Skechers(SKX) - 2019 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported record sales of $1.26 billion for Q2 2019, an increase of 10.9% or 13.7% on a constant-currency basis [7][18] - Earnings per share increased by 69% to $0.49 compared to the previous year [7][22] - Gross profit was $609.8 million, with a gross margin of 48.5%, down 100 basis points from the prior year [20] - Operating income rose by 36.5% to $111.1 million, with an operating margin improvement of 170 basis points to 8.8% [22] Business Line Data and Key Metrics Changes - Domestic sales increased by 1.5%, driven by an 8.6% increase in direct-to-consumer business, including a 36.1% increase in e-commerce [11][12] - International sales grew by 19.8%, representing 55.7% of total sales, with significant contributions from the UAE, Australia, and India [14][18] - Direct-to-consumer sales increased by 14.4%, with a 25.8% increase internationally [19] Market Data and Key Metrics Changes - The domestic wholesale business experienced a decline of 3.8%, but is expected to be flat to slightly positive for the year [12][20] - International wholesale sales increased by 18.2%, with a 30.7% increase in distributor business [18][19] - Comparable store sales increased by 4.9%, with e-commerce sales growth of 34.3% [19] Company Strategy and Development Direction - The company aims to continue its aggressive growth in international and direct-to-consumer businesses while investing responsibly for future growth [18][28] - There is a focus on global marketing efforts and simultaneous product introductions to replicate success across markets [8][9] - The company plans to open 250 to 300 new stores in 2019, with international markets identified as primary growth drivers [17][28] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in continued momentum for the second half of 2019, supported by strong consumer demand and brand perception [6][28] - The company anticipates double-digit growth for the year, driven by international expansion and direct-to-consumer sales [17][28] - Management noted that the domestic wholesale business is expected to improve in the latter half of the year [42] Other Important Information - The company has $973 million in cash and investments, a decrease of 8.7% from the end of 2018 [24] - Capital expenditures for Q2 were approximately $86.2 million, with expectations of $150 to $175 million for the remainder of 2019 [26] Q&A Session Summary Question: Guidance on gross margin for Q3 - Management expects gross margin to be relatively flat year-over-year, with discounting in international markets being a temporary issue [30][31] Question: Insights on SG&A growth - SG&A growth has moderated, with efficiency improvements noted across various areas, particularly in international markets [70][71] Question: U.S. wholesale business outlook - Management sees improving trends in the U.S. wholesale business, with expectations for positive growth in Q3 and Q4 [40][42] Question: Performance of SKECHERS Street line - The SKECHERS Street line is performing well across multiple regions, contributing to overall growth [64][69]