After the market close Thursday, the Manhattan Beach, Calif.-based brand posted earnings that fell below analysts’ already-muted expectations.
The company said that its Q2 net income totaled $74.1 million, or 48 cents per diluted share, a 7 percent decline from the comparable period when net income totaled $79.8 million, or 52 cents per diluted share. Market watchers had expected the firm to post flat year-over-year earnings-per-share growth, at 52 cents per share. (Skechers said its EPS was negatively impacted by several factors including foreign currency translation and exchange losses of 5 cents per diluted share. Additional VAT taxes in Brazil and a fire in its Malaysia warehouse also reduced diluted earnings per share by 2 cents, the company said.)
Skechers COO and CFO David Weinberg said the pull forward of shipment from the firm’s domestic wholesale business from April into March negatively impacted sales — significantly reducing shipments in April and resulting in a sales decrease of 5.4 percent in the second quarter. Not to mention, tough comparisons against last year’s Q2 also proved challenging.
“Last year’s second quarter was extremely strong as shipments were pushed from the first quarter into the second quarter of 2015, while this year shipments were pulled from the second quarter into the first quarter of 2016,” Weinberg noted in a release.
Total revenue for the period advanced 10 percent, to $877.8 million, from $800.5 million in the comparable period. Analysts had expected revenues of $888.9 million.
Skechers CEO Robert Greenberg noted that the company’s international business remains both a standout and a priority. Skechers saw a 35 percent increase in its international subsidiary and joint venture businesses and a 41 percent increase in international company-owned retail stores. International wholesale and retail businesses comprised 42 percent of total sales in Q2.
“International is a key focus for Skechers as we expand our reach and deliver more product into more channels of distribution — including the expansion of our retail arm of the company with our first Skechers stores in Belgium, Norway and Finland; another 42 Skechers stores in China — bringing the total Skechers store count to 233 in that country; and double-digit sales growth in many countries — from Germany to Canada and Scandinavia to Russia,” Greenberg said in a release.
On July 11, Skechers announced it had completed the fourth phase of an expansion to its European Distribution Center (EDC) in Belgium, adding an additional 285,000-plus square feet to the mammoth center, bringing its total size to approximately 1.1 million square feet.
While management remains upbeat on the firm’s outlook, the lower-than-expected results are weighing on investors. As of 4:40 p.m. ET, the stock had slipped more than 13 percent.
“We believe that even with the political and economic challenges some countries are facing — including the challenging retail environment in the United States, Skechers remains relevant, reliable and top-of-mind with consumers,” Greenberg said. “We are looking forward to maintaining our position as a brand leader in the United States, and growing our market share around the world.”
Total inventories at the brand decreased 4.8 percent from Dec. 31, 2015, and increased 25.5 percent from June 30, 2015.