Earnings call transcript: Skechers Q1 2025 results show steady growth
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Overview
The earnings call reveals several challenges: increased operating expenses, a decline in gross and operating margins, and heightened inventory levels. The lack of a clear shareholder return plan and management's vague responses in the Q&A further contribute to uncertainty. Despite revenue growth, the flat EPS and cautious pricing strategy due to tariffs suggest pressure on profitability. The absence of new partnerships or positive guidance adjustments, coupled with the potential impact of tariffs in upcoming quarters, indicates a likely negative stock price reaction.
Key Financial Performance
Revenue $2,410,000,000, an increase of 7.1% year-over-year, driven by strong demand across both wholesale and direct-to-consumer segments.
Earnings Per Share $1.34, essentially flat compared to the prior year.
Direct to Consumer Sales $879,400,000, a 6% increase year-over-year, with domestic growth of 11%.
Wholesale Sales $1,530,000,000, an increase of 7.8% year-over-year, with international sales up 9.5%.
Gross Margin 52%, down 50 basis points year-over-year, primarily due to lower average selling prices from higher promotions in certain markets.
Operating Expenses 41% of sales, an increase of 180 basis points year-over-year.
Earnings from Operations $265,100,000, a decrease of 11% compared to the prior year.
Operating Margin 11%, compared to 13.3% last year.
Cash and Cash Equivalents $1,240,000,000, with total liquidity of $1,850,000,000 including the revolving credit facility.
Inventory $1,770,000,000, an increase of 30% year-over-year, primarily due to elongated transit times.
Capital Expenditures $147,100,000, with significant investments in distribution infrastructure and new store openings.
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Operating Highlights
New Product Initiatives: Skechers continues to expand its technical performance division, signing elite athletes to provide feedback on comfort footwear, including footballers Isco Alarcon and Nicolo Pasili, and basketball pro Norman Powell.
Comfort Technology: Skechers emphasizes its proprietary technologies such as hands-free slip-ins, ArchFit, and StretchFit, which are central to its product offerings.
Market Expansion: Skechers opened 51 company-owned stores in Q1 2025, including 15 in China and 13 in the U.S., and plans to open 150 to 170 stores worldwide in 2025.
International Growth: International sales accounted for 65% of total business, with EMEA growing 14% and The Americas 8.3%. Excluding China, APAC sales grew 12%.
Operational Efficiencies: Skechers is investing in expanding distribution centers in the U.S., China, and Europe to enhance logistics and manage growth.
Inventory Management: Skechers is actively managing inventory levels, with a 30% increase year-over-year, primarily due to transit delays.
Strategic Shifts: Skechers is focused on enhancing its product offerings and marketing strategies while navigating macroeconomic uncertainties.
Tariff Management: Skechers is addressing tariff impacts through cost-sharing with vendors, sourcing optimization, and potential price adjustments.
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Risk or Challenges
Macroeconomic Uncertainty: The company is facing increasing macroeconomic uncertainty and waning consumer sentiment, which could impact sales and growth.
China Market Challenges: Sales in the APAC region decreased by 2.6%, primarily due to soft consumer spending in China, which poses a risk to overall performance.
Tariff and Trade Issues: The company is actively managing tariff challenges by utilizing cost sharing with vendors, sourcing optimization, and price adjustments, which may affect profitability.
Inventory Management: Inventory levels increased by 30% year-over-year, primarily due to elongated transit times, which could lead to excess inventory if demand does not meet expectations.
Consumer Demand Volatility: There is uncertainty regarding consumer behavior and spending power, particularly in the U.S. market, which could affect sales performance.
Operational Costs: Operating expenses increased, driven by higher labor and rent costs, which could pressure margins.
Global Trade Environment: The current global trade environment presents uncertainty similar to the initial phase of the COVID pandemic, complicating planning and forecasting.
Pricing Strategy: The company is cautious about raising prices due to increased duties, as it may negatively impact consumer demand.
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Guidance & Outlook
Revenue Growth: Skechers achieved record first quarter sales of $2,410,000,000, a 7% increase year-over-year, with international sales representing 65% of total business.
Store Expansion: Skechers plans to open 150 to 170 company-owned stores worldwide in 2025, with 51 stores opened in the first quarter.
Investment Priorities: Focus on expanding distribution centers in the U.S., China, and Europe, enhancing product offerings, and growing direct-to-consumer capabilities.
Athlete Partnerships: Continued expansion of partnerships with elite athletes to enhance brand credibility and product development.
Revenue Guidance: No specific revenue or earnings guidance provided due to current macroeconomic uncertainties.
Market Outlook: Expectations for modest performance in the U.S. and China, while many international markets are anticipated to continue growth.
Capital Expenditures: Capital expenditures for the quarter were $147,100,000, with a focus on distribution infrastructure and store openings.
Gross Margin: Gross margin was 52%, down 50 basis points year-over-year, primarily due to lower average selling prices and increased promotions.
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Shareholder Return Plan
Shareholder Return Plan: Skechers has not announced any specific share buyback or dividend program during this earnings call. The focus remains on maintaining a strong balance sheet and investing in growth opportunities.
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Key Q&A
Q:Could you just talk a little bit more about China specifically? Just give us an idea of how much of the company’s production is going to happen in China this year and what percent of that is coming to The U. S?
A:We’re not in the habit of giving sourcing percentages by destination market. However, we’re looking at the same three levers to deal with the higher tariffs: resourcing, vendor cost sharing, and pricing.
Q:Could you guys potentially unpack that a little bit more for the audience like what markets are you seeing notable volatility? Is it within The United States, Europe, China?
A:The majority of markets performed very well this quarter, particularly outside of The United States. The markets with the most uncertainty are The United States and China.
Q:How should we think about those three levers? You listed them in order. Should we think about cost sharing with your partners as the biggest lever and then pricing being the last lever?
A:We did not list those levers in order of importance. They are all being actively managed.
Q:Is there any under any circumstance, is it possible to be so aggressive about redirecting all the China sourcing to non U. S. locations?
A:We’re looking at how we optimize the global cost of tariffs in all markets when we look to move production around.
Q:How do you think about the flow of how long you have this window of non-tariffed inventory before it starts becoming tariff?
A:We will begin to feel the impacts of the current tariff regime in the tail end of the second quarter and fairly acutely in the third quarter.
Q:How do you feel about the consumers’ ability to absorb price increases?
A:We wouldn’t be raising prices unless it was necessary due to increased duties.
Q:How quickly are you looking to make a decision whether you’re going to raise prices to protect your earnings power?
A:It’s an in-process motion. It’s not a given day when you decide to raise prices.
Q:Do you see sales moderate in April? Or is this a concern about what can transpire in the business going forward?
A:So far in April, we’ve seen a fairly consistent trend from the back half of Q1.
Q:Can you talk about what other projects you guys are considering to pull back on?
A:We haven’t pulled back on anything yet. We’re evaluating all alternatives.
Q:How do you think about the elasticity and your ability to push price and not have it negatively impact the volume of pairs that you’re selling?
A:We’re not eager to raise prices. We wouldn’t be doing so were it not for the amplified duty structures.
Q:Review of Unclear Management Responses
A:Management avoided giving specific percentages regarding sourcing by destination market and did not provide a clear timeline for when they would make decisions on price increases. Additionally, they did not specify which projects might be pulled back on, leaving it vague.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Director International
International Merchandising
Merchandising Skechers
Officer Skechers
Senior Director
Skechers Hi
Skechers lot
Speaker
States China
Suez Canal
Vandermel Chief
action
amount
capability
confidence
cost sharing
customer
decision
dollar
duty
dynamic
franchise
impact
kid
lever
luck line
majority
manufacturing
power
pricing
process
production
sense
signal
structure
tariff
third United
trade
unit
volatility
week
SKX Transcript
Earnings call transcript: Skechers Q1 2025 results show steady growth
Unknown4-24
The earnings call reveals several challenges: increased operating expenses, a decline in gross and operating margins, and heightened inventory levels. The lack of a clear shareholder return plan and management's vague responses in the Q&A further contribute to uncertainty. Despite revenue growth, the flat EPS and cautious pricing strategy due to tariffs suggest pressure on profitability. The absence of new partnerships or positive guidance adjustments, coupled with the potential impact of tariffs in upcoming quarters, indicates a likely negative stock price reaction.
Skechers U.S.A., Inc. (SKX) Q1 2025 Earnings Call Transcript
Unknown4-24
The earnings call reveals several concerning factors: increased operating expenses, currency risks, economic pressures in China, and a refusal to provide guidance due to market uncertainty. Despite a slight revenue increase, gross margins declined, and operating expenses rose. The Q&A highlighted uncertainties in China and the U.S. markets, with management offering unclear responses. No share repurchase program was announced, and inventory levels are high. These factors, along with the refusal to give guidance and increased expenses, suggest a negative outlook for the stock price over the next two weeks.
Earnings call transcript: Skechers Q4 2024 misses EPS forecast, stock dips
Positive2-6
The earnings call reveals strong financial performance with record sales and EPS growth, indicating effective market strategies and product innovation. Despite elevated inventory levels, management maintains a positive outlook, with stable margins and a robust share repurchase program. The Q&A section highlights broad international growth, excluding China, and a commitment to sustain operating margins. While FX impacts and SG&A pressures are noted, the overall sentiment remains positive due to strong guidance and shareholder returns.
Skechers U.S.A., Inc. (SKX) Q3 2024 Earnings Call Transcript
Positive10-24
The earnings call reflects strong financial performance with record sales and a significant increase in earnings per share. Despite some concerns about China, the company has raised its guidance, indicating confidence in other markets. The share repurchase plan and strategic focus on India further support a positive outlook. The Q&A highlights management's optimism and strategic initiatives. Overall, the positive financial results, optimistic guidance, and strategic initiatives outweigh the risks, suggesting a positive stock price movement.
SKX Report
Frequently Asked Questions
Where does this earnings call transcript come from?
All transcripts are sourced directly from the official live webcast or the company’s official investor relations website. We use the exact words spoken during the call with no paraphrasing of the core discussion.
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Why do some answers appear as “Unclear” or “Inaudible”?
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Who creates the AI Summary and Key Q&A highlights shown above the transcript?
They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
