Skechers first-quarter results disappoint despite record sales

Manhattan Beach, California-based footwear company Skechers USA, Inc. reported record first-quarter net sales on Thursday, which nonetheless came in under analysts’ expectations, as the brand’s strong international progress was dragged down by slipping sales in the US.


Progress in Skechers' international business was let down by a decline in US sales in the first quarter - Instagram: @skechers

For the first quarter ended March 31, 2019, Skechers’ sales totaled $1.28 billion, up 2.1% (5.2% in constant currencies) from $1.25 billion in the prior-year period. According to FactSet data cited by MarketWatch, Wall Street analysts had expected the company to report revenue of $1.30 billion.
 
The company’s sales growth in the quarter was driven by a 9.3% increase in the company’s international business, which was partially offset by a 6.3% decline on its home market.
 
By segment, sales in Skechers’ international wholesale business increased 8.7%, while its company-owned global retail business saw a rise of 6.7%. Sales in the company’s domestic wholesale business fell 10.9 %.
 
Comparable same-store sales increased 0.7%, reflecting rises of 0.2% and 2.3% in the company’s domestic and international businesses, respectively.
 
Skechers’ quarterly net earnings were $108.8 million, or $0.71 per diluted share, down 7.6% from the $117.7 million, or $0.75 per diluted share, reported in Q1 2018. Analysts surveyed by FactSet had expected the company to post EPS of $0.73.
 
“Achieving a new quarterly sales record, especially given our record first quarter last year, which also had the benefit of Easter and positive currency, is a noteworthy accomplishment,” said Skechers COO David Weinberg in a release.
 
“We are continuing to capitalize on the chunky trend we developed with our heritage styles across both men and women – with new styles shipping around the world throughout 2019. We are already seeing a positive impact in sales with the launch of our television campaigns for Spring, and we believe our momentum will continue into the second quarter,” he added.
 
As its international business continues to drive growth, Skechers transformed its joint venture in India into a wholly-owned subsidiary and also embarked on a joint venture with its distribution partner in Mexico over the course of the quarter. The company expects these investments to be accretive in 2019.
 
In the second quarter of 2019, Skechers currently expects to see sales in the range of $1.200 billion to $1.225 billion, while diluted earnings per share are predicted to be between $0.30 and $0.35.

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