Skechers International Inc. reported record quarterly sales of $2.025 billion in its third quarter 2023 earnings conference call, marking a significant milestone for the global footwear brand. The company also announced plans for expansion and collaboration, including the release of three new capsules from their Snoop Dogg partnership, the launch of Skechers Football and Basketball, and collaborations with Martha Stewart and the Rolling Stones.
Key takeaways from the earnings call include:
- Record Q3 sales of $2.025 billion and earnings per share of $0.93.
- Gross margin for Q3 stood at 52.9%, a 590 basis point increase from the previous year.
- The company saw robust growth in most markets, including an 18% sales increase in China.
- Skechers reported a decrease in inventory by 22% and ended the quarter with $1.27 billion in cash.
- The company expects full-year sales to be between $7.95 billion and $8.05 billion, with net earnings per share between $3.33 and $3.43.
- Skechers aims to reach $10 billion in sales by 2026 and plans to invest in its direct-to-consumer business and global brand presence.
Skechers has been successful in entering new markets, such as pickleball, running, soccer, and basketball, and attracting the support of athletes like Harry Kane and Terance. The company emphasized the quality and comfort of its shoes and its intention to expand into different price points and demographics.
The company reported a 7% increase in sales in the Americas and a 24% growth in their Direct-to-Consumer segment. However, wholesale sales decreased by 1%, primarily due to lower distributor sales. Skechers remains cautious about the upcoming holiday period and the potential for early spring sales due to the unpredictable macroeconomic environment and consumer spending.
Skechers also revealed plans to bring in inventory earlier in 2024 to be prepared for potential demand. The company expects margin expansion beyond this year by increasing their mix of Direct-to-Consumer and international Wholesale business. They also anticipate some lingering benefits from lower costs in early 2024.
The company highlighted the significant increase in gross margin year-over-year, attributed to cost reductions and selling more profitable products. It expects these factors to continue contributing to margin improvement, along with a focus on selling higher-priced products and managing promotions.
Skechers has made significant progress in reducing inventory levels and expects to finish 2023 with inventory down by 1/3 in both Europe and the Americas. The company feels well-positioned for the holiday season and early 2024.
The company also discussed the performance of its traffic and sales growth. While traffic has declined in some areas, the company has made up for it through increased conversion rates and average order value. Skechers has made investments in new categories, distribution centers, and store openings, which may impact operating margin in the short term. They are also overinvesting in sales and marketing to promote their unique Hands-Free technology.
Skechers did not provide specific numbers for APAC excluding distributors but noted that there was less disparity between growth with or without distributors in that region. The company plans to gradually expand distribution worldwide and capture more consumers, focusing on building a grassroots following and prioritizing product quality and technology.
InvestingPro Insights
InvestingPro's real-time data on Skechers International Inc. (SKX) reveals a market cap of $7160M USD and a P/E ratio of 13.54, indicating a relatively low valuation in comparison to earnings. The company has also demonstrated a stable revenue growth of 9.65% over the last twelve months as of Q3 2023, reaching a total of $7918.19M USD.
Two key InvestingPro Tips for SKX include the company's high return on invested capital and the fact that its liquid assets exceed short term obligations, which suggests financial stability. However, it's worth noting that 3 analysts have revised their earnings downwards for the upcoming period and the company's revenue growth has been slowing down recently.
For a deeper dive into SKX and to discover more InvestingPro Tips, visit InvestingPro. With InvestingPro, you can access hundreds of additional tips and real-time data metrics to make informed investment decisions. Check out our pricing plans to take advantage of this valuable resource.
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