Skechers U.S.A., Inc. raised its full-year outlook after reporting earnings in the fiscal second quarter that ended June 30, which came in slightly ahead of company guidance on direct-to-consumer strength. Earnings in the quarter slipped 5.1 percent on a 7.2 percent revenue gain.

Sales of $2.16 billion topped company guidance in the range of $2.175 and $2.225 billion. EPS of 91 cents came in ahead of guidance between 85 cents and 90 cents. Skechers also announced a new $1 billion share repurchase program.

“Skechers achieved a new second-quarter sales record of $2.16 billion driven by the strong demand for our diverse portfolio of comfortable and innovative footwear,” said David Weinberg, chief operating officer of Skechers. “The growth resulted from sales increases of 9 percent in Direct-to-Consumer and 6 percent in Wholesale, as well as increases of 7 percent internationally and 8 percent domestically. We continued to achieve growth across all regions, including 7 percent in the Americas, 14 percent in Europe, the Middle East, and Africa and 2 percent in Asia Pacific. International direct-to-consumer and domestic wholesale were particularly bright spots, increasing 15 percent and 14 percent respectively. These international increases are noteworthy given substantial headwinds from foreign currency, a lackluster 6-18 in China, and supply chain disruptions related to the Suez Canal crisis. That said, we are extremely encouraged by the demand for Skechers product as demonstrated in second-half orders, which has led us to raise our full-year outlook for sales and earnings. As we look to the remainder of the year and beyond, we remain focused on enhancing our global infrastructure, managing inventory levels, and driving efficiencies to achieve profitable growth.”

“This quarter marked the 25th anniversary of our initial public offering. As we celebrated this event, we also achieved record second-quarter sales and further solidified our position as the third largest athletic footwear company in the world by continuing to deliver comfortable and innovative footwear worldwide,” began Robert Greenberg, CEO of Skechers. “I couldn’t be prouder of the accomplishments of the entire Skechers organization and appreciative of our strong partnerships with our customers and growing roster of elite ambassadors, such as the recently signed Philadelphia 76ers basketball star Joel Embiid, as well as collaborations with distinguished brands such as John Deere. Team Skechers now includes numerous athletes competing on global stages, including Golden Boot winner, Euro Cup finalist and Captain of the England football team, Harry Kane; recently announced Skechers ambassador and 2022-23 NBA most valuable player Joel Embiid, who is playing for the United States; British golfer Matt Fitzpatrick; Canadian golfer Brooke Henderson; Spanish race walker Diego Garcia and newly signed American beach volleyball players Andy Benesh and Miles Partain, who will be playing in Skechers branded uniforms. This diverse team of world-class athletes and celebrities, including Martha Stewart and Snoop Dogg, drive awareness and purchase intent for Skechers. Our first commercial featuring Harry Kane aired during the second quarter, and we recently completed several new campaigns featuring him alongside former UK footballer and Skechers ambassador Jamie Redknapp and superstar Snoop Dogg, who will be a broadcast commentator in Paris. Additionally, our football footwear launched globally this month, Skechers x John Deere is launching next month, and basketball footwear will be released globally in August. We are committed to strategically delivering comfort footwear and apparel for all walks of life, supporting our vast offering with targeted marketing, and building our in-store presence globally.”

Second Quarter 2024 Financial Results
Second quarter sales increased 7.2 percent to $2.16 billion as a result of a 6.9 percent increase internationally and a 7.7 percent increase domestically. DTC increased 9.2 percent, and Wholesale increased 5.5 percent. On a constant currency basis, sales increased 8.7 percent.

Wholesale sales grew $59.1 million, or 5.5 percent, including increases in AMER of 10.3 percent and EMEA of 3.9 percent, partially offset by a decrease in APAC of 2.6 percent. Wholesale volume increased 6.4 percent and average selling price declined 0.8 percent.

DTC sales grew $86.0 million, or 9.2 percent, including increases in EMEA of 40.6 percent, AMER of 4.1 percent, and APAC of 5.8 percent. DTC volume increased 10.2 percent and average selling price decreased 1.0 percent.

Gross margin was 54.9 percent, an increase of 220 basis points, primarily due to lower costs per unit, driven by lower freight and a favorable mix of DTC volume.

Operating expenses increased $135.1 million, or 16.0 percent, and as a percentage of sales increased 340 basis points to 45.3 percent. Selling expenses increased $48.8 million, or 26.1 percent, and as a percentage of sales increased 160 basis points to 10.9 percent. The increase was due to higher demand creation expenditures.

General and administrative expenses increased $86.4 million, or 13.2 percent, and as a percentage of sales increased 180 basis points to 34.4 percent. Increased expenses were primarily driven by increased labor and facility costs, including rent and depreciation.

Earnings from operations decreased $11.2 million, or 5.1 percent, to $206.5 million.

Net earnings were $140.3 million, and diluted earnings per share were $0.91 compared with prior year net earnings of $152.8 million and diluted earnings per share of $0.98.

The company’s effective income tax rate in the second quarter was 19.7 percent.

“In the face of significant operational and foreign exchange headwinds, Skechers delivered meaningful sales growth during the quarter, demonstrating the strength of our brand as the comfort technology leader,” stated Skercher’s CFO, John Vandemore. “Demand for our innovative and diverse product portfolio remains robust, leading us to raise both sales and earnings expectations for the full year. We remain committed to and confident of achieving our long-term target of $10 billion in sales by 2026 and, with a new $1 billion share repurchase authorization, continuing to return cash to shareholders in a disciplined manner.”

Six Months 2024 Financial Results
Year-to-date sales increased 9.8 percent to $4.41 billion, reflecting an 11.1 percent increase in international sales and a 7.8 percent increase domestically. DTC increased 12.7 percent, and Wholesale increased 7.9 percent. On a constant currency basis, sales increased 11.0 percent.

Wholesale sales increased $186.2 million, or 7.9 percent, due to increases in AMER of 8.0 percent, EMEA of 8.4 percent, and APAC of 6.7 percent. Wholesale volume increased 8.3 percent, and the average selling price declined 0.4 percent.

DTC sales grew $208.6 million, or 12.7 percent, due to increases in EMEA of 48.3 percent, APAC of 10.7 percent, and AMER of 6.8 percent. DTC volume increased 12.5 percent, and the average selling price increased 0.2 percent.

Gross margin was 53.7 percent, an increase of 290 basis points, due to lower costs per unit, driven by lower freight.

Operating expenses increased $262.9 million or 16.5 percent. As a percentage of sales, operating expenses increased 240 basis points to 42.2 percent. Selling expenses increased $76.7 million or 24.3 percent, primarily due to higher global demand creation expenditures. General and administrative expenses increased $186.3 million or 14.5 percent, primarily driven by labor and increased facility costs, including rent and depreciation.

Earnings from operations increased $64.0 million to $505.3 million, resulting in an operating margin of 11.5 percent. Net earnings were $346.9 million, and diluted earnings per share were $2.24, an increase of 12.0 percent over the prior year.

The company’s effective income tax rate was 19.3 percent.

Balance Sheet
Cash, cash equivalents and investments totaled $1.55 billion, an increase of $161.4 million, or 11.6 percent, from December 31, 2023, due to earnings and proceeds from borrowings of $63.9 million, partially offset by capital expenditures of $169.5 million and $120.0 million of share repurchases.

Inventory was $1.51 billion, a decrease of $10.9 million or 0.7 percent from December 31, 2023.

Share Repurchase
During the second quarter, the company repurchased 0.9 million shares of its Class A common stock at a cost of $60.0 million.

On July 23, 2024, the company’s Board of Directors authorized a share repurchase program effective July 25, 2024, pursuant to which the company may, from time to time, purchase shares of its Class A common stock for an aggregate repurchase price not to exceed $1.0 billion. The new share repurchase program expires on July 25, 2027, and does not obligate the company to acquire any particular amount of shares. The new share repurchase program replaces the previous program authorized in 2022.

Outlook
For the third quarter of 2024, the company believes it will achieve sales between $2.30 and $2.35 billion and diluted earnings per share of between $1.10 and $1.15. Further, the company believes that for the fiscal year 2024, it will achieve sales between $8.875 and $8.975 billion and diluted earnings per share between $4.08 and $4.18. Previously, Skechers forecasted sales between $8.725 and $8.875 billion and diluted earnings per share of between $3.95 and $4.10.

Image courtesy Skechers x Snoop Dog