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Skechers U.S.A. (SKX) conducted its earnings call for the second quarter of 2024 on July 25, 2024, at 4:30 p.m. ET, where executives discussed significant company performance and market conditions.
Overview of the Call
The call opened with Jarred Dahlerbruch, Senior Product Manager at Skechers, welcoming participants and introducing the company’s Chief Operating Officer, David Weinberg, and Chief Financial Officer, John Vandemore. Dahlerbruch highlighted the company’s growth trajectory since joining as an intern in 2017 and declared his favorite product as the Snoop One OG sneaker from the collaboration with Snoop Dogg.
Financial Highlights
Weinberg reported record sales for the quarter, totaling $2.16 billion, marking a 7.2% increase year-over-year. When adjusted for currency fluctuations, sales reached approximately $2.19 billion, an 8.7% increase. The gross margin improved to 54.9%, up 220 basis points from the previous year.
A notable announcement included a new $1 billion share repurchase plan, which is a replacement for the previous program and signals Skechers’ commitment to returning value to shareholders.
The strong sales results were achieved despite challenges, including supply chain disruptions that affected shipments to Europe, economic pressures in China, and foreign currency headwinds. However, robust global demand for Skechers’ comfortable and innovative products helped mitigate these challenges across various regions.
Product Innovations and Collaborations
Skechers has focused heavily on incorporating comfort technologies into its offerings. Innovations such as the SKECHERS Hands Free Slip-Ins—a significant draw for consumers—are now included in a wider range of products including golf, kids’ styles, and the Snoop Dog collection. Additionally, Skechers has partnered with more industry leaders like Goodyear and John Deere, enhancing its product lineup with rugged styles that blend comfort and functionality.
Weinberg shared updates on Skechers’ athletic endorsements, noting that the company continues to attract high-profile athletes across various sports, leading to increased visibility and brand recognition. Notable names include footballers like Harry Kane and basketball player Joel Embiid, further emphasizing the company’s expansion into performance wear with a focus on comfort.
Market Performance Analysis
During the earnings call, the executives addressed challenges in key markets. Although the Americas region grew sales by 7.2%, the Asia-Pacific segment experienced a subdued 2.2% increase amid regulatory hurdles, particularly in India. This includes ongoing import challenges that Skechers is addressing by ramping up local production.
Despite traffic declines in U.S. retail locations, there was a strong 9.2% growth in direct-to-consumer sales, with the international segment seeing a particularly significant uptick of 15%. The e-commerce channel emerged as a critical area of improvement, indicating a shift in buying behaviors among consumers.
Future Outlook
Looking ahead, the company maintained an optimistic outlook. Skechers raised its full-year sales guidance to between $8.875 billion and $8.975 billion, with anticipated earnings per diluted share ranging from $4.08 to $4.18. The CFO pointed out that this revision reflects better visibility into order flow and positive consumer reception to Skechers products.
Skechers remains committed to its goal of reaching $10 billion in annual sales by 2026 and continues to expand its direct-to-consumer channels while solidifying relationships with wholesale partners. The company expects to leverage efficiencies created by new distribution strategies and product innovations as it navigates a competitive market landscape.
Questions and Responses
The Q&A segment featured inquiries about specific influences on guidance adjustments, with executives acknowledging both macroeconomic challenges and strong domestic order flow as driving factors for optimism. Analysts inquired about market conditions, particularly in China and India, and were reassured that the company will remain steadfast in managing both regional impediments and overall growth strategies.
As the call wrapped up, Skechers executives expressed their confidence in achieving growth amidst challenges, focusing on product innovation as a cornerstone for future success.
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