SKX - Earnings call transcript Q3 2018

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Operator

Greetings and welcome to the Skechers Third Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to Skechers. you. Thank

begin. may You

Unidentified Company Representative

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

David Weinberg

XX.X% results. With Skechers $X.XXX to results our new X.X% is call increase financial me a XX.X% result a international total With Financial This total thank last John our a financial in quarter the increasing of joining our new year. on domestic currency Chief business. us business of was and discuss domestic Vandemore, high a increasing growth The business third and We quarter X.X%. XXXX record a increase and in for X.X%. total you our will today X-month record total quarters, our in growth basis, international in On billion, Skechers’ the sales detail. the achieved we three afternoon $X.XX review from increase of Good who sales was Officer a over came billion. quarter third X.X% achieved constant

title a are XXX Henderson both Russell casual winning the the the Brooke diluted GOLF new and sales Xth the golfer result United our including venture in walking, In States in addition We the and international joint expanded quarter per sales in network distributor worldwide, of Maintained the of Irish of company-owned shares our Knox one share home Skechers Elite number position brands, XX stores. stores third-party company-owned her footwear winning unique market. both of businesses, XX.X% opening a with of international Open, of XX.X% million sandal margin work, of increase highlights wearing earnings operating and record increase we XX.X% business, our our in repurchased and $X.XX, and and sales, X.X%, third in XX.X% representing is increases wholesale international her our double-digit increase women’s to to Canada include our common LPGA of believe in X,XXX comp position lifestyle store golfer retail global sales, retail international Elite the country a stock. GO X.X Skechers stores stores sales in

from Our trend and with the shoe resulting loyal around new remained the This to that month. on well as of world us the this the partner Fashion of trend. and interest last gains pacemakers has The cater core shows is as X chunky and as in and sections to designer Skechers. appear the editorial accounts catwalk, New of publication consumers at market acceptance during the originator fashion-minded customers to resurgence Week allowed broad D'Lites as sneaker strong fashion York in Skechers

Piece best in the selling as Skechers as also our North expanded We One to D'Lites and anime collaboration well with series Europe. America

was X X% and X.X% turning Now, for In decreased pairs. flat first to more quarter, wholesale business third the the shipped domestic the months. our quarter for our business, we

For months, pair priced X.X%. decreased X the X.X% strength partially price The collections. increased of the lower per shipments due in $X.XX by to average we several or the first quarter our

However, domestic wholesale points the margins in increased XXX quarter. basis

in the remained business as as men women during solid Our core within our numerous a our for categories. quarter accounts and we leading brand maintained position

multiple support and the across including BOBS business, commercial. we Our work for following came aired as domestic as men for the our multiple divisions, and women. in strength and sandals ran States To product golf women United casuals, well walk, and campaigns

a with D’Lites Skechers campaign Fashion Skechers and Camila women, GOwalk Joy. Cabello, D’Lites For Skechers a campaign

featuring Romo, programming footwear For on Wide we kids, and spots David Long. Fit and casual Fit footwear children’s well Toes. lightweight for men, with lighted Relaxed sports Tony our and Howie as slip-on Twinkle sports commercials And as for ran starring Ortiz,

Our golf grow. to business continues

GO golfer, in Scottish our in Brooke and During home Skechers’ product XX,XXX our pairs Xth million XX and believe point. pets $X Puerto need and children in have of on of continued more Through held for have to XXX,XXX for BOBS won launch Dogs, the her in of BOBS, Maria GOLF. XXXX, Open, donations marketing efforts million with country won shelter years. including we donated quarter, its than the quarter LPGA efforts Canada Henderson, in pairs Through are our since Russell to Championship third more Knox, Rico shoes X through Irish aid. both with golfer, competed both third our the are Hurricane we over We ambassadors than

presenting are pleased our account XX.X% International begin and for XXXX X we largest international and months. distribution single achieve it wholesale to this with remains first increasing fourth XX.X% XX.X% share the remains X will and of single channel high for and the growth with for the sales, our quarter. to As we our continues collection to we Further, quarter the total the retail, quarter the meetings week, double-digit months. Combined are represent and represented for our low third first reaction. forward and wholesale believe business strong initial looking we an in XX.X%

gains wholesale in distributor of third double-digit contributing the increase and The XX.X% was increased businesses the result XX.X%. total business venture quarter. by significantly China of joint international with Our growth in with

was first by subsidiary the XX.X%. growth wholesale X.X%. international increased This wholly-owned business X international a growth, For our of by detailing Further quarter our quarter, grew business tough for international third across of by months, region. against our our subsidiary sales quarter XXXX, the XX.X%, of sales comparison with XX.X% joint In grew growth the increases in third venture of XXXX. each the

the China our joint and came Italy, our Spain India the and and from For highest ventures. gains within subsidiaries Colombia within quarter, dollar

in pairs freestanding stores force XXX of of approximately China a retail XX.X% mentioned, in sale. XXXX strong million with base the As and points and shipped to Skechers international a an our X.X be continues business quarter, increase of

to Greece X stores and Australia, third-party Ukraine Northern stores were to In experiencing returned Philippines. third Skechers Mauritius, Hungary, and the Zealand, and in X challenges The operated third-party came Russia, India, quarter X business have Hong Philippines, XX year. in double-digits branded Skechers fourth opened as Uzbekistan. by the in XX single-digits stores X,XXX distributor joint international remainder partners, the Kong distributor The growth a New and Pakistan, Malaysia, XXX our key so in the high well XX some there expect in opened. international third-party quarter, Skechers grow XX in X France, owned in stores each the Indonesia Sweden, Iraq, the growth the Korea markets. network from far quarter, closed double-digit Egypt, grow South in Romania, in quarter Israel and Zealand XXX open XX Middle subsidiary owned end, Ireland, each believe X same will and Japan, Indonesia, business quarter in international China, after as Australia, will third-party-owned will At we franchisees. fourth distribution our in Taiwan, Switzerland, the Spain, the of each international owned ventures and and in New We the primarily East quarter. business These Croatia, of stores in another and Finland, Our period. included branded and in venture each joint and

in company-owned our international our retail on the We and was biggest by result sales continue which for sales of a XX.X% international third the in opportunity global XX.X% a of business, the our stores, X.X% the positive which domestic In to XX.X%. in increased increased international store comp increase stores. included constant offset quarter, in quarter, sales X% of increase growth retail Worldwide currency as X.X% decrease in was the the which domestic a X.X% basis company. stores our see

pairs domestic comp X.X% a retail stores. X.X% in pairs our on increased However, international and basic increased

domestic to in e-commerce XX.X%, first stores. increased in the our our XX.X% the the of X.X% our which quarter. result international and For business, which growth increase retail grew X was for an direct-to-consumer sales was Adding our of months, stores XX% domestic

XXX We In Chile. and had XX in of Skechers in sites X which quarter third also operated each X X the Chile, and the locations; have the United X in Peru, were retail quarter, UK end, international UK, States. Germany, the Canada Canada. Spain XXX we including company-owned outside opened company-owned At and e-commerce stores, in we stores, and

in We quarter, opened also we the UK which the have in fourth stores, or X were expanded and of relocated Italy. X locations. X X remodeled, in To-date

stores. and XXXX, remainder the X additional of Skechers existing remodel, an or an open relocate to expand company-owned XX additional stores For we expect

turn I review Now will John financials. call to our over the to

John Vandemore

third to Thank you, quarter am our with today. pleased results you I David. share

million $XX.X compared partially of retail due prior slight Company-owned to partially up prior sales channel. exchange which the sales. XX and and our of record. grew $XX.X venture XX.X%. off-price in represented a domestic our were increases increased by significantly to offset combined X.X% Gross XX.X% an increased point the decline and million sales a to basis, On This on third increases increase prices to currency prior in $XXX.X increasing international which $XX.X XX.X%. the from sales in negative the retail, were year. wholesale segment prior a quarter a offset improvement domestic in business million. year profit increase basis. to in basis margin global million contributed rates. increase points Selling of our over increased This X.X% an reflecting joint in up higher driven attributable essentially X.X% and currency domestic retail by a new and China currency due the in expenses were driven billion improved The General basis sales year business by X.X% flat the Third sales was XX business. to mix, and increase and distributor quarter XX.X%. $XXX.X by stronger retail X.X%. was XX.X% growth These at year was versus also our $X.XXX in administrative gross in improvement This XX.X% was were sales quarter or store wholesale growth e-commerce the to impact to XX.X% constant constant was XX.X%, in lower of foreign margin, million, expenses was a international

It in an point increase prior flat As which of This basis prior this XX.X% to million $X.X XXX a million double-digit company-owned quarter of increase increased distribution $XX.X which essentially Skechers which opened at $X.X and to investment of a the long-term million. year reflects X.X% million increase operation, $XX.X sales, from period. included for support third in versus in million growth percentage China. prior the Earnings XX growth initiative, in warehouse year our continued year XX.X% period. XX.X% with of our additional was margin XX.X% was global domestic associated to operations costs. the continued included was and Operating $XXX.X XX corporate stores, the from and in to versus also related

a expect enacted was rate quarter of to with tax This period. rate the compared rate X.X% recently tax the tax of results upon our the income for Jobs quarter quarter’s implies compared $X.XX prior which our in legislation. XX%. Our we of XXX.X and million $XX.X on share effective XX%, Net or million prior Based and period. year XX% reflects this understanding in impact the Act, updates on the third our per current of to Tax diluted between understanding year shares XX% outstanding quarter shares and between XXX.X fourth reform was Cuts the be tax application diluted XX.X% to XXXX million for share or for of $X.XX and income rate $XX.X per the the outstanding million

During authorization. cost year, $XX share the acquired of $XX million announcing existing XXXX, repurchase Class we acquired a XX, repurchase A million program we approximately have of approximately under at third share earlier Since shares cost X available shares million stock our common quarter, a September X.X our this remained $XX million. almost of at million. At our

turning September had to continuing now at our our cash As sheet we we cash, growth XXXX, have to XX, or over stated XXXX, from strength balance increase XX.X% of and was shareholders. XX.X% of before, million to million balance an $XXX.X ability confident equivalents fund And to XXXX. an while million, increase in which our XX, $XXX.X or sheet, XX, December initiatives cash $XXX.X return the remain we investments, in September of and and

is accounts reflects $X.XX position days. period. inventory attributable the of majority represented XXXX of from last XXXX. by cash diluted wholesale and inventory our at XX, year-over-year was our $XX.X consistent in our million, compared $XXX to Working an wholesale and balance quarter the XX, domestically. was Trade million the merchandise end The store line increase as domestic cash XXXX. $X.X approximately Total increase were of increase million particularly in as X were transit receivable well global DSOs share China. of are million our international or September prior offset XXXX at international $XXX.X primarily and remodels, in per million inventory increases XXXX year at billion retail, store believe million increased for the an which $XX.X were XX and to to XX, receivable Capital including $XX.X $XX.X million, $XX was that capital third of Our billion as investments inventory $XX.X X.X% and XX, for with reflecting related and year from debt at global expenditures domestic million decreases The September our September million, September at with partially distribution business openings inventory levels in Long-term growth expectations base. company-owned our approximately retail $XX.X accounts operations expansion international million was $X.X versus levels XX, September XX store higher at the quarter and and to $X.X for balances. new international support our center. We aforementioned

office estimate at including headquarters. well store an as expansion renovation. our XXXX, centers XX approximately remodels, we million, as to This XX to be $XX as the related of For expect remainder distribution excludes XX to includes to our to store as which capital expansions capital company-owned or office ongoing $XX worldwide, million relocation, XX China openings, well retail additional corporate expenditures expenditures our

our our billion in domestic currently of segments billion of in the the of of Underpinning across to in reportable fourth turning guidance guidance, markets. share to net all $X.XX diluted is this $X.XX. assumption earnings $X.X and range three be and quarter the to our Now international both be per sales will that expect $X.XXX range growth we will and

could will headwinds exchange for strength first Lastly, of U.S. now although rates, the future. this back the year we revenue relative foreign to prevailing in the particular closing David represent we cannot call and dollar the and in I the last turn predict time currency continue obviously remarks. to note to earnings rates quarter that

David Weinberg

John. you, Thank

record world kids and growth XXXX. the highest The around and X-month the $X.XX marked quarter, record new experienced in new significant of period and quarter women we we with core and first in sales for quarter the for the and the a along to growth our was quarter third due second in quarter record backdrop the of the sales acceptance against men, new The came billion. ever the of a achieved styles

by led exchange company-owned quarterly foreign by business from stores rate e-commerce we The distributors. negatively impacted our roughly our gains sales came impactful worldwide points. in China, now addition, $XX.X million most ventures XXX basis retail or the United network In revenue approximately X,XXX an are global and international business the of have Skechers We developing and around expanded and States joint world.

heritage accounts with lifestyle partners. We week, we resurgence global and style and athletic One the with domestic continue footwear begin globally our Piece. of be leader innings XXXX D’Lites with and our to subsidiaries the D’Lites for international joint next month in distributors, with our the our collaboration This X a Skechers Skechers and fall market venture

with to in We looking pipeline. are fresh forward XXXX product the

and this and are new in expect infrastructure distribution our ground And our sheet, to for to for inventory for in strong the line, the With portion to would the turn later center cash begin of break new quarter. and to to brands with that, balance our We invest operator like continuing offices over China and we are well-positioned levels in we global corporate call position question-and-answer call. I conference growth. now a the the

Operator

Our question Sole Please Instructions] ahead. thank from UBS. go you. Great, is from Jay [Operator first

Jay Sole

question on Great, the in was my quarter, SG&A, the thank $XXX David, SG&A is million. you.

at forecasting What really was was Going the into that and the million million, $XXX roughly basically quarter on the this SG&A in quarter, to which key $XXX controlling number? the consensus was guidance. coming

David Weinberg

feel do necessity. with we Well, actually

bigger completed China. lower in top in of quarter the line our had was little our than previous expansion a So, piece expected. We a

significant inflection we that point, see will depending for So are have growing to of we where close the have will growth said we we invest overall, determinant advance the as for in big certainly how we and in what to be of some a built infrastructure quarters. in amount getting watching on past,

always below but a and that such the are to we chase the time chance was on be we careful, seriously. growth, had in had slightly quarter very we a And of and are and gave try expenses So, line. we at G&A benefit catch taking it when had us infrastructure about have we automation it to where expectations, some to have to up we very now our and we figured

Jay Sole

Got it.

billion the So about the factors factor, FX billion, so a FX it going into or was you of difference actual between – low was guidance slower, $X.X $X.XX the mentioned sales, there the there explain maybe dominant range of even on sales? about little and was with was the quarter end the two one and that guidance sort the a

David Weinberg

second we say the that Yes. little we about domestic that the would probably I expected. had being think half of bit timing up FX bigger on mentioned mean Also the in a was ends drag the I certainly than always side. I impact year. had growth spoke We a

So given in we in feel prospects said where us. no domestic not I as have close in relative think healthy the fourth to to think And relevant I to then quarter you our very obviously the guidance secret see about it’s is and mean consumer quarter. have back and the that now We I retail over is fourth certainly international QX some the guided The you very the QX, being wholesale demand half. strong still demand quite channel as good we of quarter. frankly are for we growth and market expectations we has fourth what been the That in very U.S.

Jay Sole

be low there you call weak down then that’s to the internationally of or so during U.S. lot it so market, international any on could negative one fourth in And high particular comp? out Brexit have market confidence because you are talk with is are talking that you to a consumer but of was timing about like sort is just guiding on And another or are on quarter, the [indiscernible] for to call will UK, the the market in that consumers quarter, retail about. John there singles the is the talking doubles or there and the the that wholesale positive maybe that, follow-up just

John Vandemore

again domestic was we that’s the we what On we what last see. I number, I will said half second growth reiterate which and quarter in were just confident

that’s So definitely what yes, wholesale We fourth quarter. half we for expect show guidance the baked the to growth. into believe domestic second

actually markets, little you In market a particular frankly anyone quite terms It across market, you saw less as every key wasn’t FX but saw a everywhere. of consumer of robust also markets those the bit side most little on in international of one it the in bit almost that well. was affect our

Jay Sole

rate, the forecasted to is going to just that be on maybe tax are that now guidance XX% long-term was fiscal you ‘XX? run rate your clear, of forward of then XX% saying so And now is tax growth sort beyond sort even before rate the XX%

John Vandemore

think we legislation rate get that XX% to another be still range. and new tax the the again in various No, naturalized dealing we after associated through true-ups the XX% likely with with will adjustment

update the everything the bumpiness law. quarter are do I of to of our to has year the think with tax facets we this many in seeing understanding almost

Jay Sole

maybe Okay. for report you that incorporated $XX the last million left gave? And one then authorization, are on me you guidance repurchase into mentioned buybacks one

John Vandemore

No.

Jay Sole

so Okay, great. Thanks much.

John Vandemore

you. Thank

Operator

Laurent Please The is Macquarie. from next go question ahead. from Vasilescu

Laurent Vasilescu

to might have the new that on account, high a the and U.S. fourth and single-digit a am wholesale quarter a for growing I and follow-up for question. should then for quarter? I just lease be you question want think wrong, $XX it’s seems it that my that the Thanks in new always as numbers rate regarding afternoon. that million a we fourth number included, think me should benefit if is still Jay’s about customer, correct I back taking Good half that assume

David Weinberg

There magnitude am order or domestically. that of new any not not customer I is sure.

It’s closing a customer. an guys existing a good are very the on opposite the switch from stores think big what’s timing in I at like been here down.

the this move back got last we I year. the big first think will call the year John quarter part that to to from year, alluded half on big them, that in of orders promotions the conference last

when take that’s we differential significantly be would timing changes we into and the So the up all effect. knew we

Laurent Vasilescu

margins And parse can benefits then for third very helpful? quarter on gross and thoughts be maybe the and any quarter Okay, will you mix the very helpful. fourth on out FX

John Vandemore

which this the I domestic I gross revenue mix The stronger favorable overall get well the all note line. our segment retail thought would they overall slight Yes. as about pricing and did out as is – thing a both quarter would as we portion came blend FX I we product XX mean in margin a to mean that the then and being really to the activity at margin the have balance are entailed larger our lift on retail first from of And negative, segment. headwind mix. natural I say bps. international transition just some improvement comprised be of a

We the segment fourth associated we the though benefit. in have with are is in At not year-over-year slight really the forecasting tended quarter. anything moment dramatic quarter see lift to

Laurent Vasilescu

of should about international grew then think I in for the the what should anticipate dollar rate $XX we it And fourth for quarter? kind million helpful. very we, quarter, G&A, Okay, terms,

John Vandemore

China have little in need support, and the in place to I by the SG&A specific is to level Yes. a a factors. quarter that little maybe you a close the to the in our year-over-year expansion quarter, did north, grow we to expect tell think it too this I put giving think we at it will trouble that’s south I maybe what expect depending fourth so obviously grow continue relatively continue mean, again. in would we you retail in can will expansion on few a What both got we the business,

I the I mentioned in out event before opportunity particular, exists is obviously, etcetera. component that those day as does on us revenue a variable which significant that’s G&A, have it in quarter warehousing impact single – event China. distribution call would last in of and of that One tremendous mean, an we

to be revenue Singles determined based that So events and on overall part trajectory. obviously the the of Day like of outcomes is

Laurent Vasilescu

the in for headwinds the quarter fourth of the impact line question, bottom much think the what last second should quarter we the million helpful. the my and net FX third think you to Okay, And for out how FX was then called very I from earnings, quarter? to $X impact

John Vandemore

So first. we guidance, in into I the our last rates will changes on bake don’t take We any the because existing significant baked what’s have FX part are. our guidance

So come and end we a had and both translated is we included where the if to are of of current to then sheet income balance rates that you flow was the million operating guidance. income in pennies. estimate through couple will, the that drag the in probably had in and data a well. of also adjustments down At FX we line that relative from quarter We caught and our through up QX to top as will through other to total couple

rate, So was net-net we estimate the impact total $X.XX to $X.XX.

Laurent Vasilescu

best of Okay, great. luck. and you very much Thank

John Vandemore

Thanks, Laurent.

Operator

go Please from question is Omar Saad Evercore from ahead. Our ISI. next

Omar Saad

that from they down you on back I for That relative for were channels? able quarter, that. inventories what I on be wanted you are background ask helpful to about question. I you apologize get you able to to be slightness due given through the progress to of side would think the to XXs yes. supply kind but to your the sales to to to that what able the my the taking Hi, pull pushed Thanks noise. chain, guidance, the inventory clear were levers know other in

David Weinberg

We we into with – had haven’t it done comfortable very said anything our the significantly felt year. inventory going different. was We

outsized It retail China in that timing on was based our growth was is and of Some issue. a predominantly business. growth it

So pairs – of in were a in had inventory. are number We being we the mature higher the for significantly decrease inventory actually of States, even able more United though shipping. to take control more the were

feel through management we and So, of the the year getting quarter, adjusting and will end you it’s has flows of biggest year normal future the ready that good our before fill just of is, go now to first quarter. go the overall. come They and very what inventory simply because marketplace the all as of fourth the they very will part which end inventories of through big to in we up be about quarter are for our our purchases a as

Omar Saad

brands, the Okay, bigger how you the picture I think the are leaps heads-up, you looking distribution Thanks. where and term longer becomes greater Thanks. and are the bounds That’s at that you footprint to like and helpful. you where growing you globally? productivity do How it more, distribution One longer getting question, about more existing in guys of are distribution brand to be point? kind be kind you obviously that today, both in that think opportunities appreciate you to that’s you to reaching forward. for could term, what the maximum want of points where of of feel creating extent bestowed

John Vandemore

Yes.

I our feel is obviously maybe and lot a the runway front take there market China whitespace in of ton like you think and available just look of us. of to penetration by brand at a a that we province, levels

much about, just so because It’s ultimately between significantly I have to the this because be across to too is stores is think the be again at question, number a be brand ahead quite there online? consumer a Omar, Online and it the large quarter. that so will don’t two. space globe. we blend We of that number cap grew or moment, China is likely the bigger frankly all-in in the direct would think on the that retail

Omar Saad

John. Thanks, guys. Got it. That’s helpful,

John Vandemore

Thanks, Omar.

Operator

ahead. Lauren Please from Stanley. is Morgan question next from Cassel Our go

Lauren Cassel

questions. sort Two questions. much of separate Thanks taking for my Great. so

secondly been you any XXXX? the you prepared this dollar, U.S. are with updated across mentioned thoughts China FX how And Europe First, has stronger obviously, year potentially quarter sheet, into and at dividend then on so and or short-term discussions investments on of heading pricing the repurchases the volatile ending $X some any the about thinking balance close had with initiating have billion in you your remarks, point? on a board much. accelerating with share to cash Thanks

John Vandemore

there some in currencies closely. I do The what would Sure. our at will segment, we frankly the this like took something are mentioned that themselves any the pricing that’s changes be volatile obviously have FX give watch being very but going in as in but difficult, quite actions the we retail next markets, those to are very exchange well We watch. that in rates as exceedingly to something markets moment and don’t aggressive need they obviously the those key seen for make foreign retail continue quarter more rise to is we we predicting quarter know

with incredibly close to And In have a And we feel cash stock there some in to then authorization, also if cash, have have conversation sizable investments always good discussions cash we continue get stand. exhausting near even very our backdrop that the where the make and believe to still obviously, we you what we I represents. fair value we confident existing that where in go, about about sheet discount but against terms repurchase. of trading see the we currently, where another at the will will feel and with to is future balance be we can to I the on our think we us what of aggressive is remaining cash. about the authorization mean, board think do

Lauren Cassel

thanks so much. Okay,

Operator

Our Van ahead. next B. is FBR. question Please from Sinderen Jeff go Riley from

Jeff Van Sinderen

my taking Thanks questions. for

likely the the wanted off-price seeing up, wondering latest there that in where And return guidance? was First, I regarding in you wondering growth expected if business the might to domestic is might be was you pick some just channel, could your closeout in of to domestic maybe your you how that’s you touch what clarify wasn’t when think sure and been referring comments? is into just then are QX, in inventory you on to to off-price wholesale what have think factored your

John Vandemore

guidance as far the way inventory into Well, channels as try make we in we by and brand them. where is factored to for that flows the the those [indiscernible] as what those concerned is and to inventory see see see as we it’s our react plans we

are continues I fact right business you The drag. in think channel our the is core to healthy grow. off-price been that the has and on

the in what like for that We the the in have the channel and possibility there could depending that is and fourth is quarter, the is on earlier December hit quarter for that off-price terms that that move not it’s seen hot of for first weather and some we what the bigger is we is us big deliver one start always quarters, U.S. rebirth back It’s growing increases in quarter. the customer timing from and fourth reason one it retail having request our are to forth but will in how really the a like. we are of not

our I we online positive what our third-parties, presence to in move think our significantly core and both own business. just our So, customers are our and so are plans, very we you increasing in fallout, core buying basic are a no it’s seeing in, is have for settling

Jeff Van Sinderen

to the about be your And wondering doing And go terms production, what year situation, we more terms or of might other in tariffs effect some for good. shifting, that? thinking about update anything how us are in how to what think might you yes. if countries, next plans then on into about might you Okay, of tariff think just perhaps

John Vandemore

to if a days didn’t spend that’s difficult tariff going – get you never what’s you possibilities on. to and and could very days Well, all of I that the one. try close out find and the work days

fair think move China. say have to we it’s capacity what be to cognizant will We are. they of very do I outside of

We I be anybody no than else. believe will different

does I parts of Chinese happened it’s fees. a upfront. lot kinds currency, hard there that part what is is tariff the what where of up for the to the best the to on is availability moving be even for segregating of mean, price the We all moving depending production to up are. necessities quality some from around of make styles will the pieces production, some and and country world There look country too

to fair it’s we very think say flexible. are I

in capacity our increasing have China general. We of just production outside

will we have think in We quarter and we power this the be that obviously mean quarters we prior So in saw pricing I okay. international basis.

be. So it’s turns have the to we we when to we picture believe only a thing, adjust out be will that’s whatever to final okay, timing

John Vandemore

None last directly. be this affected only And get product, in our clear. it the would begin been and of with tariffs footwear have just affect existing enacted that to apparel be round of to tariffs potential

Jeff Van Sinderen

exactly and QX. thinking Right, of was forward helpful. I luck good okay, my taking for Thanks in that’s about, that sort questions

David Weinberg

Thanks.

Operator

Poser from go Please Sam from ahead. Susquehanna. is question next Our

Sam Poser

on that for quarter? are the the to you Good afternoon. you follow-up taking fourth from FX the my guidance, headwind just still within provided anticipating want guidance I Thanks the the question. in

John Vandemore

Yes. provided. time we on today year prevailing last Based and exchange at this have into we the rate have guidance factored that

Sam Poser

And am basis in there, sorry clear, just domestic up the points and the headwind am XX gross bps gross do that XX or had you so the quarter up you had again? so that XX have I – you bps – happening I basis margin XX leaves about U.S. were margins the foresee almost

John Vandemore

in of activity factored the that haven’t retail from take on of say I guidance, was that the then impact the as well business. the some started see of you pricing on mix we like to think revenue a we we overall international the higher in based segment potential mentioned concentration and actions lift that and into of side because domestic whole. prevailing we continue previously, it would pricing get any fair business if to the see part the as that But it’s as to mature in largely QX Well, positive we see I

Sam Poser

is to on wholesale, thinking should I an way Right. thinking guidance that, it, be is mean And then have single that things? domestic somebody but accurate was about I the within for touched high

David Weinberg

I think we said high singles, low doubles.

Sam Poser

wholesale? domestic For

David Weinberg

Yes.

Sam Poser

that to that that million so thought ship from that last includes shipments basically that include million the that of is is that that, that be mean predicated on I gives it, it’s the is – of where pretty $XX entire year, that $XX that the move, would you that based that but so much from would the $XX that list in And going are increase, the million? you – so

John Vandemore

more describe of fully threshold grew that that would to if and when was decline the in where as as And wholesale grew the then also as business as QX. we now core with David consumer prior side. the them keep little a retail have into I take as account but in how as residing retail in international side about business, both balance as the see QX general terms in it’s buy important the just are the you again think at and are just year it, mentioned almost we associated good would kind they about the well this health the feel we order you you and mind. in Obviously, domestic look business performed as the stronger point of domestic geographic mentioned well. The the business time I we timing wholesale agnostic business, out slight the the the a I bit domestically. in when product, domestic total that’s of is very

Sam Poser

more third the And you were to the fourth business expected grow wholesale in quarter in you significantly quarter? than

John Vandemore

Yes.

Sam Poser

much. Thanks luck. very Alright. Good

David Weinberg

Sam. Thanks

Operator

& Our question next from is Cowen Please John from ahead. Kernan go Company.

John Kernan

guys. Thanks my question. for taking Good afternoon

David Weinberg

Hi, John.

John Kernan

So, a) in quarter? that’s how Europe retail the XX the first in we wondering company-owned incredible anyway, pretty the at comp should a anything Europe XX what how guess embedded in just am business, had think international level, the the quarter I quarter, should running we this think been comps fourth picture your negative about guidance drove same I the deceleration the quarter, about in for b) international comp and overall

John Vandemore

very is you a mean, decline it one last was slight a to It mean, the change. robust I international I dramatic was mentioned incredibly Yes. this at the clear, factor performance play year. as comps. be in obviously time

of said, were the us then that coupled FX help did particular, spend and pressure we last I factor comparisons pretty retail so not giving also So, sure business difficult the some third robustness consumer with and obviously the read in that in decline Having am itself. you as discretionary business Europe have Canada about year. facing in the some

the number prospects are positive. obviously FX think be that for QX within saw we our You a well. negative store impact comp as Again,

to comps, sales the over positive expecting season. holiday are the in particular, We largely of how down couple in going but boil perform to next that’s months,

And so watching carefully. we that are

John Kernan

thanks. Understood,

come Back to look is SG&A? this then you low point, what the low guidance it the $X.XX, between prior biggest low end the am did consent that when where the $X.XX is guidance below you the at I within you between and of at margin is is do Just this gross and the high the of the and the end it is your end, do at EPS variance question, biggest you think wondering high was think swing of just well what expecting kind side high of point? SG&A kind sell in and the this factor quarter.

John Vandemore

the a I in it ever it consumer. the markets for China. to segment Day we on event go bearing obviously answer, though, significant retail Singles the mind, not more us. today has more direct-to-consumer, just is than like that’s be obviously has significant in in Yes, much continues business also consumer would a our I mean, that’s keep

So, a continue very no we the have that. gross margin, consumer have that year concern can the and real aspects seen although to throughout knock-on obviously effect to to of cause gross have and for I on point would strong we margins

guidance above well grow biggest from that David’s for the to of perspective. into already we probably that to guidance, business presents obviously us in point to the else don’t have our earlier, you as at have certainly factor see the the advantage particular hard we to to we and extraordinary can will that belief those to that’s want think have an the the and but the know brand opportunity itself, think anyone opportunities any we illustrates take we then to are it is as continue market. international that in again, at I look of given we And grow which if because the beyond grow continue will factored invest my if brand, I those, moment continue there

that. will So, be obviously at hard looking we

John Kernan

bit footwear factory little is And base to base of bit you towards, the now how to all, sourcing footwear regions, tends your tends what in was towards have Vietnam disclosed but percentage right at of Excellent. skew other global little question, overall I a final in skew have more and China, know a just discussed more much one you China? actually

David Weinberg

I out publicly. business to that. don’t half have very careful you China, but bring more is be than too much we in fair think that It’s it say to with the

We for Chinese of lot a China. production have

significantly. growing changes monthly We are basis. It a on

to the to have as and fair we it’s we I will think now moved more a forward change were in cross-border that past the move situation. regardless So we in certainly say places tariff around, of continue number of than are we

John Kernan

Thanks, guys. of luck. Best it. Got

David Weinberg

Thanks.

Operator

Your ahead. from Please Chris next go question Wedbush. is from Svezia

Chris Svezia

clarify tell questions. my currency to international John I currency taking your on and the been for same-store a Thanks us are neutral have just reported, international comp sales side? can not if maybe you guess guys. what that on reported all the something, Hey, they neutral would

John Vandemore

market, numbers. It would made If we So, they the of have impacted of decline do enough bigger you neutral It that are out it but comp currency, I comp, wasn’t less it varies to wasn’t some impacted. currency call some most would by change significant. not our markets constant tell with the ones. will of precisely. we the definitely severe trajectory the

Chris Svezia

what then about are comp right the U.S. the is and on maybe saw to seeing add color accelerate level Okay. just fourth just just maybe Can retail that expected or quarter expectation from now what in that in the in up your for X% the market comp? you DDC you you marketplace some

John Vandemore

read traffic some in we you mall offering, the that as I in Yes. saw really decline as the of about an interesting sense based quarter mean that was that well.

perform Our our to stores did of impact very warehouse concept stores levels, certainly traffic felt comparable well. lower continued the outlet a traffic see We and not impact.

testament product some our categories. mentioned growth a our price implemented as we all mentioned the to well David to store In it’s I has we every store new addition despite in coming – held ability the as store that think up comp And product. into stores, of pricing on performance

expecting are little were we on and probably footfall we more what QX, last from much pressure of trend under we depending warehouse solution. significant than bit terms outlet a from expect the concepts that have quarter store the recently. than anything hold In consumer traffic will And where this not more the seen probably

Chris Svezia

can strong, about then you distributor within I JV in confidence piece you that be continued QX, just course happening the what’s about you relative sub pretty within wholesale I to guess to or your overall growth or maybe such growth, the low a that U.S. positive I to just just business, but at the teen happening? range, for in what’s single of you talked unpack a grow would just and mentioned when your get accelerates materially talk maybe so material getting to high China XX% of it And something acceleration to QX, that is – so sales I you have double-digit revenue because know Okay. why high know outlook look XX% XX% implies somewhere maybe

John Vandemore

far. That’s what we see so

international John triple high China. aside as comments singular so doubles biggest a mean a happen And focus, in what will his makes seem line. in Single’s well. of online can impact It’s Day, as digits, triple pointed to from Single’s very his Day. big digit been Single’s out growing the the basis our statement think and I we out – John so on China a are be business doing to is be close well through those with on possibilities QX pointed our Day in I very in it numbers

significantly year. are on growth big large We anticipating are was I we talking number. a Day. Single’s It mean last year-over-year significant

Chris Svezia

So just number…? that for

David Weinberg

Sorry, say again.

Chris Svezia

Single’s pairs X.X is so million it? million pair how for you year, did on thinking Day, about that thinking than Single’s just are number, you are that Day last No more you X

David Weinberg

than And more. this million somewhat are X.X than we year than number. that more last year did significantly think I your We higher pairs thinking

John Vandemore

ventures And this of generated add don’t high it’s out – would Single’s teen, I And think and quarter then opportunity not the what for actually that’s with comfortable point how to I the that think just we number. it’s out we character the Chris, I on very you have in growth, so low-XX joint seen. that feel Day

David Weinberg

Yes.

have increase of of only last You don’t out we and over. Europe the simply have there of in growth XX% we same well a up comp is very a We taken fairly because Europe doing basis. year. kind new relative was on also Remember, single-digits, get are some places low that

grow throughout. and economy holding said Europe is the and John we up to are retail continuing As strongest not

testament will China. are than it’s actually of and in I QX show think in more the tough big comparisons and continue be improvement we where think I QX, to that So how can Day the Single’s to because international

Chris Svezia

Okay.

terms So the all China this easier expect big overall, in on really is just growth growth to rate acceleration relative down, improve clearly directionally an just international, a coupled get of comparison to with to QX is given that…? to you Europe driver

David Weinberg

of are the because results getting. we And

Chris Svezia

thought about single-digit channels, any you mid tell to as dealing between it some or or of be back or would channels, into think you core next what thinking early And next start you are just don’t about – getting going what Okay. forward know QX, are year too to you are of I sort hearing, year, I early to am you much is to still curious to too we process you should U.S. with growth into shifts off-price dip just just want the we are that? talk but wholesale, near-term just just how how start thinking

David Weinberg

we think personally, some Well, I to going next show Yes. are increases year.

The after against first is the become are comping first because part easier, off-price. we not that an quarter, comps

and tendency something going we comfortable product. and are for new unless to reacting are see the mean, showing door the or we we domestically. delivering our So would very certainly how people the some booked next sit to next the were quarters and stuff last year three first I and channel of of to the in are increases to believe with quarter off-price are if well you show be we core that are changes very

get our think I any both. we major we barring opportunity, So, from so get changes in benefits retail,

would So, will you for mid-singles certainly of see year. anticipate most some I the

Chris Svezia

just flat up selling quick, that just kind should line? curious A just Okay. does thing the final that line, talked How on know, what about QX, quick, happens of QX, to I G&A, in selling it real in was pick all the we, expense John just on real you QX?

John Vandemore

kind not Yes. we seen I say the or think the rates. prior is of precise would spending components coming a of expense but to recently at need year have necessary. absolutely promoting brand, want the of are to conscious promote brand, trend be very I I being don’t more overly below at we of Obviously, base. us you than about where But

you nothing can will general extraordinary is that relative out you of. would expect I to aware trend that call I So, think drive. There want QX be that to

Chris Svezia

it. Appreciate best. the all and you Thank Okay.

Operator

ahead. Tom [Operator Instructions] Nikic Wells Our is next Please from go from question Fargo.

Tom Nikic

there. believe past, everybody. for talked going you China the ground you I I Hi Can taking you the European the standpoint? you about timing also Thanks expansions my And projects, the said costs some are appreciated? DC stuff Any the DC be believe year. expense those and break P&L from starts in us in having of the related before those when U.S. projects to help the on Thanks. projects falling DC of question. the would remind that to some projects, end through around have

David Weinberg

completed automation talking hope United lot and to some Okay. at putting a that about service put Europe some when which you or go space mind, keep the they as into efficiencies Well, P&L the States the in in there until something through are or equipment building as anyway. get big in time it’s it’s expenses a office the important a isn’t come until distribution assets really that to center we and of

anticipation there in take should different minute. to this the That’s as parts to concerned, hope should are neighborhood XX far XX quarter. up are China some start running. they right the this United States have in are It the permits and months as So, get in somewhere We than we no of etcetera.

think I in $XXX said it’s of we million. excess

that’s The stuff As have take the season depending the It equipment capacity. in the start after We probably and are on capacity months be year. the final in between place. Europe. we need of but and smallest at are – $XX deal quarter X our after we the where first the are what U.S., we will obviously the euro, expanding as a will range a there. big not expand our because we that’s will to that first point looking lot our Europe next know automation, far signed we automation we million is concerned, busy In piece in buy happens X of more a to plans somewhere

right So, moving that’s finalized target, that’s a this minute. not

Tom Nikic

Thanks. store that own net should kind run-rate a to XX net of expansion of forward it. had base, last XX openings be on And brick-and-mortar on guidance you QX your openings Is XX kind reasonable this about your just or the store XX the year. XX Got Thanks. the in to of base? you go question one would think year, based we how

David Weinberg

Yes.

anticipate next available, going we that think is and should to more into take with be try XX forward going I not. is sometimes you that We expand available, there there sometimes at a look year. spaces to slowdown down are it space to and

looking to our footprint. are expand We international

So, Japan, America, in in Korea, some around some certainly India in you for South can franchise. store in significant look openings

just based So, on I transition the think the relay pace to from a a marketplace will of that’s international pickup domestic in the and United States.

continue continue by the this – was not our marketplace but opened a store on a think transition important but and own I we move to to will availability piece think it’s based of the just think bit and continue little in to we I an out lull XXXth U.S. design, in necessarily we point we a today,

John Vandemore

been in expect QX the have Also less stores. opening stores in to are we and that open footprint QX bigger

the actually definitely stores, expression concentrating with those higher we and warehouse as in you outlet the square the although significantly down, of of significant So there it’s a at look them footage, number if a is because are decline, carry square not and footage.

Tom Nikic

Best rest the for That’s helpful. of the it. Got of luck year.

John Vandemore

Thank you.

Operator

Monness is from question ahead. Crespi from Please & Jim Chartier final go our And Hardt.

Jim Chartier

thanks my taking for questions. Hi,

that wholesale to business the fourth subsidiaries the like in quarter in go looks international me where quarter, XX% JVs XX% the on to of from acceleration a expected dramatically go wholesale Just XX% to mix XX%. international down follow-up like the changes and fourth of in from it

relative So, the part become is mix part factor fastest a in smaller where much big that growing your segments mix of the of also growing terms a currently quarter? and to becomes the slowest third a bigger

David Weinberg

China think changed with it’s weather X not which the a in in to over such our Europe, Day mature. pickup and Singles as large do that’s is think most in X go we always quarter a some It’s our territories America. also or basically been But last degree us true, for a get years, obviously slower that new South we changes, through. we I with will some our of big

So…

Jim Chartier

Great.

David Weinberg

We are and Southeast breaking the in down Asia, are of a fourth to the that promotions the quarter fact than becoming because past. piece of anything those holidays bigger

Jim Chartier

correct? a earlier, And the are meaningful then then are in Right. that happening success forward in And that editorials lot accounts. had having you can you is Is that be? you mentioned, of distribution in terms globally you and how and/or and I that fashion potentially fashion mentioned distribution getting then more more think U.S.

David Weinberg

States. to and It the it’s the and strategy. where overall a globally. be. happening trends great depend brand for what gives It’s United grow early continues offerings it of that It’s could go. too on fashion and the will effect Well, our us Right halo ultimately tell happening to next some now, it

of juncture. and very it and of very, at as I It’s So, am do to accounts square forward. sure that the we not move needle, I will is we a big been move how some this it’s some keep very a these positive, footage positive move believe

Jim Chartier

luck. and Great. of best Thanks

David Weinberg

Thanks.

Operator

concludes floor session. Thank Skechers back question-and-answer for over like I to would final the comments. to you. This the turn

Unidentified Company Representative

would that contained note have on us joining may call today’s forward-looking call today. just for like the again you Thank statements. We to

the various actual thank risk a such have could result, those in factors, in SEC. results and great differ detailed projected you the materially Again, risk a Skechers’ from These factors with day. are As filings statements.

Skechers U.S.A. (SKX) 19 Oct 182018 Q3 Earnings call transcript