Skechers Speeds Ahead

BOSTON — Skechers USA Inc. is firing on all cylinders.

The Manhattan Beach, Calif.-based firm reported last week a sixfold rise in first-quarter net earnings, thanks to widespread growth in most divisions, including double-digit revenue increases from its wholesale, international and retail businesses. Domestic wholesale revenues, for example, popped 52 percent, Skechers said, with strength in the men’s, women’s, kids’ and work categories.

Further, order backlogs are up more than 60 percent, the company said on its post-earnings conference call.

Same-store sales jumped 30 percent at its 250 company-owned locations, while sales growth in its e-commerce division spiked in the triple digits.

“While some of our distributors continue to face challenges due to the tough economic climate, we are seeing improved backlogs and order rates, which indicates positive sales in the back half of this year. We believe our international subsidiaries will continue to grow based on improved backlog, reaction from key accounts during January pre-lines and the broad acceptance of our new product offerings,” CFO and COO David Weinberg said on the call.

Sam Poser, an analyst with Sterne Agee, said in a report last week that Skechers’ “true growth engine was toning,” where he estimates the firm sold between 1.5 million and 1.7 million pairs at wholesale in the U.S. during the quarter. For the year, the analyst sees Skechers selling 7.2 million pairs of toning product globally.

Analyst Christopher Svezia of Susquehanna Financial Group agreed that toning is one of Skechers’ key categories. “Skechers is clearly seeing a halo effect from strong demand for toning product and continues to take shelf space and share across all channels of distribution,” he wrote in a report released last week. “We look for category extensions within toning (specifically running), continued solid performance across all categories and accelerating international sales to drive strong fall wholesale sales.”

Poser said he expects Skechers’ sales growth in the second and third quarters combined should jump 40 percent year-over-year, citing an expectation for strong same-store results, “seemingly insatiable domestic demand for toning product, new toning product introductions, a stabilizing distributor business and a still nascent international toning business.”

Poser concluded, “We have known the Skechers brand for 19 years and have never seen so many categories growing at the same time, driven by consumer demand. In the past, Skechers has built goods and a marketing strategy to create demand. Now it is using marketing to stoke the fire, and we don’t see that fire being doused anytime soon.”

The firm reported last Wednesday net earnings of $56.3 million, or $1.15 a diluted share, versus a profit of $8.2 million, or 18 cents, last year. Results in the latest quarter easily surpassed analysts’ average earnings-per-share estimate for $1.03.

Net sales jumped to $492.8 million — the largest quarterly sales amount in Skechers’ history, according to the company — from $343.5 million a year ago.

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