SKX - Earnings call transcript Q2 2019

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Operator

[Operator Instructions]. Please note this conference is being recorded. I would now like to turn the floor over to SKECHERS to begin.

Unidentified Company Representative

Thank you, everyone, for joining us on SKECHERS conference call today. I would now read the safe harbor statement. forward-looking including, or statements or Litigation expectations or may herein, plans, the future Reform contained meaning events estimates the as objectives, of constitute Act statements of without Private amended. addressing limitation, beliefs, results of XXXX Certain the within Securities statements the company to and and and and and business market company. in general Such known including, not economic, unknown forward-looking statements industry limited local but as the they apply specifically, risks, the involve to, retail global, national conditions, There such the or can actual future achievements expressed no assurance be that will results or forward-looking performance implied occur. by statements

quarterly Users operations this the on reports current affect Form encouraged other U.S. and are the Federal Form to factors with Laws for Exchange all on X-K significant and company's company's of filed XX-K, the that Commission, business, including financial filings report Securities of reports reports risk forward-looking as by Securities other annual of most conditions. XX-Q, all and review statements description may recent required the SEC with results Form on

I would SKECHERS' John Weinberg; David? call Officer, over Chief to Operating Officer, With that, David turn Chief and Vandemore. Financial like the to

David Weinberg

men's SKECHERS' key markets, our thank world. From as testament in second well golf to back trends XXXX. and the Good quarter, joining afternoon, already women's product from the for reactions the half and and around our and and continuing Based to diverse from sport second offerings in the marketing efforts. continued on sales brand due in momentum accounts you growth, and demand we shipping global sales us recognition the strength to quarter, numerous and record our today. third of to casual see in including a as for quarter the is for kids our running,

sales of a XX.X% basis. quarter billion, or for We of second constant-currency with record delivered on XX.X% results $X.XX the an increase

biggest earnings our of distributor This the direct-to-consumer a which XX% of joint from through as increase business April, increases the had delivered result sales also worldwide. our per gains conversion in solid Middle and was The company-owned $X.XX. as our share We well business, in the Mexico a dollar regions. came to mid-single-digit India all comps East, venture in across

the are X,XXX in With comprised XXX stores net of stores stores. second stores the third-party we increase company-owned and XXX world, the quarter, X,XXX which of had around SKECHERS

Our the allow opportunity and initiatives they SKECHERS story stores breadth e-commerce the shop as key to entire us our consumers the to of men's, feature and division and each platforms product offerings. women's give tell across kids

the world become increased As new of smaller, acceptance . has trends the

in sport D'Lites, of collection for and and In including Europe evolve work drivers our be North and introductions, continue product globally the collaborations, sales anime Piece business around This we the Skech-Air and minded, was the our resurgence each available and 'XX, a we line, With street, categories, Asia, especially including several SKECHERS category. One globally. in done We of more to within limited-edition popular men's America. introduced through world. can series to simultaneous XXXX success speed-to-market replicate GOwalk women's ensuring our

in style We collaboration with commemorative marking a of line announced collaborations the second free styles, the continuing just States. including in and we XXth signature energy collections, United And are SKECHERS this with anniversary quarter. chunky well-known limited-edition trends the

this be quarter. will collections later announced Other

design innovation, product diverse comfort, our to be focus develop we quality on style continues as Our offerings. and and

Outside awards second several SKECHERS division resulted efforts magazine from Performance for the SKECHERS GOrun GOrun in Shape. X Our X SKECHERS Hyper and quarter World, in Hyper in Maxroad the and Runner's

tying NCAA Razor March the runner, athlete record for is in Edward Carlsbad what Cheserek, Runner's SKECHERS April, another X followed from who winningest known World XXXX, XK. as elite Hyper. Fastest the awards World's in in SKECHERS the These GOrun won is Further the

April, wins Earlier won and Meijer old, LPGA this female named Skechers the June, won Lotte in this Brooke then GOLF. be a golfer. month, couldn't by Championship ownership victory Awards. after the prouder Brooke best Henderson in XX professional at she most of Brooke took the Additionally, in Canadian Brooke also as latest victory ever sole achieves Hawaii, We Championship ESPY at was GO years golfer win in the just in Michigan. With

with victories NFL followed quarterback as accomplished week latest football play-by-play Former last has Celebrity from while ambassador, and all wearing career course. the at noted a American Tony's been off his broadcaster the at both golf SKECHERS including several Romo, also on retirement has tournaments, Championship in and an golfer, Tony a achieved Century Tahoe. SKECHERS, Lake and

turning detail. business in our domestic Now to

Our increased increased X.X% X.X% quarter. by result X.X% the increase a brick-and-mortar in sales for direct-to-consumer Comparable increase of business, X.X%, our stores was domestic sales an which of our and business. in our increase the e-commerce direct-to-consumer a in comprised XX.X%

our high an acceleration achieving saw increase comps We at in price single-digit month of business, month-over-month pair the per X%. direct-to-consumer for June also a with average

better a performed decrease business than X.X%. expected wholesale with domestic of Our

flat in opened to positive United and continue closed XXX In quarter, second New in quarter-end, to Union warehouse had stores We York. the store SKECHERS company-owned believe, XXXX. X States. At we Square the X we in it slightly for retail will be stores

and stores business, streetwear, our men's our In remodeled direct-to-consumer came Sport, line. and business, X BOBS and locations. the for domestic saw also our the and work relocated in also we X expanded In work, domestic wholesale men's and GOwalk. women's increases store, Men's best biggest sport X We streetwear increases

the collection in the SKECHERS consumers from continued to Our chunky States. United resonate with light to shoes

campaigns, Street domestic football we featuring and shoes, chunky and those an commercials for our of and legends, for campaigns, ads digital footwear, featuring marketing Howie Energy, Romo including and array business, in Kids our radio including Long, women's Tony ran numerous fashion our heritage support our SKECHERS To sports magazines Cleat footwear.

in direct-to-consumer the our second July. quarter, noted, has upward domestic experienced business trend an which in continued As we in

this as customers. Based on domestic also in occurring well as same is the our with our account meetings month, June,

Now D'Lites biggest we In the the drivers The drivers Similar our and looking our representing in to majority at SKECHERS who from in of Sales and handles the in increased XX.X% Middle grew quarter, the joint within business Indonesia, in our markets key leading subsidiaries. Alpine XX% second are and on our included transitioned support total mall billboard XX.X% came men's international sales. in campaigns, quarter. digits to To women's business. detail mid-single for improvement. street. of international build our we East, a venture basis, to a of joint Australia, sport South constant-currency United the our And India, windows business, all campaigns Kingdom and Mexico, distributors. Spain the are languages. within whom a Germany, ventures, which multiple New Zealand women's sales and many and and China, Korea Singapore, the U.S., being and and and TV but accounts, sport creating are SKECHERS men's saw China, broadcast UAE,

The sales in increase comparable business, and growth in our with increase of was sales. wholesale a XX.X% XX.X% our direct-to-consumer result an a X.X% the business increase in

in our by our XX.X%, rate the by joint up grew an saw sales As our accelerated grew wholesale wholly distributors our store In XX.X%, international at sales grow comp were venture States, business, and our quarter. month-over-month subsidiary through XX.X%. we owned the sales United

company-owned by partners, X stores, increase retail Japan, XXX ventures of to distribution X,XXX X quarter. and the Of international and Columbia in second these quarter. and operated owned Turning X,XXX, in Germany at U.K., of the and were network international stores international a are stores, an store opened quarter-end, franchisees. in second the joint quarter, In they company-owned closed the

first opened the venture in company-owned Kyrgyzstan date, To quarter, and our U.K. owned or in across XXX in countries, has Afghanistan, Lithuania. second XX the third quarter, stores including the In store X opened third-party locations joint

China. includes: stores China; in XX so in opened X in in quarter, Vietnam. X and including third openings Andorra. first second including XX in XX store stores New third-party XX SKECHERS owned quarter, far our India; the in have and the closed Indonesia each in

we the total third-party We to For to business. to and SKECHERS-branded company-owned growth international driver our XXX expect XXX of XXXX, the primary remains stores another open. believe remainder

all believe additional venture continued the India, converted Europe, converted in over growth which to had center Mexico, to the Asia strength quarter; distribution first in We would Pacific coming second quarter, subsidiary significant a especially, are record in a years. regions of both; joint a seeing our and in which across the we Plus, result shipments out which and Belgium. which

believe this With momentum double we the we are in business that our worldwide, grow we'll to year. seeing continue digits

financials John Now the and discuss over call I'll our outlook. our review to turn to

John Vandemore

David. Thank you,

second quarter international future. our and strategy success results the businesses investing Our of to ongoing responsibly aggressively our for direct-to-consumer grow while reflect the

own increased or expectations. totaled sales a to Our On XX.X%. results million exceeded These our an sales $XXX.X $X.XX second constant-currency increase billion, of quarter XX.X%. basis,

On as owned total subsidiaries. our XX.X%, our increased in and in business, XX.X% demand ventures is a evident including business, our the increased increase sales strength sales on represented from of our which increase XX.X% business. wholly joint and distributor an direct-to-consumer of international a in increase consumer our XX.X% International wholesale XX.X%

XX to result XX.X% results We increased new growth compared increase first store venture XX.X%. include, stores the Direct-to-consumer sales a X.X% sales internationally. added of These our company-owned the in time, The XX.X%. and operations sales increase joint year. period increased of an Mexico. last same Comparable X.X%, domestically e-commerce for including

have grown direct-to-consumer business XX.X%, would Mexico, international have Excluding our grown international would wholesale XX.X%. and our sales

registering expected, mild quarter. wholesale decline domestic a Our than of better X.X% the performed business in slightly

our prior to We points pressured This $XXX.X to $XXX.X per clear a merchandise average and promotional full decrease million $XX.X to in the Gross was was or by quarter. operating to and the seasonal X.X% continue markets. up by domestic positive consumer-direct pair XXX to believe million profit on international slightly X%. a the in basis pricing by business year by and promotional price million, to Total be offset efforts domestically, expenses margin activity up business basis. the will partially improved flat decreased was compared Gross increased within year. $XX.X select wholesale million XX.X%, where we're

a year. of to XX.X% the percentage prior As in year this a represents point XXX improvement basis from this sales, XX.X%

or basis of stores, XXX in in domestic year totaled a million and $XXX.X percentage prior million the that from This basis in expenses. of to by XXX expenses The points reflects advertising Selling our quarter. prior decreased $XX.X additional a the and XX.X% sales XX sales administrative from $XXX.X X.X% General of improvement primarily increased opened million, new the to decreased to direct-to-consumer the slightly in sales. primarily or point XX and was dollar related XX.X% by business XX% of expenses lower million increase this was X% including from year but quarter $XX.X quarter. as spending in

quarter second share Operating increased the year. the from to prior improved the XXX income was or diluted X.X% Earnings to Net of million million the versus outstanding on prior prior margin XXX.X or $XX.X shares basis in period. $X.XX $XX.X net in million compared million operations versus points income XX.X% $X.XX share per year. shares on to year $XXX.X outstanding million X.X% diluted for XXX.X per

year for Our rate effective decreased income in the from to tax XX.X%. XX.X% the quarter prior

our full XX% rate tax We for continue XX%. that effective expect the be and will between to year

the June average cost XXX,XXX to of an acquired an investments, available of from June XX, a second of XX, our a $XX Since share. X.X quarter, representing $XX million our representing authorization. million, XXXX. cost share XX, common $XX.XX million turning which XXXX, our X.X% a we approximately at increase now of at almost stock million we program million, from million was shares of $XX.X of or cash per we have announcing June XX, XX price and $XXX had equivalents During At cash, in December shares XXXX, XXXX, remained $XX.XX acquired per XXXX, average At repurchase and existing under balance $XXX decrease price share. million of X.X% sheet. repurchase in or And an

our initial in new investment joint venture During our made the into quarter, we Mexico.

or XX, increase and accounts of XXXX. X% $XX.X approximately at from an XXXX. $XXX.X $X.XX cash represented inventory XX, December million, million XX, increase Our $X.X diluted $XX.X from investments June Total of million, XXXX. a XXXX, and receivable X.X% $XXX.X June share of XX, from million an outstanding was million decrease at Trade per were June quarter-end or

were our of support million compared believe We The debt Capital XX, investment at was corporate billion second distribution center primarily balances. XX, reflects which approximately sufficient China. operating expectation. $X.XX real $XXX associated $XX was levels offset $X.XX June primarily million $XX.X the purposes, expenditures inventory $XX.X capital and the accounting increase $XX.X are from construction at estate cash line and for Long-term reflecting XXXX, including standard, the lease recognition new approximately transportation. decreased with XXXX. by lease million, higher versus June borrowings to these in million the Working of our in for with quarter and to million liabilities to partially growth billion used general new of

the to new construction related China; and related story several distribution company-owned to center related international and and million $XX.X domestic international our in remodels; million our to $XX wholesale openings operation. million $X.X of store XX

approximately For our includes This California relocations. enhancements of and expect headquarters corporate center million. other the new our to direct-to-consumer be our expenditures XX distribution company-owned expenditures. $XXX of to $XXX XX existing additional remainder center includes This XXXX, an total China, we to also remodels, capital of or in the construction our the in Europe, corporate XX store in distribution and expansion to expansions to stores and XX

grow to to respectively, slightly be will be the the of that This confidence on over incorporates likely billion, businesses I'll $X.XX domestic continue balance a net for and range the will wholesale David at $X.XX. in to to mid-teen over remarks. reflects range billion be earnings the turning view closing the call We rate, to per and single-digit year. basis. also sales international a full flat $X.XXX currently in It Now guidance. of now year of our the diluted quarter up turn the And third our high share that $X.XX direct-to-consumer expect business to guidance and to will

David Weinberg

Thank you, John.

demand quarter, from channels. performance net sales, increases and the reaction international in income We earnings second including operations, pleased continue strong our earnings in base domestically quarter and the experienced accounts and with our are comps domestic both the believe flourish and retail brand our share and our positive we our and record Further, both in per our business and quarter financial for our our very within our will the both global consumer strong. We we in of are product perception momentum the internationally. this believe will second

to product strong infrastructure now would of committed we our turn growth. global I to with conference to worldwide, like our continues consumer the to and that, call are demand begin the portion meet to over capabilities the investing operational resonate As call. in the sales operator to future And and question-and-answer

Operator

[Operator Instructions].

Your first the with from UBS. Jay come line Sole of question

Jay Sole

the Is give fairly -- international lot factor. If might year-over-year smaller the controlled. could third with I the gross margin us FX quarter. an of would discounting there idea of things ask in wanted do? what have Can probably same to about the The time gross that, so be that more a start products margin that you you change inventories happening. might looks is the market guidance, to in a well there's look But like? of great. you at

John Vandemore

Yes, Jay. Hi, thanks.

as more discounting to to note expectation see domestic is to likely to believe, last the the you quarter lower we For third anything recall discounting enact quarter, our mentioned, close in is retail began that year, international third the again, was year-over-year. and something aside flat The we're relatively when I'd related and activity the temporal is only thing we that the else The we market. an our if pricing markets. that, than

last year, simply that So last in has don't that an saw we expect this marketplace. increase remained the you pricing year durable will because

is at flat see for perspective won't as you gross But year-over-year margin. on much a there. moment our jump expectation of the a So relatively

Jay Sole

Got it.

ask can SG&A. on if maybe then And Okay.

quarter lot And sort that on the reason? dollar little I in of the quarters? think Or a store's the right compressed of based for into we're something Was it kind is out seeing some you that maybe that made was of number had of [indiscernible] investments just back a talked shifted where of bit a been a growth that investment other is run flat rate couple about last SG&A. how the is of that have years? like sort Or normalized now? the of

John Vandemore

that that made new we we direct-to-consumer I outside Well, of investments -- with the the mentioned think, stores.

puts other the side some in of takes saw the You business. and

were last noise lot recall, there -- quarter. you was in G&A If of the year, the a in

that, would of the made as to you're investments of particular elimination you're also come of opportunities in the but seeing early direction the that spend, think slight favorability looking in internationally some we've for signs I specific G&A the point at much in that I to G&A, the generally the provide seeing fruition. are for overall leverage but So the we that more year, out not than moment.

Jay Sole

Okay. then last one one. Maybe

from to rate the improved that has mid-June. comp You April mentioned in U.S.

back increase into retail you're commerce more the the business. probably of that lot of be making you year, going price And to the get mentioned we your investments [indiscernible] lapping As obviously, be will that you're about they numbers. in can the back half in a the comps expect year, that current it? Do maintain think lower? rate? affect you of you you about How How or the the higher do the like do you in think not

David Weinberg

that's issue. comps fact -- maybe Well, easier long-range same we coming higher. slightly a into year. slightly July, we that last the June, are as from comparisons is pretty The maintained But

If tougher much you it remember, year a around. all was

anticipate world. to do QX the any pictures any will big in be as we season, place macro barring better equivalent this we or move changes we back-to-school So the through in

John Vandemore

it just Jay, just price. the sales comp was David combination encouraging got traffic. period, sign, that factors. over by just a stronger in the wasn't It month the of mentioned It fact month, It store conversion. to as is addition wasn't that, wasn't

to online online will it's at been David has in of really. product the us product mentioned play, that And we're which coming day, So the in end there the that response give a what QX. the were seeing increases and about But be very factors all the a lot figure of good both is durable.

Operator

line comes Vasilescu the question Macquarie with from Laurent of group. next Our

Laurent Vasilescu

U.S. you decline Any U.S. the think that about I business a should results. the on up directional bit wholesale guided to on annual the better. how really on singles. It third guys quarter follow guide? solid came the for get in wholesale in to mid Congratulations to wanted little for we thoughts business

John Vandemore

at stronger, stronger that cause a call. QX we that going -- better after QX would bit has the strong Yes. on better. think bookings getting QX the a exhibited up to and little and little if I then, that was it's moment. discussed gotten it's from softness QX suggest showing that will. the we than some is you

David Weinberg

it of relatively we more before take for be up demand request whole if two will well flow this We lot think could we and lot as A deliveries together, a the flat you said the in depend that's had well. do as We thought still on year. move quarters lot true. find to more a We quarter. as

barring do and third and the worldwide. anticipate into then the given show the big way, again, true to positive of meetings holds meetings. had the increase in any great year, first last by the of continue had year quarter start changes, macro same to U.S. we We've we the will we go And quarter as So through the we've balance that in

an bookings at rate are distributor world the for last our base year around increased and July to Our for base. for subsidiary our

business is obviously, our So How the of going a beginning the to that are we're on demand grow. we sales that it in We many product will store macro our base And growing. our that continue there closings greater that is there be? picture will believe, How existing a to for depends many what How going U.S., away? the on there's be? always outlets customer is? do direct-to-consumer roll many believe

grow. go the business at will year. the U.S. of as itself, pace So we we believe and to half the continue increasing And through in back of

Laurent Vasilescu

to to China. then And great That's gears hear. switching

China? grew growth think of of tell basis. for how how can the was the a shipped noted you many point should units on about And stores, quarter? John, freestanding CC XX% we numbers sales, the the quarter, third I that us China specifically it maybe for for think rate

John Vandemore

faced growth one mean, let year. I last a Well, difficult to recognize China very address first me I rate. is the that thing mean comp to

QX, recall, you north If XX%. was up last of year China

growth that X-year just that foreign was a on half this note pretty market. market. at stack a exchange look It's you impact it's in -- I incredible if than also trajectory the the basis, would China more rate the obviously, in in So significant.

we're So with China still delivered. pleased very what

for I is have back half year the consistent with think year. the China going full We of where to in expectations fairly grow the and

much one detail I'll exciting more us, markets. the market. the that we beyond on each China want later, for -- it's of get don't still get to So it's but the most in specifics you into

Laurent Vasilescu

for And question, how mostly on mix? FX, a flat a maybe parse quarter. that it for income question follow-up With was you just third think here. Okay. we margin, I then just other the think gross line, the then quarter? just Can out And the maybe second as housekeeping line about should item

John Vandemore

Yes.

markets. standpoint, from products we the FX was out So the issue cause for a the a a real decline. point margin to frankly, maybe root need was in gross move some Quite international basis as small, mentioned, XX few a

that We a some bit where in continued we had as well, in mentioned, in think QX. quarter. it process of of bit a that that's picture as just We -- the that. we trying into little we're to And the some It little markets the profitability we're a turning of QX temporary impacted issue. had

element the noteworthy strong. is margin Contributions the domestic. gross the story and that's I very think of positive were

the think you've -- margins, year-over-year. it would seen, roughly discounting absent we the as activity have been equivalent So stands,

a is translation. of while and on come seen income where In I'll QX, significant FX other in we QX, first in terms something for the quarter this haven't note through

QX. have impact anticipating you the year be in more QX, rates anything that tough we anything are to would muted if I to in because significant although this we're be, QX, much quarter, that's creep item We that's just $X.XX foresight have lost our where up that like there would and Last that expectation warn foreign will QX. is And knowing something I of see accurate. in that year, an going you to $X.XX not to recall, tell in did XXX% similar exchange on isn't predict you to that. same But

Operator

line from comes question Saad with Omar next Evercore Our the of ISI.

Westcott Rochette

on Westcott Omar. is This for

the designing to it with lead that why benefits kind we -- we you think change more are the directly to change should about in ability you as that tone should coordination. of you're business, the think So globally or these Is in market a business, the as seem more how of the the your making about go-to-market managing you of How kind emphasizing efficient integrate change markets? global strategy?

David Weinberg

don't It's simply more think some change. I hard it's growth and in the well. times infrastructure forefront the our We've internationally. probably through for advertising a many been talking years building about for as internationally

not in be a may at it's the that So capacity to the we and business an is change It a pace. fill pipeline much focus. now acceleration because have faster growing,

internationally. had additions international now in new the over few portfolio. some we our said continuing will the at all and to grow, that and pace, they're to faster all infrastructure, filling years We a the are a advertise we that we're continue -- upgrades continuing pipeline And certainly as most and to last absorbing it's growth need that started to as they push

We So a remains it's do continue. believe focus. will focus. been it a It

said, consumer. double-digit the even business in faster and direct As United we significantly at growth than pace States the core to a

just a focal everybody, point just it. one, to we an continue it's So push and additional for

Westcott Rochette

consumer your It kind any macro store versus seems on, kind in of Okay. in after How again, that's one you in That's online question with are China? the of great. again change there opening trends kind out thinking there, are your just marketplace? stores China. then about And of noise strategy you given the all guys like And pausing.

David Weinberg

consumer the to of way consumer, get we to continue on can We've product. our have levels which do Any else availability the we always both as wanted the world. just the we want in everywhere to

significant I down that capacity think stores. onetime open a own significant to such had and a it's on franchise the business manpower stores, of so our a of the we opening and big the online capacity available to of just the slow been we our growth although have advent number number comes on

hasn't look grow there the franchisees continue been philosophy and our our continue and for to more in we So change online nor stores And to a select really business. continue open to push the process. to own continue to will

our us excess We've I of the with quite in think franchisees square And reaccelerating. footwear realize size that in to our demand going they opened growth. direct is for deliver to anticipate that are for a that for significantly continue a capacity grow with of franchise. store in we consumer they some feet couple and consumer and that's China, carries push XX,XXX us the seen have the profitably stores are Chinese to can products business market and the that to now significant demand in our

I you think and an that's we John and model clean from change mentioned you the When make saw algorithms inventory. the to growing have have time, franchise that inventory significantly had -- every you some a what once up and sure to up to online all patterns model hold are moving and while, forward. a correct clean significant of in And amounts for own change. you your

inventories back we at of feel an the to are do that go pace today we new we continue So grow that as through year. half the Chinese and market, coming all clean, will in for we accelerated the that

Operator

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

Samuel Poser

I don't have much.

in give an those of Just lot how stores there -- QX, given on of can you centers? will us a efficiency distribution the -- much much provide once timing efficiency that was update open? how And the that China

John Vandemore

similar efficiency. the process, precise The we've just and of very just not done construction. all exercise on the And would other upon of point So depend will in yet, probably the I a development of anticipate we're out, our operations Sam, pace still to year. middle is under that We're commencing next be this start-up. markets. to We in what a position

First the year optimal year. isn't

more more year. continue subsequent each You get to efficient and

your year, continue provide begin So and closer But in and that. as we'll perspective continues operating we gain and to to to expectation become optimize. as some to be should end we operation time begins get of the market the on over experience more efficient more

David Weinberg

that pace distribution pick just to How up this, do We'll grow more to have to the factor one? the expect capacity center and won't with a we'll a we that able be somewhat pick second efficiency whole here. such more. continue and to even next up help We build efficiency into grow will

Samuel Poser

managing going where international year middle more So mean given be where are growth, and efficient get That's and established, DC now. to that's today going with of next follow-up. was this I you lot I the a than better you're already today I growth it mean it. whole that's once you given make the is to that

if I could though So mean if can grow -- it you be I high mean this the where I mean, single, Is let's running, I statement? long that than fair returns put it -- the into when should you grow even how double, run, if it better today. it might a China, be -- you provide So grow mean does not low say, you

David Weinberg

our than these we I statement. distribution this will of in been fair have think a this certainly automation we originally lot idea you marketplace, a opportunity. all and facilities bigger faster people can. all is outgrow tend, beginning It's tell because we the think since our capacity grow -- to centers, planned a of in to than I But shows our so I've long here

China, believe will think we'll I high fair if accelerate do that more sell our point. to efficiency. take we So in past growth growth single-digit only say We it's certainly that

as along. more we time. take may even some more up go pick just It we'll So

Samuel Poser

the be complete. to that before case? thought DC was one Is ground be in said still you breaking the you're second breaking going -- first the you'd you ground And that

David Weinberg

now, We're months acquisition We're We're the all day it's the a months finish timing matter working land. acquiring or still a timing the It's issue. first happens timing. Whether couple working it couple after, working design only we'll a it it's a of on on but and work. on before, plan. and

You We're of end amount can quite with engineering to busy significant imagine about we're trying automation in our putting We're get three year this before we're ground distribution break Belgium. to of centers finishing facilities a California. the the all one. the into

on and it second be the delayed After be two. But month that, So design we've acquisition work may we won't plan or spun one. starting a long.

Operator

Riley. B. with Anderson Susan of line the from comes question next Our

Susan Anderson

wondering out give and the little could And maybe could I with if SKECHERS if it's just consumer. you how customer how limited there's maybe think going be category you will in coming of half. second for edition be also is mentioned was that bit the performing then bit to. what about catering and what A touch a Street the to I resonating product some you color little that's on,

David Weinberg

I'll I sure we've customer We understand product way to let John and which I'm going -- that to let functionality. that. think make beginning. finish. I point which line, moved people will want at start want the just out I the past to

of that a and the potential that I out think multiple in anticipate shoe We they called the coming strong, for about a the year men's, all growth geography. the us specific potential, we dance. the the It's product showed customer very that sports, direct or and longer no in have are specific consumer our we with what comments specific that's significant growth dollar categories category, we product all one a in parts and China world. in our all to this worldwide walk location to BOBS, prepared brings that back women's, not casual, kids, have

around world feel So the all that in right bring do product of a we're the myriad this growth continue that now. seeing we that categories will we will

John Vandemore

anything on collaborations up opportunities seen, we've well as industry, heat to what think we're In to the revenue. right obviously an I on is have particular the as going opportunity brand what to relative collaborate. to to here. brand to announce we're going similar seen in collaboration, help those But follow your you've to that question strategic drive And continue not

quarter actually hear see I you'll of part or second couldn't your And apologize. clearly the the beyond. I both question. quarter and first the third continue So in in that

don't you address repeating that, if So that mind we can specifically? more

Susan Anderson

Sure. Yes. Yes.

So was it's performing how asking the with I SKECHERS Street just line resonating the and consumer? and about

John Vandemore

time I sorry. couldn't hear us. it's it I'm that Maybe either. at

Susan Anderson

No, any Got was the color line, it. I if around... Yes. SKECHERS wondering Street could you give

John Vandemore

Oh, Street...

Susan Anderson

Yes, exactly.

John Vandemore

Okay.

apologize. I Sorry.

David Weinberg

it's that well parts of We doing multiple did comment call in on that very the world. out the

continue. does that So

John Vandemore

Yes.

grow, David's line. the of I product women's as and continuing I and lot think think I men's that, you're Street onto seeing, broad Street growing you in point increases the to a to you earlier, saw add to across see category mean -- well.

now comment, we a as opportunities introduce a and to grow we're -- the big definitely there why exercise brand which or or just are really have, U.S. ability seeing we X category really, the is strength. David's that's fairly what And growing, style So broad. across to between think, it's and and in we of some not pointed we a in internationally the style globe happening it's simultaneously, X the commonalities out that that's see beginning

Operator

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

James Duffy

of outside efficiency? from percent Not guys I retail you're opportunity much stands do you guys that The X%. the you SG&A related for that, wanted to think up out. SG&A. long the just And more expansion. finding moderating start efficiency were Where range. efficiencies? there impressive That XX in incremental too in growing is how pretty some growth to on ago, implies you are really plus Year-to-date, spend additional

John Vandemore

it's Yes. mean board. across I really it mean -- I the

running thing we note one keeping investments the global business trying we're to to in direct-to-consumer called organic business. to G&A as some trying look, the you'll the first a not manage abnormalities manage and just continue we And to in that I'd offset that. mind drive out see the mentioned, continue we growth there this of international also to in to the that the some Where I We're more result. So out the that some area, were business. that certain not to any deliver it's make market. year, point year the saw last efficiency would increases of evaporated I natural But brand, help

starting investments leverage see those fruition bit are investments, that make coming through. the such you're to of a continued to we've come to As little

natural a business kind leverage the seeing they're SG&A think many some I where of of this the you're results point quarter. of obvious of delivering those evolution the to So that in is

David Weinberg

think second India, grow tends and we've through brand-new. the what not leverage start-up. We a still in way to past. acquired part don't flows the we said have same and is Even of piece Mexico to of Yes, it anything the it's though I as it continues

there's a are X significant margins operating So and start below doesn't far as as while it investment, concerned. efficiency

that in not is spend, said as we're save -- we what not not leverage and efficiency. we in is countries. looking these a the out, with increased sales money past, do nothing with operating points unless line looking grow And to the anticipate as drive there new, to So we're John one-off we anticipate, and as increased in operating do the country, we sales will bring it

James Duffy

gears and margin. then to And Great. changing inventory

tightening Is benefits the in business nice margin inventory. along so, there in some average opportunity you if in that selling in how from domestic prices seen are markets? for to guys after up international You've that? the And getting far

John Vandemore

opportunities. some Definitely

a the say, really position is Although, global I'll inventory position.

seeing really healthy almost inventories every market. in You're

what There only stuff. that's been discounting Absent out that, you're mind you of the have seasonal from incorporated battling headwinds quarter good a into would seeing. point to we'd of the we've was the that we So pretty potentially again, in seen incremental strength. for year. opportunities. abnormality some this already negative Keeping Forex, are the Forex get did in And rid while

at looking exist. So what may we're opportunities

this lot that market. making from standpoint. currency -- just sure up with environment is important time in for been you're most obviously, have different current Now And dealing FX have dragged an of in a markets the to point right each priced you're

growth we making that brand. the priced but point out in to continue believe So we're that market there's we'd that we're sure each right also of opportunity to enable

James Duffy

seeing to China from Can cost me. any with as speak then you sourcing And one partners? negotiate Great. last relief you you're

John Vandemore

haven't of seen FX in one Yes. and over and we're significant changed. evaluating I time FX the seeing there event. But one really in any continuous executed always diligent a about not I it's any really are It's mean is cost haven't where opportunities. cost opportunities. how factors has Obviously, point pressures mean a time. there really effort we bigger

would point it's at think look ourselves as regularly. out we And characterize done being I we that. don't So with something ever I

it's over against. continue and of ongoing point the ordinary process So effort an we opportunity that course more our time we in a of not to pursue execute development

Operator

question Christopher comes next from Our with line Svezia Wedbush. the of

Christopher Svezia

I to a wholesale back guess just wanted go to I U.S. for moment.

QX. process it bit Are thought just but growth could that trajectory could mean your of in for we double of a inflection, digits through in and what terms talking mid-single-digit walk more Just then meaningful for QX? maybe be of this curious nearly QX and Just there. how the little accelerating kind like for down QX

John Vandemore

mentioned seeing in but also in having. orders good -- the prepared in really his comments didn't we We're we're in up. -- in with first off, backlog, Well, good accounts both not trends it's number we're making dialogue David the as general activity just a really trends,

to mentioned, the of through seeing a as really even David you're for asking So deliveries. point, pull some product in the pull-up

about what that pretty year see been, think unfolding, mentioned earlier, the in as slightly back of QX. backlog. we the significant see we flat then and half if As to QX, up build together we in That's you the back in QX some take obviously, would have would we suggest those aggregate, into

just So over sometimes It on timing. something touched can David quarter. I'll point on, a bridge

seen. twice, forecast it saying Suffice that wholesale it remains flat up domestic expect don't year for exactly out say, we how So will be lightly. full to We it to that plays now to we're that we slightly. a once, said be make

Christopher Svezia

what's certain can about at by on retail look that Is different words, the anything across when accounts, touch business all out year. in of kind from other does How just In about of component wholesale anything -- this it was How off-price Not growth? Or there shut channels, any look? last maybe think channels? with you customers. all you do the Is year? that? touch that's I color all it

John Vandemore

and get we year most strong did pretty quarter, last although saw better it then broad. the out. this the significant off-price where it's decrease, is this The continued and Yes, quarter

easier quarter. seeing We're a fairly broad. it's been little But bit customers, across I little it In our an a off-price. traditional fairly the So would the board. speaking, of say, this of comp generally bit it's

Christopher Svezia

Okay. gears side for the international on And just in a second, then switch just just Europe. -- on

was called Just maybe think color. the out. I know add little -- I a U.K.

mentioned think you I Germany.

Just seeing markets. any those reported, seeing, what want you talk whether in other neutral, currency color what about to you're you're just

David Weinberg

months is and to That grow you for it having incoming is that's have which ago. You higher this want. growing significantly order anticipated a an marketplace than could continues say would month we significantly, rate few any way

Going for now forward, seeing that is we're this quarter. the and reception -- first

forget and going all mode. of this had currency-neutral maybe dollar primarily macro higher significantly the in -- significant guess, as to country a that anticipated our shakeout. end original we a out wasn't if backlogs overall the we're through year as Their is quite quarter continue will quarter, Germany, largest up even how the They're So the this and forecast first performing as now we is and We I just end through It U.K. the one not basis, growing than significantly. channels. a in that's be going move Europe in year were through calling anticipate, last the basis, on up beginning grow for -- at going we'll exist the retail of what of well there, but on both a growth. is issues fast pace through we Germany, the looking up for in that the the year. pieces business for are In U.K. X and grow

one relatively quarter stronger So will on and stories, This them. third and great fire, the a continue and for fourth stronger. get of is to piece new Europe

Operator

next Nikic line Our with comes question from the of Tom Fargo. Wells

Tom Nikic

consumer and the on balance XH clarification of off, international that I Did high so you a guidance. up mid-teens? John, to correctly? the just first hear up year, direct Did say singles

John Vandemore

conservative lot of and we'd We QX. look I direct did. taking to kind thought QX, as outperformed we did. A we view selling mid-teens We're consumer. substantially I QX a the on that. be a at done be of and to in

thus we As be far, have the to in continued though, positive, pointed trends July. out,

end moment. we've a factored conservative being may got view, what that's at the up but in that So

Tom Nikic

it. Got

you one of the the your do first share as Payless in and drivers picking of capture partners that and trying wholesale far as way business market those the to you're that displaced seeing are And the U.S. this that that for brand you is holiday backlog season that are as after -- and maybe -- use think improvement away be went Okay. up is a customers? your Back-to-School will the of some wholesale

John Vandemore

demand... that I Well, try all broadly, think, to and we're going capture

David Weinberg

Payless. third-party all and left increase We store those the business picking it It's are wholesale I should that certainly business anticipate in our our to not up behind. limited of closures mean strength both the as we Those price -- a to forward. have of and we it business. interesting. that goes all spectrum of deliver. footwear are points It's categories direct-to-consumer We can think all broad and pieces access

the such this before, said a some up would same quarters, with we consumer, still be it is know and United thing. the move pick move and and through of will that are and But that links don't grow. the our and sell-through believe true. direct saw we those and And As slack clean saying believe we difficult the to increases as the weaker our that's a continue if coincides left stronger years, in I cause push the to liquidation will we customer as saw away, this retail, effect, to on for and in of out States direct been wholesale I we've it and Payless.

Tom Nikic

in of Can was that? Got year, one the it. this dollar for a what quarter. of it contextualize me, I just talked you, one from growers did That's from helpful. you think it revenues size last like business And perspective biggest about how that India, you last the anything

John Vandemore

growing, it's coming but country, the to get the on up quickly we're Yes, each hesitant too specific rate ranks. it's

without India a being to on consolidated very by close you terribly to Germany basis Just reference a was country. specific, give point

one of in I our market markets, team tremendous the So We there. that with highest-percentage-gaining we be thrilled our more and was was growth the it market execution it we're also the big-dollar couldn't think that and should over only gainer, both horizon. opportunity has a seeing from note not

Operator

with question Chartier Jim next line comes the Our of MCH.

James Chartier

slightly quarter you that positive, -- third possible pull-forward combined So curve? third when demand are and the flat the would assume expectations quarter any that of be by second to does for hinted say, you

John Vandemore

No.

James Chartier

or how guys Have interest could build product? for with ultimately editorial or category? interest the growth from on that retailers then more And And running you've the more that running Okay. on do of the how category, any had success big you? seeing the kind you this running you in be been

David Weinberg

one of the in major world. categories is the running So

It it So us helps us. obviously gives impact. umbrella obviously a bigger

We have more in shoes. runners for the coming

shoes worldwide a more requests have by basis. and for way that's the on the We

to listening that or and in there's And walking. anticipate will to advertising will push These very the all awards certainly continue that and there advertising up if we the long were distance shoes and these and we for only outdoors the them, something even to months last X it tried light online are everybody, anybody comfortable, both pick up, runners. be, geared very both hasn't out X should. they're you So to continue for certainly and that's

us give brand, So major will walking to we do the those category still so categories continue our halo the league biggest. a grow anticipate remains great effect and to

John Vandemore

platform, we just The -- add extrapolate to the David hitting the on can I'll Jim, what's Street and we is QX is that have technology one across said. the are what segments. it's and Burst it's that the as mentioned, shoe and shoe, just These shoe, David Hyper important that late shoes now. in not in But really the

improve So it the platform be can a believe lot running and like. always we affect us. won't and including something It's categories positively of a for other predominant walk

lot side, and of to running and really there. into just beginning the to just it's it in-line because the then opportunity you're this the think stuff carried from we forward has a see of be So impact coming

James Chartier

kind casual seeing for... with of more of are sort it for demand technology product that in So you already

David Weinberg

haven't just really We got...

John Vandemore

way too new. It's Yes.

David Weinberg

categories other up categories, over bring way other but obviously that array categories plan the that our of come new. yet, casual just hasn't It technology we It's just but not have. to that's into -- too into Yes. is of in those array time down

Operator

from final Susquehanna. the our with And comes Poser Sam line question of

Samuel Poser

a the part third move to quarter that of some the that the a SG&A. expenses just -- the follow-up quarter? that in I selling the going quick on line? of are Could most selling was into is have of G&A SG&A from shift come to the going third Or

John Vandemore

internationally, still little shifted that domestically. a there one to bit anything conscious pull was noticeable way conscious or but more of to a other. back domestically. It the invested a second more back of We was in So quarter, decision the pull decision wasn't it

maybe going of In generally we across to to the level, the you're board. seeing see leverage because in little scale think, of going the -- forward, same likely selling, terms a the of but increases we're speaking, in bit that's come about

a it's an So think -- makes where I it sense, also we'll an a it where we year think to on continues in invest we'll be but it's area basis see leverage. opportunity full

Samuel Poser

down absolute QX, in slightly expenses to down expect mean be in dollar again the in Should quarter, the down you selling I QX. basis you on were we were an in the QX seen expenses running Or in should while that? a I with selling it's how and flat? QX Because about time the think mean down. we we've or two first quarters

I'm thinking how So we about be that. wondering should

John Vandemore

the because the market moment, and the At adjusting in we're item it's dynamic characteristics as a sensing go. simply we main we're

like quarters. on would two I of more percentage something moment, seen we've the the in anticipate the over constant at stands sales past it a last year, what As to

Samuel Poser

So got it. see maybe to sort on going of increase of leverage but you're an hair a

John Vandemore

accurate. I'd say know don't I that's but yes. hair, you how a generally, quantify directionally

Operator

I company our and the we back end session over to the for well reached remarks. closing call would today's question-and-answer of Ladies have as gentlemen, to like as conference. turn the

Unidentified Company Representative

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

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

Skechers U.S.A. (SKX) 18 Jul 192019 Q2 Earnings call transcript