On February 1, 2024, Skechers USA Inc (SKX, Financial) released its 8-K filing, announcing a record annual sales figure of $8.00 billion for the year ended December 31, 2023. This represents a 7.5% increase over the previous year, highlighting the company's continued growth in the lifestyle and performance footwear market. Skechers, known for its diverse range of products under the Skechers GO brand name, has seen significant growth in its Direct-to-Consumer sales, which surged by 24.3%.
Financial Performance and Operational Highlights
Skechers' financial achievements in 2023, particularly the 46.6% increase in diluted earnings per share to $3.49, underscore the company's profitability and market strength within the Manufacturing - Apparel & Accessories industry. The reduction in inventory levels by 16.1% from the previous year to $1.53 billion demonstrates effective inventory management, which is crucial for maintaining operational efficiency and reducing holding costs.
The company's Wholesale segment experienced an 8% decline in sales, attributed to cautious inventory management by retailers. However, optimism remains high due to positive trends in January shipments and orders for the first half of the year. The Direct-to-Consumer segment's growth is particularly noteworthy, reflecting a strong consumer preference for Skechers' products and a successful expansion of the company's retail footprint.
Income Statement and Balance Sheet Analysis
Key financial metrics from the income statement reveal a 4.4% increase in fourth-quarter sales, driven by a 20.3% growth in Direct-to-Consumer sales, despite an 8.3% decrease in Wholesale. Gross margin improved significantly to 53.1%, up 470 basis points, primarily due to higher average selling prices and a larger proportion of Direct-to-Consumer sales. Operating expenses, however, rose by 10.7%, with selling expenses up by 15.8% due to increased brand demand creation expenditures.
From the balance sheet, cash, cash equivalents, and investments totaled $1.39 billion, a substantial increase of 75.9% from the end of 2022. This financial strength is partly due to improved earnings and favorable working capital changes, particularly in inventory management.
Management Commentary
"Skechers achieved a new fourth quarter sales record of $1.96 billion, and a record gross margin of 53.1%. This success reflects the strong worldwide demand for our comfort technology products, especially in our Direct-to-Consumer business which grew 20%. Our Wholesale business experienced a decrease in sales of 8%, as several retailers continued to conservatively manage their inventory levels. However, we are optimistic that this behavior is changing based upon early reads from January shipments and positive order trends for the first half of the year," stated David Weinberg, Chief Operating Officer of Skechers.
"Skechers’ new annual sales record of $8.00 billion was the result of the broad acceptance for our products worldwide, our loyal and growing consumer base, the cultivated relationships with our partner network, and our determined and dedicated team," began Robert Greenberg, Chief Executive Officer of Skechers.
Future Outlook and Expansion
Looking ahead, Skechers anticipates sales between $8.60 and $8.80 billion for fiscal year 2024, with diluted earnings per share expected to range from $3.65 to $3.85. The company's growth strategy focuses on international expansion and deepening Direct-to-Consumer relationships, aiming for a sales goal of $10 billion by 2026. Capital expenditures for 2024 are projected to be between $350 and $400 million, inclusive of the construction of a second distribution center in China.
Overall, Skechers USA Inc (SKX, Financial) has demonstrated a strong financial performance in 2023, with significant achievements in sales growth and profitability. The company's strategic focus on Direct-to-Consumer sales, inventory management, and global expansion positions it well for continued success in the competitive footwear industry.
Explore the complete 8-K earnings release (here) from Skechers USA Inc for further details.
