SKX - Earnings call transcript Q4 2017

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Operator

Greetings and welcome to the SKECHERS Q4 and Full Year 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation.

As a reminder, this conference is being recorded. I'd now like to turn the conference over to SKECHERS.

Unverified Participant

joining SKECHERS for call everyone you, us conference on today. Thank Harbor now read will statement. the I Safe Certain statements the including, statements Litigation objectives, results contained Reform herein events within estimates beliefs, addressing or XXXX the or plans, the the Act meaning expectations Private constitute of of may company of future without or forward-looking limitation, Securities statements amended. as and national market involve including, to industry but to, general global, risks conditions apply known and not business unknown and as and statements economic, the forward-looking and Such local they the specifically in limited retail company. no the expressed statements There assurance can or such occur. performance will future achievements be implied forward-looking by that actual results, or encouraged Users company's review the the of are filings the forward-looking to U.S. statements with Form on on XX-Q, of for all the securities Securities financial risk and Exchange a X-K Commission, Form SEC results including federal of and the the company's reports quarterly on as current Form XX-K, filed reports most laws conditions. business, description operations all report factors affect and other recent by with that may significant required reports other annual like turn With Vandemore. would Financial John SKECHERS Weinberg; and to Officer, I the Chief Officer, to call Chief that, Operating over David David?

David Weinberg

thank fourth financial you us Good afternoon, year-end review results. SKECHERS joining and to quarter today for XXXX and

wholesale comparable due and stores infrastructure. and wholesale include sales the annual Officer, business our same sales today double-digit achievements sales retail increased footprint company-owned worldwide to our our triple-digit record through brand sales growing global brand Both and across sales relevance and to international to in Joining China gain to diluted and XX.X%; domestic women's brand; casual in key pairs quarter; lifestyle the and billion. footwear which $X.XX on the XX.X% our strength who including to our me XX% in with the several joint three quarter-end, record of results to with an a full-year on the retail sheet and in million Full-year owned equivalents, focused SKECHERS addition billion $X per United approximately position detail. store increase on worldwide Financial venture SKECHERS cash in our a building increase number globally; Vandemore, and channels growth of third-party retail Fourth brand with athletic casual strong a XX.X% Subsequent international as million total marketing increase wholesale our quarter growing a a Fourth are quarter highlights call million and stores, one and will sales quarters is markets; financial expanding of business, increased the consecutive and the include $XXX.X authorized are product, our including XX% and our footwear stores in of shipped testament to XXX subsidiary gains a $X.XX XX.X% new or XX.X% Chief board repurchase two balance distribution three-year subsidiary more the significant and John highlights cash in walking, program. and discuss countries to our XX.X% gains company $XXX.X maintaining sales $XXX double-digit in primarily global of net States the a and number of quarter. work, four share. in X,XXX stock than

channels our in business turning Now to detail.

and the several a primarily the result average due the XX.X% quarterly of strength growth price. lower X.X% business XX.X% Our year. collection a fourth the of pairs per domestic wholesale for have shipped selling increased and mix product price in increase in pair, was quarter to average X% and The that decrease for

the quarter. women's and achieved men's growth in footwear double-digit Our

for We businesses up quarter, was our in the in others. issue due X.X% Our Kids multiple and part women's we believe quarter in but in On Kids the across were fourth that GO, business timing Sport was including full lines as flat a XX.X% results business period, Men's well. third to prepare year. to the GO, increased casuals the for for our performed the was season. GOLF, The holiday and extremely work, selling men's among also the growth

several holiday For GOwalk Nason, the Skech-Knit, campaigns ran footwear. Mark Joy, spots including product Kids' television for period, we digital SKECHERS lighted and and focused

featuring Sport this brand Long, campaign our Howie Sugar footwear, ambassadors, year. also Leonard also Super and Relaxed We who appeared ran and Bowl Ray our for our campaigns Fit on

athletic work career. Performance the race beloved English SKECHERS placed we ran in he XXth on new David SKECHERS and wearing media. completed campaign released York as the the Camila Meb footwear. the campaign We Cabello's as the story fourth has legend Ortiz. baseball continue walking, quarter, launched social her XX, of done brand. team will SKECHERS' At final TV to the markets with at Performance and the Targeting also and over on than teens We XX year and albums Marathon the position month New records number marathoner more SKECHERS leading, her work last our again casual and in past its broke and Spanish with Camila in second within with largest of debut women, ended solo footwear six a one the casual and footwear album years. Meb young brand, release. casual hours XXX Also, both ambassador dress lifestyle

in International our domestic and our strong our consumers wholesale at remain footwear With style heritage retro believe representing wholesale in distribution resurgence $XXX.X the well growth seek and distributor remains million for The of gains in for and compelling attributable venture as full Ukraine. in growth of and market lines, our our biggest XX.X% wholesale subsidiary year, The and growth by increases increased same and period. New joint key XX.X% quarterly comfort XX.X% sales several we nearly as and business triple-digit channel, the and while the will Zealand, X.X% styling in a the result quarterly million Russia in XX.X% $XXX.X XX.X%, as sales venture Philippines, year. Total including represented joint our international and our fourth were the or distributors, the combined international Turkey, quarter for increases retail or in price. total of Australia, the growth business. subsidiary businesses double-digit is double-digit to every

continued bringing and million grew countries impacted those markets with within international full by venture the dollar were Spain. into South ensure the were fourth each grew Estonia, X New and X subsidiary Australia, increases X as Singapore, each for by the the in France, XX.X%. Kong, highest China and partners, year. Additionally, the pull Indonesia, Korea highest quarter distributor points Italy the the In gains China, ventures owned X.X to Switzerland, Lebanon, million sale of shipped had XXX quarter Portugal owned which XX,XXX approximately in We network there XX a for as detailing the XX the stores several the our with well branded and XX UK, percentage Ukraine the the unrest X fourth pairs already achieve first deliveries. including have gains experienced mentioned business Single's include with million quarter, X.X through in spring which in XX and Further wholly-owned Denmark, UAE. joint XX, X St. negatively increase stores the forward the includes China quarter XX.X% distribution of XXXX. XX% closing Brazil, the Turkey, they freestanding were fourth to-date China e-commerce for opened and able quarter. SKECHERS Philippines, pairs Middle retail by in year. stores quarter India, in international we quarter X,XXX timely The This East, owned ended for Paraguay, in Day, franchisees results an X Lucia, business and to primarily last with were total and Thailand Zealand, over the XX stores in third-party of operated and is also SKECHERS which each our year-end SKECHERS opened XXX despite the our Hong third-party region end, fourth of joint Malaysia growing quarter in sales and for stores. growth X,XXX. grew international internationally, our and to opened, and strong China stores the business in the At At double-digits SKECHERS the in franchisees. in and third-party in which India, Spain,

XXX XXX in We expect open stores another to third-party SKECHERS to owned branded XXXX.

believe of square three the Nine stores our pace Japan; our than one sales open international Our the and an in United we of XX.X% of quarter XX.X% additional our in a our the sales each XX.X% the two will each XXX a or fourth for domestic retail our e-commerce increased quarter we relocate XX.X% biggest XX.X% company-owned remodel XX and result to in for full domestic This stores. which Peru XX our at In stores included global internationally sales Kingdom; store foot the Chile The States. that business XX.X% international SKECHERS and were XX the positive opened stores. opportunity retail quarter SKECHERS fourth were and and remains to had and increase domestic in superstore faster existing increase in in comp included an for our company-owned the in outside grew At retail continue subsidiary; XXXX, a of Adding Italy. of company-owned including to opened for total combined of XX.X% retail stores company-owned which Tucson. and quarter to XX year. stores businesses. and quarter. growth end business, growth XX,XXX grow comp was we In business, In to the the by the gains stores XXX United XX store the domestically year. in for fourth we quarter these XX.X% and increase XX% a it expect

e-commerce Chile, Spain sites also UK, company-owned Germany, and have and in We Canada. operated

over John call Now, the I'll turn to financials. review to our

John M. Vandemore

Thank you, David.

be team. growth Michael, of I a David of part alongside I begin, being like here to this Robert, fabulous brand. I forward SKECHERS look rest I to the and the how say to working Before excited continued of would am the

prior turn retail This Fourth XX% wholesale domestic over growth driven of let wholesale year quarter million. full increases results stores segments, $XXX.X Now, to our global including by fourth international XX.X%, and detail. company-owned XX.X%. to and all of XX.X% was our year sales quarter in of me the business in increased

Due shipments to ongoing results $XX.X efficiency basis the positively $XX.X international period, million prior to impacted to in margins we year long-term million, XX fourth growth It increased of up believe improvement million increase XX prior to of of points. XX.X% million, China in of us ability profit our XXXX, the $XX well million sales. administrative and recorded and for to million million operations $XXX.X million of $XX.X and period. to liabilities. by glimpse This or subsidiary first operations and in in with associated $X.XX leverage initiatives. this were gives we compared do XX.X% gross retail to the XXX $XX both However, our revaluation and accumulated additional and count points $XX.X categories. expansion and were $XX.X $XX.X million was that additional originally which quarter Act income top our Gross of $XX.X global planned performance delivered of in investments the United Tax year or expenses States for wholesale per to X.X% quarter includes of compared the sales before from year the the The support leverage of impact enactment opportunity diluted Selling in overseas as this period. our tax prior quarter. reflects our per sales the diluted a Single's million, our support deferred million Day represented or our assets share, higher increased million, contribution international scale $X.XX profits dollars Earnings XX.X% in a our reflects net up attributable an and expense investment, of $XX.X loss increase due and digital and additional new retail was improvement $XX.X record-breaking administrative grow growth our global is resulted of the of of expenses The expenses and general to General in This Jobs joint infrastructure and December our sales in continue sales X.X% to the XX.X%. of for representing million operations. the to subsidiary. expense investments venture into to in Domestic $X.X past one-time fourth businesses. into to strength included share. increased X.X% to an by quarter of we a sales years. worldwide, we the compared stores prior improvements to year-over-year, business an our increased international The representing This brand of tax basis the the company-owned as year head increased to tax sales a a Cuts primarily compared in line support X.X% to sales. $XXX.X increased on our and to part, million as our to $X.X in million from XX% as couple

which fourth XX.X% our includes for quarter tax the year. and reported full result, additional the a rate, for As XXX.X% this was expense,

XX.X% been for the rate would tax and Excluding the year. full the additional quarter our income for tax have fourth expense, XX.X%

XXXX to the tax be in XX%. our of We range expect rate to normalized XX%

aspects still many as our tax potential enacted We of the well law recently are as evaluating response.

our represents the change the XXXX, estimate that IRS of application as law. rate defines the guidance and but best in of better more Our regulations may promulgates

one-time to share diluted $X.XX million outstanding XXX.X outstanding XXX.X per per on these shares year share million prior period. $X.X shares compared expenses, on or or diluted adjusted earnings million Excluding the were in $X.XX net $XX.X million

earnings full-year, million were XXXX. $XXX.X shares $XXX.X million million on compared Diluted shares approximately net approximately $X.XX year. compared earnings XXX.X to in share were per the last $X.XX outstanding For outstanding to on XXX.X million

per $X.XX share. were adjusted basis, an $XXX.X or on earnings the million diluted for year However, net

line XX cash cash the Act. higher. end XX, including our balance million million domestic remodels $X.X was Trade inventory incoming our have an Working fourth and with actions, planned December same to sales by for expanded rate to reflecting $XXX store December million, Long-term DSOs and million related growth $XXX.X is of XX.X% accounts million at sheet. year. Total $X.X our transit, new December to Jobs as which or last efficiently billion same at the XX, XX $XX.X $XX.X and domestic This $XXX.X last $XXX.X to supports million were compared XXXX cash compared the XXXX, XXXX, in turning was would million, these versus the company-owned approximately upgrades. $XXX year-end XX XX, inventory, opening international period sought we and impacted markets, primarily levels. showroom payments and for we navigate several of Absent increase Capital billion were backlogs and quarter was days store quarter XXXX, $XX.X retail in and certain year. and worldwide our have for XX, Tax had increase This at to believe from as approximately of of million $X.X our $XX.X XXXX, Cuts expenditures At were the XX, equivalents. aforementioned provision capital of in been balance as Now, office increase million we receivable debt footprint. timing and was the order XXXX. year-end in balances million the an December $XX.X well in days we million, was at compared period to merchandise international December

openings, in related excludes have our ground to This XXXX. this project. $XX in is break center store we company-owned Today, XX which to expect XXXX, to office million additional to and China, And expenditures store the we remodels, capital to XX currently be approximately relocations spent XX an to design XX we stage. retail estimate ongoing expenditures million, or million distribution For includes which in expansions capital related $XX $XX renovations. our to expect later

our Manhattan estimate addition, may here capital excludes Beach Hermosa expansion year. office ground break and later in this which In Beach expense

Our million board allocation decision and of confidence repurchase philosophy. fund recently capital growth sheet, of This in stock balance strength $XXX directors our ability the the program. commitment a authorized three-year to to our a reflects our prospects

our offerings provide increasing direct important into Comprehensively, comprise performance is it of our and guidance, as calendar of openings, portion store the such our indicator backlog, quarterly incorporate more view diverse captures best entirety performance. note our especially these revenue. rate, we sales, mix, an businesses, shipments, incoming that overall no But estimates. our order shifts ASPs, as new the into to turning store consumer Before indicators future one to many comp to

As a result, we have made to longer wholesale the our no on backlog. information decision provide specific

of information. reflecting and However, we said, per quarterly input quarter turn billion. diluted position, $X.X sales a range strong continue basis our per earnings the of I first $X.XX. the earnings guidance of and closing the billion on in share we cash remarks. expanded believe all global to will achieve David $X.XX will infrastructure will to provide and call back to sales new and with to product a net inventory deliveries share for That $X.XXX combined And we now

David Weinberg

the period conference to call. call marked of question-and-answer first and the double-digit years. in ensure in increases The like continuing of three investments quarter our success. channels, in Thank over marketing in result potential. distribution strength $X would multiple distribution the markets. to international growth business, new brand our that, our billion John. sales the the to poses and allow our we believe annual this fourth with long-term market to time of our and and achieved and the for you, we sales. diverse record and and the we continue channels portion to worldwide With our representing a brand turn design, and the We end, product us our in believe relevant have grow And a infrastructure total innovative year global annual in begin invest a operator record for of made are the new was resulted the XX% quarter over near testament coming success we in our strongest the to this that to to growth now and the To I The

Operator

this Thank we will time, session. be you. conducting At question-and-answer a

comes Citi. Der with Please first from of Our Ghinst Corinna proceed Van question. your question

Corinna Van Der Ghinst

John. and to welcome Hi Hi. David

David Weinberg

Hi.

Corinna Van Der Ghinst

looks you like very It guys few a productive had months.

mid-teens sounds to First full-year like growth you implications, as top how given XX% on the through you reasonable to guys growth seeing? of are that of momentum line work have Is towards are all, change medium-term operating initial goal? but any working a you line you like kind margins margin and your guys it XX% top do thoughts much global tax assume still it

David Weinberg

that at Yeah, say we we I our and grow fair least don't we're in them, in over no continue see us we close the $X get along to internationally, did and We both years. XXXX. to more we reason to still down year think years can to here. tax next or changes three growth the anticipate it's we two that this while year path working through will the think this domestically the and talk replicate have John this future dollar to see billion to continue and growth We slowing do

that, continue along. So our we know it's a on with further – grow a worldwide we'll on do pace I to to we leverage get we're not as closer still consumers move anticipate for continue and but that straight line, we basis

Corinna Van Der Ghinst

year? kind XX% do you're of along think end Where spectrum going up you this XX% to guys to that though that

David Weinberg

there both year, the a what's give this one rates, that's giving it's all guidance that. because guidance year We possible and to we're around but and on to get with demand, very of time. quarter currency full-year early exactly world, kind interest in only going know, it's think see You at certainly the difficult

to next to on for year, year, not committed So, while too line. we're target potentially if that we this get do it's early certainly believe

Corinna Van Der Ghinst

pace channels trends you I fair. repurchases, year? about from share on about are commentary are driving the bit about you this just a that's categories and are just talk million for here? had you in that in there how a $XXX bit the And your the And buybacks order the guys quick with about Okay, or a then, then, talk prepared the women's can some business, remarks, follow-up what authorized little how thinking the can inflection books in feel seeing and of you little an you more of

David Weinberg

it's with start authorization. Obviously the So, repurchase. a three-year I'll

for and have in look the it the value they we so our we'll reasons and look is to an unless the we'll undervalued present near say, a now We do certainly undervalued continue why about excited guide that attractive perspective Needless think one shares over to as we a of post use and we're themselves. prudent future. three-year on that deploy to opportunity right window the believe it's in shares us for like marketplace, are today opportunities

John M. Vandemore

we're categories, as far the actually Street, all the Sports, among are women's as showing The concerned, Sport And includes strength Yeah. Active, that On Go.

seeing and success we're in is are great the very, faster world, different basis the developments we're just International and Asia come worldwide but there States our even necessarily picking different the are fully yet around said a to that got on Southeast as the up that showing they're growing in Asia, we the as parts haven't across board in Southeast So, showing new leaders product pace. launching very past, world. strong in not We've well, just women's well. of it's very at

all them, and Kids. of about very feeling men's, So the process women's we're the and whole good

Corinna Van Der Ghinst

sorry, I'm Great. well. one in I just, follow-up could Okay. as if I sneak

guys as in international as a as advertising You this fiscal that international? of advertising on us going you to about you of what mentioned expand And it quarter, in you you a sales well? thinking are was continue the percent XXXX guys forward tell can how added as percent sales

John M. Vandemore

think international was... giving mean most the about I We're the percentages. I remarkable thing quarter not

Corinna Van Der Ghinst

I guess, total.

John M. Vandemore

that a with We grow in a brand And think markets the the investment. opportunity, selling significantly. already But saw significant to leverage. for in quarter, leveraged we've testament seeded selling that's I we in ... opportunity total. expenses the to

David Weinberg

growth the anticipate leverage has depends media in far able as past that think it slow will and continue we'll of it I is but advertising not and some. to just be rate our Yeah, you define in want concerned We it, as in-stores. to as the how advertising to

We in are the We all we're more focus okay the from advertise to relatively going in and U.S. U.S. change international stable international. that think obviously increases in and will come would and

that's we would the go we And So will we slight same and maybe stay the anticipate through a positive sales. match as year. in very it range, the leverage

John M. Vandemore

whole, For a as a about sales expenses XXXX percent of selling as was X.X%.

David Weinberg

But includes fees non-advertising that some as well.

John M. Vandemore

Correct. Absolutely.

Corinna Van Der Ghinst

great. much. you Thank Okay, so

Operator

next Scott Our of Research. your proceed comes question. from Buckingham Please question Krasik with

Scott D. Krasik

Hey everyone. Thanks and job. great

David Weinberg

Scott. Thanks,

Scott D. Krasik

Just shifts, $XX a couple you've expectations And of the laid are questions, $XX and then you forward called XQ, out international out to and spring? there around was million, so guidance a million then sales of follow-up. that have split I your domestic the between terms any orders for in in pulling

David Weinberg

Yeah.

the well. biggest the Europe did as obviously the have I in is think piece but States, we in of some portfolio

explode look year, really it broke out, at this in December. you did If how we

So and December shipping of January. that which worldwide, month very became a have big in gone obviously pulled could everything up some

to million $XX guess $XX about we million. it's So

and booked very February March. strongly for are We

very March and April Easter the had how season on good in to which there's certainly of really month and So a it April, of some while Depending but certainly But possibility we're does accelerate. we us we incoming in very feeling very positive this early year up, strong through order had a the January. came a the leg January would depend way, strong up. cadence, opens breaks expect give moving into March we a January, February the and sales

Asia. over, Southeast Europe, world, for and So America well now Belgium, here, South are we the around shipping all

we'll this we're as into the move we to well a solid we off much exactly very more change, quarter. think and is checking very stuff see temperatures think weather can and we start, So how

Scott D. Krasik

in $X XXXX Okay. And that of for sort sharing thanks long-term then, target. billion

between how Could that? that or sales represent domestic versus about $X in think your much internationally. growth billion just us that around thoughts will give you As domestic you

David Weinberg

to the wholesale believe as to past, grow the and and very, our third-party, will we of And in at outside that I will direct-to-consumer, we're some which said location. own we're very own do continue end building I our doing a per think grow faster certainly increased that us we'll It domestic little and doing digits, grow. well. believe the seem mid-single bigger the which some give sales malls, stores, on maybe more I stores be

very around to our rest think and grow Japan. the world, America, comes wholly-owned in we China. like continue subsidiaries We we're South expand from think So obviously And positive we the on. can significantly retail we'll which in Europe,

So or came the the drivers over us carry the you the you we growth what see, fourth through is I – see think today quarter near will out what what anticipate midterm.

Scott D. Krasik

well, All luck. Great. right, good Thanks.

David Weinberg

Thanks.

Operator

from comes your Company. with question Please of Cowen Kernan & next Our question. proceed John

John Kernan

my guys. taking good Hi, for question. Thanks afternoon,

Just wanted to... (XX:XX).

John Kernan

You bet.

first the business. wondering you zero-in comps pretty own in to that of accelerated domestic Just were the the quarter trend the wanted on what international both retail drivers expectations comps two-year biggest and think meaningfully. in just into your comp for stacked both retail, and I'm the what your are going

David Weinberg

Well, an by more than item. it's driven we that think

it's some well, of continue the are of distribution. to gotten. And out new stores quite think we've degree all some product Our brand do cleared to resonates introductions and Excess more. in through inventories these channels we

fourth way stores, and merchandising certainly also difficult with back-to-school so in fourth well, marketplace, we're think the picking up in quarter quarter. with it's very months, and a new the year, and was the inventory the so the in easier because And comps the of excess the last that retail six stores I it in made starting our in position relatively bankruptcies all and last

comp we than last go first of to month higher year. the quarter continue in into we January, As

worldwide. double-digits are up We

up single-digits are January, far obviously As significantly an to we're for basis. domestically concerned high comps and as mid- better international than on

rate growth significant and quarter. any change, continue So the through of can don't we see the

John Kernan

and give us the – wholesale, your between give a between detail expectations SG&A retail. in there's detail lot can first But did wholesale QX? a the quarter international and on of gross any just and you I Impressive. more John, breakdown mix shift between margin little know margin you expectations? domestic the in

John M. Vandemore

grower maybe I Yeah. would on increasing influence the probably has participation gross right. been perspective, in looking depend gross begin in and due our that because right will significant us. and experienced into bit contributor international trend other leverage have a China currency SG&A than matters that The of show there's mix to in degree, SG&A And an And QX, some now, impressive stable-to-better say FX on don't it has what the mix. visibility in obviously then, SG&A on our line Obviously, To line. better like little to biggest for growth, What of we been impact overall we've in it'll shifts. China. mix, think linked the influences margins the spend from alone we're is a opportunity, margins revenue rates we was growth our a great that also QX. much to top somewhat that'll

John Kernan

Thanks. great. luck. of Okay, Best

John M. Vandemore

Thank you.

Operator

Poser question from Financial next question. of comes Please with your Susquehanna Group. Our proceed Sam

Sam Poser

taking million Well, domestic the pull to dig for just my is that Thanks of to Was more. or split? forward forward pull how a into little the questions. $XX majority $XX million that

David Weinberg

the of than we think million December it a more up because in quite because the to year, even think stronger from single the it million world, could were was we (XX:XX). than but piece be than guesstimate is though most like in against addressed pieces $XX piece, but we of picked somewhat month $XX move the I it. rest the bit to a was million, a what $XX we of we quarter, The We some December everywhere higher last biggest had forecast was felt forecast. and little big there and domestic, that January significantly

Sam Poser

was, Easter, much week expecting early the basically given later? a but lot let's pull allow Easter, as that basically, a So, may if into acceleration forward Easter for not say, you're

David Weinberg

pull So, be came our March later, XX. I if obviously, time because that'd know forward quarter a ends – don't the more Easter

depends it on So delivery.

both we're next the Europe deliveries sell month, over just said, if But ready and which February, we So six is early to pickup very with tell. like shipping or to in I well there'll I way biggest at through weeks seeing. think it's be Easter, for domestic that in our in maximum certainly a starting probably quarter. store too we're Big which five are the be internationally,

those make way but assessments. good roller it's a So to we're early on jet, too

John M. Vandemore

keep David Easter mind, as end. in our Sam, right straddles mentioned, quarter And on

you of in significant of So results, quarter that not out but a benefit extraordinary. Maybe slight a overall it's one experience. retail, into not to another normally shift terms

Sam Poser

of out you would group? this that you be here? in you that you've wholesale which most billion a comps if remain strong, number, leaves domestic but the at I expected mean, would tea I when to, number meaningful flat looking likely think some mean, we deceleration, wholesale, guided especially So break you're to $X.X unless doing, a think properly don't international I read by how you're said I

John M. Vandemore

put color. Yeah, let some me

in in David probably distributors, I quarter, wholesale and think, same mind, even the digit range. mid-single as domestic wholesale international you that weren't everything all aggressive. our through saw this way in Keep mentioned, from subsidiaries as comprises distributors

of kind expect digits we're to And see but global season of rate a then We high-single don't we of selling but blended done. deceleration, a something the trends, a it's So there there. throughout meaningful mid- seeing retail, we be quarter. early certainly, the trend excellent still expect lot to is

David Weinberg

distributor The places actually year trends, bigger one in the the out we that some to and quarter. have little won't about see in Because back. Also, will in into we East that in now talking in decline our in be have, increases first actually any there they is of is And than come come we're back half because like up, quarter. distributor early a on picked a a because but we year will Europe the up do first the the has signs pick it base looking the on biggest largest piece drag the basis you're of our of had the distributor Middle forecasting model year-over-year weaker distributors. however, moved this QX, we basis,

strong always always was quarter First and the comp. toughest

and very, do we're I honest some conservative out forward. the were opportunities see customers. back don't forward. this take at in So all They think quarters – end take think moved of sequence actually if We're fact carry we at full we you as the trying to well. the our We quarter. slowdown be that very this I in but a some the have it you'll And that trading you

Sam Poser

picks combine up. combined then basically of QX, two momentum QX and the sort back and those So

David Weinberg

Correct.

Sam Poser

Okay.

David Weinberg

the complete. There fast, end make the quarter. that if the of be in switches about I that you mean, some month. has on at grew Depending it, the XX% we we inventory think don't because to deceleration

can but availability. of itself We have pickups doesn't some we because in April, it make compound

Sam Poser

Got you.

the So with just got what to it this as is now deal warmer? gets where you've demand looks like

David Weinberg

It's what deliver. their we dates see part on order, and everybody is of coming at to the early

the means get sell-through at quarter. better As visibility, what of end to a that the know we we'll

Sam Poser

success. Great. and Well, continue thanks

David Weinberg

Sam. Thanks,

Operator

Van FBR. question. comes with proceed B. question next Riley your from Our Sinderen of Please Jeff

Jeff Van Sinderen

to my congratulations me John. add Let welcome and

John M. Vandemore

you. Thank

Jeff Van Sinderen

factoring I from QX add wonder if Are if if can end of us can – higher that? the revenue And you there your if magnitude forward pull of order any so, into maybe sense. give guidance? you in you a

John M. Vandemore

as pull explained into see too through, early us, we us for it, it's as might sell get we for kind QX. David conjecture until of early to too to It's what

is at included none no, point. So, that this of

Jeff Van Sinderen

of latest then up will wondering add and else on, Okay. That's on running. to you're most that China and on this then in estimate when initiatives timing what the And grow to at business guess year? what point, on of at, anything good that China focused looking you know. terms you're just And your cost key of can I on is then this that be DC, the

David Weinberg

as work D'Lites the Well, moves knowing concerned, up is D'Lites as states, starting the fully, States in well. to and not everybody here products how the lighted product it's the key working initiatives starting to D'Lites pick as we D'Lites, are far working developing and that worldwide – is market for then are China and and

and construction automate feet system be cost still we're We're to it's as million finalizing going X far going and difficult. the estimates, costs. a to square As it's

and to is growth we'll But, to if As guess and a a just need, building look cash you I $XXX a venture the to at would between placeholder, want for million million $XXX take somewhere it's capacity concerned. of China I the far we're as we're putting and said, watching like rate as be equipment course, issues still inside. the growth finalizing, that

Jeff Van Sinderen

a Okay. running point? up And to target be at that date there this is and for

David Weinberg

third running fourth We'd like quarter of or to be XXXX. quarter up and at

Jeff Van Sinderen

Okay. XXXX. XQ

can Okay, the And of give you what is business a I us your percentage the Thanks. to guess as growing ecomm, magnitude on know. any order that's of part of good revenue. really direct strong. And

that where Just wondering stands kind this point? at of

David Weinberg

We very do online. we more That's United And well and in have all third-party for in online, We've ourselves. keep a China, those and we moving grown that target presence. the States difficult. it accounts in a massive online do

that through is own Day, saw pairs X.X you Single's account. our all So, the million

to us, grow too without that online, does around demanded online, is we numbers through as about our searched fair well world talking deeply it's think I it's it's parties So third continue to and say the directly the brand very show whether the sites. we online, sell

significant digital new once will which we into try money the be investing around and site presence our subsidiaries. we amount get we And out is world our are changing site. every it and will work We of have developed, now, bring own have in capacity, to the place we the

Jeff Van Sinderen

the QX. rest to my taking Good questions for Thanks of Okay. for luck good know. and

David Weinberg

Thanks.

John M. Vandemore

Jeff. Thanks,

Operator

Evercore comes ISI. question Please your of Our from Saad with next Omar proceed question.

Omar Saad

the the the brand just those interesting guys of we lot on international about around you focusing maybe of markets what we would is to understanding categories, how Thanks. better helpful of It's consuming States? are pretty be across consumer well phenomenal products rates growth the and know in bigger how differentiates see it brand? thinking brand, United the mix those those styles picture from different? a these a Europe maybe there. the about different and And also and over in How here how doing of get to consumer first and the positioning wanted China are instead markets ask brand Maybe thanks. so to quarter, in longer-term think should I question. and perception It's a the How markets. Hi, the

David Weinberg

take us the afternoon to the territory or if probably of you it's by by country wanted different. go so me That country, rest territory would

predominantly And has a talked true grow in certainly capacity and been within which internationally. So, at you plus Southeast we've is the especially pick necessarily mid-channel. talk GO not but starting top in the as the to nice what see about this forward for exist slowed been everywhere pace, broad us past had big which the by that's growth, up on The That very product, picture, way continues I the the in and doesn't offer offline know a of GO now The the on we've domestically, we selling. that a we in In we world. grown internationally. Asia. to more mid-channel certainly what brand detail. in the U.S. has can go end through

mid, It's brand the upper, although So most but I is considered as quality. that expensive. would as as considered the you perceived tell not it's not

fashion-forward at average on in the we So probably a United well, pricing slightly designed higher it's States. quality, here see than price

United because here significant probably the So States. if where most it certainly up in are I more United countries is in is there levels a all, ticket had to than the it's not parts couple it, outside States, the price third-world some

Omar Saad

trend Thanks, Can going wear industry street helpful. of kind on David. I ask, really sneakers. we're across the fashion That's watching in also the fashion

the at like that Lanvin new category, Is kind and it of Gucci feels and chasing that at lot high-end, brands You're of Laurent bigger business? the that very Saint your sneaker the a seeing a your where exists and opportunity well. brand that point really it? am brand thinking opportunity the I price Is for part big becoming or over of SKECHERS plays a

David Weinberg

I'll not sure. I'm go really to about think myself. have that

styles through opportunity. in a as I think of an play there is can categories the go We world. they multitude and

develop, as certainly entrées become categories. they So our put they into we would should those and meaningful, participate

nine change increase So over to think the many as happened same were because footwear a rebuying good purchases and us. months. and is in it's item, have like is of company not we're for or are flexible what Because we categories, our because all they has tends the change new, we've past, be said six they to can brand so things that type we're in benefit, the last which go to

Omar Saad

Thanks. Congratulations. work. Great

John M. Vandemore

Thanks.

David Weinberg

Omar. Thanks,

Operator

question. next want Vasilescu comes Please - Laurent proceed on Our congrats Capital with China. Macquarie phenomenal and ask question of Inc. Group. afternoon, (USA), your Vasilescu Laurent guys, results. Good to about I from Macquarie

wanted just the where think end digits. for you context I And up where million? China to a to it ended was XXXX. double fiscal prepared said should $XXX of year sense fiscal get level XXXX? I it strong up it of think fair be in we year high the Is by any can of say remarks

John M. Vandemore

Yeah. a about last had of so spoken I phenomenal million just mean quarter. million, growth, bit for it XX% north ended the $XXX the little the we $XXX year, above for

any then Laurent the Vasilescu regards sense – phenomenal. much - Macquarie here on of happened fourth and starting margin, and implications And because any next the Capital increase QX you're like (USA), this a dollar offsets think great. large maybe That's maybe quarter as quarter law gross much be for performance, takes, record FX Day growth the how to Single's was much what sense another I driver, this factors? numbers for with look And in deal gross any same the give to the of That's the a that Inc. overcome of to puts would significant there percentage, a then obviously you to early level those how driver, were And year, margin a year, first about was stores. with like would quarter phenomenal but the on then in obviously challenge improve great. pricing there for and not

John M. Vandemore

Yeah.

margin And businesses FX was for differential. higher and like mix what So little we from QX the about an a equal offset of retail in-category uptick very was contribution a saw slight declines. between bit and with improved international

mix, a we've and retail, hard right simply exchange. you taking going segment push kind be more volatility up. little now more in product such then what QX generally the because right saw back mix, foreign look it a down, to between So was just at to of margins international, seen bringing is bit

And overall. normal. point. Vasilescu which forecasting a QX drag bigger than bit the Inc. for improvement as The the little increase gross at (USA), this be assess little again, amplitude there. a important think above-average rate in we're hard year I'll grow Laurent always in continue from letdown margin. we're see David But, distributors, to It's at is, may there say of a bit again, net we our stable-to-slight impact we'll more one - Capital is our mentioned, to full to I looking maybe So for are in a a gross so internationally, margin, thing Macquarie

Okay. Very guide inventories helpful. inventories, were above on up for the sales the quarter. then first And

America, like don't So inventory it would Asia, maybe in here? context any by great. Is That some context be North of what's you maybe that. I give can know, happening Europe, any channel, sense on of

David Weinberg

the I first most and becoming Easter you we basically Well, closer quarter do first what because is up have coming see to XX for already booked in, take by think merchandise of with quarter and larger us all the our is into account business. December have transit international much so in in that you especially

ready sure to of at forward So is so from a production early think too cycle the I demand on we significantly what because move speculating see XXX getting should be it last that and shipping you as there is we we inventory. part year, million up our that increase done pairs in the without we've can make customers try a over probably

and America our where that at it's look retail growth. places started you it's year would like you just of It's grown Asia, that through in ahead grown, Europe. growing grown It's in and grown last of grown think find where that are we've stores. If It's were anticipate it's would those South that underutilized I Southeast quicker you course, grown very Korea.

in we're good shape. So I think

of risk. last it's taken on much I question without Vasilescu there, Macquarie take having too here Inc. (USA), think Laurent lastly great. - can tax. we And is we're early, That's and opportunity then Capital any advantage and and

on I range a of forward. the tax to there's where the at nice Obviously, directional a for to quarter, happen the further can think what's going here for visibility guys year. quarter? the going lack rate on any still could XX% you for of kind But least XX% gave first think guidance be of we

John M. Vandemore

we continuing with stick is tax everybody is learning going the we learn learn largely about you actual law, and the a Keep point applied. be application to is about going the profits. range law perspective that more this our time, to in at as the overseas tax in of of provisional I'm when regard mind, that's we're and to how the a element newness giving that recorded exactly because consolidated law of to doing more

XX% goes now, color you more (USA), the - Laurent give right going we'll to the to the year learn more we're So about as Capital the we of XX% Vasilescu and to to on Inc. stick law. try but Macquarie application

Okay, great. And congrats, again.

John M. Vandemore

Thanks.

Operator

with Chris Please your proceed question. of Svezia comes question Securities. from next Our Wedbush

Christopher Svezia

and Good the afternoon, on quarter. everyone, congratulations

John M. Vandemore

Thanks.

David Weinberg

Thanks.

Christopher Svezia

magic guess on And the the buyback. I on congratulations would say have so also you touch, I that too. congrats John

John M. Vandemore

allocation It's to all. nothing longstanding with company's expression the personally. do an Not at of philosophy, me capital

Christopher Svezia

Okay.

checking into for the March, start about about I a guess just an thinking QX, of the where wanted get you business to from get – there start So, as QX marketplace. that that's into either, a trying where forward I could to change? first, there QX, see other things A, I could of you're replenishment, to when things would you I'm or revenues, potential you really idea and timeline in is in out whereby guess pull start the that whereby just getting words inventory how in already you point February potentially think inflection what's see through the

David Weinberg

year big but in ends is point most mid-March, retail somewhere shipping maybe that everybody not because You month much. slightly but probably fiscal in earlier see – February. Remember at January,

then you of places north, the weather to some for and getting So February have new it's just spring in that not the product. those retail may take issues in

it wait you And a the in good to second through week until idea. got you've March system. have the by gets probably So

Christopher Svezia

global on basis? And a Okay. that's

David Weinberg

Yeah.

Christopher Svezia

no? happen in that Would sooner the Okay. U.S. or

David Weinberg

I depends sell-through think happen It the same get. may a It timeline. how much on sooner. No, little bit you

not and It's month. February coming product usually is the sell-through hitting. is strongest So, new

than So environment if to an to magnitude came the significantly that. the like probably be late would earlier you in large come on and of February, it really marketplace order one. I depend tell would it does it on earlier mid- a

Christopher Svezia

a maybe you there. for know to answer line I question perspective, top on pound mixed, John, enough. a touched anyone thoughts you fair about but you want I gross margin, Okay, revenues more just FX, you're or currency from this, thinking a do just little for been impacting about has QX? euro, how but there, and happened what's China thoughts your know your

John M. Vandemore

in beginning movement, In dollar driver as some would QX lead to of than we've point makes really quarter overall, more that percentage mentioned, probably it not of of depends much market, conclude seen tail-end to in QX, forward. hesitant out. predict. X volatility there's certainly we've significant weakening seen currency, and how that of I but going the growth, to anything top the currency line the that. the maybe wasn't really And sells markets in hard a just Yeah. lot I overall, which tailwind me the predict a Obviously, the it QX it volatility makes Again, the the mean there. you on

Christopher Svezia

Okay.

to that a fair from material So it's say currency your for forecast QX nothing in perspective?

John M. Vandemore

Yeah.

watching the markets although extraordinary certainly not carefully. I of would We associated in top in we're haven't – layered line anything that terms with FX, consider

Christopher Svezia

$XXX you're then China I And dollar just enough. You out threw is mentioned overall was the growing on year-over-year? real increase it, dollar actual What that Fair million? the it us if Okay. what remind just John, quick. roughly dollar the size. the was year-over-year? you – dollars, overall again Is increase similar know dollar

John M. Vandemore

Yeah, a $XXX million. little of north

Christopher Svezia

U.S. and but to about thing FX, any Final just year, in momentum? given When China, to just be for growth that these in of Europe of couldn't trajectory roughly mid continue International, any some I the on about seeing the wholesale there's about that you're they we other as sort business quick growth, the what parts north about think talked reason moving real for the broadly? single-digit year. of here. gain Just think seeing so Okay. you think XX% I international, what context the how you're international markets know

David Weinberg

Yeah.

that would only distributors. all is that's don't out with number possible. – things which other and distributor if think be the I issues base, certainly obviously now, Right straighten to the drag have

know the is biggest We the doing very – of is They're for moved in And that's Middle magnitude have the not distributors for needle us are that order how small. you East. just past. us some

I back have I back. no numbers. in would issues think come problems Should back coming they and half, no strongly the with they're those

Christopher Svezia

much. very best. All you Thank Okay. the

John M. Vandemore

Chris. Thanks,

Operator

with Wells Our comes of Please Tom next question question. Fargo. Nikic from proceed your

Tom Nikic

sort help and just but quite understand somewhere I everyone. was we you know seem the taking guess about touched gross QX margin? good on was are earlier, QX it question. like out of that, Hey, the be us a the why last – or middle. couple we mean should quarters? just I have Thanks of was And really not FX that sort sort afternoon, around the I margins, can it like that and And stuff strong for mean, gross should was when impacts really, like like margins model bounced as I bit my of much. in QX there really of wondering would the and that about then, gross there's the think anything I mix

John M. Vandemore

is over which which gross I doubt from domestic significant up QX, contribution have pattern, fact a is particular, retail and mean, pattern. no significant wholesale the grew international higher fact has in I think margins you're but a most influence, great been would in XX%, probably the mix, the picking

than down, that the QX, call distributors, gross margin again margin, QX QX the you look to I on you the kind a historic full gross reinforce of to QX year full-year the right out line with where is distributors to increase to expect major relative relative at extent was shift. range. think result your basis, if will stronger QX in traditionally. that's flat that to but we're I'd mix a And are

Tom Nikic

Right.

a we So in QX, saw as basically, down in your than QX. gross what be you margin lowest mix get business much better should

John M. Vandemore

Correct. Yeah.

Tom Nikic

very right. Best much. All Thanks luck. of

John M. Vandemore

Yeah. Thanks.

Operator

& question question. Co.,]. proceed Please Crespi, Jim next Hardt from Our [Monness, (sic) Monness, Chartier your with of and Hardt comes Crespi

Jim A. Chartier

afternoon. Good Thanks my taking for question.

[0F94YQ-E David Buckley

Hi.

Jim A. Chartier

fourth America improvement year? best wanted newer over to some quarter? how Did you've I how you Korea. the of last start of one Hi. of just those in couple in growers. markets taken Overall, called out margin Korea know as expect and And the years, international in businesses to I the the touch doing? Latin any is margins to on see next those are you trend do

David Weinberg

because terms operating or margins... gross margins, of In gross

Jim A. Chartier

margin. Operating

David Weinberg

stores. a to but stores. limited a margins, a lot are extremely to of that South increase even high, company to gaining as flat South we are we're of It's but invest America, in brand some new than number in new starting last there's Operating relatively back It's fair whole, are and there. They for just say Korea, continuing our opening momentum. America, store the higher comp quarter sales of the in

So it can't move the needle yet.

So, a year, in go maybe they I we and to of you little to through we starting slowly in certainly hold, Latin Korea, year take start the meaningfully. to America, will see tell increase potential back the great would they're we anticipate half this more but that

Jim A. Chartier

India. about was And last then, the quarter Great. in do you a potential fourth what that How talked you business ultimate quarter? little bit think And there is?

David Weinberg

mono-brand fairly but certainly It's It's a in is comping doing India our nicely. certainly get The stores increasing, brand it's very often timeframe. model. franchise stores. a resonating but Well, volume is to your rate. difficult and big more up. that at slow is depends started growing the are India, a on got little It's

So the turn in it certainly nice year the a double-digits. They increased, we've profitable was time. increase, did size last for first

that expect We continue. to

impact will the So do ultimately. continue $XXX million we now, to as than Right is what we there. grow to less

for multi-hundred middle for $X $XX India massive can for million grows. a what's hold as close million do us through a dollar us, million country class and maybe we population the as it think believe to $XX the concerned take We is billion to as build even as far I year. be country

as take over the a But make or to brand, they key them perspective significant too two it's piece you wanted a if will So player. certainly, be to three a early years. a longer-term next

Jim A. Chartier

Thank Great. you.

Operator

Ladies and time two follow gentlemen, we for have quick ups.

with Our first up Research. from of comes Buckingham follow your question. proceed Please Krasik Scott

Scott D. Krasik

Hey, thanks in. for fitting me back

grew? clarifications. Just or much distributor did a the how say fourth were of couple quarter what One, sales they you your in

David Weinberg

X%.

that? hear You

Scott D. Krasik

again. Say

David Weinberg

X%.

John M. Vandemore

Yeah, they X% grew the in quarter.

Scott D. Krasik

have sort what revenue comps XQ then of into And embedded do guidance? Thanks. you Okay. your

David Weinberg

high domestically. mid worldwide, to double-digits single-digits Low

Scott D. Krasik

Good luck. Okay. Thanks.

David Weinberg

Thanks.

Operator

comes Sam question. with Please your Financial from Susquehanna Poser of Group. proceed question final Our

Sam Poser

the Well, international of level and the down given the road against these all all hedge inconsistency changes here, buybacks a foresee and you to given with for basically currency everything do this currency to starting playing yourselves bit? field

David Weinberg

No.

note cash exposure balances more we're now have they we would value. I right to to our think market. cash they're I need foreign I we currencies volatility the just fluctuations but foreign we manage only actively a accretive not given it's in and overseas active exposure than at what we a foreign relatively operations drive mean currency we'll currency, the to manage new that on well. in continue mean, obviously seeing our already opportunities we we normal, feel look there, the doesn't extent so any that if see becomes because

Sam Poser

– But against purchases dollars? I'm how the of and of to so in impact comes to for everything I perspective it you and so since buy gross that on and inventory and use SG&A margin forth. referring from mean

David Weinberg

to more live a to past, matching think may currency. us. very is the take for done it the be it to we've In through depending difficult process. how the situation is And hedge only you can it on view long-term a It's back, than short-term significantly on work volatile dollar points the price very weaker modestly take adjust then, advantage sides, that we shown pricing when to a and dollar the tends We've when around with dollar dollar. and both the the power well do stronger a world other with stronger both have way. goes and get our As

look the we said, that develop open. dramatically. So I when business can John then Should that or a And we'd so match don't we a to certainly like even know something always is growing closer, short-term would process look. out swings take we're

Sam Poser

one. Have much. very you a Thank great right. All

David Weinberg

Certainly, Sam.

Operator

end we of Ladies This session. reached question-and-answer and the our today's will have gentlemen, conclude conference.

lines time. You this at may your disconnect

Skechers U.S.A. (SKX) 8 Feb 182017 Q4 Earnings call transcript