SKECHERS U.S.A., Inc., a global footwear leader, announced financial results for the first quarter ended 31st March, 2021.
“Skechers new sales record in the first quarter is a remarkable achievement, especially given the lockdown measures in many key countries, including across Europe,” began Robert Greenberg, Chief Executive Officer of Skechers.
“This significant growth is the result of continued demand for Skechers product as consumers desire comfort and quality in their footwear and walking remains a top COVID-19 pandemic activity. With warmer weather and increased vaccination rates around the world, traffic is improving in many of our retail stores, and our digital business continues to be a very strong growth driver. In the first quarter, we increased our marketing efforts in the United States and supported many open international markets, including the airing of new campaigns with football coach, Jon Gruden and sports analyst, Howie Long—both for Arch Fit shoes, and a Super Bowl spot with commentator, Tony Romo, for Max Cushioning footwear. In addition, we ran Brooke Burke Arch Fit and Skechers apparel commercials, and multiple campaigns, on traditional and digital platforms. As a comfort technology company, Skechers received several product awards for our sport, running and golf shoes, and we were named Company of the Year from leading industry trade publication Footwear Plus. Despite the ongoing challenges related to the pandemic, we are pleased with our exceptional start to 2021 and believe our growth is a testament to our execution and the relevance of the Skechers brand,” continued Greenberg.
“The momentum we experienced in the second half of 2020 continued into the first quarter as we achieved revenue growth of 15.0% over the same period in 2020, and an exceptional 12% increase over the first quarter of 2019. This resulted in the Company’s first quarterly sales of over $1.4 billion,” stated David Weinberg, Chief Operating Officer of Skechers.
“The positive results were due to a 20.2% increase in our international business and an 8.5% increase in domestic sales compared to 2020. Driving the quarterly growth was a 23.8% increase in our International Wholesale, led by triple-digit growth in China, an 18.1% improvement in our direct-to-consumer business, with March being the strongest sales month, and a 143.0% increase in domestic e-commerce. Domestic Wholesale decreased 0.9% due to timing of shipments. Nonetheless, we saw strength across customer types and encouraging sell-through in multiple categories. The momentum in our direct-to-consumer business along with continuing demand for our comfort product, leads us to believe that Skechers’ remains on a positive trajectory,” continued Weinberg.
First quarter sales increased 15.0% as a result of a 20.2% increase in the Company’s international sales and an 8.5% increase in domestic sales. Increases in international sales were driven by wholesale. Domestic sales increases were driven by direct-to consumer, including e-commerce growth of 143.0%, partially offset by a slight decline in wholesale. On a constant currency basis, the Company’s total sales increased 11.7%.
The Company’s International Wholesale sales increased 23.8% and Direct-to-Consumer sales increased 18.1%, offset by a Domestic Wholesale sales decrease of 0.9%. Increases in the Company’s International Wholesale segment were driven by growth in China of 174.4%, partially offset by declines in Europe of 8.1% and a 6.5% decline in distributor sales. Direct-to-Consumer comparable same store sales increased 10.2%, driven by an increase of 25.7% domestically, partially offset by a decrease of 27.4% internationally.
Gross margin increased 350 basis points to 47.6% as a result of increased margins in both the International Wholesale and Direct-to-Consumer segments. The strong margin performance was driven by an increase in selling price across all channels and a favorable mix of e-commerce sales.
SG&A expenses increased $19.9 million, or 3.9%. Selling expenses increased by $11.2 million, or 15.2%, primarily due to higher domestic marketing expenses. General and administrative expenses increased by $8.6 million, or 2.0%. The increase was primarily the result of higher global warehouse and distribution expenses, partially offset by reduced retail labor.
Earnings from operations increased $112.9 million, or 252.0%, to $157.7 million.
Net earnings were $98.6 million and diluted earnings per share were $0.63.
In the first quarter, the Company’s effective income tax rate was 20.2% driven by profitability in higher tax jurisdictions such as the U.S. and China.
“Skechers record setting first quarter, in the midst of a global pandemic, is a reflection of the strength of our brand and product offering, combined with outstanding execution,” stated John Vandemore, Chief Financial Officer of Skechers.
“Despite headwinds across the globe, we achieved triple-digit growth in e-commerce and China, and resurgent growth in domestic retail, all of which we believe are evidence of the potential for our brand. Additionally, our continued investments to support our growth initiatives are on track to provide long-term value to the business and for shareholders,” continued Vandemore.
Cash, cash equivalents and investments totaled $1.51 billion, a decrease of $65.1 million, or 4.1% from 31st December, 2020.
Total inventory was $1.07 billion, an increase of $50.7 million or 5.0% from 31st December, 2020. Increased inventory levels primarily reflect growth in the International Wholesale segment.
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For the fiscal year 2021, the Company believes it will achieve sales between $5.8 billion and $5.9 billion and diluted earnings per share of between $1.80 and $2.00. Further, the Company believes that for the second quarter of 2021, it will achieve sales between $1.45 billion and $1.50 billion and diluted earnings per share of between $0.40 and $0.50.