Skechers Continues Stellar Performance

Skechers is soaring.

After some industry insiders speculated that sales of the company’s toning footwear could be slowing, Manhattan Beach, Calif.-based Skechers USA Inc. answered back with quarterly results — and a triple-digit increase in backlogs — that blew past analysts’ estimates.

“It was a broad-based beat [of expectations] that encompassed gains in revenue, gross margins and future orders,” said Christopher Svezia, an analyst at Susquehanna Financial. “What’s good about the backlog trend is that the visibility is really extending further into next spring.”

For the period ended June 30, Skechers reported a net income of $40.2 million, or 82 cents a share, soundly beating analysts’ prediction of 44 cents, as polled by Yahoo Finance. Revenues vaulted 69 percent to $504.9 million, marking the first time the company’s quarterly sales surpassed $500 million.

“Their business is absolutely on fire, and the response to their goods is very strong,” said Sterne Agee analyst Sam Poser. “We’re projecting a minimum of a 40 percent to 45  percent [sales] increase for the third quarter.”

In a conference call on Wednesday, Skechers COO David Weinberg said the backlog figures are particularly promising, given the company’s strong performance at the end of last year.

“Where many people have thought that the fourth quarter [of 2010] might have some barriers to growth because it was such a great quarter [last year], it looks like it will be higher,” Weinberg said. The company is waiting to see what transpires during back-to-school, but Weinberg is confident Skechers will be up “significantly” for the back half. “The question would just be how much right now,” he said.

When asked about the increased competition in the toning arena, Weinberg seemed unconcerned.

“It’s fair to say there are certainly more entrants, but … we plan on continuing to [offer the widest variety of product],” he said. “That’s still on track.”

The company also is banking on toning, in part to help give its international business a bounce.

International wholesale revenues were up 26 percent in the quarter, while overseas retail surged 53 percent. Weinberg said the decline the company has experienced in many international markets is reversing itself.

Moving into back-to-school, Weinberg said Skechers will continue to be aggressive on the marketing front.

“We have a very extensive advertising campaign that will be starting in the next couple of days, and I’m sure everybody will see it,” Weinberg said. “That will just add strength and momentum to the brand.”

Higher ad costs contributed to an increase in the firm’s sales, general and administrative expenses during the quarter. That spending rose 38 percent to $180 million, from $130 million a year ago. At the end of the quarter, the company upped its cash balance to $273.3 million.

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