Skechers(SKX) - 2024 Q3 - Quarterly Results

Financial Highlights and Executive Summary Skechers reported record Q3 sales of $2.35 billion, a 15.9% increase, driven by strong global demand across all channels and strategic brand initiatives Q3 2024 Key Performance Indicators | Metric | Value | Change (YoY) | | :--- | :--- | :--- | | Record Quarterly Sales | $2.35 Billion | +15.9% | | Wholesale Sales | - | +20.6% | | Direct-to-Consumer Sales | - | +9.6% | | Diluted EPS | $1.26 | +35.5% | - The company achieved broad-based geographic growth, with sales increasing 30% in EMEA, 14% in the Americas, and 7% in Asia Pacific, demonstrating strong global demand despite challenging market conditions in some areas[2] - Strategic focus remains on product innovation, particularly comfort technologies like Skechers Hands Free Slip-ins, and raising brand awareness through high-profile ambassadors (Snoop Dogg, Joel Embiid, Howie Mandel) and expansion into team sports like soccer and basketball[2] Third Quarter 2024 Financial Performance Q3 sales rose 15.9% to $2.35 billion, driven by strong wholesale and DTC growth, while net earnings increased 32.9% despite a slight gross margin contraction Q3 2024 Financial Summary (in millions, except per share data) | Metric | Q3 2024 | Q3 2023 | Change (%) | | :--- | :--- | :--- | :--- | | Sales (in millions) | $2,347.7 | $2,025.0 | +15.9% | | Gross Profit (in millions) | $1,223.0 | $1,071.9 | +14.1% | | Gross Margin | 52.1% | 52.9% | -80 bps | | Earnings from Operations (in millions) | $233.4 | $213.2 | +9.5% | | Operating Margin | 9.9% | 10.5% | -60 bps | | Net Earnings (in millions) | $193.2 | $145.4 | +32.9% | | Diluted EPS | $1.26 | $0.93 | +35.5% | Q3 Sales Performance by Channel and Region Q3 sales saw strong growth in Wholesale (+20.6%) and DTC (+9.6%), with international sales, particularly EMEA, outpacing domestic growth - Wholesale: Sales grew $241.4 million (20.6%), with volume up 21.2% and average selling price down 0.5% - Growth was led by EMEA (+30.9%) and AMER (+21.6%)[3] - Direct-to-Consumer: Sales grew $81.3 million (9.6%), with volume up 10.7% and average selling price down 1.0% - Growth was led by EMEA (+28.0%) and APAC (+10.0%)[3] Q3 2024 Sales Growth by Region | Region | Sales (in millions) | Growth (YoY) | | :--- | :--- | :--- | | Americas (AMER) | $1,156.1 | +13.6% | | EMEA | $625.6 | +30.2% | | Asia Pacific (APAC) | $566.0 | +7.4% | Q3 Profitability and Expenses Q3 gross margin contracted by 80 basis points to 52.1% due to lower selling prices, while operating expenses increased 15.2% but improved as a percentage of sales - Gross margin decreased to 52.1% from 52.9% in the prior year, a change driven by lower average selling prices[3] - Selling expenses increased 18.4% due to higher demand creation expenditures, while General & Administrative expenses rose 14.4% from increased labor and facility costs[3] - The effective income tax rate for the quarter was 14.7%, a decrease from the prior year due to the release of certain allowances and other provision adjustments[3] Nine Months 2024 Financial Performance Nine-month sales grew 11.9% to $6.76 billion, with gross margin improving 160 basis points to 53.1% and net earnings increasing 17.8% Nine Months 2024 Financial Summary (in millions, except per share data) | Metric | 9M 2024 | 9M 2023 | Change (%) | | :--- | :--- | :--- | :--- | | Sales (in millions) | $6,756.9 | $6,039.4 | +11.9% | | Gross Profit (in millions) | $3,589.1 | $3,111.0 | +15.4% | | Gross Margin | 53.1% | 51.5% | +160 bps | | Earnings from Operations (in millions) | $738.8 | $654.5 | +12.9% | | Operating Margin | 10.9% | 10.8% | +10 bps | | Net Earnings (in millions) | $540.1 | $458.6 | +17.8% | | Diluted EPS | $3.50 | $2.93 | +19.5% | YTD Sales Performance Year-to-date sales showed balanced growth across Wholesale (+12.1%) and DTC (+11.6%), with international sales, particularly EMEA, driving overall expansion - Wholesale: Sales increased 12.1% year-to-date, with volume up 12.5%[4] - Direct-to-Consumer: Sales increased 11.6% year-to-date, with volume up 11.8%[4] Nine Months 2024 Sales Growth by Region | Region | Sales (in millions) | Growth (YoY) | | :--- | :--- | :--- | | Americas (AMER) | $3,276.5 | +9.6% | | EMEA | $1,745.7 | +20.5% | | Asia Pacific (APAC) | $1,734.7 | +8.4% | YTD Profitability and Expenses Year-to-date gross margin expanded 160 basis points to 53.1% due to lower freight costs, while operating expenses increased 16.0% and rose as a percentage of sales - Gross margin improved to 53.1% from 51.5% in the prior year, mainly due to lower costs per unit driven by reduced freight expenses[4] - Operating expenses as a percentage of sales increased to 42.2% from 40.7%, with selling expenses up 22.2% and G&A expenses up 14.5%[4] Financial Position and Shareholder Returns Skechers maintained strong liquidity with $1.60 billion in cash, increased inventory to $1.71 billion, and repurchased $90.0 million of stock in Q3 - Cash, cash equivalents, and investments totaled $1.60 billion, an increase of $211.8 million from December 31, 2023[4] - Inventory was $1.71 billion, an 11.9% increase from December 31, 2023, to support expected demand[4] - During Q3, the company repurchased 1.4 million shares for $90.0 million - $910.0 million remains available under the share repurchase program[4] Business Outlook Skechers forecasts Q4 sales of $2.165-$2.215 billion and raised full-year 2024 guidance to $8.925-$8.975 billion in sales, confident in reaching $10 billion by 2026 Q4 2024 Outlook | Metric | Guidance Range | | :--- | :--- | | Sales (in billions) | $2.165 Billion - $2.215 Billion | | Diluted EPS | $0.70 - $0.75 | Full Year 2024 Outlook | Metric | Guidance Range | | :--- | :--- | | Sales (in billions) | $8.925 Billion - $8.975 Billion | | Diluted EPS | $4.20 - $4.25 | - Management expressed confidence in achieving the long-term goal of $10 billion in sales by 2026[3] Operational Metrics Skechers' global retail footprint expanded to 5,332 stores as of September 30, 2024, a net increase of 164 stores year-to-date Store Count as of September 30, 2024 | Store Type | Dec 31, 2023 | Opened | Closed | Sep 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Domestic | 563 | 42 | (13) | 592 | | International | 1,085 | 149 | (83) | 1,151 | | Distributor, licensee & franchise | 3,520 | 315 | (246) | 3,589 | | Total Skechers stores | 5,168 | 506 | (342) | 5,332 | Supplemental Financial Information This section details Q3 segment performance, geographic sales, and non-GAAP constant currency reconciliation, highlighting wholesale vs. DTC margins and EMEA's strong growth Segment Information (Wholesale vs. Direct-to-Consumer) Q3 saw Wholesale sales grow 20.6% with 42.8% gross margin, while DTC grew 9.6% with 66.3% gross margin, and YTD Wholesale margin improved significantly Q3 2024 Segment Performance (in millions) | Segment | Sales (in millions) | Growth (YoY) | Gross Profit (in millions) | Gross Margin | | :--- | :--- | :--- | :--- | :--- | | Wholesale | $1,416.0 | +20.6% | $605.4 | 42.8% | | Direct-to-Consumer | $931.7 | +9.6% | $617.6 | 66.3% | Nine Months 2024 Segment Performance (in millions) | Segment | Sales (in millions) | Growth (YoY) | Gross Profit (in millions) | Gross Margin | | :--- | :--- | :--- | :--- | :--- | | Wholesale | $3,969.8 | +12.1% | $1,738.5 | 43.8% | | Direct-to-Consumer | $2,787.1 | +11.6% | $1,850.6 | 66.4% | Geographic Sales Information Q3 international sales grew 16.4% to $1.43 billion, outpacing domestic growth, with EMEA as the key driver, while China sales declined 5.7% Q3 2024 Geographic Sales (in millions) | Geography | Sales (in millions) | Growth (YoY) | | :--- | :--- | :--- | | Domestic | $916.0 | +15.3% | | International | $1,431.7 | +16.4% | | Total | $2,347.7 | +15.9% | - China sales for Q3 2024 were $252.4 million, a decrease of 5.7% from $267.6 million in Q3 2023[13] Reconciliation to Non-GAAP Measures (Constant Currency) Non-GAAP constant currency reconciliation shows Q3 sales growth unaffected by FX, while nine-month growth was 12.7%, 80 basis points higher than GAAP - The constant currency presentation is a non-GAAP measure that excludes the impact of period-over-period fluctuations in foreign currency exchange rates to facilitate performance comparisons[15] Q3 & 9M 2024 Sales Growth: GAAP vs. Constant Currency | Period | Reported GAAP Growth | Constant Currency Growth | | :--- | :--- | :--- | | Three Months | 15.9% | 15.9% | | Nine Months | 11.9% | 12.7% | Consolidated Financial Statements This section presents unaudited condensed consolidated balance sheets and statements of earnings for Q3 and nine-month periods ending September 30, 2024 Condensed Consolidated Balance Sheets As of September 30, 2024, total assets reached $8.65 billion, driven by receivables and inventory growth, with total liabilities at $3.73 billion and equity at $4.82 billion Key Balance Sheet Items (in thousands) | Account | Sep 30, 2024 (in thousands) | Dec 31, 2023 (in thousands) | | :--- | :--- | :--- | | Total Current Assets | $4,698,508 | $3,952,604 | | Total Assets | $8,646,041 | $7,547,351 | | Total Current Liabilities | $2,396,656 | $1,660,867 | | Total Liabilities | $3,733,527 | $3,147,309 | | Total Stockholders' Equity | $4,820,535 | $4,310,210 | Condensed Consolidated Statements of Earnings The income statement details Q3 2024 sales of $2.35 billion and net earnings of $209.3 million, with nine-month sales at $6.76 billion and net earnings at $614.2 million Statement of Earnings Highlights (in thousands) | Line Item | Three Months Ended Sep 30, 2024 (in thousands) | Nine Months Ended Sep 30, 2024 (in thousands) | | :--- | :--- | :--- | | Sales | $2,347,705 | $6,756,935 | | Gross Profit | $1,223,046 | $3,589,117 | | Earnings from Operations | $233,424 | $738,753 | | Net Earnings | $209,309 | $614,211 | | Net Earnings Attributable to Skechers | $193,221 | $540,145 |