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SKECHERS USA INC (SKX)·Q3 2024 Earnings Summary

Executive Summary

  • Record quarter: Sales $2.35B (+15.9% YoY) and diluted EPS $1.26 (+35.5% YoY) on broad-based strength; Wholesale +20.6% and DTC +9.6%, with EMEA +30% and U.S. wholesale +26% .
  • Gross margin 52.1% (-80 bps YoY) on slightly higher promotions/lower ASPs; management guides Q4 gross margin roughly flat vs last year (around 53.1%) given higher Europe freight and mix dynamics .
  • Raised FY24 guidance: Sales to $8.925–$8.975B (from $8.875–$8.975B) and EPS to $4.20–$4.25 (from $4.08–$4.18); introduced Q4 guide: Sales $2.165–$2.215B, EPS $0.70–$0.75. Effective tax rate trimmed to 18–19% for the year .
  • Offsets: China -5.7% YoY; inventory +24% YoY driven by China and elevated in-transit (EMEA). Management expects Singles Day/helpful reallocation to mitigate and called early Singles Day read “encouraging” .

What Went Well and What Went Wrong

  • What Went Well

    • Broad-based growth and record sales: “The third quarter marked a new quarterly sales record…$2.35 billion…growth of 21% in wholesale, 9.6% in DTC…16% internationally and 15% domestically” (COO) .
    • EMEA acceleration and domestic wholesale recovery: EMEA +30% YoY; domestic wholesale +26% on partners’ capacity and adoption of comfort technologies (CFO) .
    • Brand/product resonance: Diverse comfort technology portfolio and ambassador program (e.g., Slip-ins, Arch Fit; Snoop Dogg, Joel Embiid) driving awareness and purchase intent (CEO/COO) .

  • What Went Wrong

    • China underperformed expectations: Sales -5.7% YoY on macro pressures; inventory build concentrated in China (CFO) .
    • Gross margin pressure: 52.1% (-80 bps YoY) from lower ASPs/promotions and international mix; freight to Europe also a headwind (CFO) .
    • Elevated in-transit inventory (EMEA): Supply chain delays improved but still elevated; expected to normalize as constraints ease (CFO) .

Financial Results

Overall P&L vs prior quarters

MetricQ1 2024Q2 2024Q3 2024
Sales ($USD Millions)$2,251.6 $2,157.6 $2,347.7
Gross Margin %52.5% 54.9% 52.1%
Operating Margin %13.3% 9.6% 9.9%
Diluted EPS ($)$1.33 $0.91 $1.26

Q3 2024 segment performance

SegmentSales ($MM)YoY GrowthSegment Gross Margin %
Wholesale$1,416.0 +20.6% 42.8%
Direct-to-Consumer$931.7 +9.6% 66.3%

Q3 2024 regional/geographic mix

Region/GeoSales ($MM)YoY Growth
Americas$1,156.1 +13.6%
EMEA$625.6 +30.2%
APAC$566.0 +7.4%
China (subset of APAC)$252.4 -5.7%
Domestic total$916.0 +15.3%
International total$1,431.7 +16.4%

Key balance sheet and capital return KPIs (Q3-end)

KPIQ3 2024
Cash, cash equivalents & investments$1.60B
Inventory$1.7068B
Share repurchase (Q3)$90.0M (1.4M shares)
Company-owned stores (US / Int’l / Total)592 / 1,151 / 1,743
Distributor/licensee/franchise stores3,589
Total Skechers stores5,332

Non-GAAP note (FX/constant currency)

  • Q3 constant currency adjustments reduced reported EPS by ~$0.06 ($1.26 GAAP to $1.20 CC); CC sales impact was de minimis (+$0.1MM) .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
SalesFY 2024$8.875–$8.975B $8.925–$8.975B Raised (low end)
Diluted EPSFY 2024$4.08–$4.18 $4.20–$4.25 Raised
SalesQ4 2024N/A$2.165–$2.215B Introduced
Diluted EPSQ4 2024N/A$0.70–$0.75 Introduced
Effective Tax RateFY 202419%–20% 18%–19% Lowered
Capital ExpendituresFY 2024$325–$375MM $375–$400MM Raised

Earnings Call Themes & Trends

TopicQ1 2024 (prior)Q2 2024 (prior)Q3 2024 (current)Trend
China macroDouble-digit growth; optimism with DC buildout “Lackluster” 6–18 in China; supply chain (Suez) disruptions; raised FY guide Sales -5.7% YoY; derisked outlook; early Singles Day encouraging Softening vs H1, cautious H2
EMEAStrong DTC and wholesale; infrastructure investments paying off EMEA +13.7% despite FX/supply chain headwinds +30% YoY; robust demand; in-transit improving Strengthening
Domestic wholesaleRebound underway; orders earlier in window +14% domestic wholesale; outlook constructive +26% YoY; partners embracing comfort tech Accelerating
Gross margin driversFreight tailwind fading; mix supporting 54.9% GM (+220 bps YoY) on lower freight/mix 52.1% GM (-80 bps YoY) on ASP/promotions; Q4 GM ~flat YoY; Europe freight a headwind Normalizing
Marketing/demand creationElevated to brand technologies; 2Q peak spend Lean-in continued; raised FY on demand signals Selling expense +20 bps YoY; focus on Slip-ins and performance categories Ongoing investment
India & local sourcingLogistics/regulatory uncertainty; LT opportunity —24% growth rebound; building local manufacturing breadth Improving execution
Supply chainDC leverage in U.S./EU; efficiencies Suez/Red Sea disruptions affected EMEA timing In-transit elevated esp. EMEA but improving; distribution efficiencies drove G&A leverage Gradual normalization

Management Commentary

  • “Record third quarter financial performance with sales of $2.35 billion…EPS of $1.26, up 35%…driven by strong international growth…domestic wholesale momentum and durable gross margins.” (CFO) .
  • “We saw growth…30% in EMEA…14% in the Americas…7% in Asia Pacific…growing awareness and broad acceptance of our comfort technology products.” (COO) .
  • “China…Sales declined 5.7%…below our initial expectations…we’ve derisked China going forward…early Singles Day reads encouraging.” (CFO) .
  • “We remain committed to achieving $10 billion in sales by 2026.” (CFO) .

Q&A Highlights

  • Domestic wholesale +26%: Partners now have capacity and are fully embracing comfort-tech lines, aided by marketing; last year’s inventory constraints have abated (CFO) .
  • Guidance raise drivers: Broad strength ex-China; wholesale double-digit growth across regions ex-China; watching Singles Day/holiday season closely (CFO) .
  • Gross margin outlook: Q4 GM roughly flat vs last year given European freight headwinds; promotionality stable; ASP pressure tied partly to China; mix volume-led growth (CFO) .
  • Inventory: Increase driven primarily by China, secondarily in-transit EMEA; company can reallocate inventory globally to meet demand (CFO/COO) .
  • SG&A: Expect modest leverage from marketing normalization and distribution efficiencies; near-term OpEx leverage/deleverage limited and holiday-dependent (CFO) .
  • India: Local sourcing capacity expanding across more categories over time; margin impact modest near term, positive long term (COO/CFO) .

Estimates Context

  • We attempted to retrieve S&P Global (Capital IQ) Wall Street consensus for Q3 actual-vs-estimate and Q4 estimates, but the data was unavailable due to request limits at the time of access. As a result, we cannot quantify beat/miss vs consensus for revenue or EPS for Q3, nor provide consensus for Q4. We will anchor to S&P Global when accessible and update upon availability.

Key Takeaways for Investors

  • Domestic wholesale momentum appears durable into Q4, aided by comfort technology adoption and healthier partner inventories—supporting top-line resilience despite China softness .
  • Guidance raised again for FY24, with a narrower EPS range; Q4 intro guide appears balanced against macro/freight headwinds and promotional stability .
  • Watch China: -5.7% in Q3, inventory elevated; management expects Singles Day and global reallocation to mitigate—monitor sell-through and inventory normalization cadence in Q4/Q1 .
  • Margin setup: GM normalization from peak levels; management indicates Q4 GM roughly flat YoY even with Europe freight pressure—mix and DTC should help offset .
  • EMEA strength continues (+30% YoY), underpinned by product/advertising and improving supply chain timing—key lever for international outperformance .
  • Capital deployment remains active (Q3 buyback $90M) with ample liquidity ($1.6B cash/investments) to fund capex ($375–$400M) and growth initiatives .
  • Medium-term: The brand’s comfort-tech positioning and expansion into performance/team sports support the $10B 2026 target; monitor incremental ROI on demand creation and wholesale/DTC mix shift .