David Weinberg Chief Operating Officer, Chief Financial Officer SKECHERS USA, Inc. (310) 318-3100
Investor Relations:
Andrew Greenebaum ADDO Communications (310) 829-5400
SKECHERS ANNOUNCES SECOND QUARTER 2011 FINANCIAL RESULTS
MANHATTAN BEACH, CA. – July 27, 2011 – SKECHERS USA, Inc. (NYSE:SKX), a global leader in lifestyle footwear, today announced financial results for the second quarter ended June 30, 2011.
Second quarter 2011 net sales were $434.4 million compared to $504.9 million for the second quarter of 2010. Second quarter 2011 net loss was $29.9 million or a loss of $0.62 per diluted share based on 48,341,000 weighted average common shares outstanding compared to net earnings of $40.2 million or earnings of $0.82 per diluted share based on 49,130,000 weighted average common shares outstanding for the second quarter of 2010.
“Second quarter results were impacted by several factors,” began David Weinberg, chief operating officer and chief financial officer. “First, we were up against a record second quarter in 2010, and we aggressively reduced our excess toning inventory during the second quarter by selling two million pairs of our original Shape-ups for a loss of $21.0 million. We also recorded a $4.4 million reserve for additional product, which we believe reflects net realizable value. We made a decision to accelerate the clearance on early generation Shape-ups product in order to eliminate the overhang of excess inventory. We believe this will expand the sales of our new toning and performance product, which are showing positive results at retail.The impact of these two transactions was a loss of $0.31 per diluted share and a reduction of gross margin to 33 percent, which otherwise would have been 41.5 percent. We feel this was a big step in reaching our goals for the year, which include right-sizing our inventory, bringing new product to market, and getting our overhead in line with anticipated sales for 2012.”
For the six months ended June 30, 2011, net sales were $910.6 million compared to net sales of $997.6 million in the first six months of 2010. Net loss was $18.1 million or a loss of $0.38 per diluted share based on 48,292,000 weighted average common shares outstanding as compared to net earnings of $96.5 million or earnings of $1.97 per diluted share based on 48,955,000 weighted average common shares outstanding for the first six months of 2010.
Gross profit for the second quarter of 2011 was $143.3 million or 33.0 percent of net sales compared to $237.6 million or 47.1 percent of net sales in the second quarter of last year. Gross profit for the first six months of 2011 was $335.9 million or 36.9 percent of net sales versus $475.1 million or 47.6 percent of net sales in the first six months of 2010.
Robert Greenberg, SKECHERS chief executive officer, commented: “Every business faces challenges as they grow and at this time last year we were experiencing record growth and were the leaders in an explosive new category of footwear. Recently we have leveraged our experience and learning in the toning category to develop new footwear in both our core lifestyle lines and in our rapidly evolving performance division. This product was delivered to our own SKECHERS retail stores in the second quarter and began reaching our key accounts in June and July. The initial sell throughs have been strong, and we believe will accelerate as the marketing begins for back to school.Dancing with the Starshost Brooke Burke is the face of our women’s lightweight toning and running product, and we have several new commercials for our kids lines. We also recently signed Danny Woodhead, the New England Patriots exciting young running back, to appear in a multi-level marketing campaign for our SKECHERS Resistance footwear. Kim Kardashian is appearing in SKECHERS broadcast, print and outdoor advertising globally. We are pleased with our international sales, which grew by double digits, and our retail business, which remains steady with new stores opening in the United States and around the world. We believe SKECHERS continues to be a brand in demand globally, and there are many opportunities to grow our business in the coming years.”
Mr. Weinberg added: “We believe that while the second half of 2011 will pose more challenges, we also see growth opportunities in both the international and retail businesses. We are pleased with the reception of our new product offerings for men, women and kids delivering in our stores and to accounts now. With our Holiday 2011 and Spring 2012 product being reviewed by our customers this month during prelines, we believe we are well-positioned for the future.”
SKECHERS USA, Inc., based in Manhattan Beach, California, designs, develops and markets a diverse range of footwear for men, women and children under the SKECHERS name, as well as under several uniquely branded names. SKECHERS footwear is available in the United States via department and specialty stores, Company-owned SKECHERS retail stores and its e-commerce website, as well as in over 100 countries and territories through the Company’s global network of distributors and subsidiaries in Canada, Brazil, Chile, and across Europe, as well as through joint ventures in Asia. For more information, please visit www.skechers.com.
This announcement may contain forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate or simply state future results, performance or achievements, and can be identified by the use of forward looking language such as “believe,” “anticipate,” “expect,” “estimate,” “intend,” “plan,” “project,” “will be,” “will continue,” “will result,” “could,” “may,” “might,” or any variations of such words with similar meanings. Any such statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected in forward-looking statements. Factors that might cause or contribute to such differences include international, national and local general economic, political and market conditions including the global economic slowdown and market instability; entry into the highly competitive performance footwear market; sustaining, managing and forecasting costs and proper inventory levels; losing any significant customers, decreased demand by industry retailers and cancellation of order commitments due to the lack of popularity of particular designs and/or categories of products; maintaining brand image and intense competition among sellers of footwear for consumers; anticipating, identifying, interpreting or forecasting changes in fashion trends, consumer demand for the products and the various market factors described above; sales levels during the spring, back-to-school and holiday selling seasons; and other factors referenced or incorporated by reference in the Company’s annual report onForm 10-K for the year ended December 31, 2010 and its quarterly report on Form 10-Q for the three months ended March 31, 2011. The risks included here are not exhaustive. The Company operates in a very competitive and rapidly changing environment. New risks emerge from time to time and the companies cannot predict all such risk factors, nor can the companies assess the impact of all such risk factors on their respective businesses or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, you should not place undue reliance on forward-looking statements as a prediction of actual results. Moreover, reported results should not be considered an indication of future performance.
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1
SKECHERS U.S.A., INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands)
June 30,
December 31,
2011
2010
ASSETS
Current Assets:
Cash and cash equivalents
$
250,782
$
233,558
Trade accounts receivable, net
275,958
266,057
Other receivables
10,375
9,650
Total receivables
286,333
275,707
Inventories
325,815
398,588
Prepaid expenses and other current assets
70,072
53,791
Deferred tax assets
11,720
11,720
Total current assets
944,722
973,364
Property and equipment, at cost less accumulated
367,152
293,802
depreciation and amortization
Intangible assets, less applicable amortization
6,587
7,367
Deferred tax assets
12,323
12,323
Other assets, at cost
17,679
17,938
TOTAL ASSETS
$
1,348,463
$
1,304,794
LIABILITIES AND EQUITY
Current Liabilities:
Current installments of long-term borrowings
$
9,893
$
11,984
Short-term borrowings
46,096
18,346
Accounts payable
245,185
246,595
Accrued expenses
19,259
30,385
Total current liabilities
320,433
307,310
Long-term borrowings, excluding current installments
81,075
51,650
Deferred tax liabilities
77
—
Total liabilities
401,585
358,960
Equity:
Skechers U.S.A., Inc. equity
908,542
908,203
Noncontrolling interests
38,336
37,631
Total equity
946,878
945,834
TOTAL LIABILITIES AND EQUITY
$
1,348,463
$
1,304,794
2
SKECHERS U.S.A., INC. CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) (In thousands, except per share data)
Three Months Ended June 30,
Six Months Ended June 30,
2011
2010
2011
2010
Net sales
$
434,351
$
504,859
$
910,585
$
997,623
Cost of sales
291,021
267,214
574,645
522,560
Gross profit
143,330
237,645
335,940
475,063
Royalty income
1,376
875
3,024
1,260
144,706
238,520
338,964
476,323
Operating expenses:
Selling
53,099
52,437
90,659
86,746
General and administrative
139,965
127,299
281,948
249,786
193,064
179,736
372,607
336,532
Income (loss) from operations
(48,358
)
58,784
(33,643
)
139,791
Other income (expense):
Interest, net
(1,596
)
318
(2,974
)
1,031
Other, net
(944
)
1,611
(595
)
1,820
(2,540
)
1,929
(3,569
)
2,851
Earnings (loss) before income taxes
(50,898
)
60,713
(37,212
)
142,642
Income tax expense (benefit)
(20,846
)
20,396
(19,313
)
46,202
Net income (loss)
(30,052
)
40,317
(17,899
)
96,440
Less: Net income (loss) attributable to noncontrolling interest.
(136
)
80
209
(93
)
Net earnings (loss) attributable to Skechers U.S.A., Inc.
$
(29,916
)
$
40,237
$
(18,108
)
$
96,533
Net earnings (loss) per share attributable to Skechers U.S.A., Inc.:
Basic
$
(0.62
)
$
0.85
$
(0.38
)
$
2.05
Diluted
$
(0.62
)
$
0.82
$
(0.38
)
$
1.97
Weighted average shares used in calculating earnings (loss) per share attributable to Skechers U.S.A., Inc.:
Basic
48,341
47,422
48,292
47,107
Diluted
48,341
49,130
48,292
48,955
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