On July 25, 2024, Skechers USA Inc (SKX, Financial) released its 8-K filing detailing its financial results for the second quarter ended June 30, 2024. Skechers, a global leader in lifestyle and performance footwear, reported record second-quarter sales but fell short of analyst earnings per share (EPS) estimates.
Company Overview
Skechers USA Inc is renowned for its diverse range of footwear under the Skechers GO brand, offering styles for men, women, and children. The company also markets apparel, bags, eyewear, and other accessories. Skechers operates through two main segments: Wholesale and Direct-to-Consumer, with the Wholesale segment generating the majority of its revenue.
Second Quarter Financial Highlights
Skechers reported record second-quarter sales of $2.16 billion, a 7.2% increase from the same period last year. On a constant currency basis, sales were $2.19 billion, reflecting an 8.7% increase. Direct-to-Consumer sales grew by 9.2%, while Wholesale sales increased by 5.5%. However, the company reported diluted earnings per share of $0.91, missing the analyst estimate of $0.94.
| Metric | Q2 2024 | Q2 2023 | Change |
|---|---|---|---|
| Sales | $2.16 billion | $2.01 billion | 7.2% |
| Gross Profit | $1.18 billion | $1.06 billion | 11.7% |
| Gross Margin | 54.9% | 52.7% | 220 bps |
| Operating Expenses | $977.9 million | $842.8 million | 16.0% |
| Net Earnings | $140.3 million | $152.8 million | -8.2% |
| Diluted EPS | $0.91 | $0.98 | -7.1% |
Performance Analysis
The increase in sales was driven by strong demand for Skechers' diverse portfolio of comfortable and innovative footwear. The company saw growth across all regions, with notable increases in the Americas (7%), Europe, the Middle East, and Africa (14%), and Asia Pacific (2%). Despite facing foreign currency headwinds and supply chain disruptions, Skechers managed to achieve significant sales growth.
"Skechers achieved a new second quarter sales record of $2.16 billion driven by the strong demand for our diverse portfolio of comfortable and innovative footwear," said David Weinberg, Chief Operating Officer of Skechers.
Financial Metrics and Achievements
Gross margin improved by 220 basis points to 54.9%, primarily due to lower costs per unit driven by reduced freight expenses and a favorable mix of Direct-to-Consumer volumes. However, operating expenses increased by 16.0%, reflecting higher demand creation expenditures and increased labor and facility costs.
Net earnings for the quarter were $140.3 million, down 8.2% from the previous year, and diluted EPS was $0.91, a 7.1% decrease. The company's effective income tax rate for the quarter was 19.7%.
Balance Sheet and Share Repurchase Program
As of June 30, 2024, Skechers reported cash, cash equivalents, and investments totaling $1.55 billion, an 11.6% increase from December 31, 2023. Inventory levels slightly decreased to $1.51 billion. The company repurchased 0.9 million shares of its Class A common stock at a cost of $60.0 million during the quarter.
Additionally, Skechers' Board of Directors authorized a new $1 billion share repurchase program, effective July 25, 2024, replacing the previous program authorized in 2022.
Outlook
For the third quarter of 2024, Skechers expects sales between $2.30 billion and $2.35 billion and diluted earnings per share between $1.10 and $1.15. For the full fiscal year 2024, the company anticipates sales between $8.875 billion and $8.975 billion and diluted earnings per share between $4.08 and $4.18.
"In the face of significant operational and foreign exchange headwinds, Skechers delivered meaningful sales growth during the quarter, demonstrating the strength of our brand as the comfort technology leader," stated John Vandemore, Chief Financial Officer of Skechers.
For more detailed information, readers can access the full 8-K filing.
Explore the complete 8-K earnings release (here) from Skechers USA Inc for further details.
