Q1 2025 Earnings Summary
- Strong global consumer demand and DTC performance: Executives repeatedly highlighted robust direct-to-consumer results—with international DTC channels (ex-China) showing double-digit growth and consistent consumer enthusiasm—demonstrating the brand’s enduring appeal even amid uncertainty.
- Proactive tariff mitigation and supply chain flexibility: Management outlined a multi-pronged strategy—cost sharing, sourcing optimization, and pricing adjustments—to counteract tariff headwinds. This proactive approach, coupled with the ability to flex production across locations, positions the company to maintain efficient product flow and protect profitability.
- Adaptable omnichannel strategy and selective store expansion: The firm’s ability to rapidly shift between robust e-commerce performance and profitable physical-store openings—making microeconomic decisions based on local market dynamics—underscores its strong omnichannel capability and capacity to capitalize on evolving consumer behaviors.
- Margin Pressure from Tariff Challenges: The executives noted that tariffs on imported goods could force Skechers to raise prices to protect gross profit dollars, which may lead to erosion of gross margin percentages if price increases are not fully passed on to consumers [doc 23][doc 10].
- Uncertainty in Key Market Demand: Comments in the Q&A raised concerns over weakening U.S. consumer confidence and ongoing challenges in China, suggesting that softer domestic demand and market volatility could negatively impact revenue growth [doc 5][doc 14].
- Supply Chain and Inventory Disruptions: Ongoing issues such as the lasting effects from the Suez Canal closure and the logistical complexities amid shifting tariff regimes could result in inventory management challenges, potentially delaying product delivery and increasing costs [doc 0][doc 8].
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | +7% (from $2.2516B in Q1 2024 to $2.411571B in Q1 2025) | Total revenue increased by 7% driven by higher sales volumes both internationally and domestically. This improvement builds on last year’s consistent growth, with enhanced performance in both wholesale and DTC channels supporting the current period’s uptick. |
Wholesale Revenue | +7.8% (from $1.4217B in Q1 2024 to $1.532208B in Q1 2025) | Wholesale revenue rose by 7.8% as a result of improved unit sales and favorable regional performance. This trend continues the prior period’s robust performance in key markets, where volume gains helped offset slight pricing pressure. |
Direct-to-Consumer Revenue | +6% (from $829.9M in Q1 2024 to $879.363M in Q1 2025) | Direct-to-Consumer revenue increased by 6% due to stronger customer demand and higher sales volumes, although partially offset by a slight decline in the average selling price. This builds on previous period trends where targeted initiatives in the DTC channel spurred volume growth. |
Operating Expenses | +12% (from $882.836M in Q1 2024 to $989.249M in Q1 2025) | Operating expenses surged by 12% driven by higher global demand creation, increased labor costs, and facility-related expenditures, reflecting continued investments in marketing and operational support. The cost escalation accelerated compared to the previous period despite revenue gains, thereby challenging margins. |
Earnings from Operations | -11% (from $298.798M in Q1 2024 to $265.125M in Q1 2025) | Earnings from operations declined by 11% as the increased operating expenses outpaced revenue growth. Despite higher sales and improvements in some segments, rising costs—particularly in selling and administration—eroded operating margins when compared to the prior period. |
Net Earnings | -6% (from $240.378M in Q1 2024 to $225.072M in Q1 2025) | Net earnings fell by roughly 6% due to the combined effect of higher operating costs and margin compression. Although revenue growth continued, the softer operational leverage relative to last year resulted in a modest decline in profitability. |
Net Cash Provided by Operating Activities | More negative by ~$68M (from -$37.606M in Q1 2024 to -$105.636M in Q1 2025) | Net cash used in operating activities deteriorated, with a further decline of about $68M caused by adverse working capital changes. This trend, similar to earlier periods where higher inventories and receivables impacted cash flow, intensified in Q1 2025. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Annual Growth Expectation | FY 2025 | no prior guidance | Skechers expects 2025 to be another year of growth, driven by strong global demand (with macro uncertainty) | no prior guidance |
Store Openings | FY 2025 | no prior guidance | Plans to open 150 to 170 company-owned stores worldwide in 2025 (including 13 opened in Q2 2025) | no prior guidance |
Capital expenditures | FY 2025 | $600 million to $700 million | $600 million to $700 million | no change |
Focus Areas | FY 2025 | no prior guidance | Committed to expanding distribution centers in the U.S., China, and Europe; enhancing product offerings; growing its direct-to-consumer footprint | no prior guidance |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Sales | Q1 2025 | $2.4 billion to $2.425 billion | $2.412 billion | Met |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Global Consumer Demand & DTC Performance | Q2, Q3, and Q4 2024 calls consistently emphasized strong global consumer demand and robust DTC performance—with strong regional results in EMEA, Americas, and international markets—but noted challenges in China and some uncertainty in the U.S. | Q1 2025 maintained the narrative of robust global demand, with particularly strong performance in the Americas and EMEA. However, it underlined continued struggles in China (16% decline) and increased U.S. uncertainty | Consistent global strength despite persistent regional challenges, particularly in China. |
Tariff Impact and Mitigation Strategies | Q4 2024 and Q2 2024 discussed tariff impacts and historical mitigation strategies (e.g., vendor cost sharing and production re-allocation), while Q3 2024 did not mention tariffs | Q1 2025 provided an updated view detailing significant tariff uncertainty, proactive measures such as cost sharing, sourcing optimization, and pricing adjustments—with expectations for more acute impacts in Q2 and Q3 2025 | A consistently concerning theme now refined with updated timing and more proactive mitigation. |
Supply Chain Disruptions & Flexibility | Q2 2024 reported disruptions (e.g., transit delays due to the Red Sea crisis); Q3 2024 highlighted efforts to overcome delivery delays; Q4 2024 detailed impacts due to the Suez Canal crisis and tariff-triggered adjustments | Q1 2025 emphasized enhanced production flexibility, agile inventory management (pre-clearing and weekly demand planning), and adaptiveness to changing market conditions, showcasing continuous efforts to mitigate disruptions | Persistent challenges met with evolving and proactive flexibility measures. |
Omnichannel Strategy and Store Expansion | Across Q2, Q3, and Q4 2024, the focus was on expanding the direct-to-consumer (DTC) channel, enhancing e-commerce performance, and growing the global store footprint (including new store openings and distribution center investments) | Q1 2025 reiterated a strong omnichannel focus, highlighting robust DTC growth, significant company-owned and third-party store openings, and a bias toward international expansion despite macro uncertainties | Consistent expansion strategy with an even greater push on omnichannel adaptability and international growth. |
China Market Performance and Risks | Q2 2024 noted modest constant currency growth amid promotional challenges; Q3 2024 described underperformance with notable inventory issues; Q4 2024 reported an 11% decline and macroeconomic headwinds | Q1 2025 revealed a sharper 16% decline in sales with ongoing macroeconomic uncertainties, while also noting modest stabilization and long-term commitment albeit with cautious near-term outlook | Recurring challenges remain; long-term commitment continues but risks persist amid ongoing macro uncertainties. |
Margin Pressure and Operating Efficiency Challenges | Q2 2024 mentioned improved gross margins (helped by lower freight costs) alongside higher operating expenses; Q3 2024 observed an 80 bps decline in gross margin due to promotional pressures and slightly rising expenses; Q4 2024 noted stable margins with efficiency gains offsetting FX and tariff pressures | Q1 2025 reported a 50 bps decline in gross margins (now at 52%) due to lower average selling prices tied to higher promotional activity, along with increased operating expenses, producing a reduced operating margin (down to 11%) | Ongoing margin pressure driven by promotional investments and cost increases, despite continuous efforts to improve efficiency. |
Foreign Exchange Headwinds | Q2 2024 and Q4 2024 extensively described FX headwinds impacting sales and EPS—with Q4 noting a significant $34.7 million FX loss and a 200 basis point headwind on sales—while Q3 2024 had minimal explicit discussion aside from favorable variances in other income | Q1 2025 emphasized FX volatility impacting reported sales (7.1% growth reported vs. 9% on a constant currency basis) and highlighted notable fluctuations seen in other income figures | Steady recurring headwind that continues to erode reported growth, underscoring its persistent adverse effect. |
Global Minimum Tax Regulations | Introduced in Q4 2024, where it was discussed in detail with expectations of raising the effective tax rate to 22%-23%; not mentioned in Q2 or Q3 2024 | Q1 2025 confirmed an elevated effective tax rate of 22.3%, directly attributed to the global minimum tax regime, reinforcing the impact first noted in Q4 2024 | An emerging regulatory challenge that started in Q4 and continues to weigh on near-term tax rates. |
New Product Category Expansion (Football & Basketball) | Q2 2024 provided detailed plans for launching football and basketball lines globally with high-profile athlete signings; Q3 2024 highlighted successful athlete partnerships (e.g., Embiid and Harry Kane) and early market traction; Q4 2024 underscored strategic expansion with additional athlete deals | Q1 2025 continued this momentum by signing elite athletes (including footballers and a basketball player) to support their technical performance initiatives, emphasizing credibility and market expansion | A consistently expanding performance segment, with strategic athlete partnerships driving the narrative in every period. |
Increased Selling Expenses and Declining ASPs | Q2 2024 reported a 160 bps increase in selling expenses and highlighted negative ASP pressure due to product mix and promotions; Q3 2024 noted a 20 bps increase in selling expenses with an 80 bps decline in gross margin from lower ASPs (particularly impacted by China) | Q1 2025 recorded a 70 bps increase in selling expenses (to 7.7% of sales) and a 50 bps decline in gross margin attributed to lower ASPs resulting from higher promotional activity and changes in customer mix, indicating further ASP pressure | Mixed trends persist—with elevated marketing spend and sustained pricing pressures; while some periods showed expense moderation, recent data indicate renewed ASP declines and higher promotional costs. |
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Pricing & Margins
Q: How manage pricing versus margins?
A: Management said they aim to protect gross profit dollars and may accept some margin erosion to avoid unnecessary price hikes—pricing adjustments will be made only if extraordinary costs require it. -
Landed Cost Modeling
Q: How model landed cost under new tariffs?
A: They noted that while tariffs affect the FOB costs, numerous factors such as differing labor, logistics, and production shifts make modeling overall COGS complex. -
Tariff & Sourcing Adjustments
Q: How will tariffs impact China sourcing?
A: The company is using all available levers—cost sharing, sourcing optimization, and pricing—to minimize high-tariff production for the U.S. without disclosing exact percentages. -
Inventory Timing
Q: When will tariff impacts hit inventory?
A: They expect to start feeling the tariff effects on inventory in late Q2 and more acutely in Q3, noting actions like pre-clearing inventory to delay the impact. -
CapEx Spending
Q: Will you cut CapEx spending?
A: No changes have been decided yet; they are proceeding with planned investments that support growth while continuously evaluating alternatives in light of uncertainties. -
Market Volatility
Q: Which markets face current volatility?
A: Management highlighted that volatility is most evident in the U.S. and China, whereas international markets remain solid and continue to drive growth. -
Production Flexibility
Q: Which products rely on China manufacturing?
A: They noted that a significant portion of kid’s footwear is produced in China due to superior quality and cost-effectiveness, though production is diversified overall. -
Holiday Order Timing
Q: When are holiday orders due?
A: Timing varies by product—new constructions require earlier orders, while established products follow routine scheduling, balancing logistics with market demand. -
Airfreight Consideration
Q: Can airfreight delay tariff effects?
A: Management explained that while airfreight could shorten delivery by a couple of weeks, its high cost makes it impractical as a long-term solution against tariff volatility. -
Retail/DTC Store Strategy
Q: How will store and DTC growth evolve?
A: They remain committed to profitable store openings based on rigorous local assessments, complemented by robust direct-to-consumer performance, ensuring flexibility amid changing conditions.