SKX - Earnings call transcript Q1 2020

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Operator

Greetings and welcome to the Skechers First Quarter 2020 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 will now turn the call over to Skechers. you. Thank

begin. may You

Unidentified Company Representative

beliefs, for may now on statement. read including risks future addressing contained everyone, of uncertainties. or today. Company and forward-looking the Certain conference statements I herein, for the statements limitation, will the or without objectives, joining you, estimates Skechers expectations events us results call statements plans, constitute Thank Safe involve Harbor that

cash Company's pandemic flow COVID-XX to currently COVID-XX what results having differ and dynamic a pandemic. means business, time, those is And pandemic. pandemic these financial such circumstances plans on significant any said impact change actual the is limitation, of At the results Such conditions, The could Specifically, materially of operations. about there uncertainty this duration Company's the and is the nature that and the respect this a result, of time. extent forward-looking at response forward-looking include, from has significant call with to in this on as the statements. had could statements without by of the contemplated COVID-XX impact

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

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

David Weinberg

company. today in what most of on unusual us for you public is earnings the call years XX a our joining Thank certainly being

Beach bustling Manhattan talented offices normally individuals the empty. with corporate of team Our is

to positive We the adhering are guidelines with results. work-at-home very

by that our leadership always, world. around and our of I'd wellbeing employees team, the saying top partners and of to health the the like start is as priority

are as COVID-XX entire world. has We impacted pandemic in times unprecedented the the

While of be we notably have like visibility most sales do, Germany, China atmosphere markets and ecommerce most we Scandinavia the positive business limited our see will strong as several they reopen markets, indicators positive when when trajectory to some our of and and reopening what Austria. extremely business, business, including will

call, the on this the For we and is taking navigate will the primarily current has Skechers to focus and environment actions crisis.

the we as those cover quarter our reflected first However, also strength results, will well of our in results. brand as

our where virus our our and employees, business of as on saw local actions team We aggressive took the our partners China business. customers, well impact January, in first management the in to protect as

crisis led preserve the all management all impact began and and worldwide, globally, closed operating virus nearly implementing in actively cash. restrictions of expenses policies work-from-home began adjusting stores the committee established we travel our to Skechers As spread the offices, senior

We our to liquidity. on credit our unsecured also facility drew enhance senior

enable actions confident successfully will these these We many us waters. turbulent others to that navigate are and

momentum speed forecast of with to agility us provide operational that Skechers actively across been decisions In the addition, in healthy our making throughout experienced we and both globe, believe we tools of necessary bring demand. have reviewing to and XXXX. We the decision-making brand balances production with commitment the maintain inventory the line will

resulted quarter ended being record history an into increase the in the as of highest business subsidiary sales billion. in domestic $X.XX and business. XXXX all-time a performances our continued Company's our increase fourth Skechers’ high. that and fourth momentum a wholesale for X.X% quarter quarter our XX% with in X% in strong quarterly was sales growth That demand second consumer annual our first We sales wholesale exceeded product with

Total the period activity because significantly month primarily March, most $X.XX in year, over of China mid-March. for same sales by a of as as the first the X.X% last February decrease were markets quarter the global well shutdown of of and reduced billion,

Our excluding international would quarter, X.X% X.X%. in but it increased wholesale business the was down China, have

our subsidiaries was across and Australia, Scandinavia from came Germany, the and our While Japan, markets, growth Eastern in highest Turkey. increases and there distributors Europe Central many in

comparable same-store increased brand. reflecting X.X% strength direct-to-consumer our quarter, company-owned months for the of first worldwide sales business Further, the of in the our two

North this the and believe extremely these Skechers that month experienced was of line. price, offered the brand strong our comfort, as key product confirm indicators key We to attributes centers continue and distribution at acceptance both Our record for shipping demand throughout consumers innovation European quality style, reasonable five a American same period. global

they We are value want learning that a consumers in brand trust. and the during crisis comfort, still quality

ecommerce this in which grew the company-owned excess first increased We but month-to-date. sales in platforms accelerated XX% are in our XXX% quarter, in seeing have over of

sales our the their our get there will month. several anticipate end April international balance For key entire are and first of that above of the we quarter already online markets, online by sales, the

the with ecommerce at also now brands if the among of three, in are sales footwear wholesale seeing of sites We our Skechers top their purchased. top being not partners

encouraged of reopening highly and from are in learning those results retail franchise partners. are and our the and of the our own by in market online China We both

steady trajectory. April. January and of in stores rising and all returned business open has low-double-digits growth grew online Our in growth on to are China mid-single-digit our Today, nearly in are a

opened In since in it the fact, a store performed extremely well. first occurred, outlet foot our northeast of X,XXX the pandemic square week, and China new store we last

relationships partners, our exceptionally solid with success, the and brand product, factors ends, both, balance beneficial ample our and our helping our inherent stability and the liquidity. to and there factories believe strong diversity sheet are strength our of it pandemic wholesale distribution and with of several the during Along are we and once proving the that product channels, ensure and

for as testament crisis. over work this Skechers the the Before one No footwear believe that disruption to our turn and which We markets would in we new speed. strength like I believe leading navigate performance is we normal. of our quarterly brand. ability in get reopen, to customers to John, prior was brand, that will when to its with a us to I reiterate that believe acted product the to We forward all back challenges call people of return of the this reacted to and leads are prepared confident our continue position a shopping, and to

John. to Now,

John Vandemore

David. you, Thank

safe healthy. and hope I all First, are you

results, discuss XXXX to elaborate first on through our I taken would challenges quarter navigate have unprecedented like steps the COVID-XX. I the of we Before to

senior facility, unsecured in which we drew gives immediately $X.X liquidity. billion month, from over $XXX us Last our available credit million

addition, of In feature that have an we $XXX accordion of million liquidity available facility. additional through

operating reducing reassessing also at look and non-digital reduced all spend non-essential plans. a global taken marketing actively We hard all our This store have rollout and business spending. expenses discretionary have curtailing travel, includes

our We and reduced implemented re-prioritized to as have well projects. compensation on headcount focus including only highly-strategic we also staffing, as business-critical have and furloughing Further, expenditures employees, levels. capital select freezing

we either continue projects believe the market to while delayed challenging these and hold. times. current have are manage well-positioned through will others adapted on be Some that dynamics or will quickly the to pace, We placed

forward. we experienced going should will continuing I the but pandemic, clear our our on quarter Now, our not have results. entire the first were detailing impact be to from all business that we COVID-XX impacts be global a operation, turning there and throughout impacts it expect

in quarter. quarter and at On men in work our primarily sales our customers of the grew Sales the a fact two This and sales strength of and the weeks to we X.X% about totaled sudden decreased constant decrease women's categories. prior a basis, million, of currency Go, our to men's in or quarter $XX.X X% $XX.X that operations or as $XX.X Domestic million the a $X.XX wholesale million year stop. street lost or X.X%. and many billion, despite came USA, from due the wholesale women's shipping

subsidiaries was by increase significant return X.X% inventories appropriate a with merchandise. offset our ventures, our XX% seasonally from decreased our China, impacted sales wholly-owned reserve down in wholesale as quarter the franchisee decrease a joint in sales from clean primarily by keep the to which X.X% and was International XX.X%

distributor Direct-to-consumer business mid-March. X.X%, of the X.X% internationally. increase significant this increased of impact as a stores and sales operations domestically X%. decreased in clearly by seized Outside decrease Our where from pandemic result nearly is the an company-owned China, most X% all the saw we

preceding illustrating X.X%. up were store the brand year-to-date sales through strength comparable direct-to-consumer of the closures, Skechers However, February our

There of we recorded The acquisition interest gross Gross our was approximately quarter, year, acquired the venture million, margin gross international profit inventory. margins in was a purchase profit prior were million, XX.X%. in with non-cash in joint lower a value price adjustment the a associated the the $X down basis decreased compared quarter points onetime Mexico step-up impact to of to attributable gross year. profit million, to negative $X.XX results. the in and by to approximately gross also in XXX of our $XXX.X the In related last to

million million, advertising by million due increased in to domestically. primarily the Selling in expenses primarily sizable operations to of inclusion $X.X rebate XX.X% in driven labor operating by digital prior million by quarter, expenses China. expenses an Total Mexico the higher year or the expenses, X.X% $XX.X tax $XXX.X $XX.X and to increase increased or

General prior charges million $X.X to related China, in million inclusion and year to with a quarter; XX.X% to $XX.X Mexico, new and the operations and stores of outside increase or by costs. services comparable primarily to business associated of increase million opened the rebate $XX.X acquisition; of that and XX our $XX.X XX administrative to $XXX.X to approximately compensation The expenses higher net absence of the including increased $X in million in direct-to-consumer related related including $X.X included million. related million million the a company-owned non-cash

$XX.X margin XX% year, decreased in the prior the operations from operating was million our year. versus compared to X.X%, XX% prior with and Earnings

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

to venture and share negative foreign reflect adjusted currency million and joint of purchase related in acquisition $X.XX, and the adjustments price of earnings net per our adjusted However, impact diluted respectively were and Mexico. earnings certain our rates $XX.X

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

we March, facility over $X.XX drawdown of available now of XX, The primarily which through or equivalents which existing cash our investments, increase XX.X% our XX, sheet. balance the reflects $XXX.X accordion senior to an March cash, credit unsecured in December remains increase and in was million an And XXXX. had turning on from At $XXX billion XXXX, million feature.

per investments $X.XX cash Our at March diluted XX, represented and outstanding approximately share XXXX.

$XXX.X due million, an $XX.X or $XXX.X were quarter-end XX, both increase March impact in collections to franchise China, X.X% December at of deferred sales, as receivable from following an increase XXXX internationally, Trade and The from COVID-XX of XX, receivable the XXXX. accounts primarily pandemic. XX.X% as domestically and million well or accounts increase customers million wholesale was the in from higher certain of

a XX, XXXX. inventory or million December Total XX% of increase an from million but of $XX.X X.X% million, was $XXX.X March or XXXX, $XXX.X decrease XX, from

the of we taking allow is toward higher the will to have before we with we seized closed orders clean be factory our actions from level this customers planned energy than eye manage we us inventory While these wholesale inventory with an adjust our and retail emerging climate balances shipments will had clearly stores, levels. future and taken current to to originally believe

and debt, drawdown compared of our March increase million, both including portions The long-term credit was senior at reflects primarily $XXX.X to unsecured facility. current XXXX. million the $XXX.X Total XX,

billion lower balances. senior payable levels to million $X.X $X.XX $XXX.X offset versus was on by approximately partially This unsecured due to credit and increased drawdown globally, increased XX, capital the at facility billion XXXX. Working March our inventory accounts

our direct-to-consumer China, building corporate expenditures general the was million of as retail worldwide $XX.X first investments. to which the ecommerce capabilities quarter $XX.X Shanghai distribution stores for acquisition million, related of and and stores $XX.X as well related to were $XX.X an related world, around to in the million million investments in Capital office new and

We year expenditures are and prioritizing have capital thoughtfully of reevaluated for the only our essential remainder and the projects. strategic

distribution have expect We but operate center venture of excludes primarily reflecting the the business we location. we completion of expenditures store our year new the retail at between plan, dramatically expansion company-owned now of XXX first to remainder distribution into until our joint This our the investments the for be $XXX we million, have that visibility and be China. which Given opening least slowed which capital also financed over domestic center, will in conditions. better will through separately climate, in continue the current

in invest is and POS to of connection We the application continue channel including mobile will also our us for a with a our evolve rollout critical new as and our to business, this consumers expand loyalty ecommerce program. new website, system, strategically

the We from be revenue or will as earnings a is results which to success. of current providing plan dynamic time, assurance environment not at simply this too with guidance reasonable

term taking that necessary the Skechers that the is navigate As uncertain, crisis. to are we David said, confident ensure are near will while actions successfully this we

the balance are growing normalizes. well-positioned of sheet, and brand, the our to proposition Given strength once compelling healthy value continue we we our believe situation our

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

David Weinberg

Thank you, John.

normal. operating unusual this how is. new by in efficiently, normal struck am I year is have we although not been very it this still And

here the dynamic have team world, healthy with all and States and we success the United working of goal the both in ensuring continued around as remotely that Skechers. appreciative of are We the staying strong well as a

in are has three The We're and the believe We ecommerce markets know and is be Netherlands. the that been decades. Austria, shopping, starting international in when We're this value. optimistic consumers that Skechers pleased China Asia they markets now worldwide. on with also in Scandinavia now sales also to business for experiencing delivering in trajectory to open and other return and to strength nearly And to several Germany, several we front including looking open, positive. our they are for also comfort work will stores report

strong our by results. brand as and was evidenced strength extremely pre-crisis online Our

liquidity, food are believe We solid inventory ever and focused as and and mid-March and taken and efficient, management will ample more stronger demand proving since evolve emerge foundation to supply be Our than cash a measures we before. adapt. Skechers

see the sales We forward reopening of look product shelves on at globally world. and points the to our Skechers’ stores around to

the like operator to to questions. the for turn Now, I'd call over

Operator

Sole conducting We'll proceed from the you. line a with Please Thank Jay now question session. comes question. [Operator Instructions] your of question-and-answer be Our first UBS. with

Jay Sole

and all And is you. is Thank business. hope you staying number. right over of total is what The really the a Great. both everyone I XXX% Company's is question on that what across just wanted I the about Skechers Talking partners Can own, skechers.com us the big your digital month-to-date with is growth tell say, online to about just growing all now? today websites, size world well and associated business retail the healthy. doing and

David Weinberg

we say with our because to obviously get it's I neighborhood believe, from significant, and else. we European you what the what and pushing Amazon, year, we're especially everyplace online, through and It's Amazon and and retail in China our April, growing to Amazon a that people the we in customers believe with take we don't know say, own going third-party some and Difficult we about details, sellers if rates dramatically. partners, like and domestic, must own, have some here, be running get complete while $XXX on the fair million folks somewhere I Europe obviously are like do on of

the it been big I shows for brand. in think, the China. It's demand always

the up year As portion significant we said, year made and volume, even before. a it a this of

South it But America, the groups we fact significant sales Europe, is have is we stores size. where to around around And quarter’s the does our can here regardless we to first scale entire continue quite in increase. ourselves, lap -- of own that in have own five that online it nicely. pretty And that starting

we plans continue site. to the So, have growing

operate in months. be year countries XX subsidiaries, next the as all in we We hopefully will to that

continuing and continuing current the So, the environment. even to has compound, grow to in this to only possibility

it's forward around bring it. we think and We great out world. push it and about continue So, we're the very positive

Jay Sole

Okay, great.

When business, because So, think brick-and-mortar distribution the Austria, model stores can percentage -- Germany, up have are now do if Scandinavia, in What think? Company's mentioned opened, follow on places, an you what Asia. bunch right reopening a I up maybe do that. total we just you of back about footprint of of of the brick-and-mortar you the to addition is and closed percentage idea

David Weinberg

brick-and-mortar. it’s still closed, China, all Outside of

opened have We anything. not

parties sales. even Germany have We third good gotten some and quite results Skechers for we've opening in

won't stage the some are before Germany where longer we out. much We too bringing it we to starting Austria out in them some. be in where planning bring start have for We open, to think they’re and

I it planning and allowed think, will the actually up set question coming Austria. everything concerned, one did But open to where is can the back. we in And those places percentage still your safety tiny. is, and is in we're as on U.S. far as be even

little So, very all brick-and-mortar. these with are results still of great

John Vandemore

most XXX% this open. at good all to is time, at In full not if most are time, to close sign in open China, this incredibly at are not in which an productivity, are stores But but we see. point stores point all

Jay Sole

it. that. for you're just really, about of measures talked thinking you might one grow SG&A the a like already staffing, about range adjust managing not year? like talk ballpark give taken last And maybe moment, sort John compensation, for travel, us maybe Got a to year, mean, one marketing, just a I me. range? Can this But much grow about or SG&A how for how

John Vandemore

pieces Jay, our don't understand are that big brick-and-mortar. you the

a months And got back. And I'm to there's want significant is. spend. as if lot know projects fallow you outstanding. much You start to more undertaking a of when really certainly going don't, the going tell they how the I me to they're open, they to mean, to more that's come it

for will back in a when as SG&A that is the we're as limiting it's a basis will fair investing furloughs when -- worldwide going an what coming end, online very things be. be G&A we difficult possible, people much I office, business certainly control, eye we're reopen to say you and think it's number in with business. all our back in until when give So, to as know have our the to from we far But that keeping perspective, ballpark on on we to as

Jay Sole

much. Got right. it. Thanks All so

David Weinberg

Thanks, Jay.

Operator

Thanks you.

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

Omar Saad

you for April alluding or actually be of million there? just It's framework taking to the that sales $XXX there, the Thanks for which David. as my on different wanted I the you that online, out Thanks comment the all number rate? are clarify $XXX your questions. run should information, Is guys. business, to a million XX% threw

David Weinberg

No.

what that April growing poetic license we now know the of we're and building XXX%. put And to ballpark exists in numbers what other what and somewhat it that for also sell little we We closed We are first $XXX that we remember, what customers it should that rate quarter, certainly but here taking sell running period time. up for and a rate into are through it is. now. into have of edge to talking China, together, we're Amazon a about excess to-date being longer that Obviously, in because didn't we else running in When are everything rate the online we're million. a with people have sell big them all you have run --

and pretty customers, then might get a and the you own significant be numbers. our Europe, here site size to here in and that site our of other America. you of Amazon think South number, both And in actually our start China, and some add I given in small

Omar Saad

Got you. Got you.

kind are side guys be it's wholesale So, it or ramps accelerate the make pretty at you maybe can kind a more mass you around the to imagine bit that like of doing something of timeframe? towards talk of could investments gear business of I that. I you up that than logistics as need more to what shipment there? you Is even orders, to digital, reconfiguring a really do operations know kind the demand in going and short a that

David Weinberg

we've already Well, started.

Valley that and conference will additional XXX,XXX that other specifically predominantly are So, broken our in there. an already which in new facility, the the be Belgium, that's building facility, online for will if you taken ground, be old also square big our business. We’ve go back to out calls, growth Moreno online feet for we've is bulldozers

had in and we come addition go continue of this the way. won't moving go in it one don't the stuff. online that them, continue wholesale and of want just we growing to something is even you any they that year but to we'll to our are factor. moving over back We shifting we was always not had on a down. do. we XX and countries time. planning to have to I would number, which any were business consumers some brick-and-mortar way back again, would on want question strong a that guess, I believed ahead and We're from thing maybe sacrificing as This from past. way and moving get far, what tell we we the be us more That's keeping is been we for do to seen a to that you beginning focus in our or your in quite in We we higher said believe get and away focus to even obviously We've process. as our and the

capacity the for place, our it the presence to our other online as countries and a we will systems to And out in in as places place world. roll more big all do have that world be omni-channel significant for well that subsidiary in our We upgrade model POS in the have and base. as our our distribution retail our systems stores to we in our

Omar Saad

America, there Anything you that in logistically, kind learning the build apply you returns on again, behaves, you you you're in how the in that Europe and are how side? and how your they're shopping that can of in match China operationally, up that apply Europe North consumer like you're seeing back as and operationally that business

David Weinberg

we we Europe considerably always opens. use third expanding. and our still We've hasn't been been build view. point in moving continuing Right now, move we've brick-and-mortar, the We've have grown a seen, from to the even both of always different way methods, capacity subsidiaries, as to changed joint multiple quickly. It around logistics that distribution ventures parties we the business center it world that capacity We're these China. you've in our in wholesale, the franchisees as and the And with have way.

decision the changed slow constantly burdened take The and really where continue hasn't we by not modify end through. orders, we’re it We’re making and considerably end the moving fulfillment we and to going front continue our to grow. We're a May develop, June, launch in actually depending for new been a for do how going online which planned obviously more than probably to has on or things year.

we're on minute, doing we our hopefully that is in before all growing we and heavily ends. those right So, putting concentrated more foot on this turn are the have to on places plan accelerator capacity doing and that year but it this everywhere the

Operator

you. Thank

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

Kimberly Greenberger

could wanted are us remind still China some like Skechers revenue understand I so with but let's negative? it on China to just second or total back quarter percentage had revenue on what follow growth here ask us revenue of aggregate, follow-up represent? total then, that also, in up of just that percentage If that. is are gross And does to to-date, -- margin, you a one. help start what I pockets growth in And the then, stores ecommerce far and positive positive China in your but is

David Weinberg

-- what were back stores positive The Okay. I it XX%, And while time ecommerce a our weeks be consistently of business is XX% Well, ago about believe right comping special. may month are in and some first forward. growing most is the they're and open. and comping you they that certainly aggregate, goes to now year as you see the positively, getting throughout were the

probably not $X remember a and take John company. proper they're or And give that there. did we $XXX in year, jump -- in, as did of I quite So, billion if plus last we million correctly about China the

John Vandemore

That’s it's memory spot in also behavior David’s usual we're different is as would on. -- Kim. Hey, patterns add, right. seeing channels. different I

better from Retail well. than is at is pressures stores and the upward is ecom the actually is also other But, channels. doing is the is an weathered So, operate And own we seeing actually positive what partners trajectory. the both pandemic on sell-through on on the a It trajectory. ecom upward trajectory. and that extraordinarily franchise our extraordinarily we're encouraging

markets not standpoint, they're other really fully consumer are reopen. China of replicated the actually a we a globe while is signs good from across lot So, back that hope showing as

Kimberly Greenberger

my great that, margin. Thank And just then, color. the you is follow-up on John. Absolutely, for gross

XXX sort in in a You first And could sounded to is due in first Is that decline spread if basis-point it indicated that quarter a unpack you the just that like it was little or cost -- elements decline bit and gross that that all there? international? international. of it are talk you so largely about the Thank margin Is helpful. would drivers what support, much. margin inflation, are the driving the be in quarter, China,

David Weinberg

Yes.

entirely international. me That a elaborate bit. is let first, So,

you as improved are direct-to-consumer doing trajectory. quarter. We the shutdown good seeing well good domestic margins, very they was domestic there The well, wholesale seeing were shift very at mix pricing. very as some positive pricing, was the actually look If some this improved prior to business

actually margins were in very gross doing quarter. domestic the the well So, very,

are charge So, the If rolling again, to inventory -- consumers store. and non-cash stepped related recovery out it's in It's the Mexico, things up it in attributable at that entirely impact which has the to certainly really. value a on the retailers China to of we particular the attributable back that's some into it's also purchase acquisition. through offering to called two price is in that accounting there the was many on revenue it's -- a China been get little the as trailing discounts bit unit a there side level,

cash accounting actual no So, outflow else. an chart than more but of anything

saw And that in in pandemic earlier caused of bit It bit you bit little in European of the a in the markets Overall, margins several highlight some gross little though, particular, is markets. the purchase weakness March. again that, a in China as attribute margin most European weakness good little in a started I began. were accounting outcomes quarter. to price and related and domestic would pandemic really in of would the that it After

Kimberly Greenberger

you so Thank color. much. Great

Operator

Thank you.

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

Tom Nikic

I for Hey, sort all Thanks about David. expenses. select you and store my ask can to Hey, furloughs or or But, wanted it's you get in when to the furlough the the like know, employees, DCs us some closed. just John. question. the have stores offices taking mentioned Is through know anything furloughs. And let did corporate I that of this began? you that? employees difficult

David Weinberg

after Well, and furloughs and people. We two-week we've two began, number then kept we -- we the guarantee stores I closed the believe began furloughs. of retail of had at weeks level the some the them

think, is a I issue. important note it's to worldwide this

it some where governments In of has far people they've in they to what tax and done where government get come that to we big a or rather point the So, foreign than of back the do had keep to pay may they quickly. United them to Europe, as they contribute contribution a furlough concerned. -- furlough not different as from payroll too the rather is and they to personnel of and that more unemployment for it on and States -- our with them it we piece have

we It's to say So, need, there. working. been we who's don't have safe they’ve steadily that what two we seen as going we’ve different what scenarios need,

have We are hard. very a that working of lot people

office business both and closed the demands So, for the of it's we the the since retail. from probably consistent and consistent with been stores, the

John Vandemore

on of because closure the the the really results quarter store in as the just David weeks that as kept first Tom, none first I appears our everybody two mentioned of for that payroll. we close, double would emphasize notion

that would is unexamined going available internationally. much that furlough. are back think or curtailing There's other of it's that is in handled the allows not this in as looking benefits you just the which that So, What different pave we're add every been is this of time. the them holding we're takes to a and I step what point programs we it made are We've that really at to in resources we're to who is continuing manner describing, no back United take left being people consider expense. Most at States line really on countries. have into expense through though feasible. doing in nothing no government And and in formats tap of QX -- different that of he I if started a

at an depending maximizing looking how course So, hand. of on cash everything. unfold. adjustments we're we'll be see, on And that, business conditions toward our to eye making you'll with It's over the the QX,

Tom Nikic

scenario. taking it. luck my best for navigating question this Got of Thanks unprecedented and

David Weinberg

Tom. Thanks,

Operator

Thank you.

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

John Kernan

question. my everyone. Thanks afternoon, for Good taking

David Weinberg

Hi.

John Kernan

just and as wholesale John, all and back the distributors, David platform, outside ability operated your what like, well and channel, partners, your about -- of looks talk to and the China up running with as within get the wholesale the directly can Hey. normal franchisees you JVs, both your new licensees?

John Vandemore

one capability I I'd there is, operation right retain core now. is out mean, the a thing we that point there still

clear. ports need are In keep addition to China, the to goods. We online in the receiving business still we

key have the taking we're we the actively ever bring we managing our working in with that That's So, production been undertook We're commitments really line also activity inventory plus away existing since. goods. those into and have right that demand. diligently to on very

major in about channel, will waiting hear wholesale the goods. to taking customers On when our begin we're that and wholesale

in retail good our We are different recently, some consistent it's seen reopening a some base. at have begin considering area retail we're line. instances That's very in been contemplate curve. many clear their in the sign. But, own positive that markets also energy in as what It's that other points to

develop So, to and to be need then readjusted. get consistent halted orders back what running it we're starting where fairly and starts up retail is a approach is to and see

which end on similar So, encouraging, very trajectory to China, a is at this point given countries again most seen. up that that trends hopefully the we've

businesses, to customers even a the our of through So, country-by-country fantastic have say, mentioned, some that's now. perfectly we're to as all I on would of lot wholesale a right needs be well. still shifting case-by-case, And would almost we're are business to and it able doing those accounts there's And how actively, as to, it but we're addressing of be online handle who some then, to players, ready online poised that partners basis. David I add, we're

on. is shipping still some core there going So,

not Although at that normally. would case levels, it's clearly the be the

David Weinberg

is nothing reiterate just that Yes. I closed. would

that most been very have it's enough. only distribution or So, a had scale, people centers The so a and We world. will just already of that of couple that goods made, matter in running getting quickly be them ports. back parts do are the left to minimally issue of receive receive could they clog not the

in our automated facility. big fully We’re

we both in protective because distancing, our work obviously, distribution practice well. do somewhat and face centers be have to safety will social And around and gloves measures all that we easier. as gear, So, masks

learning going that's to So, scale But, and is piece the the working. get everything to there. be curve

soon as way. be scale and the to will along So, be everybody's we ready will as able shipping

John Kernan

quick dislocation maybe up just inventory running? balance now. It And up follow-up ability a of to in back freshness John point get XX% It’s the everywhere and and is market, through things on sheet. there's is channel, the on made. tremendous the the a inventory. the the But, that to inventory it when Obviously, get

David Weinberg

We Well, is. depend some define we it, that what coming before through. no capacity would done coming don't for there a we haven't issues, think new the well, in. channels have how can. we what's and have their we've you given stuff Physically, and demand been anything is there's and and We selling what on

as we go continues So, decisions and as our stores our make wholesale open those and we continues, to as grow will online forward. business

the different the of I like have world. have think, John we says, in different is we starts parts benefit

capacity earlier someone world later. of is to coming have the move purchased was to originally inventory its the where part We and another we demand for if the replace even it have, it

very that. So, to we're when it agile comes

and inventory our to inventory, as it worldwide first. our take a is that move will we exists on So, basis needed worldwide start

going be to breaks So, we're think time we as everything in shape good pretty loose. over

John Vandemore

started going this for, -- given an for pandemic, retail of category online sweet the the which benefit benefit think Everything frontlines to from of when for right on the now inventory. to given of opens provide to many what having of to benefit understand we're products we into entail through a seeing work looking who are team certainly the those athletic of consumers David’s work spot online, again, I footwear what add, John, the our lot now. get should up. online, environment chain lines it's seeing what bring our something actually And also the pandemic would category, When the of are the to business position the This on orientation, have what the we here of business online, with how we the our with very partners’ side, we we would and quickly very, team, closely witness order line credit of China. viewing have. immediately. got I what's globally, of is given flow into this But, to the effects sells, customers is we all to there's way about. spoke value a comfort after work And manage us we happening the looking in broader started consumers our battling our are to our well that inventory supply factories, many we

John Kernan

That's really helpful. guys. luck. Best Thanks, of

David Weinberg

John. Thanks,

Operator

you. Thank

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

Sam Poser

mean, where can alone, about retail where what the I just second on -- what SG&A should my what your as looking Good through the a you you're like, there. the for QX in we about right in little is are bit baseline, We're at? help presuming how it? question. talk as in shut are are you ranges And so, -- for May you afternoon. be right you quarter down I now are if -- us U.S. just seeing far taking now? on And QX, thinking Thanks you're much how

John Vandemore

it our precisely customers. have relates out comes that it’ll And our of at own points David as to Sam, business, we that but retail to that to to not business guidance there's two providing this inability impact when, our online, impacts Obviously, are a forecast reason us. because impact point largely wholesale also back will in retail it'll begin time.

So, quite plan. a frankly, have we don't

those it’s to it And, multiple depends environments it of have -- and we I plans be makes so which countries, going different the makes in We at number this a we've begin emphasize to But want essential allows both us all on environment frankly, a to the critical so only different them bit it governments be going difficult be that think prioritize what continue quite give what as We take are factors exceedingly countries now. for everything suspension not advantage contingent said. to time. to reliable. which what we're going as point a that to doing after you range in it's to many different though to We're at of many right retail pacings And What I already open. because know can reopen. We're and on side. of online. so to looking spend and until upon is or

Sam Poser

in -- up isn't the else get sort second in okay, some with I you here. for of spent everything just cutting sort find you've us Well, chopped? we that I'm what horse of going mean, an of idea time did beat amount now idea Like, going already to money certain right one the of give more you you to of give Can a quarter could found the us grabs? XX

David Weinberg

will Advertising but where you nothing to like I for it. and Sam. -- one is questions tell has cut all and there And, the right, thing, been May because at up everybody's -- significantly, you. All April I happening. the only been least

if see serious, that our So, and there larger you you is it's one and of start expenses. very

print, significant. have big a to be for and push we that a so will while of do online number So, don't TV obviously ways, continue as sales advertise we presence on to and and online

remember, out not So, we're point advantage and assure we've you, to as there's no if we're And as taking we’re serious, managing expenses I if can serious from find basis. your of. taken that cash expense cash is it a certainly well

John Vandemore

the just the of G&A also, distribution, is associated remember associated the variable to a store. with the that portion base right, But warehousing, with remind labor there's you labor the that, significant that

obviously there's So, suspended, operations. a opportunity related those of variable that about some there. G&A we lot the to that been operations have lot all base, talk And is a since there's in time,

Sam Poser

retailers -- big family their get if of Thank Number folks those questions. of it. like is business they're do about or outside you. buying parts customers, of to started or just and so this Does seeing one, online -- you've etailers? outside about once started some talking I are the retailers people going shipping billing thinking I etailers there to of get retailers businesses, most -- that orders see hungry things more from aren’t how online them two are you or like you mean online the are things replenishment three mentioned stores, so, from mean been have that of to two -- you like like that things for wholesale

David Weinberg

around safe do people the that that to take we say Well, their inventory, of there. still we goods that shipping predominantly are it's especially probably those to are Skechers world. are own product, customers some have domestically that evidence anecdotal out that But, continue and out that have of both online

So, some. we are still delivering

beginning since own, our all We the are consistently more delivering obviously grows throughout now. year, so of which even the and

to that's as ship piece. get to order the pretty we continue too request, That’s biggest And are want and don't we to have on predominantly fulfill. running. them. of I away magnitude scope. facilities they consistent. and So, we carried But, those that the online, continue do And up

places ship goods, community online goods and receive the own before said John like in ship most the continue to our in We online world.

Sam Poser

centers, started mean, lastly, then really But, safety Are those stores bigger are a around have you masks? stores? you work require or as you generally. spread you issues about of stores for seating I start within distribution taking what when way? sure that measures your pretty the have spacing, you're some talked move measures employees about your to you on face in to to to are make appropriate to going reopen you wear the to And going out you. Thank safety reopen some

David Weinberg

almost closed. they since We've on issues those been working

CDC. I And have. best best we get assure safety stores for when obviously, So, in be will follow do the And opened. among practices. leaders do practices we we the can follow the in we We you,

Sam Poser

by is to with but and or or for sort as state it of And especially of much potential -- U.S. what situation told lastly, waiting, you what openings other could the in the stores it open store doing how of in given be so then, going the municipality on, and would -- the countries if tells versus well, California, be you, you sort would they would in be like there? you you you today, driven

David Weinberg

would be many to I its How so you own as open as concerned on we municipalities, difficult done. will open? when mean, governments. and will many situation, follow consumers? to can back by questions. Well, you safety that in you potential California anything are personnel far you, given How pertains We that open, evaluate else opening get we What are to it's go test and that are answer every hypothetical. beginning would can saying it's the Sam, tell it? to merits you guidelines, What I and very certainly our where doesn't tell the that there we guided stores see certainly are all you rules let there? neighborhood? in

see close every and to And it's if aware. when them, recommended ask that closed place obviously best looking We I'm start are in or our be now where be at it's open. we sure don't open be to you'll you to not to interest

Sam Poser

safe stay much. you luck. And and good Thank very

David Weinberg

Thank You too. you.

John Vandemore

Thanks, Sam.

Operator

Thank you.

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

Susan Anderson

follow just wanted the inventory. I up to on

to color to I was were anything the quarter? of that there it also around more orders half. if that magnitude were and second what you kind was wondering looking sounded some you like you was back of could looking of you cut cut if say, more for think give I some the said

John Vandemore

globe. we that demand. honor bring, to obviously already in are made as say escalating it’s as trying as it, pandemic that in quantify And do factories what else sizable. already we are to certainly production That's I dramatic impacts I is long to commitments. everybody inventory, our what We've we like commitments started with of we're our but we the working want have something almost the we to the the that reductions production foresaw immediately with across would don't forecast

lot poised we've of reopen, but clean, stores that, levels very of continue customers a to a that we our growing. So, with certainly because want lot aggressive sure when been when make can we reopen, we're so orders, inventory activities, with appropriate

David Weinberg

as And like into scale a up would a see with down time. of largest bit that our certainly do quite add for develop. build with to most I lot the dealings of our things doing some of either to amount flexibility been business we we're flexibility or building in we We've factories. them,

outguess to So, all we times. don't the situation at have

day-to-day tomorrow. you not would would as -- So, to today he he whatever -- same John will it's give said have so, a be give you answer the answer

in how to how but give can cycle up, a down flexibility, they we a thought when from well just longer So, to shorter move or depending continue are like scale they out building process of production cycle scale and scale when open. this, -- we things everybody that to the production or we on and and

Susan Anderson

to a aggressive talk standpoint? you'll little you're Is a you something front, guess to more and inventory I or or you about what that to from then, then this just are you think handling in about think get need promotional thinking on about bit maybe how And be that seeing you'll thinking on environment? a promotions that tool clear manage the able competitive promotions

John Vandemore

to value States, we've is describe least that partners that starting It's the be the in with store. online bit. likely into aggressive that certainly advisable it doesn't at I that us And diminish I or see as seen confidence may near though pandemic most into of return required our any while some requirements to happen, way is that it's gives encouraging But market of the seeing we're entirely a begins us that And certainly What of little is term our in definitely that similar In out before what early, What customers the product for materially, promotions dependent the promotion off each how place, we spur promotional tended we’ve to that some as the be China. put hit. to activity the to the begin had there off reopens. activity so. open advocating of to see think or not United pricing wouldn't that upon is, We're China, will least for of back they’re at I levels moment in that or markets of but as at level emphasize norm, taper would a market to evolution the the normal. that tapering sign. we the as

David Weinberg

Yes.

-- we've I us, for flexibility. just think is of this, in like other one the it’s answered most questions building of today

the don't competitive idea of inventory see to is, first, go take. is not in We'll have in of is it's see what's with marketplace before opens we part what a which nature to the we an what So, available, the world going much of sort to stone want there available, decide. how and

to flexible to tune in and marketplace. very try we So, very be the

Susan Anderson

quarter and rest the with Good That's very luck of the safe. Great. Thanks much. stay helpful. so

David Weinberg

you. Thank

John Vandemore

Thank you.

Operator

you. Thank

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

Chris Svezia

I a So, bunch. got

Sorry.

plus clarification. point mentioned skechers.com Amazon.com you run owned First, those Ecommerce, strictly rate, that just or Zappos.com skechers.com? is your just David, when in million $XXX a that of your, that marketers is roughly

David Weinberg

online all. it's that's We as even the Skechers more of said there's the a that pretty third-party. think be for just all And minimum have whether I'm it much venues, sales was I all of I numbers, give think in us, third it conservative, add And a because was It the but I of selling don't above. not sure lot when would we it's all -- around online remember details. them could scope you question aware a the specifically, that if I'm parties world. to are

Chris Svezia

Okay, got it.

think or prepared in to? reference that China. about Is ecommerce was your that said up early your April something mid-singles. you mentioned remarks and David, the also, And I You about China what

David Weinberg

up I the that carries the In online The not the stores obviously of be aggregate, here and will else. as it we piece The first, on just and was it was bulk it. biggest all, as catching said is everyplace China. like ecommerce fast was are obviously, brick-and-mortar. think

positive territory is ecommerce its So, broken now. the already the carried positive most into and into

Chris Svezia

clear. be to just So

of business that So, month your you're mid-single saying is totality up April? China for in the

David Weinberg

said to I Yes. think we low mid.

Chris Svezia

Okay.

positive, turned negative stores, the part it's still entirely by in So, year-over-year. driven ecommerce Correct?

David Weinberg

a them. on record started fill know mean, basis sell-throughs sell-through, it's very the the franchise from have for sale when it we I the to Store positive. that pipeline. that's we difficult we created And us I because don't ship the that

we took some As of gave we some a in back up making April we're sales. and John we that took mentioned, credit -- goods February, and in big

through I get carried away a don't flows too to way. it So, with different is. what want it

I go think, you the us to last or if online we are in direct comp the the average. online big or and sale. franchise consumer, coming big ship it's positive whether Regardless from stores and XX% slightly recorded on what franchises the those the carrier, year the with push XX% of to

Chris Svezia

on -- one G&A Okay. to to I go just for want second. just

You fixed versus mentioned is or variable categorize line? SG&A a can much in Anyway, it discuss lot you variable. of is how

John Vandemore

there are amortization, reality the we like Well, mean, But, can't and anything I that costs right? about, those non-cash. look, there's in is, depreciation do

cost normally After fixed point company, a in on cash what's point for of and concerned categories some derive to we time variety have as ample some this the estimates that. So our with that probably would reasons. as at also not. you ensure would liquidity not there's expenditures variable like of be that what out for that, able But items described be fixed, with that to should guys focus best primary not we're I may

And well. think advertising that I there examples take But, categories in adjusting other as we'll we're significantly. to obviously if we're back that, looking gave have is emphasis there's fixed and that that's everything a would at David going we're viable cut looking probably path normally at. been So, to those, the make. that we

Chris Svezia

Can are chance? those John any describe you by what Okay.

John Vandemore

Yes.

at certainly looking things categories. One rents like things cost of and them like those is

Chris Svezia

Last me, Got key for things just Okay. it. one quick. real

with are What's the when we the at you stores, going Beach? what was looking in is up you about on XXX on open And it think CapEx about side, headquarters What now, to globally. what XXX, Just that? think Manhattan stores? I expected

John Vandemore

not number, to be a significantly prepared going curtailed. stores obviously but it's We're to give

unfolds, environment of So, emerge be part of some attractive really on at the part may quite time. upon point depends frankly how it opportunities environment it into. what There depends type we of some in

we the wait visibility I better give environment David to So, those the make need into have way is, tell store we to decisions. grow at doesn't don't grow you mentioned retail that disabuse appetite to want to commitment a before number. we think point us level. the I is would incredibly What until any we a important. though It and continue

the ecommerce consumers best. works in is think combination our believe we're what I growth also physical to than that brand most. grow solutions think I And for it's unique ability addition we seeing, better of and the online have we to because

a opportunity shake on advantage environment a of. market take decision grabs we're corporate As evaluating. we’re want out incremental the and and share headquarters will to phased we'll up retail that continues making to be from That's for The here, there project. probably still

ability a the some that all not others. have basis. judgment we of we're in case-by-case So, throttle and on in areas exercising to But,

Chris Svezia

Got Okay. it.

very Thank healthy. the Okay. much you all and Stay best.

John Vandemore

Chris. Thanks,

Operator

you. Thank

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

Jim Duffy

Thank few me from time. guys. for afternoon. A you. Good questions Thanks the

on and then merchandising follow-up one a the inventories First, on strategies.

way John, the You've production about inventory orders the for of of the year? mentioned balance is receipts to trajectory sizable the over year. balances there any and reduction to think

David Weinberg

public it difficult up stand in is equation. it’s what’s and something and what's to we turned what just well. I really doesn't you inventory building as don't Without open have that plans frame that? it for reasons, we common, to to see very in are all sales guidance, or can territory. the on to Can where, what moving. you said tell the to the put on we like believe, each we're side scale side flexibility out I'd the our in would we making we And sales or give it’s what scale so out But depending get things he Well, management -- until what time yet. competitive spot be it's be on down, them

John Vandemore

want to risk be not I all We're in completely that's on Jim, would posture add to accurate. a to certainly going that inventory.

that So, out the to if to but David risks not flexibility, make anything, sure actions in don't need the have we've the as taken inventory thus been, far pointed build moment. any taking side we're at we that to on

Jim Duffy

categories And the will about categories you go management deeper Great. sensitive you going be of you're But, assortment, helpful. in risk you talk to and Thanks. steering merchandise will with risk? hopefully, trying That's helpful. isn't also can there would which David, this information. to balance direction minimize in marketplace, thoughts choose newness in which competitive how Any

David Weinberg

has changed. we see very carrying and to strong with we're merchandising what seasons really up. I nothing just a going this it mix out came into we We're think open and

products thing think, it, the core number over the part our we've one is is correct that building building competency. we've of at the I proven years been merchandising, of time in correct business

to -- these times in though We even develop are even those difficult. continue

market the we've risk view, a we take quicker like have to sells being in down. do we'll production in on like to we we're -- what got cycle what just this the we'll said, John be potentially and pipeline with point back always we what put a that have of deal and see So, lot but to part, to and averse

have forward in else, pipeline flexibility, we we products as and everything show the plenty well, will will we we're building cycle as and we that is think with as great customers to looking well necessary. forward So, will production that sell are of change our that getting move

Operator

you. Thank

proceed line Our with your Chartier Hardt. Jim final Monness question the Please of comes question. with from Crespi

Jim Chartier

size in margin for Can inventory gross mentioned take and in us that you franchisee to terms You reserve the for impact? back the China. of significant the sales

John Vandemore

a other that I’d than especially say they rather late franchise February We environment. clean, in aggressive are to meaningful. as spring sure our wanted that made not decision partners size, from emerged we it was kind make of winter, early again to

because meaningful side out the to side So, it simultaneously. is The there's sales significant margin simply COGS take impact was that a amount. and the not

But, we out gross their for opened it the as So, the It it say, sales think us. a number China. And for been seeing position suffice mentioned significant it and was in margin to a it critical doors that absolutely that to the brand came of felt we in overall. of benefit the certainly the I trend ensuring in big wasn't contributed to quarter. we're impact very encouraging But, was strongest that's possible China. down

Jim Chartier

talk you rest where go about over business you can can relative ecommerce do the of then, And Okay. think is and the to the time? business, own your you of where profitability today

David Weinberg

We're strong. of stages ecom. relatively still early it's So, in

time, to the be. continue operating of that accretive do margin it'll some But At right the come bit. And, a in accretion very an it's obviously actually So, the to we us have continues over for today down grow. doing and well. we moment, business now, little will it's expect very,

dilutive, we don't to is at we to the pretty future. many, foreseeable But, least But pressure some actually time, not again, downward the there like So, accretion get be expect high. over on. expect it for

Operator

Thank you.

reached of question-and-answer the and call. our end session of have We the today's conclusion

now day. may a You your your you have and wonderful for participation lines. disconnect Thank

Skechers U.S.A. (SKX) 23 Apr 202020 Q1 Earnings call transcript