Sign in

    Skechers USA Inc (SKX)

    Q1 2024 Earnings Summary

    Reported on Mar 7, 2025 (After Market Close)
    Pre-Earnings Price$58.82Last close (Apr 25, 2024)
    Post-Earnings Price$67.21Open (Apr 26, 2024)
    Price Change
    $8.39(+14.26%)

    What went well

    • Strong product performance driving exceptional results, with domestic wholesale sales increasing by 7.7% in Q1, surpassing expectations due to the success of new products and comfort technologies embraced by wholesale customers. ,
    • Improved gross margins and profitability resulting from better internal processes, including optimized promotional strategies and discount structures, contributing to the goal of achieving double-digit operating margins for the year. ,
    • Significant growth in international markets, particularly a strong recovery in China with continued optimism for growth, and robust demand in EMEA for Comfort Technologies, indicating continued global expansion opportunities. ,

    What went wrong

    • Earnings per share are expected to decline slightly in Q2, with guidance indicating EPS between $0.85 and $0.90, down due to increased demand creation spending and higher marketing investments. This suggests near-term pressure on profitability.
    • Gross margin expansion is anticipated to slow, with management expecting only modest increases of about 100 to 150 basis points going forward, relying more on product and channel mix rather than cost improvements. This indicates limited upside potential for gross margins.
    • Sales growth in China remains uncertain, as the company expresses cautious optimism due to the market's ongoing recovery and persistent challenges. Mixed macroeconomic signals suggest potential risks to growth in this key market.

    Q&A Summary

    1. Wholesale Growth Outlook
      Q: Given the strong Q1 results, should we expect wholesale growth to be in double digits?
      A: Management anticipates the wholesale segment will grow in the mid- to high single digits for the year. Encouraging signs in wholesale activity, order books, and sell-through are noted, with growth expected mainly from the international side. Domestic wholesale rebounded by about 8% in Q1, and similar growth is expected in Q2.

    2. Operating Margin Expectations
      Q: How should we think about operating margins for this year given the strong first quarter?
      A: The company aims to achieve double-digit operating margins this year. The exceptional 13% operating margin in Q1 gives them optimism about reaching this goal. Investments like the ERP implementation are embedded in guidance, and they remain confident in margin progression.

    3. Gross Margin Outlook
      Q: What is the outlook for gross margins this year?
      A: Management expects gross margins to improve by 100 to 150 basis points for the year, driven by product mix and growth in direct-to-consumer channels. While Q1 saw higher gross margins due to factors like reduced freight costs, such leaps are not expected over the balance of the year.

    4. China Growth Outlook
      Q: How should we think about growth opportunities in China for the rest of the year?
      A: Management remains cautiously optimistic about China's recovery. Q1 showed strong results, and despite macro challenges, they see China as a growth market with long-term potential. They acknowledge it's a market in recovery but have continued to see good growth over the past year and a half.

    5. Input Costs and Freight Rates
      Q: Do you have visibility on non-freight input costs through year-end?
      A: They don't see any material impact from input costs on product margins or overall gross margins. Freight rates have returned to normal, and no significant benefit or impact is expected from freight going forward.

    6. Marketing Spend and Sales Growth
      Q: How should we think about demand creation spend and its impact on sales growth?
      A: The company is increasing marketing spend in Q2, investing ahead in regions with significant growth potential. This includes promoting their comfort technologies like the hands-free Slip-ins. The spend will benefit sales throughout the year, but there's not a one-to-one correlation with Q2 sales.

    7. Domestic Wholesale Growth Drivers
      Q: What drove the 7.7% increase in domestic wholesale, and how does it affect future growth?
      A: The growth is primarily due to more wholesale customers embracing Comfort Technology products. Strong sell-throughs led customers to accelerate existing orders. Similar growth is expected in Q2, though shipment timing may impact results.

    8. Slip-in Technology Expansion
      Q: Can you discuss the rollout of Slip-in technology across markets?
      A: It's still early stages for the hands-free Slip-ins, both domestically and internationally. The technology resonates with consumers and has significant runway. They're incorporating it into more products and see it as part of a broader portfolio of comfort technologies driving growth.

    9. ERP Implementation and Investments
      Q: What are the impacts of the ERP implementation on OpEx, CapEx, and margins?
      A: The ERP implementation is part of ongoing investments to grow the brand towards $10 billion and beyond. These investments are embedded in their guidance, and operating margins are expected to reach double digits without adjustments for these costs.

    10. India Business Update
      Q: Can you provide an update on the trends in the India business?
      A: India is a significant international market with long-term potential. Regulatory issues on importation are being addressed, and they aim to increase local manufacturing. Despite challenges, they remain cautiously optimistic about growth.

    Related Publications