Skechers USA Inc.’s fourth-quarter income was hit by burgeoning costs related to retail expansion.
The firm also continued to struggle with excess inventory of toning product, and is forecasting wholesale revenue to be down as much as 10 percent in the first quarter of 2011.
For the quarter ended Dec. 31, 2010, net income at the Manhattan Beach, Calif.-based firm was $3.2 million, down nearly 90 percent from $27.9 million in the fourth quarter of 2009.
Earnings per share were 7 cents, down from 58 cents a year ago.
The firm missed estimates by analysts, who according to Yahoo Finance were looking for EPS of 13 cents.
Although group revenue increased 17 percent to $454.6 million, from $388.6 million a year ago, selling, general and administrative expenses rose 24 percent, thus denting the bottom line.
Robert Greenberg, CEO of Skechers, attributed the rising costs to increased advertising and promotional expense, as well as increased rent from our retail expansion, warehouse and distribution, salaries and professional fees.
Meanwhile, the revenue bump was driven by significant growth in both the domestic wholesale and international businesses and company-owned retail stores, as well as an aggressive stance with respect to liquidation of excess inventory, Greenberg added in a call with analysts.
The firm noted on the call that its non-toning product is selling well and at full price, while its international wholesale business is seeing “high double-digit sales growth” and the domestic and international wholesale backlog is up 29 percent.
While inventory increased by $175 million year-over-year, the firm said it is “confident the inventory situation will be resolved within the next six months” because it executes plans to open another 30 to 35 company-owned retail stores this year.
“We are carefully reviewing our expenses, which have increased in part due to significant growth over the past year,” said David Weinberg, Skechers’ COO and CFO. “As we aggressively work through our inventory position, we anticipate our domestic wholesale revenues and margins will be impacted in the first and second quarters, but we believe they will improve in the second half of the year.”
For the full year, net income more than doubled to $136.1 million, or $2.78 a share, from $54.7 million, or $1.16, in 2009. Full-year revenue hit $2 billion, up from last year’s $1.44 billion.
Skechers ended the year with cash and cash equivalents of $233.6 million and long-term debt of $51.6 million.