SKECHERS USA, Inc. (NYSE:SKX), a global footwear leader, today announced financial results for the third quarter ended September 30, 2011.
Net sales for the third quarter of 2011 were $412.2 million, compared to a record $554.6 million in the third quarter of 2010, and income from operations was $2.3 million, compared to $55.6 million in the third quarter of 2010. Net earnings for the quarter were $8.3 million compared to net earnings of $36.4 million in the third quarter of 2010. Net earnings for the third quarter include a $4.6 million tax benefit related to certain research and development tax credits. Net earnings per diluted share were $0.17 on 49.4 million diluted shares outstanding, compared to net earnings per diluted share of $0.74 on 49.2 million diluted shares outstanding for the third quarter of 2010.
"Third quarter 2011 net sales were down 25.7 percent, while our gross margins returned to our historical norm," began David Weinberg, chief operating officer and chief financial officer. "The decrease in revenues is primarily attributable to a combination of comparisons against a record third quarter 2010, the decline in higher priced toning footwear, and lower than expected sales across many of our other SKECHERS footwear lines. We are pleased that we continued to experience growth across much of our international business and that our domestic and international retail sales volume remained fairly constant. The significantly improved gross margin from the previous quarter of this year is a reflection of our reduced inventory levels and more in-line product levels, as well as a normalized flow of our product.”
Gross profit for the third quarter of 2011 was $175.2 million, compared to $252.7 million in the third quarter of 2010. Gross margin was 42.5 percent for the third quarter of 2011, compared to 45.6 percent in the third quarter of 2010. Gross profit for the first nine months of 2011 was $511.1 million, or 38.6 percent of net sales, compared to $727.7 million, or 46.9 percent of net sales, in the first nine months of 2010.
For the nine months ended September 30, 2011, net sales were $1.323 billion compared to net sales of $1.552 billion in the first nine months of 2010. Net loss for the first nine months of 2011 was $9.8 million, which includes a tax benefit of $4.6 million related to certain research and development tax credits, compared to net earnings of $132.9 million in the first nine months of 2010. Net loss per diluted share in the first nine months of 2011 was $0.20 per share on 48.3 million diluted shares outstanding, compared to net earnings of $2.71 per share on 49.0 million diluted shares outstanding for the same period last year.
Robert Greenberg, SKECHERS chief executive officer, commented: "Last year we were experiencing record sales growth as the leaders of an explosive new category. This year we are leveraging that learning– both in product development and distribution. We created many new offerings in our Fitness division, which delivered earlier this year, and have our first true performance footwear line delivering to our accounts this quarter. Early reads on this line in our own retail stores has been strong, and we believe this performance product will also experience solid sell throughs in our key accounts. Inspired by our fitness footwear, we are developing fresh looks in our classic athletic lifestyle footwear as well as in our SKECHERS Kids lines, with commercials to support this business for Spring 2012. We have created substantial buzz with consumers thanks to the star power of Kim Kardashian, and are looking forward to growing our relationship with Dancing with the Stars host Brooke Burke, who is appearing in SKECHERS Fitness print and television campaigns around the world. The signing of elite runner Meb Keflezighi for our SKECHERS GOrun footwear has helped us to elevate the profile of this performance line. He will be competing in our footwear in the New York Marathon next week. While we develop and market new product, we are continuing to look for new opportunities to grow our business, including in the international arena where we are in the process of transitioning one of our largest distributors to a subsidiary. We are looking forward to international growth, opening new retail stores around the world, and to delivering fresh product to the market this quarter and next year."
Mr. Weinberg added: "We believe that we will continue to face challenges in the fourth quarter of 2011, but we are pleased with the strides we have made to better position our business for 2012. These include significantly reducing our selling expenses, consolidating our North American distribution facilities into one building and reducing excess inventory. We are also evaluating our overhead to better control spending while seeking new expansion opportunities in product development, as well as international and retail sales. As we look forward to 2012, we believe SKECHERS continues to be a relevant brand globally, and there are many opportunities to grow our business in the future."
SKECHERS USA, Inc., based in Manhattan Beach, California, designs, develops and markets a diverse range of footwear for men, women and children under the SKECHERS name, as well as under several uniquely branded names. SKECHERS footwear is available in the United States via department and specialty stores, Company-owned SKECHERS retail stores and its e-commerce website, as well as in over 100 countries and territories through the Company’s global network of distributors, and subsidiaries in Canada, Brazil, Chile, and across Europe, as well as through joint ventures in Asia. For more information, please visit www.skechers.com.
This announcement may contain forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate or simply state future results, performance or achievements, and can be identified by the use of forward looking language such as "believe," "anticipate," "expect," "estimate," "intend," "plan," "project," "will be," "will continue," "will result," "could," "may," "might," or any variations of such words with similar meanings. Any such statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected in forward-looking statements. Factors that might cause or contribute to such differences include international, national and local general economic, political and market conditions including the global economic slowdown and market instability; entry into the highly competitive performance footwear market; sustaining, managing and forecasting costs and proper inventory levels; losing any significant customers, decreased demand by industry retailers and cancellation of order commitments due to the lack of popularity of particular designs and/or categories of products; maintaining brand image and intense competition among sellers of footwear for consumers; anticipating, identifying, interpreting or forecasting changes in fashion trends, consumer demand for the products and the various market factors described above; sales levels during the spring, back-to-school and holiday selling seasons; and other factors referenced or incorporated by reference in the Company’s annual report on Form 10-K for the year ended December 31, 2010 and its quarterly report on Form 10-Q for the three months ended June 30, 2011. The risks included here are not exhaustive. The Company operates in a very competitive and rapidly changing environment. New risks emerge from time to time and the companies cannot predict all such risk factors, nor can the companies assess the impact of all such risk factors on their respective businesses or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, you should not place undue reliance on forward-looking statements as a prediction of actual results. Moreover, reported results should not be considered an indication of future performance.
SKECHERS U.S.A., INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
|Cash and cash equivalents||$||247,974||$||233,558|
|Trade accounts receivable, net||244,977||266,057|
|Prepaid expenses and other current assets||78,168||53,791|
|Deferred tax assets||11,720||11,720|
|Total current assets||828,335||973,364|
|Property and equipment, at cost less accumulated depreciation and amortization||382,418||293,802|
|Intangible assets, less applicable amortization||6,192||7,367|
|Deferred tax assets||12,323||12,323|
|Other assets, at cost||19,037||17,938|
|LIABILITIES AND EQUITY|
|Current installments of long-term borrowings||$||9,974||$||11,984|
|Total current liabilities||226,032||307,310|
|Long-term borrowings, excluding current installments||78,974||51,650|
|Deferred tax liabilities||73||-|
|Skechers U.S.A., Inc. equity||904,956||908,203|
|TOTAL LIABILITIES AND EQUITY||$||1,248,305||$||1,304,794|
SKECHERS U.S.A., INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
|Three Months Ended September 30,||Nine Months Ended September 30,|
|Cost of sales||236,988||301,975||811,633||824,535|
|General and administrative||136,364||139,455||418,312||389,241|
|Income (loss) from operations||2,294||55,568||(31,349||)||195,359|
|Other income (expense):|
|Earnings (loss) before income taxes||1,703||52,909||(35,509||)||195,551|
|Income tax expense (benefit)||(6,653||)||16,330||(25,966||)||62,532|
|Net income (loss)||8,356||36,579||(9,543||)||133,019|
|Less: Net income (loss) attributable to noncontrolling interest||71||201||280||108|
|Net earnings (loss) attributable to Skechers U.S.A., Inc.||$||8,285||$||36,378||$||(9,823||)||$||132,911|
|Net earnings (loss) per share attributable to Skechers U.S.A., Inc.:|
|Weighted average shares used in calculating earnings (loss) per share attributable to Skechers U.S.A., Inc.:|