954 17,396
Other assets   40,038     41,139
Total non-current assets   643,775     630,058
TOTAL ASSETS $ 3,005,665   $ 2,735,082
Current Liabilities:
Current installments of long-term borrowings $ 1,810 $ 1,801
Accounts payable 577,783 505,334
Short-term borrowings 11,179 8,011
Accrued expenses   128,783     82,202
Total current liabilities 719,555 597,348
Long-term borrowings, net of current installments 70,181 71,103
Deferred tax liabilities 161 161
Other long-term liabilities   102,306     118,259
Total non-current liabilities   172,648     189,523
Total liabilities 892,203 786,871
Stockholders' equity:
Skechers U.S.A., Inc. equity 1,971,084 1,829,064
Noncontrolling interests   142,378     119,147
Total equity   2,113,462     1,948,211
TOTAL LIABILITIES AND EQUITY $ 3,005,665   $ 2,735,082
(In thousands, except per share data)
  Three Months Ended June 30,   Six Months Ended June 30,







Net sales $ 1,134,797 $ 1,025,934 $ 2,384,875 $ 2,098,742
Cost of sales   573,840       537,613       1,240,815       1,133,923  
Gross profit 560,957 488,321 1,144,060 964,819
Royalty income   5,350       3,221       10,872       7,451  
  566,307       491,542       1,154,932       972,270  
Operating expenses:
Selling 114,022 99,950 198,468 173,759
General and administrative   370,927       305,283       726,308       587,779  
  484,949       405,233       924,776       761,538  
Earnings from operations 81,358 86,309 230,156 210,732
Other income (expense):
Interest, net 1,054 (1,464 ) 731 (2,540 )
Other, net   (7,473 )     2,664       (4,070 )     3,359  
  (6,419 )     1,200       (3,339 )     819  
Earnings before income tax expense 74,939 87,509 226,817 211,551
Income tax expense   14,080       14,109       28,700       31,516  
Net earnings 60,859 73,400 198,117 180,035
Less: Net earnings attributable to noncontrolling interests   15,575       13,865       35,181       26,505  
Net earnings attributable to Skechers U.S.A., Inc. $ 45,284     $ 59,535     $ 162,936     $ 153,530  
Net earnings per share attributable to Skechers U.S.A., Inc.:
Basic $ 0.29     $ 0.38     $ 1.04     $ 0.99  
Diluted $ 0.29     $ 0.38     $ 1.04     $ 0.98  

Weighted average shares used in calculating earnings per share
attributable to Skechers U.S.A., Inc.:

Basic   156,518       155,579       156,476       155,340  
Diluted   157,091       156,174       157,366       156,016  

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