SKX - Earnings call transcript Q4 2018

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Operator

Greetings and welcome to the SKECHERS Fourth Quarter and Full Year 2018 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to SKECHERS.

You may begin.

Unidentified Company Representative

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

David Weinberg

our an in to the and We last the Vandemore, year On XX.X% quarter X.X%. our business for you over afternoon currency business This and us billion, SKECHERS for fourth quarter the detail. of Financial Officer me constant our increase joining domestic $X.XX Chief a growth XX.X%. result full international XX.X% our SKECHERS’ Good quarter new basis, increasing sales record results was fourth achieved call was year. of sales increasing discuss and XXXX today financial With thank results. John financial review on is will who a

our quarters Our $X.XX in record record a a fourth business annual increase in business. The new follows resulted and sales domestic in our XX.X% X.X% billion. growth of increase prior international from a of record came which three sale, quarter

network which the sales a highlights offering, quarter domestic to These of earnings XXXX in new which center reach record expanding to XX% opportunities. XXX our sales logistics in growth A million company-owned addition earnings accounts numerous shares XX million, billion, our was diverse sales, and our capabilities stores third-party a success Russia SKECHERS $X.XX of of quarters product subsidiary as India and offered in distribution South included and four North improving work, A in stock. into share position one Highlights our our the diluted distributor, earnings In our stock. fashion diluted double-digit sales, in diluted of representing X.X% $X.XX, $X.XX sales as our our include breaking key common on the of of e-commerce sales our digital fourth in record joint increase; gross record the $XX.X well international of business, United businesses; million achievement. a of States retail increases $X.XX; number operations venture and in distribution, our infrastructure ground to record of increase e-commerce result more in per lifestyle earnings brand XX.X% Class significant margins dress centers the opening of of our allowed We company-owned year X.X in to repurchasing and shares business; our China common sales expand stores for repurchasing the casual and casual United including X.X% The of per and of increase X,XXX distribution include stores; XX.X% X.X and new and sites of Class our retail and new worldwide, States. us walking, in launch believe annual Japan, and America, the shipments maintaining from our distributor international increase from our share share wholesale wholesale per diverse international record opportunities the the buy as and stores; Europe in full are XX.X%,

a with continuing great brand markets our young will and international opportunities and building Latin high-growth in in In product as sales countries Mexico. China, as brands like We drive with be are well in offerings international our Europe still and markets. including developing India in relatively America regions new focus Eastern on XXXX, to

business for channels points were quarter X.X% increased for business our for Now, increased and wholesale turning flat XXX gross domestic for the margins X.X% and the our Domestic the full wholesale in quarter fourth year. to the basis detail, year. full

as such featuring D’Lites and women’s following and spots, maintained during we our and Skechers styles walking, to according work, marketing numerous Tony women, Long. ran performance, casual GOwalk casual for casual the Joy; holiday SKECHERS footwear business, States up had support position and the work, moved slip-on. dress in sport the casual year, for the one in the season: SKECHERS in and one saw starring wide-width our strength Sport the lifestyle be and third-largest and to a USA States and brand position men’s men’s We To men, and to and the Romo, and as campaign, United such domestic several multiple BOBS brand For as United categories slip-on sport SportsOneSource. Howie footwear we our commercials number SKECHERS across campaigns D’Lites

in already season. for and our Champion to new lighted networks, and changes to develop For of needs on kids, two-time on products featuring growing broadcast golf our consistently this base commercials Twinkle and a is adopt the trends. children’s our and meet elite our Matt footwear including We ambassadors, consumer GOLF programming spot who Toes GO we ran Kuchar,

share relations We quarter. have begun wholesale our largest the spring new our channel or remains XXXX continues our to distribution single product shipping to XX.X% reactions spring total as of collection. forward and are sales – looking autumn/winter at the for account in XXXX well as and fourth represent largest sell-through to International

by China gains constant with the the increase subsidiary, was of for and business currency our XX.X% this basis. quarter, or international of significantly increased XX.X% Our on growth contributed a XX.X% double-digit result distributor in joint venture wholesale businesses.

Our quarter. and business in including international wholesale XX.X% quarter, our increased our and by detailing over our grew year sales joint Further fourth XX.X%. quarter for international represented XX.X% the retail for the owned and wholesale for our both of subsidiary sales, the business XX.X% by and XX% wholly growth, venture the international

portfolio gains our of remains stores, India, and Malaysia the and dollar of increase ventures. an XX.X% sales annual full For joint China from the Germany, close within in and XX.X international country within pairs Singapore approximately At shipped significant quarter, Peru China, subsidiaries, our largest the Spain, came we Japan within million year. an SKECHERS and XXX of and expected the million-square-foot XXXX. year with our the center operational broke X,XXX China, a the on the had of facility support quarter a distribution sale become total our in XX% increase ground logistics in growing in To second points to sales. we of approximately online business, is our freestanding and annual The X.X facility.

distributor X.X% first international and full increased Indonesia, despite strong business sizable due in And international half to quarter, the the of Middle Turkey the for our primarily Our in the the sales the year, increased quarter, East. party-owned Russia, gains headwinds network operated from year. distributor international by opened owned third of Tanzania. ventures Northen By end, the were Cyprus including a fourth In distribution there SKECHERS and locations partners, first franchisees. XXX our quarter X,XXX branded and in stores joint and Cyprus, XX.X% stores

Kong, third-party and Colombia, Canada, stores in China, X closed Thailand Macau, today. Spain, Singapore, Greece, Switzerland, Northern Honduras, to Paraguay, branded Uruguay. the SKECHERS as Mexico, have stores England, in so third-party owned Additional Brazil, Egypt, Taiwan, X and owned in stores Indonesia XX Cambodia, X XXXX, the remainder fourth each Australia, Turkey, the in of to SKECHERS quarter Ireland, Malaysia, opened have XX in excess owned In each far XXX us and each the X we include Netherlands, third-party Philippines, first one Hong X in in Korea opened in of stores in of and closed, which Norway the each open X,XXX South third-party XX and Vietnam, stores XXX India, and Ukraine year. each Serbia, brings and expect in quarter. in in Croatia, X Iraq,

for venture to joint India to of as which are approximately biggest XXXX. which of continue international see a a one markets was in transitioned With e-commerce XXX stores, and owned platform, wholly subsidiary. the opportunity company, is the owned why our growth We a from new we just XX India wholly retail fastest-growing SKECHERS over have

in our which believe also of the X.X% agreement XXXX. this be a in Worldwide and our in XXX we business stores sales We was fourth constant for X.X% partner. be was Operating I growth increased sales planned sales attractive our company-owned over on believe an to plan, increased establish which than currency on global result distribution principle another have was of in increase our to quarter, which in a another which support result market stores will XX.X% to business, international complete, potential per When coming country to see venture grow our international X.X% in retail diluted earnings share stores growth great a retail this quarter, accretive the X.X% that to significant accretive and in opportunity billion people years. joint have we transaction domestic is was X.X XX this for a the SKECHERS Mexico basis can earnings. and increases current our we X% XX.X%. XXXX, of will In the store store, comp the with today, additional why our reached domestic of believe stores the in this XX more sales.

which promotional increased XX.X% due XX%, Domestically, XXX quarter X.X% the XXX our to basis the our the year, for full and gross improved a by our decrease points was sales by stores domestic basis in in of year, margins result of retail in in and and points For increase activity. full the international pricing increased an stores.

to XXXX for continued quarter and for business XX.X% year. by in X.X% grow the e-commerce domestic Our the

one also improved stores, UK, each quarter, SKECHERS opened XXX fourth user more In stores, United launch and outside year functionality, to sites At in countries. the Peru the and this and Italy. X in we X we XXX the expect company-owned States. and U.S., XX We retail year-end, company-owned were out to the accessibility which roll in had interfaces of

We also bringing stores XX or company-owned stores existing remodel, XXX locations. XX and including and stores, relocated opening, X, have this we’ll not and expand XXXX, us In additional relocate XX approximately X to India the X expanded be we remodeled to to To-date first X open quarter, in stores. opened stores. we XX that closed stores, X to stores expect an

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

John Vandemore

increased our XX.X% international of retail. we year to the company. a ventures, growth of wholly prior X.X%. from increased David. billion same-store front especially XXXX. calls, increase you, Domestic fourth record and increase quarter previous rates fourth a the and half fourth quarter International e-commerce, sales retail, sales quarter, X.X%, foreign domestic X.X% XX.X% in a XX.X% gratifying highlighted our exchange by included our for was $X.XX in XX.X% represented including wholesale business increased headwind a It Company-owned expectation increased from this the increase each contributions our Thank in of a In the would is a that XXXX global of over in the owned segments. and result become our and On the XX.X% XX.X%, driven which a increase new subsidiaries. distribution in retail wholesale joint that increase business

Gross was rates For to basis partially stronger prior expenses to were offset General administrative grew points on XX this increased impact or retail the million Total by X.X% a year. XX million million $XXX.X million constant $XX.X foreign X.X% basis quarter, domestic sales, improvement $XX.X and of to growth. or foreign was grew selling to And negatively million, decreased margin currency were $XX.X gross a the quarter. the which year. which rate. year-over-year. wholesale over that, margins, in sales expenses of up was This impacted exchange million of million. from the to improvement XX.X%. currency profit point negative $X.X $XX.X expenses sales XX.X% basis $XXX $XX.X X.X% by compared million Within basis SG&A points sales of exchange up or XXX roughly prior attributable and

company-owned continued also this internationally our sales, percentage gains point improvement increase initiative. in basis in this a quarter from As as Operating the XX.X% which as quarter. prior X.X% year in growth and of XX $X.X domestic retail This worldwide, XX.X% It reflects $X.X support million. to million of a in from year included driven versus operations distribution-related corporate well of related XX.X% China. in long-term to from by the $X.X to dollar prior fourth the double-digit XX increased opened growth basis operations $XX.X global was included to an XXX X.X% costs and in continued including The higher year period. million million increased Earnings investment volume XX margin increase points improved additional SKECHERS volume. prior stores to the versus

for Our income the with year in tax rate was the compared quarter XX.X% prior XXX.X% period.

Tax our year a Cuts impact As of recently-enacted reminder, and the Jobs prior included Act. the rate then

XX.X%. impact Excluding our change, discrete have of that tax would law prior the income rate been tax year

impact the Our reflects Tax current year Jobs Cuts of effective tax final of assessment the and Act. rate our

outstanding fourth XX% XX%. was to diluted the the share loss a on enactment XXX.X share be December of XXXX XXXX period. of the representing million and per We Cuts $X.XX per we tax Net compared million per $XX.X our income Tax $X.XX shares $XX.X an the million, due $X.XX or diluted of to or In on expect year Act. outstanding Jobs net to for shares for prior tax of XXX quarter $XX.X expense million effective between income share rate diluted recorded and in million

item, Excluding diluted $XX.X of adjusted share. the XX.X% year diluted fourth respectively. XX.X% per basis, earnings the and net $X.XX tax our adjusted earnings on prior share current an quarter were our year discreet and million grew Therefore, that income in or per net

we quarter, million at representing X.X last of shares at repurchase year, available per common average million, December Since XXXX, XX, million $XX.XX $XX of existing our At authorization. announcing representing share stock $XXX cost of an repurchase remained per our price X.X acquired average fourth of of approximately almost A the Class cost million, under million we price acquired $XX shares program share. a our have $XX.XX During a share. an

to remain we As strength we our growth of continuing fund stated have cash shareholders. to balance to return our our the before, and sheet confident while in ability initiatives,

Our SKECHERS share confidence growth as belief that and profile long-term cash as as actions current price meaningfully that undervalues our earnings this past reflect prospects. recent well our as flow firm year well our $XXX.X which or to sheet, XX, an And billion XXXX. now cash, increase was we in XXXX, from XX, December and XX.X% had turning our balance $X.XX at equivalents of investments, cash million December

December to of debt expectations includes store relocations. in our versus Total levels expect million investments reflects This requirements of to XXXX. related XX, million, million, quarter inventory in base. retail This in fourth DSOs, December well of for transit, Trade versus XX, and and balances. diluted from the accounts also includes China. XXXX, share store to investments in XX, domestic $XX.X receivable represented quarter new increased to capital expansion cash stores, $XXX.X our at period. was of million million which, $XXX.X our as in enhancement million were our levels with of days year China, wholesale X.X% California. were the and prior decrease United an XXXX. increase or reflecting operations. billion days retail center Capital fulfilling receivable XXXX, Our construction billion the million December the $XXX $X.XX we to to openings construction our cash diligent million, $XX.X And related in of our outstanding corporate increased as of centers XXXX, December per accounts the our distribution XX $XX.X XX, expenditures company-owned In international of end million million. higher were in million approximately Long-term an primarily approximately additional million our globally, or merchandise $XXX approximately to at $X.X XX million This $XXX.X XXXX. our XX expansions XX borrowings China. remodels, for of $X.XX a from distribution be primarily XX, $X.X growth approximately Working including as new management and distribution XX inventory, while to construction was the expanded XX at and $X.XX X compared and associated and capital at store December $XX.X reflecting $XX international center new to $XX.X and distribution store Europe, company-owned remodels, States related existing and the to XX expenditures our XXXX, headquarters center

of some of earnings guidance billion turning to diluted to $X.X and the of takes not impact does currently back the to turn sales headwinds range include the Now in of into $X.XX we estimated and first from the benefited It currently quarter, important discreet quarter out David point $X.XX a represented $X.XXX share. guidance, with Tax quarter a to in of also Act, the investments billion joint I It foreign-exchange pending quarter, tax our This the Easter due Cuts in year’s that we the for no will our will We the range net to of $X.XX. in be implementation which venture but from item year. be such per to shift India in timing impact first closing this first and in now existing per diluted in the account remarks. share last to expect second includes sales impact the expect the call is of the of Jobs will Mexico. benefit our XXXX. first the associated

David Weinberg

Japan. $X.XX importantly, our as Europe record in as achieved from In North centers John. record of America, and we most operating XXXX, income South well and several distribution shipments records, Thank record you, annual billion, sales

challenges the product diverse is despite strength the attributable of comfort, and and came and at tough our comparisons markets foreign currency XXXX. We to our price. is sales in year range, style, political the growth which to in several an on focused believe innovation affordable in quality growth Our due economic headwinds,

year in as among looks heritage brought We are from well our SKECHERS, others. sport men’s as both that Cali, BOBS newer casual pleased the and growth from SKECHERS looks

ending year stores. to opening in brand at and continue SKECHERS stores through the our companies invest retail owned the We of X,XXX company-owned third-party

the second With unveil upgraded have we SKECHERS planning stores the site other in first fully X,XXX in of States of countries United XXXX. e-commerce in the now quarter, we the Further, and than around to SKECHERS are stores a half more opening several the world.

week We completed these continue a this minority to in of be of efforts will to believe the believe a venture, transitioning venture. joint international end are this transitioning to repurchase India the it the stake accretive of holds growth we and greatest potential, the our subsidiary earnings. joint We process our distributor Mexico to to and

And As always, begin in business over to call we that and remain resulted in the record to growing believe call. focused the of with that, XXXX, pleased are can portion and on strong I in achieve the question-and-answer operator both conference and the XXXX. our turn to like annual sales results earnings efficiently would efforts our we continue to

Operator

question Vasilescu with proceed Our from Group. your first question. Instructions] from of Please line [Operator Macquarie comes the Laurent

Laurent Vasilescu

taking How China for we particularly numbers, think questions. strong my on on looked Thanks up about for Congrats do XXXX? quarter. afternoon. Good to I they solid fourth China the results. the in follow wanted

David Weinberg

numbers growth continued and quarter, for it’s Well, in guidance we it’s understated by and in the first currency. see difference significant while the our

and will as as well, of a we move growth will go show something continue double-digits, we the be an they’ll far as slight in double-digit pairs great sort we’ll to shipped, digits balance see and as unless impact, significant only significantly. think the have currency in the least year, we of significant currency at year. as double while into changes be through the we But increase there up volume in local can So,

Laurent Vasilescu

first you on Very helpful. margins, margin? can maybe the help how we maybe the And about quarter gross to us, walk the then margin drivers do quarter gross and of John, gross fourth think

John Vandemore

retail we were said, gross of, the quarter fourth domestic on wholesale The performance. and margins back as strong

and discounting and margin performed they previously activity the have to exceedingly mentioned on we retail basis. we continues some That through environment, reduced As the pricing. business, limited gross some well in a taking power retail had

also price down. favorable business, and wholesale domestic We both trends our average saw terms in of then costs up in

I saw our again, for the we mentioned we offset, trends foreign-exchange, So, speaks businesses, think the the retail of and overall wholesale margin been our solid but good obviously, on of good us, mix well. include was the businesses, as which domestic through that portion. the basis going health domestic consumer health speaks the performance you there. to And of when performing to which both has The

you that, early only QX. of that remains is quarter, XXXX, where least us expect severe but XXXX some how exchange based know a bedevil will look material rate is exchange differential mentioned QX caveat, based I exactly in we be in China foreign in seen slight in today. As definitely first like David core improvement and on to we mix again at continue would to as modest rate the some the over improvement of expect the markets half first pretty we our at the what on

Laurent Vasilescu

potentially Very year? squeeze course $XX.X think backing helpful. in and then it quarter increased for that China. I item do like think line of by Half the we over I out How of one International full about the looks And if first one last million. just that the is can G&A,

John Vandemore

going was probably fourth what driven more saw you not by gains. give quarter country-specific I we’re Well, to think in but volume guidance, really the

before, a of gains. correlation our does with As there be party structure to distribution wherein third we’ve P&L China tend mentioned the are partners volume

So, it the And we volume I going in with expect gains line fourth in roughly XXXX. saw definitely would be that into quarter. to

timing any given the of we quarter can Although over again, as see shifts XXXX. course we saw in

conscientious as be that we’d well. So, of

Laurent Vasilescu

luck. best and much Thank of helpful. Very very you

Operator

from Please next with & Co. proceed Cowen from John of your question. line question Kernan Your the comes

John Kernan

well? wholesale some that’s there moving just little international is timing us implied around as afternoon can well. Easter quarter about the numbers and around John, bit a guys. the help think understand for first then quarter. domestic good and both more as Hi this top piece line I Congrats you the on guidance,

helpful? any detail Thanks. very would can give be us you there just So

John Vandemore

question is of I things we of of timing the the Yes, so end Easter to think moment I how the out. at see part maybe at the as down What slightly a and the timing mean obviously, put of shake holiday exactly probably kind mark we part associated continued that the of flat Again, shakeout see. domestic is, retail with to is and environment. that quarter

be distributor of international, that’s tell will bit last the actually growth a a bag. business tough our expect I come internationally, performance with would year back terms type In single-digit if mixed of modest will that and international a QX you, We following probably be low-teens the high-single-digits, which not double-digit be are half will in be performance. were retail number it headwinds a high may XXXX. for our business are depending upon low double. would the we in again, believe retail foreign-exchange And our then, releasing of we single-digit, key almost markets come Because, be first counterbalanced

done lot domestic are there’s to but this a thus of We the be seeing year, selling certainly good in far market still. trends

little gives generally, us maybe weren’t an that that’s, mix out, almost the a things basis, shakes if we higher mid-Single-digit lower that maybe FX, on into a again, than foreign-exchange. how So would average That probably number, believe how little on that, things account a be depending it but bit bit for double out. taking it

John Kernan

But any to just those for to international, up. books I on guess you’re how for detail domestic starting year I when guidance. a shake not and both XXXX, know for look That’s are giving a holiday you Sure. order full helpful.

wholesale. with an both wholesale the in acceleration quarter in actually fourth did and You international domestic

one next partners that would feeling pretty fall? orders terms good So, your of are think for in

David Weinberg

We the are process we that in of middle speak. as

come top of had order very growth that on last pre-lines now. solid. had even feedback. was what look a significantly in more very We very good makes to it starting high are January, owners and good incoming January, The have good We a so rate

potentially So, as that’s we’re holiday Fall, into there, getting current I the reception acceleration very good from out sell-throughs transition increased all and we so feel getting think get we positive about there. we good the here are even and line

Operator

Our of question. line next proceed Morgan Cassel question comes the Stanley. Lauren with your from with Please

Lauren Cassel

XQ Maybe, could versus XXXX? perform wholesale And you performance different those about about different each channels guys box how domestic how areas channel, bucket, family off-price thinking then perform? to versus those big you talk so in of generally are by did within

John Vandemore

Could we off-price in keep off-price, definitely to bit a prognostication. you I define saw mind talk trends again, matters QX. would how generally, for little in of is XXXX continued us. a say, the

are traditionally those either liquidated sell others. that We from looking inventory at

the of For us channel, challenge is although, it were XXXX, again bit. product performed some their made-for pretty QX, the we back though, been outside that we strong. generally portfolio, well it’s been continued we off-price a had since seeing a product that decline very based in-line see or some Certainly, lifted holiday of which things trend through the did that, over some half exceptional positive. and us, activity categories the items going the bit in of was pricing really weakness on had fits for a Outside but that of I’d say of kind did that generally,

now. response that they’ve David lines Looking booking seen the strong the lines forward, we to product, continue the on are in and interest they strong mentioned, from see, as

However, seen the its certainly States of caveat share in both United I that just has retail stores attrition environment and in doors.

So, I and with to seen we’ve is very I good that certainly grow. ‘XX think in to What going that have will been accounts, have think we key for ‘XX our impact. early continue indications that they’re an pleased growth

Lauren Cassel

comp the any there? on versus full-price quarter, during U.S. in great. the X.X% just the then within Okay, commentary just the outlet stores And

John Vandemore

store up single in of lower better was at store sides and where the middle every pronounced, margin in again, you the in really you saw the pronounced comp one in keep stores and the probably In things. in types. that’s our gross concept performance, But actually, It to our Again, look margins of store most approaches. mind the that’s against were year, slightly most of we change concept and delivering if performance. the backdrop detail particular, significantly underneath the decided of

costs in mentioned important perspective, in and the David financial us, incredibly the point. we general you retail speaks consumer, for activity in be same seen performance domestic So gross is combined year our not we’re good of stores remains store the the And very to from vantage a some that’s in about and year, some day. wholesale but – think a you’ll so going the domestic again, end see and that lot least a pleased a on good we part speaking, again, a consumer the with of which points the the when the trends, would think I Where maybe And business to at interest. the the probably are us approach but, there’s result and generally we’re selling, changing in I at more seeing next suggest margin comp still good I that on market, grew probably because of that a financial our the think early of quarter. response sales of few

Operator

proceed Our Jay comes from the UBS. Please Sole question. your next line question from of with

Jay Sole

terms then fiscal about wanted you’re John, on an give idea QX? SG&A about thinking how dollar follow-up for how can us maybe in it for you thank also, ‘XX? SG&A. thinking general to I you’re and Great of growth

John Vandemore

compared depends a portion, still the certainly to the out moderate we see growth on believe to of numbers in international kind it gains. that part accept in but as line. what Yes, again, the is in the once volume early the last will continue somewhat year It in top is of side, see volume you category, driven. mind SG&A year’s the keeping we’ll Basically, you will

see. volume activity drives activity certainly to the we and of So, the kind that’s want

of in and of percentage line things anything about have what more not SG&A. in are totality aiming I Because the an the talk now, anything as get benefit shifts system, when like considered sales, grow, of the is when see. in which within always against we kind full between growth all the stability behavior change that smaller, particular rate mind you But categories FX-adjusted between planning costs. think keep gross the or for buckets activities to distribution-related don’t move of year-over-year for alignment a is even backdrop maybe though in We right the the you some SG&A else you of drastic in pairs, top than a through we’re

at I into the So, but in of percentage quarter. there’s would overall looking stability a that there, guide first you’re that some as kind going probably offset

Jay Sole

in just Okay. base been been of now? a China stuff. right about follow-up, that look SG&A be for you into And big there’s some year? through is there Angeles, projects ‘XX any upgrades some budget the go in the commerce cause headquarters, projects, big you capability, as investment talked in big a all are whether out as Los new maybe might then that your that jump And it kind or Is there

John Vandemore

you from the but What which everything that in mentioned. be impact. is side, that have and those through all footprint Those a the have mentioned the we you’ve California. like CapEx all agreed kind will, that here And categories abundantly clear, direct capital Yes, projects we’ve sizable our they impact just ventures from to be are not joint consolidating we all will in be accretive, ultimately, time. for right in center in way will begin principle do, of distribution believe be projects significance on-board or not the call really to already at dollar we associated China P&L consolidating on in the would so P&L SG&A point nothing direct When begin obviously, when revenue, that. visible this have it year, to categories consolidating the Outside to on the a won’t gains that, a we with it’s We once of on see results, of But SG&A, all specific that, costs. Mexico. we your perform attention some don’t clarity I gross on as now business. take the the good those the margin in Again, gauge board will we’ll, those those in we will timing. we give but

Operator

your the next of Our line from Please with Stifel. question Jim Duffy from comes question. proceed

Jim Duffy

the to Thank My John, there? the quarter. SG&A be close was point that breakeven, may a are you Good you. can you understanding in afternoon, leverage. leverage that accretion profitability JV India including that get the the Very a expecting see from to to consolidation. is Nice was opportunity spell business out everyone. nice running to

John Vandemore

Yes.

in significant is of a minority operation things. of abundantly we FX with entirely just our the been it’ll say market on interest more the the clear Early the get-go. consolidated at mean, think year. would the Obviously, venture, believe on so acquisition slightly business headwinds. maybe than planned. a it’s contributing, But What India, relative seen so from another I that if performs minority go to of of been So, so it’s stake I be the on have probably fully I it’s is it’s probably pennies see better and year, how a takeaway we the joint where things now on will but lower, couple that side couple the on depends pennies you moment,

Jim Duffy

Okay. the gross China. half – some can seeing release that costs from year? pardon you And with Does me, the into what with respect opportunity with back to suggest currency speak in margin, an then you’re the of to input

John Vandemore

We’re if will. adjusting by basis, input costs on kind of shoe, almost constant a you

we’re see as some did positives lot we’re that generally a wholesale numbers. and some reflected, cost domestic not that, was remark of in of mentioned, go. we seeing adjust as But alleviation speaking, in the probably that lot the I of seeing I negatives. a not would We So, margin quarter

when currencies mind opposite you move sword but when double-edged We back. can give way, of are in taking advantage that direction, the along also keep to that’s we bit to of because don’t the want currencies a got the you that,

we conscientious develop how we’re product. the in of So, that of context

in question would point a more it’s then in that that as keep apples-to-apples. the so say on it’s through benefit compare you I mix completely up significantly probably basis. rolling but So, a time, really And changes, bring on, this shoes been mind tough slight to to style new modest net also

Jim Duffy

Fair enough. Thank you.

John Vandemore

Thank you, Jim.

Operator

Our of your comes next proceed question. with question Sam Poser Susquehanna. the from Please line from

Sam Poser

for A couple Good my things. taking afternoon. of questions. Thanks

that move from to of amount QX, Easter be will a shift, – your also of DTC affected won’t DTC QX selling that? the by good could – shift the expenses With big some and will sales, I the mean,

John Vandemore

the second as guidance can into direct-to-consumer part that best factored we So, as we given, we’ve yes, the question, are the influenced, tell at sales on your of moment. the and

Sam Poser

a walking first sort the I it, through should think confused shift were you quarter into walking sort when So, that the taking about you was little were mean, in how I of direct-to-consumer of account, we sales through it?

John Vandemore

kind and terms So, in our most significantly the out DTC retail the Easter in believe we’ve Sam, is impact previous shift in numbers already the I both of numbers we of elsewhere. base what from adjusted the gave,

Sam Poser

saying I’m add sort you of what wholesale how that walked international wholesale that and increase domestic No, through you expect the you and DTC then in QX.

I on little aggressive to the more the think seems mid-single that something in about shift and bit clarification I QX, So, wanted a comparison you know – said get – the but like gap? given you a

John Vandemore

again, shift impact DTC for into will most And mentioned, contributor the believe be what Easter Well, what kind our that retail we previously now of be QX. right as in a impact retail for the high expect be going we includes to QX we’re significantly to base. the see I’ve and single-digit of to

Sam Poser

the X% So, it is think way –like to X%, you X% it? about around that to expect increase to

John Vandemore

For QX, yes.

David Weinberg

well. That includes stores as the new

Sam Poser

then – rate the quarter, is those secondly, first – you at that a is And assuming when Got when what – when you’re tax the lower for level? it.

John Vandemore

expecting range law, full-year. Yes, items, should the discrete in tax a and relatively year between evenly absent XX% et any for of XX% the we’re throughout It cetera. be again, applied changes

are planning juncture. flat decent opinions and a at aspects the I’d say, reliable being the we But on that’s looking tax So, think some for assumption. recently said, at this I still enacted regulatory generally, is a midpoint moment, of those we’re estimate rate law relatively how That applied. for a certainly think

Sam Poser

look it U.S. rate higher international. then profitability a your at And than was like QX, you – I mean,

expect to QX, which drive do So, a into bit the continue little you rate likely would higher? tax that

John Vandemore

think in will impact change tax revenue streams be don’t the of composition meaningful there that we will guidance. a that on the No, QX

Sam Poser

And that your sales those how to sales or plus then going does XXX in, store lastly it’s on before? base, just change the stores with hit when is that already India, impact

David Weinberg

a the when is will see there through they franchises remain That’s was and profitability this would year in is owned last that the we remain to in. into did already The the franchises, you in. you unprofitable expect stores interest shift profitability. say, big stores share this that year that question they break year. minority and increase The the I because that And fact of go were owned

Sam Poser

much, Thank John. you very

John Vandemore

Thanks, Sam.

Operator

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

Jeff Van Sinderen

opportunity year? then a later Do congratulations. the to add me in you think. to an clarify, First like sales QX just mentioned my you percentage as feel SG&A stability in let in have I you leverage And of

John Vandemore

Yes.

particular, in looking pursue to kind year. in just the So risks looking stability seen that a international percentage also we a those a and mean, we significant those. I about ability to again, of maintain the SG&A want overall portion are the part early aggressively but think of to to stability as in the clear comment. business rate we respond abundantly and �� we’re perspective opportunities sales. there’s for been Yes, at always you’ve there’s of we of, the the from come growth volume-driven. as I’m SG&A has be keeping And in mind recently opportunities they forward,

last the think something is as I is So I would at you again, guide moment to percentage probably stable a of year. to what that sales

Jeff Van Sinderen

we in enough. XXXX? growth And then we those? in you any you’re regions that should growth the kind but expecting Mexico about I think have investments on maybe can Okay, about how strong India to been those and XXXX and touch in that you might should there of transforming then are make fair as need areas, think know And you growth

John Vandemore

really into Yes, That don’t one out wholly-owned that exceedingly country-specific well. for a of part from did again our last X it bring – our was on continues I’ll perform India to certainly a years, in just to we point was segments get percentage I the growth over now. fastest want profiles. action –countries to subsidiary rationale basis a as and in the taking growing

We’ll otherwise worth We brand. our would certainly faster it There for will we modest able out the that together good a as it grow there grow would be of that to Mexico, business remains opportunity I faster believe market think may been at agree us in-house calling I we be than wholly-owned subsidiary think that distribution significant but to definitely was quite some the can believe be scale grow frankly bear that So, that investments it an market. grow. we’ve with They nothing growing the that the with eye the an when were the distribution to the grow – partner moment. rationale it’s a limited existing be –our be joint eye for and expect to But brand able it better transaction some taking but felt will otherwise. say, presence could towards did. a We be it towards better suffice there, to again in exactly better. that again, have we on probably it for growing the action once we and the investments we format indication in of part see it brand, underlying venture than we’d close. together

just certainly that, consideration partner, joint an be about business today the are it’s would will point out. I with the distribution again, clear to as stores warrant we the market, nothing into the that But of attractiveness given venture way. our existing along there So, of operating scale investment that outside of original mentioned. investment it the And some

grow then So, partners. and venture it into in to this joint instance, we are there buying as form from the

Jeff Van Sinderen

Okay, QX. in for and luck questions understood. taking my best of Thanks

John Vandemore

Jeff. Thanks,

Operator

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

Chris Svezia

and questions the on Hey guys, my to taking year. Thanks for congrats the finish

David Weinberg

Thanks.

John Vandemore

Thanks, Chris.

Chris Svezia

QX U.S. the wholesale, low-double. guidance curious, was so think I I’m initial high-single, just

don’t X-and-change, anything color in at know, happened you that level about it just why in You versus did the saw growth. unique I what Any maybe quarter X% either that? expected. – just come a did Was

John Vandemore

weaker have thought. was what we continuance you the probably – mean seen saw even of little not bit QX, than more I but deficit that QX say a I’d in extraordinary, we and a off-price little Yes, it

new that recovery the we see QX, than say at it of that styles that were of comping anticipated. that point to That the little just still think number were partners. taking that was Lights. mentioned. advantage strength in a some was had we of we and other in retail looking top one given quarter signs that year the was And weaker would through, and come tougher five an last It beginning of had the saw generally level against and the for But QX. it retail a our incredible showed probably we bit of our product growth, market the we Kid’s in – I growth we We’re impacting good I I also backdrop last Energy growth so out we think from traffic against two year didn’t comparable, the we was kind I’d saw considerations again, those numbers hoped.

David Weinberg

as from well because of that, as part up mid-to-high And a – Yes. there’s pair was single. shift in pricing the information

Chris Svezia

cycle we been has think a what that maybe thoughts guess, we U.S. think in up so about make you bit about and think just about the on for I the full to of rate in any QX? we – authority, bit has given softer talked wholesales I strong, Men’s category, should guess. guess, have about you kind U.S. Kid’s year, what I growth like when kind wholesale seems for you about QX, forward? down back how of comparison, Just little growth But When I sales flat I a about Women’s, Okay. move year been as depends think the

John Vandemore

getting sit the And orders we here of David out, with year. the with year as the kind fully back Yes, now vetted initial booked customers. for I pointed mean, half half of

forecast for single-digit tell at backdrop we wholesale would the against a think So, the a I it’s Again, is, it’s you full domestic of counts though a store from year. environment dwindling, counts down. the What make coming to fairly store early moment.

for it’s Energy the good a the so saw really only phenomena obviously, good gender it’s facing think we think Lights year before just that’s best Kid’s, out and tough the category that But actually I Men’s again that for And a the context, guide. the was point and and grow the Women’s I given we would also that difficult I was quarter, reassuring. was comparable quarter. this So, sign. probably saw really tell. early to you decline in

Chris Svezia

on what’s near-term. in pricing? go your But think holding of markets, about on forward? markets, is there we how up, speaking, about the been headwind those talk Western equation, how any of some UK, broadly bit going as Western of going just currency the And other the business Just has we on Europe, Germany, here what’s out a obviously, out should maybe color currency take about Europe

David Weinberg

and first positive year. a currency certainly a Western Europe for good very piece on the to what’s quarter quarter in on very top local continues be of grow will basis us a last first we

bankruptcies and – environment that they’re to country well would in purposes tell Germany, already I We We currency at grow will local the for are a on reshuffling slightly probably issues growth from growth quite some shipping some largest and is the had Europe retail they Western January with internal just largest actually continue and we to But with. UK you every UK remain the anyway. for February. level better will begin our the basis, and would anticipate – in Europe about although

Chris Svezia

on Okay. Mexico. Last is just have I question

timing you you I about disclosed first going shortly haven’t how thoughts that? a or that quarter, us in can is on any big is know any just of it could to share the this the or potentially be, And size? Just but color sort what’s happen quarter, timing, second with

John Vandemore

business recently. forming with dealing components. existing easy joint diligently this starting it that venture, not scratch hope you’re as because it’s and Yes, will it’s we’ve as but taking a an it working been from on We so close operating quarter,

is able our think So, end too quite a in timing close, anticipation be frankly I – this moment at degree for but a to just I of would with to number. able any to us we’ll by early to that at the of quarter, point the – bit the commit little be it’s reliability

Chris Svezia

your that’s numbers, right? John not And Okay. in

John Vandemore

Correct.

necessary. we the update as update time, will you have excluded the at an will all and and it accordingly have idea guidance from when We in close this point we guidance if we to

Chris Svezia

Thank Okay. much. best. All the very you

John Vandemore

Chris. Thanks,

Operator

line Omar the of your with Please proceed Evercore. from next question. from comes Our Instructions] Saad [Operator question

Unidentified Analyst

Omar. guys, business. on on your this Hi, e-commerce A [indiscernible] question for is

need were you growing as with going an new roll put things little really functionality that You had mentioned be a you’re or expand And line to that Thank to kind on get then peers? well? do more focused bit? really some you abroad really in to What improve Can you out going behind e-commerce. to you pieces emphasis of think you. they’re business of of there doing domestically also your are more the

John Vandemore

– I want detail Yes, ago be don’t even a say, it’s – ton actually a for so that everyone. started to go before and may year of or would too into But really. we microscopic because I this probably

We everything marketing interface. what the have assets, complete will our our been all re-platform a through digital our be of investing capabilities, way user digital commerce in from digital to

from XX% trends I many competitors you’re of is that, just regards everything everything beginning involves to bring similar again, It encompassing digital, in so to to through process. think exception on also emerge actual seeing a definitely expert in and when marketing – far is us well. our way today to of ahead focus are that’s with working So but e-commerce. some we on I for as the of today, can more business we over which solution, turnkey but this, China we comprehensive solution, we have internationally because continues already It having year, note what I so for us about, but e-commerce. very, can to speaking moment you’re depends its operations, very creating an already with as e-commerce, who in off about the for same domestically solution markets, domestic external of are well partners, to from it’s China with do it all building far, grew to of close at international market a to that a global e-commerce. our would it as a want goal exceedingly and significant this e-commerce a solutions as characterize doing talk the

Unidentified Analyst

out know Okay, kind secondly, perfect. fashion-forward of specialty going branding guys doing product, and more just have apparel. I more some been then you rolling into And

some Thanks. and it’s about the the that, moving you overall As you continuing evolving, brand brand how – abroad? in kind is viewed are the metrics customer of to younger, could traction you how seeing have think view the there, recognition, domestically build how any

David Weinberg

the and We only exception increases brand. more see more acceptance – to and more more

continue U.S. and significantly trend we I it’s the deliver think to basis, newer the as looks to beginning brand on to push happen now a in And and the worldwide continue in styles younger. well.

our all larger are we world. we brand demographic, acceptance positive and anticipate getting we are offerings offerings, significantly will our product everywhere more but So, a in about brand solidify the

Unidentified Analyst

Good That’s and on great. work, guys, good year. the next luck

David Weinberg

Thanks.

John Vandemore

Thank you.

Operator

from Our with Fargo. line question Nikic Wells Tom the comes final of your from proceed Please question.

Tom Nikic

a for everybody, squeezing Hey the here. in the me John, on thanks one quick buyback. at just end

to we of authorization. you’ll think already you’ll and Thanks. a stock Should of I should how look back pretty when and the up that? that you’ve keep of significant it thinking just used think buying assume portion re-up, expires, sort about we kind

John Vandemore

a value we I seen our been think we almost price. the as that’s year-to-date about precisely I undervalued, where see we’ve plain mean, share and mean, mentioned, how think we it’s I has in SKECHERS it. value reflection tremendous Yes, simple. activity of and

was action took the we available So, us. to that

pursue an completion will dialog to I we then capital prices have program of we’ll allocation. on there. with prevailing the mean, ongoing to the it’s market. And in We from go the based we regards continue have

about will forward it certainly definitely last we’d component So, place the program with Board that put near year. we going as of what and completion in a we talk be of the

Tom Nikic

Thanks this luck of year. much. Alright. Best very

John Vandemore

Tom. you, Thank

Operator

of to call over for question-and-answer end the the We’ve SKECHERS session. reached I remarks. closing turn And the now will

Unidentified Company Representative

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

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

Operator

conference, Thank lines This you participation. time. your for and concludes disconnect at this today’s your may you

Skechers U.S.A. (SKX) 8 Feb 192018 Q4 Earnings call transcript