Release Date: October 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Skechers USA Inc (SKX, Financial) achieved a new quarterly sales record of $2.35 billion, marking a 16% increase.
- Earnings per diluted share rose by 35% to $1.26, showcasing strong financial performance.
- The company experienced balanced growth internationally (16%) and domestically (15%), with significant increases in both wholesale (21%) and direct-to-consumer (9.6%) segments.
- Skechers USA Inc (SKX) saw impressive growth in EMEA (30%) and the Americas (14%), driven by strong consumer demand and improved product availability.
- The company is expanding its product line with new categories in the Skechers Performance division, targeting a broader audience with technical running, golf, and pickleball footwear.
Negative Points
- Sales in China declined by 5.7% year-over-year due to macroeconomic pressures, impacting overall performance.
- Gross margin decreased by 80 basis points to 52.1%, primarily due to lower average selling prices and increased promotional activity.
- Inventory levels increased by 24%, driven by higher inventory in China and elevated in-transit inventory, particularly in EMEA.
- The company faces challenges in certain markets, especially in China, where consumer discretionary spending is under pressure.
- Operating margin decreased to 9.9% from 10.5% in the previous year, reflecting some operational challenges.
Q & A Highlights
Q: Can you elaborate on the drivers behind the 26% domestic wholesale growth and the categories contributing to this increase?
A: John Vandemore, CFO: The growth is primarily due to the increased capacity of our customers to embrace our comfort technology products, which was not possible last year due to inventory constraints. The success of these products in the market, supported by our marketing efforts, has driven this growth.
Q: How has the market in India progressed recently, and what is its significance for Skechers' future growth?
A: John Vandemore, CFO: India is a strategic priority, and we've seen significant progress due to improved collaboration with local teams and regulators. While we won't disclose market size, India has been growing well for the past 8-10 years, and we remain optimistic about its future potential.
Q: What factors contributed to the raised top-line guidance despite muted expectations for China?
A: John Vandemore, CFO: The strength of our performance in other international markets and domestically has allowed us to raise guidance. While China remains a challenge, the overall brand strength and product demand have been robust, supporting our confidence in raising the guidance.
Q: Can you provide more details on the gross margin decline and expectations for the fourth quarter?
A: John Vandemore, CFO: The 80 basis point decline in gross margin was due to increased promotional activity and lower average selling prices, particularly in China. For the fourth quarter, we expect gross margins to be flat or slightly up compared to last year, considering the freight impacts and market conditions.
Q: How is Skechers addressing the inventory situation in China, and what are the expectations for normalization?
A: John Vandemore, CFO: The inventory increase in China is primarily due to macroeconomic conditions. We are actively managing this by potentially moving inventory globally. The resolution will depend on sales activity over the next few months, particularly around Singles Day.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
