SKX - Earnings call transcript Q4 2019

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Operator

Greetings and welcome to the Skechers Fourth Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the call over to Skechers. you. Thank

begin. may You

Unidentified Company Representative

beliefs, for may now on as Reform statement. read including, meaning future Private addressing contained everyone, of the or today. company of forward-looking the Certain conference of statements I Act amended. herein, or the statements limitation, will the or without Litigation objectives, joining you, XXXX estimates Skechers expectations events us results call statements plans, constitute Thank Securities Safe the Harbor within

and known global, and involve apply will implied or statements performance risks, economic, including, and no to, forward-looking forward-looking Such retail such in the by they limited not unknown can results be or specifically, assurance national business achievements industry but There to occur. statements the as local that expressed and company. future general the market conditions, and actual

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

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

David Weinberg

businesses. $XXX achieved is the and XXXX records XX.X% our XX.X% sales XX% business yet result joining We Typically, The a today. growth. $X for thank double-digit the international year, a increase. quarter was milestone Every of of sales the afternoon in $X.XX Good we the history fourth growth increase our XX.X% increase you a billion, of billion, it increase quarter $X.XX the in Skechers set us in surpassed domestic and or in was year-over-year of net a the region in was year a and sales million. contributed quarter quarter billion of of in with our highest each year. for second smallest as our

growth direct-to-consumer included, our as our This anticipated, our segment. in well to domestic business double-digit as in growth return wholesale as double-digit

in sales our of continue leading to the XX.X% it for quarter Importantly, in will year. our being that businesses strong XX.X% business driver. our international our resulted growth in increases the We believe total international be and

Our At sales XXX stores. the around achieved world which we growth stores same-store outlet strong direct-to-consumer Skechers business comparable XXXX a XX.X% company including sales the quarterly worldwide. of with X.X% increase year-end included had

only efforts notably but innovation, awards performance Kids Excellence design. and in resulted Company product, Most also XX were more Our Plus from Footwear not award XXXX Year magazine. our HYPER and BURST improvement, Design technology featuring in of the shoes for and sales than

location recycled. on addition of include of at Invesco of in and Disney Top YouGov Via by brand Plastic California, Highlights Brand property. a at Montgomerie win Wide, all named The and our Fit A Buzz being Arch X%, Relax, a Elite is course XXXX opening one which power on of and flagship includes Rome's offering ambassador, the packaging Championship in to record the Colin shining fourth a golfer in footwear first quarter and Shanghai, Skechers del Fit. number reduction our Town to to XXX% the in [indiscernible] our plastic also star on Disney Corso product the store Skechers which Stretch

and believe along global apart vast to ability product and global other develop At footwear the most competitive active that core our success marketing our We our from brands. us importantly sets is a lifestyles of for pervasive innovation offering, our delivers on range with of unique style, comfort.

our for are XXXX throughout and beyond. optimistic and demand world. With and around growing XXXX products direct-to-consumer Our success continued extremely we strong momentum about business, and of are the confirmation backlog our strength the

health concerned crisis and strategy optimistic deeply guidance. and our of and our Skechers to by well-being we the about the are partners address in we we understanding our into in the While in John including current of China of strength vendors, China remain the will how situation our long-term have committed incorporated those employees, growth country. affected, the

with our by quarter fourth In increased XX.X% domestic driven Now [ph] the direct-to-consumer turning sales to increase XX.X% XX% our for increasing domestic the business business sales detail. comparable our same-store in quarter. in

[ph] wholesale price modest the XX.X% a the of was pair of quarter, in accounts pairs in about Our base a for With their domestic and best for along comfort, seeking offering, are domestic of growth our we quality average and strategy per resource and product in both increase increase footwear. growing with innovation valuable shipped result a distribution resource style, consumer X%. a XX.X%

had nine stores we XXX fourth States. states. end owned in we company quarter opened quarter seven across At stores In the the Skechers retail United

two and quarter have We the the To extended date stores locations. store closed. first also have in company-owned three remodeled in seven States, opened United one

to predominantly for of before planning in year. the another warehouse format stores end currently XX XX the are new open our We to

women's fourth men's, domestic quarter and kid's the business improved Our fourth quarter. the in in

for and Specifically increases and the came our lines women. biggest from sport men work

and business collection. with digital XXXX print, commercials television campaigns, and Max we women's over to keep as marketing Skechers for To footwear business, in included and men's Our outdoor, well our Go and of Cushioning Bars holidays our collection, kid's growth as line, the returning our domestic quarter. Casual the Ultimate several [ph] and well kid's as thoughts as from for our from supported This top our Skechers Performance Walk mind new broadcast. into

channel, positive our strong comping quarter. and believe backlogs continue our domestic wholesale direct-to-consumer low to sales domestic we double-digits within domestic will January growth Based first business the our up on in show

in distributor across reflect Now region. subsidiary, international XX.X% in increased and basis in growth our on total detail venture currency which represented quarter. a looking XX.X% and Sales XX.X% our our constant each the sales of business, joint or a and businesses

biggest venture only didn't The China, terms increases Mexico were usual subsidiary in to Kong, faced quarter, grow and or dollar were of joint the the XXXX. the which drivers For and quarter. market Chile Kingdom, unrest political in that venture United India, of a during Hong both UAE which the transitioned fourth joint

net stores, international increase joint XXX of sales. increase business the retail sales Specifically, are ventures franchisees. those wholesale XX.X% X.X% in was the the were fourth Of end and by XXXX quarter. of distribution increase direct-to-consumer quarter international stores a business an network our result our and XXXX store owned operated with XX.X% growth of and there in a a comparable a in in partners, At

quarter trafficked to in in UK, to and wholly-owned open a the in Peru, company Also each stores del another Poland, in Rome. three opened XX including stores markets international in remodeled Italy plan relocated. Spain international and In opened, and two on XX XX store in Chile was Corso highly Via India, company-owned which XX We the the one each another India.

countries. venture stores the across or quarter XX owned third-party fourth In joint opened XXX

New the XXX anticipate XXX in and Skechers five in India, in third-party to XX in open. China, Romania. XXXX between seven Mexico In stores included store eight closed we XXX in XX and quarter. and openings Indonesia, both stores in Malaysia,

in Central and expansion in drive and Asia. and in in engage and sporting Mexico, the fashion across Europe, avenues Greece, across Europe in key that and massive and Spain India billboards events turkey, Chile, consumers Eastern and weeks available. kiosks to print business underground global Canada malls perimeter campaigns utilize windows Skechers UAE events are where consumers digital stores France, the we to included boards our campaigns support television, at This UK To outdoor, and in and

reflected was in pairs Our efficiently each increase brand. in international business our of shipped preparing the Europe, in remains distributions infrastructure the performance and while growth driver primary the simultaneously This XXXX our in India Latin the America, handled through business for for of future exceptional our Japan, growth which has double-digit Skechers of centers project.

benefits segment international of our the to we conversion across subsidiary and a of the up venture. are backlogs a Mexico are to and joint India seeing Our

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

John Vandemore

you, David. Thank

with Right want to during employees, in welfare I These and are know add we crisis there be about the time. First, Skechers like for and that we our China. of day sentiments this to critical are in will we day partners closely with would most out them my now work them concerned and the people vendors.

Skechers transitory. As prove brand challenging, China in the is strong we David said, situation, will although and firmly the believe

sales quarter of fourth sales or million an totaled record $X.XX brand, our million worldwide basis, $XXX XX.X%. increase execution Our or strength and increased of $XXX.X a the currency billion, and constant portfolio, reflects capabilities. On product XX.X%

tariffs. As David mentioned continued exchange of we incremental nearly in foreign all every enduring region, from country. every and segments, headwinds impact rates domestic grew the growth in The and despite in earlier,

sales in domestically increase a increase XX% wholesale increased from our a including increased International result in and subsidiary, business. a XX.X% distributor and joint of increase a XX.X% increase wholly-owned increase internationally. XX.X% sales our Direct-to-consumer the a ventures XX.X% XX.X% XX.X% our

in XX addition division Domestic in sales of was an mid-single-digit by sales growth with our sales a both increase in International increase XX.X% comparable store net XX.X% sales of new Men's new driven by increase double-digit addition comparable stores. was increases and and net wholesale XX driven grew a or the and sales store direct-to-consumer the X.X% and growth direct-to-consumer million stores. Domestic in Women's Kid's. $XX

XXXX. domestic wholesales the among half We signals our to encouraging first see for continue Skechers business of the into

year. $XXX.X XX.X% Gross was and our increased to increased businesses, $XXX.X lower million domestic profit up ventures joint due prior margin partially margin, gross by due wholesale direct-to-consumer compared XX the and offset points by subsidiary primarily duties. to to the domestic to latter the Gross strength in basis million distributors,

by in Total increased XX.X% the operating $XXX.X or expenses quarter. million $XXX.X to million

the sales, to driven advertising in percentage spending invest future XX both XX.X% momentum the where and increased chose year, to strategically growth. increased points a to in of largely business our compared basis order global we to of prior by current As marketing in operating and XX.X% by support expenses

to both in as as the on by backlog reflected comparable and as higher increased build The due to increased million Selling in in the growth our strong awareness $XX.X expenses both opportunities million and expenses domestic product our market. and supported performance. to store quarter well international brand advertising $XX.X worldwide

increases to to expected General increased were which The sales which million, of $XX.X million than but variable and handle warehousing, higher of as distribution expenses and increased remained arrival included support the accelerated the sales. the $XXX.X and opened including additional business associated new that both joint venture XX Mexico products tariffs. with The like list increase XB a quarter. volumes administrative reflect at to in incremental expenses flat costs the a dollar in and percentage $XX.X and China time net primarily direct-to-consumer stores, million our businesses of company-owned and increase exposed to our also growth $XX.X of XX million essentially

and prior operational distribution Belgium was to for from incurred year million startup compared related increased China. to Earnings operations and the our our our in in also new X.X% distribution year. operating planning from XX.X% prior in the costs automation We with margin the new center $XX X.X% versus center

Net XX.X $X.XX or compared per income share or increased XX.X% in per of outstanding income diluted XXX.X to share diluted million million on million the to diluted shares year. XXX net shares $XX.X outstanding diluted on $X.XX prior million

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

our rate XXXX XX%. be effective We and to expect tax between for XX%

which And sheet. joint to $X purchase to that XX, and XXX Mexico. and venture or former million cash, XX, a million over over investments billion invested to of XXXX this XXXX. a we venture our from earlier $XX.X year decrease was our India December in the turning new we of joint X.X% cash now had December in At balance form equivalent minority interest in Recall

at Total million growth of believe where business. to million, in $XXX.X outstanding quarter by share inventory approximately in expectations. increase approximately our from Our December per The we XX, $XXX.X XXXX XXXX. driven support particularly $XXX.X investments in our an was increase $X.XX sales at XX, December $X.X wholesale international level end international an December our Trade diluted markets our inventory million cash was receivable from XX, were accounts increase or higher XXXX. primarily of billion, well-positioned represented XX.X% [indiscernible]

business. China. was both The primarily XXXX. quarter including December to during the long-term at of the and debt portion first distribution $XXX.X XX, million $XX our construction we million borrowing associated current [ph] in Total with compared million center with replaced reflects increased June grow credit facility to expire facility existing to million XXXX our our to unsecured $XXX credit also liquidity support new the additional $XXX in provide backed due was senior that continued of a asset

lease from $X.XX Working accounting the decreased standard billion inclusion the capital totaling approximately December to partially attributable of XXXX. new current adoption $XX.X operating million year XX, arising versus billion $X.XX million $XXX.X to XXXX, for lease at liabilities of the fiscal

to of the China, general related distribution worldwide to and quarter construction as $XX.X of $XX.X well our globe center Capital our and expenditures was the related stores around fourth million million the for related million $X.X $XX million distribution was to investments corporate in investments. which e-commerce as direct-to-consumer capabilities

For year our total the capital XXXX million. full were $XXX.X expenditures

our for XXX to technology XX capital center, construction expenditures range to of opening corporate $XXX $XXX headquarters includes distribution expect U.S. remodels, our completing new Skechers the to XXXX the million, in expansions business. investments, XXX facility, company-owned We direct-to-consumer and our of expansion be million stores which and primarily our XX China relocations, of distribution our expansion in the to store the and of

China. there do is to much know Now the we in current about turning guidance; reiterate situation let not me first, that

in that know to meaningful both closed pattern. and company-owned and number sales stores our open franchise is the are have assessing Skechers What those remain we significantly traffic is difficult. result seeing below of been and average a a that store temporarily comparable China, As business impact

backlog Incorporated in guidance businesses estimate following impact the our to XXXX incorporates may situation worsen $X.XXX other into three influence continue our China the $X.XX. and in impact quarter our crisis aligns of these of will of be current the first China to to guidance and billion to chain, XXXX. segments the currently all the quarter per of in outside is $X.X the and/or of be billion the first to that range of severity global view factors indicators from guidance supply China quarter our diluted $X.XX the expect the of If on in sales the based and our earnings upon share trends, of in the This grow with range first We change. and expectations. this best

to over turn call closing I'll remarks. the now, for And David

David Weinberg

Thank you, John.

international in our infrastructure of believe business, that the XX.X% sales strong. sales, product, double-digit at upgrades with quarter. strong in will in world extremely we total our XXXX. achieved international we we XXXX is business and billion greatly stores half and surpassed annual marketing than milestone the ecommerce Skechers We of businesses XXXX and mentioned, we our domestic the in $X As a are distribution, have In believe a our of and fourth improve more year-end first now to around growth business completing

our backlog momentum We for given believe comps continue the had direct-to-consumer low XXXX and which will channel this January. double-digit in strong our strength of

our will continue well assess of impact the crisis our We and to potential the support elsewhere as health on in China. as to business in provide teams Asia

to I'd operator of question-and-answer over that, with conference And the turn the like call portion now begin to the to call. the

Operator

[Operator with Thank proceed your Our Jay Sole the from question. with question of first comes you. UBS. Please line Instructions]

Jay Sole

you growth quarter. what making, go give thanks us business are the idea so ecommerce the think within strong Great, here? an upgrades David X.X% The you about of business? was you where much. you some just from in that very one numbers in retail strongest was can topline the comp of mentioned you a And talk Can can

David Weinberg

don’t think growing even there can to where months that anymore measure triple in digits relatively some into double very, digits. I grow. still for small, business limit It and single significantly. Well, don’t a or We even is the Well double-digits. although very is that

our of so complete made go. is However, low of – there room plenty to about direct-to-consumer now is it double-digits only is it still sales,

our world, a be are in the launch in around On invested top of to use lead don’t re-platforming ecommerce and online the country in in take of have major things it we've on getting that, - the for to direct-to-consumer We subsidiary direct-to-consumer we that have new and going that year lot we are ready plan program. and the over couple world. years next past world. every the money of online prototype a to but We as in every including

the our to shouldn’t which So away comping And it the take it we be them product mortar can well, better. we our when significantly But and we great that the direct we is and fact offer shows to as consumer. of when as be in the we our what it much even put brick to even up have with you all this that omnichannel, difficult significant. from put very, have years very time altogether in the think version and going coming destination is together,

Jay Sole

Got it. you of Can for every And ask then such the given obviously the topic the what impact and sort a maybe China sales [indiscernible]? situation out split if about from I can guidance big Coronavirus guidance just that you're into and you incorporating company. have that is

John Vandemore

precise probability is overly different would But is Well, we outcomes. from we what lot grow. the a want reiterate to get segment of what awaiting every expect still because don't to we're of I guidance

at quarter. that planning to We of be for China a taken fairly unfolds We've February severe is parts How are this down and look March. determined. really

But it's that which our the of really directly of other right strength business situation segments that powering being by guidance. impacted is the now, aren't all

I'll taken appropriately conservative impact I view China, will you, our So results. tell quarter first think an we've about

levels situation learn performance very is we'll other David as But seen at other the think expectation strong to more of I is similar that continue unfolds. business, the contribute highlighted. roughly which every segment, our what to as will we've piece every

Jay Sole

one maybe if then I could. more And Okay. me from

the You terms strongest growers dollars within mentioned international that India of was one in the business. of

small still is India a business. piece probably the of fact, pretty overall a In

are that India, type what So us in of and the give can what rates you growth prospects of for you're market? an percentage seeing idea rest

David Weinberg

recognized where market you've the the with for we in bright, the an tell term, this consumers. are the for over rate XX% ranks extraordinarily because It think was traction It seen of loved and over one prospects the I market especially was you, brands I'll in as Skechers incredible quarter the Well, India fantastic. by start it's continuously the most prospects long brand. growth. would incredible

also level. very to the economics of become meaningful a near For full starting contributor It's was our the year, rate the international subsidiary overall that to business.

growth far, what and expectations a continued spend extraordinarily that consumer the discretionary right brand through environment. it's thus seen market And are very we've a from high encouraging. which the even for in is have difficult significant the So driver, we of times somewhat tower now

Jay Sole

Thanks it. got Okay, much. so

Operator

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

Christopher Svezia

question, clarification and my thoughts same, the congratulations. inventories like Thanks one supply anticipating what to now, stand Good it you chain? half deliveries? the think you product for you any looks worse, afternoon, first taking I China, stays I get first guess are where right guys. about currently. on But about know as

David Weinberg

was China the up the place. XXrd, restrictions very for about good go January So until into we saw right when travel

early part was actually the through performance So, encouraging. of very January

are well. the comp moment, traffic we and stores, trends continues physical seeing in do store While our franchise our at depressed stores, in e-commerce to and

What steer of discretionary guidance of March, the as is that a similar of difficult, incorporate not at the are the assumed to a of a restrictions, partly us view because very this dissipate. we quarter we've also assuming when. to have. February latitude though going the leeway revitalized result spend patterns in attempted to will partly of this unknowns taken begins give and how as moment situation We've we've But that consumer travel be that is because enough

John Vandemore

outside not but the concerned, We far early an a supply it's took lot as have we issue, for for around stuff fulfilling of issue as world in it's is reasons. chain the China. a various available what of And us short-term obviously

already since for obviously chain down. demand working those and that materials to sales supply China parts of have outside China to decreased our somewhat raw of have the of in capacity be are gone have that will We have supply and work factories a

we're is potential be real there road. watching somewhere We So it certainly while closely think significant for down QX. the don't and impacted can there

happens we through have So, time as see the monitor go to what and year. we

Christopher Svezia

QX, think congratulations. compare, digits, a just just U.S. am QX got you've you. way an XX% - growth moment for switching QX, it have about thank anyway double Okay, seems you some QX hit color guidance? want just any easier there momentum I DTC the By here. give gears much you wholesale you lines the [indiscernible] the and to or wholesale pertains some like do segments? those along U.S. is other How anything just if revenue of to we comp

John Vandemore

I happy Well, hold you going told I'm wholesale in the to domestic actually quarter. you The that see view gotten I and saying so shipping resurgence very We at good note likely we product is we be will it's backlog stronger we've from order domestic we where trends. see were back next on are quarter. with every although quarter seen good the clearly resonating. this great flow, I to as We traffic. around tell moment wholesale, would

will we even better very that optimistic we to or similar are So see performance QX. a relative potentially

world. on I as asterisk of although China that good first in there now in knock-on and what's that you're extent put is in - we're only quarter, even assessing right the we're seeing second has not to the the elsewhere fully very impact happening But booked trends effect yet. indications Again, global the in the a seeing

sales would digits, you David this which the similar is impacted wholesale, comparable international are general I obviously is guide because is of China, fantastic. tell outside that using to of store mentioned somewhat going seeing up And we which January by trends. low-double are we're quarter [indiscernible] be that

each bit So plus minus of growth we're international China, of the of there are or well, patterns business phenomenal. the and to segments somewhat continues the outside wholesale looking backlogs in for similar a resoundingly do

see this which at resonance I the through for is everywhere is exists we is right moment. to to think a offsetting carry planning the quarter, again down But to what quarter testament the the which of it's that the in strength again, product the are really we of brand the going else us now. believe China, quarter that the we the ahead, again across So in portfolio, strength challenge are

Christopher Svezia

we in invest I dear opportunity Okay on on know took still QX. Is line general thing, near and to you to want sounds at forward final have selling good. G&A something or And your investments grows make revenues to SG&A, in just look to move heart, look the we here on it still it at an the opportunistic want as one SG&A but with you should John, is how that that? line based or we thought or

John Vandemore

thank you Well, glad first asked, I'm you. so

that So, speaking generally target. remains our

year take are be point me moment let to Now, a going a different. that this out to things few

of mentioned three that with China, the we onset center the costs. the will of most quarters. the be startup there distribution opening cost concentrated As likely our first in be we incur year over throughout This will

there. we them our that After is to just frankly that $XX It's of the accounting. likely adjustments, few you purchase on accounting at million accounting of guidance deleveraging are year give a because the full so finalized, should which year, expect investment costs. approximate effect will There we the the to really I be about some related we be when $XX in quarter, but U.S., a just are to the full out, Mexico. million type also cents have they natural first have one-time quite finalizing will purchase we to - will the end point

of our to do again there though would latitude incorporated our I our this upper being growth global Outside point China, want that, too anomalies. we've I the again So, because we've bound P&L. are probably, they - caveat continue out revenue as point to throughout some to

we is to need some operations. spend in me money there China, we deleverage that two be to or about it where be. difficult frankly much that is to quite need really It better get with how surprise if would be China to to to that's wouldn't reignite quarter a may going specificity how in until unfold, or It But specifically. going we when project informed

at guidance those SG&A still obviously to would you the high unique in better. is us with So revenue, end do line, growing with targeting it's that's items, to carving point out I the

marketing also had saw was and quarter. We put I would strength emphasize in in into an brand. We've opportunity an quarter related expenses, the great that actually that itself the to definitely G&A line. was this opportunistic sales

the would those the as of future So of investments yes, I largely for brand. think

David Weinberg

the it there it mentioned, as add reacceleration usually This would And of we as from well. year. showed and is in our Chris, have many the quarter the a places usually around quarter a and in that like we small year that, in it shows fourth I growth That, in year. smallest in fourth the wasn't when Europe world includes following acceleration an significant quarter

can good you year, fourth have significant China acceleration QX an when about see outside seen we tell quarter have So significantly growth were significant. along that that higher the And the it is, what such in have be quarter, to still with strong the trends all having would booking first talk because our subsidiaries I pattern this a is opportunistic, into extremely last we seen available we and which throughout leads we year. had coming growth certainly growth, in And us any than would to even year. some think for

kind well. as that for ready of getting be we'll growth So

Christopher Svezia

best. I Thank all appreciate understood. it. it the you Got and

Operator

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

John Kernan

afternoon to and good quarter John, Congrats David my start and this on good Hey, taking fourth question. thanks the very strong for year.

David Weinberg

you. Thank

John Kernan

fourth year? strength regions excited David robust. most and the quarter Europe Fannie. what for of you're when of extremely were numbers are both your in really this on offset I'm they about thoughts XXXX. the Yes, maybe and in China about type you're can at you help John with - met Clearly we What wondering pretty are one-time some some internationals, Europe the just challenges you Europe to seeing enthusiastic

John Vandemore

grew with that we It for about Yes, you, in in Europe what honest average excited international both grew developed much actually be describes the quarter. we above that wholesale were and mean, I developing significantly. saw the Europe, John, as it. To markets. in pretty a region

trends continuing really in seen we've good market. So that

are second right first encouraging As quarter the seeing indications David on fantastic both quarter. and mentioned, now early the we're backlogs very for

to anticipate as that's those the accounts, going our in business and be resonating in wholesale I results we have across to international the pull is our markets it's and moment. across in where product them Again, e-commerce our channels think headwind the the them in markets, the we the China it's be it's stores, QX going through - our others. that at it's

market in for South that about to challenge, America, country quite nearly continues right frankly more that's could and it a that growth every very standpoint. it on. we and facing every optimistic there. from of be in currently the the robust long-term every quite frankly, Asia And potential the other the brand that segment us And So of parts aren’t region was mentioned be

many was that where could or some extraordinary think instances because partner subsidiary strife. the of political of sort largely didn't is fact, a have instances, in venture In only country, grow joint it the I we of in

So the all again is resonating the the which different at think business the and of lot design to marketing is a and behind in product testament it. I a once, markets

John Kernan

Why January. just has more the company-owned this, in domestic story just impressive in the to don’t put to shift into it some international, just you drivers it. maybe is got this, with of continued the comps, the and is place? Right, talk converting both obviously ASP can are initiatives traffic, strength gears to Obviously you there you we an of omnichannel

drivers a I more think running could on said I you if of wonder color low digits, little up the bit are up comp? overall comps you this double give us

John Vandemore

in competitive product double digits around the said we about we brand, what as was the around we for us acceptance certainly were well, as well up low always what a environment. go and The domestically, world. Yes, up the drivers it's and develop

a is go see everything. is, what So it little you bit I of think you through as

them through them We stores. traffic categories, We We advertise the have get well. many many of resonate.

we places conversion. that much anybody traffic se not because is but we so especially have else, traffic is don't per us different It for know in do better than those I share,

to for, a We which better in there looking what knowing come have leads they always conversion to purchase. customers are they're and that

and everything. significant. So is have acceptance pricing of it's all little about ASP, we conversion, A of bit little a bit and offer. the nothing but It product to and

John Kernan

okay, Excellent, thank you.

John Vandemore

John. you, Thank

Operator

Our the question. with Carbone comes of Please from proceed Bank. question Gabby next your with line Deutsche

Gabriella Carbone

mean ask I much. Hi, category categories you our by the if Thanks little growth? styles aiding return afternoon for are such and to kind thanks was so I about wanted wondering can you could speak that what's and bit of question. driving if discuss categories strong good Performance. and I deeper taking growth? was to a then business, back to And dig kids I wondering

John Vandemore

lot like to them. Yes, sound very divisions we again a as a of across We to record. saw broad I strength the refer broken hate

quarter we encouraging a growth. as was I seeing grew, as as some men's across all fantastically. well in back quarter Kids kind our to of brands this grew and is this life that genders women's kids product, returned general describe come would battling malaise mentioned fantastic. lighted grew; to think all been comparisons in from most I difficult It's

probably big us, that it's well. very back general think in street of broad done at has a and helped obviously is the bringing way but feel the of moment the different has look aiding I casual appeal product go lot a divisions, our

a most, definitely is well. which category has completely products, work Our than different grown exceedingly

David mentioned helping as won in Performance the category we Performance awards the That's have well. our category.

honest to be with different well. divisions very lot performing So, a you, it's of

we with don't. products like the now. that fact We that looking Relaxed but combination for casual comfort the right our atmosphere, the prize Arch in products I market unlike think I like and also features it mean other many customers and else again is are thing that have to bringing Fit whole anywhere comfort it's

David Weinberg

I digits longer this need a been of in hero we all but anyway well follows search actually, in shoe the in growth longer acceptance. spread has are awareness of product division or is the to along. brand Performance amount brand a and it those We When categories, brand of think It the really all and geographies. identity and – the to and at all through what hero hero a with we've do of lot territory that's carry this out broad saying or look offering are no in year so a in no it. search you double

John Vandemore

yes, make I left be they Group this too, BOBs done year the the too, so I to offended phenomenally Yes, I they’ve didn’t, BOBs well I sure out if up team. would call want

Gabriella Carbone

said on gross going? on this obviously in there some tariff nice pressure is job Got margin, an a I believe - it, first could follow-up you've quarter be thanks. how did is just situation And past you managing that quarter. that there update in the then still the a

John Vandemore

need the took of feel quarter, so quarter. you segment. wholesale tariffs margin you'll bit this all let all, margins the impacts we is, and the increases, the In domestic And of actually our the the of or a to tariffs. point What certainly see for the release included though saw have in recoup impacts definitely XX-Q. out beginning didn't we in strategies just that we along, mitigation a that we me the hit you have level because them domestic wholesale tariff Yes, the to breakdowns segment gross this said can we have address all that have before the while

margins drove know talked was that the so, And accretion XXXX. of part I a elsewhere offset accrete deferred taking we our that little bit margin pricing but about the until there, had for we that also should first of that to that a kind we quarter. you hit this overall you of earlier saw took something let the and

mix cost. the some that are flow that - see The So, strength. wasn't the own even help through only pricing more our brand has actually to that offset to retail within able in of on we

that into agreement, So, we to second tariff quarter first would reductions maybe at we into work board, expect the impact the put little the the quarter, the a over higher phase were a some to arrived inventory continuing bit place, higher way tariff in had the through first cost, need the tariff still to of that quarter. the still signing first least prior everything there of be

a So bit into little QX. that we expect pressure - of into coming coming

because being because fact product. somebody what China I we quarter concert an to delivered know margin just be is the in fact gross in in will expect that in probably first for would ask, on we that there as well of as ASPs anticipate do And with pressures some some I impact already

Gabriella Carbone

so thank color. the for all you much Great,

David Weinberg

Gabby. Thanks

Operator

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

Omar Saad

of Great on like my question ask I thoughts on what follow-up? first has Thanks pricing, it's And Good-Better-Best, information. lot like-for-like wanted to that? for us thanks it your of feels power customer sense retail, have one - are you or of I trends whether right for maybe all from give any the have taking the guys, my quarter, question. pricing up just your AURs, then brand a mixing the you now, pricing can kind do

John Vandemore

the growth the the largely any Yes, price any that pricing pricing you attribute of – when contemplating to segment for if our a for already any changes major line. response Again, driver until strength price didn't I we we pulling in pricing, to the reset We quarter in changes, but we booked XXXX quarter, mentioned of recall, are that also was enact would the pricing the path to this want it action was brands, action wholesale for in in part early us deferred the we tariffs, didn't that through consciously at retail. orders.

as didn't of you much we a the the on think did kind see domestic So that see in I X%. up wholesale, was off about leveling of pricing, it

interpretation price the But your strength the I of forward actually well. again, It is as of the brand got price driving is the that we're bringing volume we of little bit is relationship. that the wholesale and quality in So that domestic product and think a correct.

Omar Saad

you. Got

sure commentary still about digital bit guys commentary years and e-commerce, initiatives skeptical a one Okay around follow-up, of your e-commerce, ago, were the making, not thinking ecommerce you with towards you're the work I little kind if your your and and then share back that my investments think business of and few the that gearing that as of around a how some – your given model channel views in us profitability you about channel segment. the Maybe now? how would how a kind on they've could evolved and you're investment much how

John Vandemore

both evolution pretty will This significant in and Well investment. people of that as David mentioned, it's technology. the next see certainly you in year, investments a source of

re-platform will that it. had significant across beta the program, investment re-launching and in will site take technology be to obviously also then least We globe. in which likely loyalty a U.S. We're out the our we phase some behind at our

and going with We're system greater completely base our so our also our to that for existing POS will online it store interoperability revamp functionality account. have

business. us The agree with much very our It's to e-commerce are earlier stage overall us. to very still good in the I relative performance. look for us very economics statement. So, attractive to retail very David's early They

We It's where carefully, that upside for has Skechers Dave standalone concert think as obviously our we mentioned also the runway e-commerce great stores, the come. as think is solution watch offering, but both a with in opportunity. we the element of but something omnichannel for which will

David Weinberg

Around the world.

Omar Saad

Understood, thanks, luck. good

David Weinberg

Omar. Thanks

Operator

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

Sam Poser

the for – your in past thanks the questions. how big Can talked and China afternoon year. in Good taking you my you've were prior about sales

the were China big how year? So last sales

John Vandemore

also last so in [ph] I of going XXX with a significant to get prior – I'm range. pretty China the just keep mid you year, the So that ask overly in Forex to within increase kind a precise and from was reasonable would headwind million was mind, saw year. It dealing from we

Sam Poser

up you're you there it and – going you're products take that's their against is could down, that it $XXX next give we're Can back of million that when within a when you're might because spring? is planning what and might should QX we that a that it give be And knocking is assume or to of planning, mean, $XXX I year approximately then idea that was. you so some dollar be amount, we some or us it get million

other So idea helpful? us took the it greatly will what was And that Within we number so the know give this be mean given you've your you of should, I China, fairly about you it number have could guidance. change, is? some us out you but specific what I know number revenue companies been it. may

John Vandemore

I You’re a were or XXX get actually can up or million. quarter $XXX million They Sam, dealing $XXX in whole million January.

unless significantly. So can't goes the quarter down as it really be catastrophic

a haircut by a significant keep. So taken we've but we month still

Samuel Poser

course. right, of course, Right of

percent of in China? now China what is overall production what production is your Okay, in percent of

John Vandemore

half, from changed significantly little It half. last than hasn’t about It's time. maybe the less a

John Vandemore

is big a which China, much China of as deal production remember But that doesn’t pressure. for have

Sam Poser

in sitting Because or far are see? let's right is either percent there need warehouses now your, a don't product so as the you water on what the they step sales say not can half first big of as and

John Vandemore

Well, there's going on. things a couple that of are

capacity know that they June raw there and So the because water things and half, although the from piece. first we materials like significant goes June that have we'll through on a today, also that. have obviously have talk first may still don't taken we is nothing and I about half the

our are some As on what set pretty water – what with Chinese things before, quarter available pushed first early the that's make with we of with New and Year. to production I that before even said took we some for much we the factories the our

have that's quarter. again be for a will is there risk. amount significant not soon a don't chance to at that I ship the think didn't shipping and They that

not For June, big we're need again. waiting the April to is production. to We but we a early more go month first quarter If to scenario the certainly way out of kind what that so see get for would whole us, happens. it's all through

Sam Poser

may know Monday. I've you heard And they then factories potentially I now to you when next are going mean, these reopen? opening at when were what factories last about opening talked again, But least right the Chinese about hearing you be are

David Weinberg

anything you. hear for what’s don't more than official Sam, we

regions planning most that them to are how sure not Monday. retention following long started. week. or it take will We're what get go some the them piece the of will open is are back work We have to There to

it's and match mix the country. a around So

means of some that out. Like the anticipate until we come as at do said, and retention don't know that will right what to available get I we I minute, started. workers it what's time they So, take this see

Sam Poser

think of fact the especially mean your perspective, in-store lastly, a margin, given that you're margin better for is the gross mix a would that additive, grows. on then bigger back of stores that to and it and that gross I I where the strength your from gets despite both margin? e-commerce, sales that – and of is year, this From business the just planning number the getting Okay you're is DTC with opening the that gross

John Vandemore

Well, always true, that's a percentage. but that's as

move and impact you you as this to So, as pricing. and against it what the pieces is China still some, tend has and Europe we in FX plays and world the moving get some we one, have remember the concentrate how more exchanges lost so has when dollar how much depending foreign many a have on direct-to-consumer. on around out

there throw a of number the number into you are have to things So of pot. in a pieces

average basis, And is the United than an China higher on States.

necessarily tried giving the that very certainly cetera. aggregators the not – short-term that that and currencies, careful with impact depending and we flow be but be some we're have So depending could et fact line there are to the although on up through there expenses how in on the guidance, bottom

Sam Poser

success. you right, very All continued much thank

John Vandemore

Thanks Sam.

Operator

question Please question. line next from Kimberly comes Our the of with your proceed Stanley. Morgan Greenberger with

Kimberly Greenberger

you question, benefits offset cases on did thank margin. could. the much. in just clarify, wanted some Oh so of fully great, can FX I gross that with you if BXC I Sam's line to the the Starting margin say on gross

BXC has been margin but pressure offset So the other? gross times on on one has margin often can a point good a gross news been FX downward story

John Vandemore

within gross what mean, of margin, improvement but saw also there was offsetting and from DTC positive simultaneous just there this then kind more was from is you that an of quarter, there And DTC. One general were I which the impact was margin two impacts. mix lifted also Yes, FX. comes

experience quarter. We to the continue headwinds FX in

and a So that's they bit totally accretion. little you saw almost why of offset not

even FX to improved businesses, to impact from accretive that gross in Like international direct-to-consumer long-term the margin. that to of overall in and David's which overall. some our situations to get where has past and of advance mix Again, point, severe our is the you are both seen continue we the more away certainly washed strategy benefits though been have year has

Kimberly Greenberger

estimate replaced e-commerce be not interested certainly as if if China, Great, wanted think sales portion gross then what the ask an FX in is could sure and out lost just a mix about on looking e-commerce to but what China, to I'd any? you if be that? what that be do based rate, - margin super sales hearing on current store in okay clarification you just XXXX of then between have view And of the think revenue you brick-and-mortar I'm by is to And enhanced you helpful. have will exchange impact I

John Vandemore

in if it based first already gross on question relative we by points margin baked XXX quarter. gross quarter. from the the We our FX growth think modest to will may basis moment we what is probably this today. It we probably in guidance at dampens be and FX, where the like margin know looks the on know into about there On the pressure some sit

being that that. in the quarter margin. as to have certain fairly we'll That of some nature of be wait so gross rates there'll the end until are flow-through on to So said, the dynamic, foreign exchange be they of the

overall unfolds. hard What Relative to would tell I and very I be e-commerce that the June though. There some revenue of us to is is driven, – single obviously the a for point and about then third would quarter this by rather you fourth at significant changes just events China, XX:XX. in in selling how is, quarter with it the day situation now guess

precise franchise be on stores this point. obviously but then evolving business, through What a our now seeing strength e-commerce, will is e-commerce we're we've this have what assume fairly I fast in is challenge do is a that the we it's retail and so performance continued in don't endure. owned but fairly that right in significant to situation, if at that attempted steady the So to comes know difficult

Kimberly Greenberger

you. Thank Understood. That helpful. was

John Vandemore

Sure.

Operator

the from proceed Riley next comes of your with question. Susan Anderson Our question line with Please B. FBR.

Susan Anderson

the Nice at couple tariff through necessarily guess you said you situation, job that questions. the think I When on this I quarter. flow evening. Hi, look a the doesn't up follow quarter. of good pricing

expect rolled also kind as half we quarter to pricing to higher? get less should keep we the when first back, then bit pressure be So those and the or continue tariffs little the into back you go gross a the will margin of Thanks. in

John Vandemore

I do. Well,

reduced absorbing actual be the XA next rolling that or was benefit think to or impact reduced bit product, XB quarter, is going continue get in exempt rate. simply product a the don't – to we're little tariff the higher to fully going that I at yet we cost the roll because through and the through

throughout to at expect least pressure at see we continue that moment quarter. we'll the the So first

that some begin over combination the FX watch something play our place will moment have how The should to our pricing really that, of and then going in situation put out reallocation offset margin plus that's on and of gives drag of but vendor the uncertain caution It's is that in resources, pricing we quarters. and the from we're the potential the and timing at the gross the to strategies, in to the first two China line planned carefully us we obviously quarter. that

Susan Anderson

it. Got

Okay, just to nice the I return great. up business a see And that growth. on kids follow to guess then

more I guess there how it products should - we think better is that marketing. the growth you any driving about or that? guess there is maybe I the talked I are is But or about also compares some cycling think easy new

David Weinberg

It's always new product.

really never that. So we stagnate with

we starting John to has mentioned lightened that the outside when for tougher group some And back you rather our features quarters and we've up with that to setting. core we're what what's there not again grow business were is product over within comes necessarily about last the our against than U.S. environment we're was few and these it now in time in now more one normal in wonders. think looking what comps see along I talked the and

Susan Anderson

Great.

that Hong see how we as throughout to about Okay, pressure or we lastly, go for that starting year? should the should ease and I Kong, we there guess expect continued think you out Are in then this pressure year? this

David Weinberg

time. is year long a a Well,

know as that see large China will certainly significantly we and of will don’t – and us, not tourism yet. a impacted just it's of but we as So pressure not some because market that it's seem close, for those continued

was So, probably on the overall. effect Hong not an to the significant basis for significant overall Kong it's

Susan Anderson

it. Got

Good Okay, great, quarter. that's luck so helpful, thanks much. next

David Weinberg

you. Thank

Operator

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

Jim Duffy

Thanks, good afternoon.

seeing the on Tier China are setting I there these comment as in on as For the X to a you more Can guys any can. cities, you cities you decide moment you're green that that here Coronavirus expand plus to if focus brand differences the to in reception opportunities we challenging? makes want just more, learn growth pasture

John Vandemore

on by mentioned, is long-term in Well, a that changed. coming growth again, was temporary singles I did did view our – XX/XX. day we we informed view of both on business The this China a and both that situation success QX we as I, China QX, out quarter. solid that - We David the mean hasn't a and well saw very well

certainly So and be has but we're still our over seeing Tier few the mix, consumers. the of grow X more extremely will X far Part strategy brand with and we've resonate strong. X, into cities the seen next been incorporating so the reception years

of consumers, continues us Chinese online the be e-commerce, location think out been digitally who and we solution. obviously drivers also worst temporary difficult world-leading country of savvy timing that this of - is consumer really big the the a that because if both entries I has to more a point very by way. and and commerce and say at brand bounded little the which going not know of in don't who embraced continue has to I that's is will the with significant is play out. the today obviously the probably one how mobile platform that to bit I some are the a the resonant commerce. to It's is for of setback those they've would grow benefit And most

Jim Duffy

I That's regions, question. simplify in distribution ask growth the a it terms curious of to these growth? new you as great. feel new particularly Timall to my to does are relates center segue wanted support China growth I'm e-commerce in guys leveraging good next to and in where That's you logistics and

John Vandemore

for very been So partner long Timall a and Skechers a fantastic has time. for is

but look international very value closely and at around day were to an brand, day, important singles the of by on our those highly very year. also came category, like you especially brand. the out to they but continue days we of for work with the year Timall If We other strong, it Timall advance selling rankings every the

more globe for distribution the a a long-term and reliance from availability center, operational we that think efficiency ensuring benefit the Skechers of both and frankly terms perspective In have probably doesn't that's quite I worked the very, how the It the today is us. for through the we because know third well on key platforms largely systems really that with interface change we across very interface parties.

So I Skechers. for probably a think benefit net-net long-term is

Timall our ability others, if will be a kind relationship the think and of but it's not a going really reliability to interface anything, with factor of enhance major I change because strategic that to standpoint. from in

Jim Duffy

Very thank good, you.

John Vandemore

Jim. Thanks

Operator

question. We have last for one time

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

Tom Nikic

me David. in here. Hey, for John. Thanks Hey, squeezing

want your to year. this seems you on Just of really it ask, guidance, store are accelerating like the U.S. based openings pace

what know as XX standpoint openings I'm should that you all to drove new Thanks. anything, or you've which of from in think to expense a standpoint in what go is recent store of years. and I pretty strongly the but I decision in of increase said sort comping step if an I there's as gas stores extent physical far done U.S., at of we pretty the store the XX realize don't domestically, on about think openings? wondering terms from significant you're just deleverage kind

John Vandemore

Yes, about thanks. are mean, open we unprofitable don't We large. stores. first we how I I the foremost, think and and by cautious and where keep stores

format. now stores. we're So stores right are opening profitable opening big box we're The

are offers, whole of the family there the range So solutions and product.

opportunity our a advantageous to company with a grow XXX about rates is to we is cautious stores but feel some very as in locations seeing opportunity an where there business. are attractive the in out there We're grow count. market, lot of store even to obviously cannibalizing very believe continue globe We presence we any across the

earlier as think to I think omni-channel important, the a Right? online it's a David and well presence also online physical Our it's presence. as mobile an presence an We complement a capability. needs solution deliver and as ability mentioned to

it's versa. supplement online, footprint So, it's whether you know for on and consumers, presence predominantly really the system or a retail delivery in the vice complementary

run strategy, to consumers state closer I'd the fully there probably feel rates, and obvious. like So, again We we're the and room just advantageous We will with importantly profitable the these as locations. the to is to lease significant States. be most part seeing penetrated again, would United get of don't like we're feel in rates

David Weinberg

sort mind of see because is marketplace to You the that stores the deteriorating States. own seems our also know, We're conflicted chasing going a are very economics are the required some keep them smaller been ones the do as and require good and we're stores, first John online them to malls it that cities. in. turnover you in - don't first going it what the United of says you well city in be there not are our and in will to able be some malls neighborhood motif presence of not We're not or work and ones there are the with we've here same to with like larger of in in together outside to

put with us. worked in some very it economics territories isolation the for you has when of the together very, well these So

Tom Nikic

Got best and guys [indiscernible]. it, helpful. of that's Thanks luck

David Weinberg

Thanks Tom.

Operator

Thank this your to does time have a call remarks. and wonderful may back lines you and conclude I'd for your Ladies this gentlemen, disconnect for like today's to participation, at the closing day. hand you teleconference. management

Unidentified Company Representative

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

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

Skechers U.S.A. (SKX) 6 Feb 202019 Q4 Earnings call transcript