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Skechers Announces Record Second Quarter 2022 Sales

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LOS ANGELES, July 26, 2022--(BUSINESS WIRE)--SKECHERS U.S.A., Inc. ("Skechers" or the "Company") (NYSE:SKX), The Comfort Technology Company™ and a global footwear leader, today announced financial results for the second quarter ended June 30, 2022.

Second Quarter Highlights

  • Record quarterly sales of $1.87 billion, a year-over-year increase of 12.4%

  • Wholesale sales grew 18.3%

  • Direct-to-Consumer sales grew 4.3%

  • Diluted earnings per share of $0.58

  • Repurchased $24.2 million of common stock

"Skechers achieved a new quarterly sales record of $1.87 billion, a significant accomplishment especially given the macroeconomic headwinds, supply chain issues and COVID-related restrictions in China during the period," said David Weinberg, Chief Operating Officer of Skechers. "The growth was the result of increases in sales of 15% in our domestic and 10% in our international businesses. Growth was driven by sales increases of 21% in the Americas and 8% in EMEA. In APAC, where sales were flat due to COVID-related restrictions in China, we saw strong growth in most other markets, particularly in India, South Korea and Malaysia. During the quarter, we focused on delivering our in-demand footwear direct to consumers and through our wholesale partners globally. While we remain cautious given the challenges across the globe, we believe our comfort technology footwear, impactful marketing and the strength of our brand will drive continued sales growth in the back half of the year."

"2022 is shaping up to be another remarkable year for Skechers with two consecutive record sales quarters, the result of our talented team’s passion, determination and execution to evolve our product offering, inform the world of our exceptional comfort technologies, and effectively navigate the supply chain constraints," began Robert Greenberg, Chief Executive Officer of Skechers. "In the second quarter, we delivered hands-free comfort footwear to a world now desiring more ease in their lives, expanded our Skechers Arch Fit offering, and designed more fashion-focused styles as comfort at work and play is the new norm. Further, we elevated our performance game with the launch of Skechers Viper Court, a collection designed specifically for the fastest growing sport in America, pickleball, and saw major championship wins on the golf course with Brooke Henderson at this past weekend’s Amundi Evian Championship in France and Matt Fitzpatrick at the U.S. Open at Brookline last month. We also signed several new ambassadors—specific to Europe and Asia, as well as a rising Latin music artist and a global pop sensation, all to further strengthen brand awareness in key markets. This, our 30th year in business, is our strongest year yet from a sales, marketing and product perspective. We are in a unique position as a brand that delivers on comfort technology, style, innovation and quality with a global reach that includes 4,355 Skechers stores. As a company, we are determined to outdo ourselves and reach further heights as we strive to meet our customers’ needs."

Second Quarter 2022 Financial Results

Three Months Ended June 30,

Change

(in millions, except per share data)

2022

2021

$

%

Sales

$

1,867.8

$

1,661.9

205.9

12.4

Gross profit

897.6

853.6

44.0

5.2

Gross margin

48.1

%

51.4

%

(330

) bps

Operating expenses

743.4

652.4

91.0

14.0

As a % of sales

39.8

%

39.3

%

50

bps

Earnings from operations

154.2

201.2

(47.0

)

(23.4

)

Operating margin

8.3

%

12.1

%

(390

) bps

Net earnings

$

90.4

$

137.4

(47.0

)

(34.2

)

Diluted earnings per share

$

0.58

$

0.88

(0.30

)

(34.1

)

Second quarter sales increased 12.4% as a result of a 15.4% increase in domestic sales and a 10.0% increase in international sales, primarily driven by strength in wholesale sales. All segments experienced growth, with Wholesale increasing 18.3% and Direct-to-Consumer increasing 4.3%. On a constant currency basis, sales increased 16.4%.

Wholesale sales growth of $176.1 million, or 18.3%, was led by increases in AMER of 34.9%. Wholesale volume increased 14.8% and average selling price increased 3.1%.

Direct-to-Consumer sales growth of $29.8 million, or 4.3%, was led by increases in AMER of 3.7%, EMEA of 13.5%, and APAC of 2.7%. Direct-to-Consumer average selling price increased 5.3% and volume was essentially flat.

Gross margin was 48.1%, a decrease of 330 basis points, primarily driven by higher per unit freight costs partially offset by average selling price increases.

Operating expenses increased $91.0 million, or 14.0%, and as a percentage of sales, increased 50 basis points to 39.8% from 39.3% in the prior year. Selling expenses increased $25.1 million, or 17.8%, due to higher global demand creation expenditures. General and administrative expenses increased $65.9 million, or 12.9%, primarily due to volume-driven increases in labor and warehouse and distribution expenses, as well as higher rent.

Earnings from operations decreased $47.0 million, or 23.4%, to $154.2 million.

Net earnings were $90.4 million and diluted earnings per share were $0.58, a decrease of 34.1% over the prior year. Diluted earnings per share include an unfavorable impact of $0.11 due to declines in foreign exchange rates, primarily in EMEA.

In the second quarter, the Company’s effective income tax rate was 21.3%.

"Skechers continued the diligent execution of our long-term global growth strategy, achieving record quarterly sales primarily from continued strength in our Wholesale segment," stated John Vandemore, Chief Financial Officer of Skechers. "Despite pandemic-related lockdowns, disruptions in our global supply chain and macroeconomic volatility, we remain focused on our direct-to-consumer capabilities, distribution infrastructure and deepening connections with our consumers in order to drive long-term growth and shareholder value."

Six Months 2022 Financial Results

Six Months Ended June 30,

Change

(in millions, except per share data)

2022

2021

$

%

Sales

$

3,687.4

$

3,096.3

591.1

19.1

Gross profit

1,721.7

1,539.3

182.4

11.9

Gross margin

46.7

%

49.7

%

(300

) bps

Operating expenses

1,391.7

1,180.4

211.3

17.9

As a % of sales

37.7

%

38.1

%

(40

) bps

Earnings from operations

330.1

358.9

(28.8

)

(8.0

)

Operating margin

9.0

%

11.6

%

(260

) bps

Net earnings

$

211.6

$

235.9

(24.3

)

(10.3

)

Diluted earnings per share

$

1.35

$

1.51

(0.16

)

(10.6

)

Year-to-date sales increased 19.1% reflecting a 21.4% increase in domestic sales and a 17.3% increase in international sales with the largest contribution derived from wholesale sales. Both segments experienced increases, with Wholesale increasing 25.4% and Direct-to-Consumer increasing 9.0%. On a constant currency basis, the Company’s total sales increased 22.1%.

Wholesale sales growth of $484.3 million, or 25.4%, was led by increases in AMER of 38.2% and EMEA of 24.0%. Wholesale volume increased 18.8% and average selling price increased 5.9%.

Direct-to-Consumer sales growth of $106.8 million, or 9.0%, was led by increases in AMER of 6.8%, EMEA of 44.2%, which experienced COVID restrictions in the prior year, and APAC of 5.3%. Direct-to-Consumer average selling price increased 9.4% resulting from reduced promotions and higher prices.

Gross margin was 46.7%, a decrease of 300 basis points, primarily driven by higher per unit freight costs partially offset by average selling price increases.

Operating expenses increased $211.3 million or 17.9%. As a percentage of sales, operating expenses improved 40 basis points to 37.7%. Selling expenses increased $42.0 million or 18.1%, primarily due to higher global demand creation expenditures. General and administrative expenses increased $169.3 million or 17.9%, primarily due to higher compensation costs, rent, and volume-driven global warehouse and distribution expenses.

Earnings from operations decreased $28.8 million to $330.1 million.

Net earnings were $211.6 million and diluted earnings per share were $1.35, a decrease of 10.6% over the prior year. Diluted earnings per share include an unfavorable impact of $0.14 due to declines in foreign exchange rates, primarily in EMEA.

The Company’s effective income tax rate was essentially flat year-over-year at 20.6%.

Balance Sheet

Cash, cash equivalents and investments totaled $946.4 million, a decrease of $94.0 million, or 9.0% from December 31, 2021, primarily as a result of changes in working capital and completing $49.2 million of share repurchases year-to-date.

Inventory was $1.56 billion, an increase of $92.9 million or 6.3% from December 31, 2021. Increased inventory levels primarily reflect growth in AMER.

Share Repurchase

During the second quarter, the Company repurchased nearly 636,000 shares of its Class A common stock for $24.2 million. Year-to-date 2022, the Company has repurchased almost 1.3 million shares of its Class A common stock at a cost of $49.2 million. At June 30, 2022, approximately $450.8 million remained available under the Company’s share repurchase program.

Outlook

For the third quarter of 2022, the Company believes it will achieve sales between $1.80 billion and $1.85 billion and diluted earnings per share of between $0.70 and $0.75. Further, the Company believes that for the fiscal year 2022, it will achieve sales between $7.2 billion and $7.4 billion and diluted earnings per share of between $2.60 and $2.70.

Store Count

Number of Stores

December 31, 2021

Opened

Closed(1)

June 30, 2022

Domestic stores

515

28

(17

)

526

International stores

845

49

(58

)

836

Distributor, licensee and franchise stores

2,946

202

(155

)

2,993

Total Skechers stores

4,306

279

(230

)

4,355

(1)

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

Second Quarter 2022 Conference Call

The Company will host a conference call today at 4:30 p.m. ET / 1:30 p.m. PT to discuss its second quarter 2022 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 July 26, 2022 at 7:30 p.m. ET, through August 9, 2022, at 11:59 p.m. ET. To access the replay, dial 844-512-2921 (U.S.) or 412-317-6671 (International) and use passcode: 13731127.

About SKECHERS U.S.A., Inc.

Skechers U.S.A., Inc., The Comfort Technology Company™, based in Southern California, 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 over 180 countries and territories through department and specialty stores, and direct to consumers through digital stores and 4,355 Company- and third-party-owned physical retail stores. The Company manages its international business through a network of wholly-owned subsidiaries, joint venture partners, and distributors. 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 the Private Securities Litigation Reform Act of 1995, 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," "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; delays or disruptions in our supply chain; international economic, political and market conditions including the effects of inflation around the world, the challenging consumer retail markets in the United States and the impact of Russia’s invasion of Ukraine; 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, 2021 and its quarterly reports on Form 10-Q in 2022. 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

As of

(in thousands)

June 30, 2022

December 31, 2021

ASSETS

Current assets

Cash and cash equivalents

$

751,904

$

796,283

Short-term investments

105,099

98,580

Trade accounts receivable, net

916,784

732,793

Other receivables

55,039

80,043

Inventory

1,563,907

1,470,994

Prepaid expenses and other

177,236

193,547

Total current assets

3,569,969

3,372,240

Property, plant and equipment, net

1,225,529

1,128,909

Operating lease right-of-use assets

1,168,385

1,224,580

Deferred tax assets

452,747

451,355

Long-term investments

89,423

145,590

Goodwill

93,497

93,497

Other assets, net

77,046

75,109

Total non-current assets

3,106,627

3,119,040

TOTAL ASSETS

$

6,676,596

$

6,491,280

LIABILITIES AND EQUITY

Current liabilities

Accounts payable

$

972,399

$

876,342

Accrued expenses

258,640

265,420

Operating lease liabilities

223,230

225,658

Current installments of long-term borrowings

73,414

76,967

Short-term borrowings

1,195

Total current liabilities

1,527,683

1,445,582

Long-term operating lease liabilities

1,049,330

1,094,748

Long-term borrowings

253,260

263,445

Deferred tax liabilities

9,712

11,820

Other long-term liabilities

118,507

133,613

Total non-current liabilities

1,430,809

1,503,626

Total liabilities

2,958,492

2,949,208

Stockholders’ equity

Preferred Stock

Class A Common Stock

135

135

Class B Common Stock

21

21

Additional paid-in capital

402,360

429,608

Accumulated other comprehensive loss

(75,784

)

(48,323

)

Retained earnings

3,089,530

2,877,903

Skechers U.S.A., Inc. equity

3,416,262

3,259,344

Noncontrolling interests

301,842

282,728

Total stockholders' equity

3,718,104

3,542,072

TOTAL LIABILITIES AND EQUITY

$

6,676,596

$

6,491,280

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

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(Unaudited)

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands, except per share data)

2022

2021

2022

2021

Sales

$

1,867,804

$

1,661,871

$

3,687,398

$

3,096,326

Cost of sales

970,225

808,279

1,965,656

1,557,075

Gross profit

897,579

853,592

1,721,742

1,539,251

Operating expenses

Selling

166,609

141,470

274,818

232,795

General and administrative

576,812

510,912

1,116,862

947,578

Total operating expenses

743,421

652,382

1,391,680

1,180,373

Earnings from operations

154,158

201,210

330,062

358,878

Other income (expense)

(19,259

)

2,158

(25,005

)

(12,016

)

Earnings before income taxes

134,899

203,368

305,057

346,862

Income tax expense

28,739

41,545

62,731

70,530

Net earnings

106,160

161,823

242,326

276,332

Less: Net earnings attributable to noncontrolling interests

15,756

24,454

30,699

40,390

Net earnings attributable to Skechers U.S.A., Inc.

$

90,404

$

137,369

$

211,627

$

235,942

Net earnings per share attributable to Skechers U.S.A., Inc.

Basic

$

0.58

$

0.88

$

1.36

$

1.52

Diluted

$

0.58

$

0.88

$

1.35

$

1.51

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

Basic

155,941

155,561

155,969

155,196

Diluted

156,748

156,674

157,074

156,321

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

SUPPLEMENTAL FINANCIAL INFORMATION

(Unaudited)

As previously announced, during the first quarter of 2022 Skechers refined the way it views its business operations and decision-making and now presents its reportable segment results as Wholesale and Direct-to-Consumer. Prior period results have been recast to reflect current reportable segments. There was no impact to the consolidated financial results of the Company as a result of this change.

Segment Information

Three Months Ended June 30,

Change

(in millions)

2022

2021

$

%

Wholesale sales

$

1,140.3

$

964.2

176.1

18.3

Gross profit

414.5

379.4

35.1

9.2

Gross margin

36.3

%

39.4

%

(300

) bps

Direct-to-Consumer sales

$

727.5

$

697.7

29.8

4.3

Gross profit

483.1

474.2

8.9

1.9

Gross margin

66.4

%

68.0

%

(160

) bps

Total sales

$

1,867.8

$

1,661.9

205.9

12.4

Gross profit

897.6

853.6

44.0

5.2

Gross margin

48.1

%

51.4

%

(330

) bps

Six Months Ended June 30,

Change

(in millions)

2022

2021

$

%

Wholesale sales

$

2,391.6

$

1,907.3

484.3

25.4