Skechers U.S.A., Inc. (SKX) Q3 2024 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
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.
Key Financial Performance
Sales $2.35 billion, an increase of 16% or $323 million year-over-year, driven by strong international growth across segments and continued momentum in domestic wholesale.
Earnings per diluted share $1.26, a 35% increase year-over-year, attributed to record sales and strong performance across various segments.
Direct-to-Consumer sales $931.7 million, a 9.6% increase year-over-year, primarily due to a 14% increase internationally and a 3.7% increase domestically.
Wholesale sales $1.42 billion, a 21% increase year-over-year, driven by a 26% increase domestically and an 18% increase internationally.
Gross margin 52.1%, down 80 basis points year-over-year, primarily due to a lower average selling price from slightly higher promotional activity.
Operating expenses 42.2% of sales, decreased 30 basis points year-over-year, with selling expenses increasing by 20 basis points due to brand building investments.
Earnings from operations $233.4 million, a 9.5% increase year-over-year, with an operating margin of 9.9% compared to 10.5% last year.
Other income $11.9 million, an increase of $18.9 million year-over-year, driven by favorable foreign currency exchange rates and increased interest income.
Effective tax rate 14.7%, compared to 19.5% in the prior year, reflecting the release of certain allowances and other provision adjustments.
Inventory $1.71 billion, an increase of 24% or $324.8 million year-over-year, due to higher inventory levels in China and elevated in-transit inventory.
Accounts receivable $1.19 billion, an increase of $257.7 million year-over-year, reflecting higher wholesale sales.
Cash and cash equivalents $1.6 billion, maintaining liquidity of $2.42 billion including a revolving credit facility.
Capital expenditures $113.9 million, focused on new store openings and enhancing Direct-to-Consumer technologies.
Share repurchase Approximately 1.4 million shares repurchased at a cost of $90 million.
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Operating Highlights
New Product Launches: Skechers introduced new categories in the Performance division, including technical running, golf, and pickleball footwear, and is expanding into team sports.
Marketing Campaigns: Skechers launched campaigns featuring ambassadors like Howie Mandel and Ruud Gullit, and highlighted athletes like Snoop Dogg and Joel Embiid during the Paris Games.
Market Expansion: Skechers opened 68 company-owned stores in Q3, including 20 in China and 17 in the U.S., and plans to open 55 to 60 more in Q4.
International Sales Growth: International sales increased 16%, with EMEA growing 30% and India rebounding with 24% growth.
Operational Efficiencies: Skechers achieved a decrease in operating expenses as a percentage of sales to 42.2%, driven by efficiencies in the distribution network.
Strategic Shifts: Skechers is focusing on enhancing its product offering and expanding its retail footprint globally, while navigating challenges in the Chinese market.
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Risk or Challenges
Market Conditions in China: Sales in China declined 5.7% year-over-year due to macroeconomic pressures impacting consumer spending, leading to below-expectation results for the quarter.
Supply Chain Challenges: Despite improvements in supply chain delays in Europe, challenges remain in certain markets, particularly in China, affecting overall sales performance.
Consumer Discretionary Spending: There is pressure on consumer discretionary spending in China, which is impacting sales and leading to modest expectations for future performance.
Inventory Levels: Inventory increased by 24% to $1.71 billion, attributed to higher levels in China and elevated in-transit inventory, indicating potential supply chain issues.
Regulatory Issues in India: Skechers is working closely with local regulators in India to advance their local sourcing strategy, which could pose challenges if not managed effectively.
Economic Factors: The overall economic environment, particularly in China, poses risks to sales growth and consumer demand, necessitating adjustments in near-term plans.
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Guidance & Outlook
Sales Growth: Achieved record sales of $2.35 billion, a 16% increase, with significant growth in both Wholesale (21%) and Direct-to-Consumer (9.6%).
Product Innovation: Focus on new product lines and comfort technology, including performance footwear for team sports and lifestyle products.
Market Expansion: Continued investment in international markets, particularly in India and EMEA, with a focus on local sourcing and new sports categories.
Store Expansion: Opened 68 company-owned stores in Q3, with plans to open 55 to 60 more in Q4.
Brand Partnerships: Engaged high-profile ambassadors like Snoop Dogg and Joel Embiid to enhance brand visibility.
2024 Sales Guidance: Expect sales between $8.925 billion and $8.975 billion, implying a 12% growth at midpoint.
Earnings Per Share Guidance: Projected earnings per diluted share between $4.20 and $4.25, representing a 21% growth at midpoint.
Q4 Sales Expectations: Anticipate Q4 sales between $2.165 billion and $2.215 billion.
Capital Expenditures: Expected capital expenditures between $375 million and $400 million for the year.
Long-term Sales Target: Committed to achieving $10 billion in sales by 2026.
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Shareholder Return Plan
Share Repurchase: During the quarter, we repurchased approximately 1.4 million shares of our Class A common stock at a cost of $90 million.
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Key Q&A
Q:Can you elaborate on where the growth in domestic wholesale is coming from? What categories?
A:The primary driver is the ability of customers to fully embrace our comfort technology products, which are succeeding in the market. This growth follows a year of maturation and increased marketing efforts.
Q:Can you tell us more about the progress in India and its importance for future growth?
A:India is a strategic priority for the company, and we've been growing well there for the last 8-10 years. Recent regulatory changes affected our ability to respond, but we are optimistic about future growth.
Q:What drove the upside for the top-line guidance despite muted expectations for China?
A:The strength of domestic and international markets outside of China, with double-digit wholesale growth across regions, gave us confidence to raise guidance.
Q:Can you provide more color on the gross margin and expectations for the fourth quarter?
A:We expect gross margins to be flat to slightly up compared to last year, despite some pressures from increased freight and discounting.
Q:What is the state of inventory heading into the holidays?
A:We feel good about inventory levels, which are balanced overall, with some elevated in-transit numbers. There are no significant imbalances.
Q:Can you discuss the pricing dynamics for the fourth quarter?
A:Promotionality is stable, and we expect ASPs to adjust due to last year's comparisons, with growth largely volume-related.
Q:What is the status of local sourcing in India?
A:We are making progress with local sourcing, opening factories, and increasing production capacity, but we still need to mix in some imports.
Q:What are the drivers behind the 30% growth in EMEA?
A:Consumer demand and the strength of our product and advertising have driven growth, despite challenges in the region.
Q:What are your expectations for inventory levels in China?
A:China was the largest driver of inventory increases, and we expect to normalize inventory levels based on upcoming sales activity.
Q:What are the expectations for operating margins in the fourth quarter?
A:We expect to deliver double-digit operating margins this year, which is a significant achievement.
Q:Review of Unclear Management Responses
A:Management avoided giving a direct answer regarding the size of the market in India and the specifics of the inventory situation in China. Their responses lacked clarity on the exact impact of macro conditions on sales in China and the specific expectations for fourth quarter operating margins.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Bank
China pressure
China transit
DTC
Direct Consumer
EMEA
GA
India market
Singles Day
Wholesale
adjustment
base
breadth
channel market
couple
door
driver
ecommerce
holiday season
idea
inventory market
lifestyle
luck line
market China
market consumer
market way
network
product consumer
product line
product market
production capacity
progress
promotion
regulator
sale leverage
space
sport
stage
supplier
technology category
top
value
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.
How soon is the transcript available after the earnings call ends?
Full verbatim transcripts are typically published within 4–12 hours after the call ends. Same-day availability is guaranteed for all S&P 500 and most mid-cap companies.
Is the transcript edited or altered in any way?
No material content is ever changed or summarized in the “Full Transcript” section. We only correct obvious spoken typos (e.g., “um”, “ah”, repeated 10 times”, or clear misspoken ticker symbols) and add speaker names/titles for readability. Every substantive sentence remains 100% as spoken.
Why do some answers appear as “Unclear” or “Inaudible”?
When audio quality is poor or multiple speakers talk over each other, we mark the section instead of guessing. This ensures complete accuracy rather than introducing potential errors.
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.
