SKX - Earnings call transcript Q2 2022

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Operator

Greetings, and welcome to Skechers Second Quarter 2022 Earnings Conference Call. [Operator Instructions].

As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Skechers' Investor Relations. Thank you, and you may begin.

Patricia Nir

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

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

specifically the statements and company's on the filed by a Additional national but occur. and they company. with Financial will limited filings Operating the securities disruptions including, on expressed not would quarterly and delays Users to on Vandemore. report conditions, conditions, that, results, all general assurance risks, SEC Officer, Securities company's of David as or the Weinberg; encouraged all other to There annual can and statements review for our David? supply the Form that unknown reports U.S. achievements financial the significant global, recent XX-K, and with in most the and including and flows statements be XX-Q, to known of forward-looking laws results With of future performance Chief and implied like Officer, and of affect over apply Skechers' business, reports or current chain no the X-K cash actual Commission, Chief economic I to, operations. including retail forward-looking business by other and reports to the local Form industry that turn any involve may market description federal as forward-looking required risk factors Exchange call Form are John

David Weinberg

cities athletic partners. largest to network the as world, Thank footwear Skechers with they through company serve brand the as on a as you return and quarter X,XXX safely us lockdowns for retail leading and by the opened. trusted well challenges. to political efficiencies in of efforts our leading like teams ongoing management conference technologies, creative our team We our global the our to workforce build design Skechers' COVID-related economic today move ongoing evolve lines this as to of continue the the face anniversary, from on weather personnel brand, product the world. retail call. our to comfort associates to second our our front of year would to diligently COVID-related our of recognize to in China and joining execution supply the We and XXXX chain our the restrictions also commitment our growth strong to drive a testament a continue quarter and work year-to-date and XXth better talents recognized third This is are of working the our of who strength accomplishments acknowledge Skechers widely global team who like and to in business stores marks around would customers Skechers the to

every know comfort, and agent on everyone a and innovation, a need, we fit While a also with Skechers' quality. range style has broad products we are not brand that for of flipped

from commerce growth and specifically in was Direct-to-Consumer first America. The business, in new recognize tremendous weekend, our Comfort designed at digital partners fastest-growing on choice his major Skechers expansion also also second career the expanding we meeting and products. past men, footprint, styles and footwear we the including remains major Division to our quarter, while are Technology are relatively meaningfully delivered our major all championship championship to comfort wholesale performance Skechers of the We Viper ensure technology We sport launched our Matt with our Championship the Skechers globally at loyal demands Amundi golfers, continue Fitzpatrick elevated her that and second elite to women Brooke this U.S. markets Fit. Performance consumers win for footwear Henderson slip-in the for month a wins Court, customers our children for hands-free, opportunities. X worldwide. growing and wear consumers Company, develop Skechers many Awareness In have focused We of with secured able pickleball, our in last worldwide to earned the Open Evian and new Arch France Skechers, comfort Brookline. at leading

price of the and a Our the By of domestic meet product XX% led given improved in increases per primarily was efforts selling in on and average to China, EMEA, broad-based wholesale other Asia sales China. quarter, XX% improved X%. region, the offset was growth which were achievement were increase our a the lockdown the business XX% on international and sales in easing headwinds, supply constant COVID-related of macroeconomic basis, currency an in growth began growth sales new unit primarily APAC APAC basis volume innovative $X.XX XX% X% for driven a of in by in June by driven in currency issues strong our a and especially in resulted brand result EMEA, or in record sales currency increases most constant decrease partially comfort businesses and the unit. in by constant Pacific in respectively. Americas X% APAC. chain XX%, basis. XX% remarkable a our increased strength XX%, X% wholesale and quarterly markets. the sales On Americas year-over-year, of restrictions, In which growth and to offset were flat Total the growth demand measures billion, an in by due and by XX% Overall,

wholesale This including product. U.S. and XX% increased double-digit strong across consumer demand, categories, reflected of lines. due accessory to with apparel availability and improvements business genders Our along improved

primarily in as currency and the addition and Turkey. offset the due headwinds In Middle in wholesale double-digit by United driven weakening returned market cessation APAC India, growth, in in shipments The Americas growth temporary year, due lockdown as continued primarily EMEA growth well to the of Canada. well and Africa the to as to to distributor much EMEA improvements the the including euro closures nearly store East Russia. the to lockdown sales, and achieved faced Scandinavia every other particularly availability the was of this States, by declined in during demand solid strong as Mexico quarter of partially wholesale through the driven XXXX Growth were and the by measures quarter which China. measures product. pent-up second sales of

strong our Zealand, South also Korea, a improvement. and distributor Australia and in New Malaysia

navigate long-term COVID, prospects continues through the China we region. Skechers in confident to this in for of are effects the While

X% of due to in slightly, growth much lockdown retail EMEA, increased Sales in XX% business. digital Domestic in and X% a the store DTC sales Americas offset in X% partially to comparison the primarily in in Direct-to-Consumer APAC. our to for decline measures which quarter the a Turning and due growth quarter year, last difficult by China, both online. commerce. experienced of stores to decreased saw

XXX X We including India XX other concept stores our and improvements. in saw we closed we XX big stores, the stores, in including sequential third quarter, stores stores stores In X China. additional the XXX X to that to Hungary, China showed in we've Belgium, XX countries States, box Netherlands quarter with Italy, X Republic, the in by of back in new in launch second with rollout are e-commerce the the X,XXX platform not second stores opened is including an of Nearly In year-end. Skechers our XX United international continued date, opened Today, Portugal. planned third-party stores X and XXX which in the the the all second Czech United The worldwide, have sites the new company-owned including quarter, company-owned levels. and X,XXX opened locations majority stores, We in quarter. the Skechers company-owned improvements. China. though were traffic the locations During of reopened, quarter, States in to ended quarter and quarter preclosure the of

through and X launch and DTC our strategically to international out Program continue sites X global the reach, will Skechers U.K., we South X in markets, expand our to additional in in Spain. investments robust XXXX, We to by roll achieve digital our distribute of Further, we Skechers assortment. sales America footwear upgrade centers to Canada, capabilities Plus our enhance efficiently commerce goal annual systems $XX point-of-sale in Loyalty billion and Germany plan domestic more Europe, Japan. our grow To best in with our open to stores, beginning our logistics expect and omnichannel

the the growth and stronger. never brand belief in Our of long-term Skechers been has position opportunities

The focus As been the operating our team. center of foot have X.X new American million a and LEED logistics we network certified distribution expansion mentioned, begun is moving has primary complete, Gold square almost our goods our of North of distribution our centers throughout testing system.

on from in goods our which China delays, has and an led that accounts seen the inventory of to a increased have the also during processing operating Europe. We quarter. put strain of our port, restrictions in COVID-related flow particularly

year work challenges broad-based in process Phase our factories center a Our XXXX. our our ongoing in logistics our and is to products. with efforts of this goal allow to X meet COVID-related completion to teams planned order through China begin expansion distribution expedite will demand shipments for to us of and with the

India. also square new have on X.X begun Platinum a million center in foot We pre-certified development distribution IGBC

outside be be operational and The first mid-XXXX. is planned Mumbai facility of the XXX,XXX fully feet to square by phase will

in Canada are facility also moving distribution and new have open outside We a center Vancouver, foot a new XXX,XXX slated into to we secured XXXX, Panama. for a location currently in early square

athletes with Colombia feet. distribution facility year with also expanded courts, a be winning cars, our in is awareness course, will well with to designed facility the Hand the create We from this and marketing as fields on as golf capacity square grow our product hand In on in to branded races pickleball XXX,XXX foot saw elite current strong and in develop completed our new approximately baseball that to quarter, development drive Skechers. road square feet demand. we plans XXXX global XX,XXX in sports to

a from a at price, to Joon sell we macro Amanda India and showcase which Tony innovations, celebrities And our Chesca in delivers and results. turn a in quality We Burke fashionable appeal the and I'd Brooke Seo by to Romo; promote like position Stewart; of consumer brand Willie our Jamie Asia that our Matt TV our Park Clayton All-Star markets. environment. artists our footwear Nelson Sanon in in designed current given multimedia more Kloots, we Martha local especially to drive details base. financial on Fitzpatrick; as over marketing now Kershaw winners, Leonard in and unique campaigns as call including to John legends Ray all ever-widening desirable were sports as the from for innovation from awareness to to are team major athletes Sugar These to Brooke Kriti key the Our many countries comfort, to style, an Henderson well believe personalities, products also in on Redknapp appeared in influencers joined reasonable Southeast relevant from to and to to U.K. talent music

John Vandemore

and segments record XX% basis. $X.XX and good sales markets, distributed geographically afternoon, was of in headwinds basis COVID despite China. over Skechers significant in a notably as-reported most on achieved growing in and on Direct-to-Consumer and our David, everyone. constant wholesale both currency you, XX% evident billion, new Thank a an several Growth quarterly our

activities China, demand and results excluding for fact, our operational strong In limited, proposition sales technology distinctive value were These products. reflect consumer where comfort grew XX%.

congestion on update challenges further from into want particularly I of distribution the to a an experience centers of in first delving and our shipment those to countermeasures financial In Before customers. processing chain COVID-related result continued to second dynamics. supply delays, quarter, Asia we as domestic results, our in our provide

stores to products efficiently are our and consumers working customers chain are possible. as ensure supply Our and delivered reach quickly our our teams diligently to and ultimately and as logistics

gradually to moderate capacity balance expanding disruptions chain operational that demand to will drive supply execution expect do ability meet we dynamics. our remain However, inefficiencies to to the these distribution disciplined and consumer of year. constrain and our Yet, throughout continue impact the we fully confident the of

growth increased to billion, with segment in despite increased performance. year-over-year year XX% details internationally, as sales demand. a to federal quarter payments growth led quarter drove results when XX% partially enthusiastic $XXX.X second XX% throughout sales to and the last Now Momentum ongoing let's operating million continued in offset and Americas remain We the and by driven faced quarter. stimulus domestically, strength during nearly outsized Wholesale by where in turn every XX% Direct-to-Consumer country X% Direct-to-Consumer in the restrictions COVID-related opportunities our growth X% a second year-over-year of decline China. internationally to difficult double-digit $X.XX every growth our financial growth reopened, the domestically consumer comparisons we nearly markets about business saw in we country. by the

to connections consumers. Americas, sales sales. quarter supply to billion, challenges. our increased persistent to invest for second an year-over-year XX% capabilities to drive the We impressive now the also And online our turning deeper omnichannel regional presence our chain and amidst with achievement In continued $X in

on and or saw growth Our million. our results But in portfolio. returned weighed or as APAC, increased wholesale distinctive robust results. from Pacific, last $XXX.X consumer some are But nearly EMEA, saw to Asia shipment Korea flat. outside notable every South lockdowns. year's experienced were brand which China, market we the of with In product sales demand and We strength India, indicative Malaysia. proposition also inventory and strength shoppers Europe, East delays of during sales the Middle Africa, In of compelling our X.X% quarter, value

Excluding XX%. sales than was we China, had China, which originally better sales In XX%, rose anticipated. declined

we improvement, June. eased, restrictions sequential saw As especially in

region, the impact the the to take a as long-term especially view continue While APAC operations. of continues optimistic of we remain we over about balance health the performance brand our cautious to to expected the relative in pandemic year, financial

quarter and distribution from prior and wholesale result points $X.XX increase by to as basis continue capacity. of XX% percentage grow margin offset Operating we our from basis compared expenses the Second with mix and pricing. improved decreased basis XX.X% XX.X% XXX.X quarter XXX gross totaled sales, increased year-over-year unfavorable the earnings margin per pressures higher due margins a points impact year-over-year was operating a costs higher sales an decreased freight a of were and of XX $X.XX. increased partially as XX.X% from globally. gross increased share XX year-over-year. rent shares a sales, to expenses diluted points demand $X.XX retail and compared largely increases to to as to XXXX, foreign footprint expenses diluted our X.X% in labor the previously primarily would Earnings decrease currency, due basis negative our operations XX XX.X%. points administrative expenses General creation to percentage in volume-driven as due as as to higher Earnings percentage for have Selling sales, which includes year, per from a primarily increased spending of a on impact million share absent diluted This mentioned. outstanding, per XX% share

in-transit rate the quarter needs increase slightly ensure to up with compared balance working in But $XXX.X was to the compared second capital of million year. meet have to to XX.X% is related XX, decrease of ensure at for required longer Inventory our related billion, of resulting year-over-year of XXXX, investments. equivalents million product and times wholesale related $XX.X X.X%. This from increase was nearly we retail an to center. invest to million to reflecting of have and in the in customer $XXX.X a inventory, XX%, customers. technologies, our $XXX.X Capital globally which million sales. to continue $XX.X to lead million, of December increase end were to were million design the investments, meet of quarter and quarter $XX.X or our XX, new XX, drive an year. the XXXX, we expenditures as $XX.X compared June second the turning $X.XX prior were available from at million in or sales we primarily from June cash to only product our the inventories prior infrastructure distribution $XXX.X needs. includes million And our to XX% investments receivable effective cash, tax quarter $XXX.X now in million, This We sheet. Direct-to-Consumer XX.X% a $XXX Our XX% product Accounts of and million for expansion higher stores ended

million expect between XXXX, million. we For be the $XXX expenditures $XXX to year fiscal capital and total

the During we A approximately Class quarter, a at cost of second stock XXX,XXX common million. shares repurchased $XX.X our of

toward with returns capital our maintaining share while of continue balance a consistent investments opportunistically making philosophy form sheet We business, in the will to deploy direct our in stated our to providing repurchases. strong and shareholders

Now changed I earnings announced our will since results. quarter first we has Much turn to guidance.

that don't would been think belabor that need have myriad we the more become While uncertain. the already I others, like we emphasize much environment to challenges to economic has documented and by we face

on while our we about confident strength and long-term cautious of year. remain result, in a As the focused growth balance strategy the we the our brand, increasingly are of are

For fiscal diluted in net of the sales XXXX, in range to range expect billion to we and billion of per the $X.X be $X.XX. earnings to $X.XX $X.X share be to

will fourth expect we the between tax is $X.XX to to quarter third earnings XX% continue to impact over year $X.X includes year of to experienced over range foreign for that movements, per both those those the this of in third the and and quarter, be have continued particularly to our that adverse that currency the net We sales in of $X.XX note APAC to range XX%. the billion effective rate will be and $X.XX. the For diluted the COVID, year important billion close from the as we share margins expect and in well It prior balance gap already as and the headwinds the of gross we anticipate region. guidance

enhancing by the we to continue are to drive long-term navigate infrastructure, our global investing in now great all and we supply to chain, and strategy macroeconomic growth remarks. to closing over our executing our committed in our above for with value global As through in our headwinds consumers pandemic-related And I'll else, relationships the turn and David ongoing Direct-to-Consumer delivering call volatility, deepening direct product. distribution China disruptions create on capabilities,

David Weinberg

years XX no of slowing in and down. business, we're showing signs

we quarterly in new a States rolled innovations product United successfully appear fact, new sales early that equally are with with markets, In in be we and record, consumers. they to celebrating embraced by out the other deliveries

product spread Our our combined ambassadors we loyal comfort, the unique global dedicated are as brand team with a base and different and to as of growth. continued message offering working forward of style, innovation and look quality, hard and Skechers and success employee to

come. of will the this now and isn't the them in And beginning, accounts. While brand signs the Ukraine, We the the war as global we strengthening in to consumers. approach partners we through the message for yet and more idea the come. with felt work of our of Skechers To are and annual through this and and each growth to strength Skechers drive years comfort quality we is our but stores COVID-related to sales and reach the we and sales reach in day shop expansion deliver global many well of back still of make by billion the the are of consumers our will being of digital XXXX, expect within seeing platforms, from half determination, $XX know year impact easier offering retail best mission, we the faced markets, in our efficiently to challenges as the this it in which with to and through is believe

to like turn back the would for I to operator the call Now questions.

Operator

from [Operator Alex Instructions]. Straton question with the Morgan And comes of first our Stanley. line

Alexandra Straton

Skechers down Skechers guys. Stanley. positioning. down of about have you thinking terms in you how this how or ask I beneficiary slowing deceleration your wanted A about income us as you to lot back just potential the trade what Straton, build a benefit into or in quickly customer on potential been Alex given a of of you its maybe just prior And saw the of in of is It's value Could about customer across the recessions maybe Great. average revenue quarter, half? remind guys household Morgan kind talk potential think kind base? also about distribution of advantage think economy. that the you a any Great us

John Vandemore

Thanks, Alex.

given I'll crack other and would to say, at first forward context. future. has as and is take I we a as over what more facing company matter changing that we've are really historical But of it that dynamically. for noted some the the as So much account the turn we David to noted, look guidance. things uncertain you are fact every into relatively then We taken year believe we've we balance a in

next in said, mean, That couple benefit we under of quarters us again, perspective it's are the form would it We're some say believe a known backdrop good we We're of long always a mention trends globally. environment definitely going comfort, is environment we for. to our for being slightly style that things in carefully. going make that we an our locations, favorable the think far, economy and we the out don't term, of that in with And providing is product quality we're that environment along we're the cognizant value difficult see very the of optimistic where So I is one brand the retail to of. consumer. the it watching the that more though unique But probably about give most average particularly still the for demand there. we're is I some duress. good have

David Weinberg

if economy like they more point. for in just movements price than the Yes. about to it these I'd shop as not is happens, price product it's to don't it's just the want. People say, me, something historically, tend

us simply new entrees and into a comfort are priced even although in and for of with the bring across offer, them for their range products they our it that with opportunities I plenty right, comfort and a quality more we all making certainly and categories, right. lower slip-ins offer today looking end of think we our gives broad and downturn comfortable what on people fashion what because and not

do to the It's So of the take an right opportunity combination the past have the in advantage right as adverse by for I we a think situation at offering do price. us. product

Operator

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

Jay Sole

just China. to I follow on want up

think heard pre-pandemic was quarter-to-date I quite from strong back seeing elaborate China China you to that I more QX? you're mentioned what expecting a QX in perspective little June, China in growth but sort bit and rate yet a could from on traffic you Maybe isn't of you're and in levels. what

John Vandemore

Yes. Thanks, Jay.

First as we the season. showed of you've say, would had we participate. very that business. increasingly anticipated out an and was our more the results, had I particularly actually impact where of that a I remarks, they the high the sentiment and reemerged, markets would revealed, successful the was a What team on got more wonderful The in quarter seen in better results restrictions which selling we deepest echo good of the has environment. the holiday than job results our are, openness better which point degree June in thanks China, is provided saw fairly each all, who's in a prepared between of doing correlation very the the we to XXX and difficult open our navigating coming of to

environment digital and economy, mentioned that be real case, growth over in the now, certainly channels expectations facing. driver X in the pace given that also though, one a the reemerging. seen think Certainly anticipation an was the of level China, limitations first we've some year. are strongest now COVID while for the I among of that that our they're for that, tempered in to more subsequent side. occurrences been expect have For say of lockdown seen the And which COVID has to of I that have we there the of remainder clearly we and restrictions month, continues recovery would would that main the we we've and that have the this China our

whereas recovery So we've we were looks we explained into baked a a little expectations, It is the longer. for recovery. a our little think hopeful I bit going relatively that V-shaped of to had take like bit previously

the our well remains encouraging about again, to the in day, make mentioned, of Although, products, at our comment incredibly the newer the David its as the especially as response I'd as digitally. we're the last strides view from the And longer-term market, product end then is, perspective making testimony how abundant we on center of our trajectory in a we distribution our the investment is recently if type beginning that second about We we are market heels that just that to of make feel completing have brand's market. the first. that wouldn't confidence didn't

Jay Sole

about trending? any how the for orders Wholesale you second growth very change strong. the in talk it. is sell-through And sell-in seen of Can Got Okay. more. versus was Domestic If I year? can you The obviously ask half one have

John Vandemore

bit. which strong. although, commentary some recession in of our improve but in That wholesale the best would you we're thus ever that stable. and chain remain Yes. similar change factors. signs good, strong, have tend also that then The about encouraging a I up underfoot. Margins things. in environmental to since to seeing with There of the a a pick than did and We've what the we points And was to a back-to-school are other that we things we don't some early, all windows coincide is admittedly, give have more orders year. environment, the that a challenges side kind I again, expect is things far, remain partners. And season, supply you to it's that is going booking on although sell-through had where retail seen longer at remain recognize then Consumption strident it dipped demand there's from earlier looking going own pace bit. into seasonality perspective more would the a say I the summer, our thing period note strong. Overall, also off remains early orders things of would remained the remain seen important can good. because dramatic the that we've sense had of at both Price in of

have also out used delivery of than supply of we windows having. chain we're looking challenges the would because So at traditionally we're further

David Weinberg

should to we we're of I orders a taking John trying as that to differential there's get flows our to way going longer over in back Yes. said, because normal a We're be the period simply frame. time. add time receive

because we their the Our in have to time flows to supply the more and pickup react of customers reevaluating are that. chain,

time So strong. as strong our the within position current says, frame. remains We're John

think it the a we recent outdate will than book we're change going simply I past. lower in to because at have

have quarters a So that as out peak to over see means quarter-by-quarter far at than amount a to changes as X what booking rather significant it time. and looking as because don't explain over X we everybody last you'll did to we'll year we anticipate of

Operator

Our next question comes Laurent Paribas. from the with Vasilescu BNP line of

Laurent Vasilescu

follow of here. I up wanted couple on to things

slippage to there you to John, I think there mentioned I might XQ. have chain of into revenues disruptions, -- some XQ supply due think, been from

of John, items just cadence? how other should EPS much about or we it's much it it you take And be could of as if the about of may maybe know number us, that revised I incremental guidance? FX, how I for we it then it think consider me, was $X.XX midpoint but the ancillary have is lower. can impacted costs think guidance, that Maybe frame a remind if the to curious quarterly Just certain EPS

John Vandemore

to Happy Laurent. help,

place. to the from. the volatile chain and always to On There's shipment They're would as congestion now, X DCs. there's timing supply that in over as could with congestion last obviously, we've quantify in quarters the a anything right issues. differentials, -- I slip to really that, with which from things shipment customers' all or X outbound It to over to amount than RDC our world is observed the other say, be timing delays port congestion no

impact. can I it's quarter's are those next the to have what unfortunately, impacts All difficult of also to But going anticipate an be. think,

anytime of reflection quarter because the given constructs able we there's we going and guide is we are to what those were fair away not So achieve you no those soon. think constructs a give

with slippage. The unavoidable kudos what our an environment. as job supply chain was here happens doing change there won't to our current excellent next It's still our dealing through a just what can on in to job to So we team quarter, net will, is consumers. tremendous the absolutely on getting customers that posted, challenges. continue we amount, and you I a that depending that's certainly think, Again, see in numbers those. the of And experience some basis, will

guide I challenges we would and combination we've supply the of way where owing which continue in the way on these as is that's reason experienced and that guide, And impact significant not probably challenges at one chalk a we pretty change X/X note the or of something impact a I this made On quarter. having had well FX it, stability extraordinary some that, think there this markets already one chain COVID-related COVID anticipated. would EPS about FX, to X/X to is given another. we a to an as about up rates And for which in was from expect levels. generally then both

Laurent Vasilescu

you're fourth think in the that margin follow-up remarks, Love said XQ question, And just I And there have for wholesale John. baking Alex's gross as then a helpful, decel question, would to XQ, love John. your a to are is XQ U.S. around the you here? should rev Or that that, quarter? some guardrails conservatism Very level in gap. prepared grows in you close anticipating implies the of --

John Vandemore

guidance, along, and indicator a expect gross the to the to that to gap close quarter last was hoping on our improve upon continue at was rather we've prior to what year pace. all we I said So margin ratable

Now our in steps QX That's for wait to of we some and previously noted. to QX. that factors, how and ratable issues is we between as margin close be going that year gross close between expect ultimately year's catch input some prevailing mix cetera. out year's probably up variety of costs, et the for all influenced a aiming But pricing sorts what the by this margin been and to of wide differential cost adjustments gross prior and to including we've to we

experiencing. you reason that guidance, a going the it. is challenges obviously challenges materialize. anticipate In in don't we've to own, for at a just exactly supply And we country. the to been terms market of tell where that don't up great the and on their is provide hard exacerbator pop chain are They given specifics And time to that's or today very by revenue segment to enough we know

we're handicap of that on variety layer us based ascertain. an But this to to especially and materialize. of basis. to number. all We reflect that made factors can done on that type I we with the of ultimately, goal forecasts. adjustments did, And a channel we've providing said, point environment, overall best some results and see segment a we've in then attempted the We've to on going existing wait to our how a trying where wide gets have going we're guidance. China. is like get unfolds, or a to to to of what environment for combined better-than-not adjustment top us So It's as And you make a

Operator

question next Bank. Our Carbone from the line Deutsche Gaby of with comes

Gabriella Carbone

quarter. a on Congrats nice

any you're overall increases. if then So be then how I in environment. fully to promotional I more. price when changes at just wanted the price are bit increases you baked was you've those consumers increases. the just all, to could in about if into touch channel? And dig you the how maybe about thinking impacted seen wondering you wholesale that's expect a And can talk little on price And responding to

John Vandemore

been been things, And consumer increases certainly this side of price response from increases. the far price had any Obviously, thus retail our sensitive has on we're it prior to say point, to constructive very perspective. stable. would the I to

So we environment retail to good. try what continued is relatively to be those perspective, very which The thoughtful on stable remain price a under and we about when circumstances. introduce

some quarters. I of the half but in while, that today. promotionality drastic say the think for of likely expected true And level back was We previous to expectation reemerge I been significant under though, to a given consider of be X would ideal of we've remains anticipation it or kind that the have, promotionality to level been some communicating our X be for the circumstances year. or don't We is

wholesale we'll response watch bookings remain will mentioned those mix end of strong. the the the most we've the to most everything again, at quarters think, neutral realized to by again, those, consumer be response in a we've I sell-through relatively But from the to on seen, increases, basis in. reflect of assess will this On Obviously, very which, evident remains such next baked perspective. of Customer ASPs that price material positive customer continue durability is X adjustments, that expect the and year, the those. a we juncture,

Gabriella Carbone

I just follow-up gross on had quick margin. it. a Got

results, help the quantify and pressure For the from versus freight pricing? XQ us I if maybe wonder mix can you

John Vandemore

Yes.

I the had think if in year's previously -- There big almost just Direct-to-Consumer, on -- we a caught a driver, so level very by almost things, process being a before. by ratio think after basis the mentioned QX, side mix or you yet cost slight recall, QX mostly small hasn't last fully mentioned had because implemented the up as detriment normal on to was The Direct-to-Consumer. XXX of far, was was heavy implemented, cost mix, was which I above is we biggest points a we've single pricing impact. side. X:X of The to the

wholesale which the bit. been in a cause the there, having The gross pressures robust overriding margin growth gross mixed So the margin a is this I just on though. down think has quarter, cost rates result evident more

Operator

Securities. line the from Tom comes Nikic question with next of Wedbush Our

Tom Nikic

the a I When spread we about kind look of performance in and wholesale? you and such when simultaneously basis look there's domestic kind of seeing dynamic? channel [indiscernible] why strong mean business, think at the on are should we And a a DTC X-year in the you while how big that performance wholesale seeing really lagging between channel, both DTC,

John Vandemore

was I year I recognize last keep side of within year an in things, Yes. mind, you perspective, that financial mean on there's question a been have you of from a first, think moving think pieces extraordinary I DTC lot the while. for I Direct-to-Consumer mean a to perspective. a to from got

certainly you the a And at that didn't of on e-commerce note the the -- though, growth from have would on our pullback. significantly continued so was outside that not the same prior year. then didn't level within difficult comping things United States, was slight that, side I dynamic, the to that, And see fact cause store same you to tremendous. pattern

side of the comp carry by to and some take share. a worldwide had its have had some seeing to in that needed a as I then product, side aside, it if But side, a especially obviously as occur partners that's X-year getting to else, to, fantastic restocking upon basis, XXXX. that tremendous brand pleased of Direct-to-Consumer the and particular we the you on could product challenge. presence back the seeing pull wholesale the in though, evidenced an China, to on we're continue to the than small we're base quickly kind flip product. think and side, response which coming the I again, continue at on been year as anything into you as the the more probably store going DTC probably at that more if issues overall, X- work the did think well the Direct-to-Consumer of doubt a of created with Overall, product the some headwind we for stores on that On what's things, day. away wanted to again, slightly grow we basis, of depending been I no as side you prioritized your have I a would with note, grow performance favorable business. performance. look sales retail some of just out I Certainly, we're newer -- or the was opportunity some response opportunities certainly think to We're wholesale on to there seeing do

XX%. rate. fantastic If take and a of pretty you of headwind, was that's international had out the things China, strip you growth Direct-to-Consumer almost side And a which you

of the side the there. the about to DTC continue remain very and we pleased business performance optimistic So with

Tom Nikic

could Laurent's on quickly from earlier. up I follow If question

seeing the X/X given was of that that. Nike lockdowns. mean to what think the mean the more it sales the revision rather outlook in was EPS as revision And EPS related they're related was well? I you're very revision about COVID, a Adi last I that both that spring Is X/X and [indiscernible]. and heard environment couple I margin from you related because think I China than like and is the weeks to we've in is sales hyper-promotional said contributing that FX following seems seeing

John Vandemore

and in I any suggest But actually see an where overall mean, anticipate keep QX, don't holiday itself saw I got in actually to we impact the I that June, of selling mean most recovery, in is would being didn't a window of in said, XXX significant margin promotional you're probably in in quarter. some It and significant That challenges of from that environment. the doesn't in that. sort market we and we I Yes. mind, that the the you particular, middle perspective. guess wouldn't echo margin

both extraordinary we don't prior that year to more that normative as noted anything was would in consider window what and environment. think compared I a we to be So

do. So think what yet. others that that's we've seen a be obviously, extent I the to to that's But by -- market don't factor going influenced

be definitely haven't we we'll But short seen no, I is my guess that. eye So answer an on keeping that.

Operator

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

Susan Anderson

to ask ASP units. about maybe I wanted versus

said drove you that I think both wholesale.

of changed So in you about there for original And DTC the it the did was pretty thoughts. X SG&A similar maybe trends I anything's was if your you your expectations between just also then and channel? if half And then curious talk could if versus also, equal them? back see

John Vandemore

is I yet up, did in actually but than haven't we Thanks, there. though, think wholesale, we previously it what Susan. had which that more the made ASP we had fully say mentioned caught units saw I see on price, more of than reflective would of some both. we Yes, price units increases adjustments was

ASPs already Direct-to-Consumer we'd close the of of again, units to saw things, reflective flat taken, essentially side and the actions up. pricing you On

So it adjustment ASP-driven an was there. more of

in parts moving in mixing of lot a of there, the there's net it. that's particular, Now with but China,

G&A side, On no, the to new nothing report.

we is chain to that, supply experience the We challenges. itself have do manifest inefficiencies. think experience That I expectations. some again, note only of does continue in some

I volatility that ones that that, themselves we present resolve supply think those inefficiencies the to on reasonable side things. work from continue as the of will

of to hold performance. Otherwise, though, continuing line our would top longer-term and those. objective say to in we're more work So no G&A in attempting no, through with I change OpEx real line broadly,

Operator

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

Omar Saad

COVID couple huge A the here of end quick ones comfortable end. positioning asset was consumers as feet. comfort a comfort, at during footwear, comfort became towards the -- super Skechers focused on

hearing making in from shifting of a that fashion less rebound but lately -- any of footwear air from the consumer We hear that one. love you have a this away you been ocean quarter comfort update the maybe footwear, to in you fashion to comeback. on as the and freight. in Then I tailwind it I'd flip number to a big lap headwind could some kind utilization. some footwear from fourth also, bit dressier little a of any comfort freight begin comfortable discussed away Are seeing shift know

David Weinberg

what mean so. pretty be certainly I good. I a the hope the happens freight to well. That are down, going. will there's demand one only around That's less on And more. the country lot has be through still It goes rates that's port will come a strike the it depend taken freight we've potential but And at end. that piece there's as freight here. demand. to of to It everything starting at and

all. rate. comfort And a comfort, years. down, rates still So starting way at shifting the been certainly item. from find that absorb going as to come building early only freight inventory to going It's It's old mean pandemic and that's away out transit until we've fourth to Remember, carry see be to that's here we're in We're we not we trend. too the don't so. as for in I that far hope the all quarter. possible,

enjoy Kids I want comfort. comfort. They think people like it.

don't around buy being stylish, purchase to it's wherever think shoes fashion forward you or we're that a something If I remember, for being being you carry to just known that as and the nobody you broad we without to fashion go at. you're sport house comfort [indiscernible] base. style right buy the used can and forward, for believe from, you're it comfort, and wants with out I And look comfortable not going just without

better like, positive lack term hot we're, of we've of always for us. a now. as think we that's ever So been for been We are a

the styles starting releases. we We anticipated had lot we many demand cadence that so through than that as multiple the a are out and quicker bring them is in have

are, use to very that fact So [indiscernible] home, various be for stay in or not the these running, at they comfortable we're to it's walking reasons, the whether feeling only these, marketplace to work. comfortable wherever going continues just enjoy

So think there's we plenty still room. of

We deterioration. any haven't seen

anybody own haven't from away our and moving We seen the sell-throughs, that's we it pretty it, in haven't and seen much around world.

Omar Saad

pickleball And great Got it. that opportunity. job on

David Weinberg

going I'm learn it play to Yes, to myself. how

Operator

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

James Duffy

back more bring inventories can some towards comments have if the been adjusting you're is you norms? And of I'm pre-COVID in still to on curious, I'm for elevated inventories. norms. even of availability well pre-COVID inventories state make -- the so, confident hoping that, you levels? production your what back if in more transit. appreciate versus But of I the are inventories there to are capacity, would normalized opportunities

David Weinberg

find are really norms going can you Yes, what forward.

of weren't high all it slow when simply demand. And items. down didn't production is shipments what the was And how there and last is to of that world. one in. it the slow you think long use can we we We to still would at And I our things, the this a and down, brought early factories. with we inventory, see around because want We as lockdown next it of stage would be. confluence dealt here move as it number the sure

can we're a our inventory. stay So closer moving open, as option. people stay to we modify Like places purchasing I said, much

far to So we when the go end. we'll be as out reevaluate able on

demand, business we it. it all we'll holds in it, is more been on up the we'll not given move of it's certainly and what would end. good The today all in world far shipped in this rather through into centers the own quarter, it constrained modify as had and distribution in and new, States, forward, been anywhere but news it it's A moves in demand. bit So still grow see little United all we than need the our making it's have the more

lot and evaluation the [indiscernible] is inventory of demand of usually, in This at what very world. the is much the the at So relatively places level. retail in and demand all new a in and consumer

already it's where we're move shortages. most it been around there's the to where beginning the for world biggest needed, So

months. what world the still mean use can with it is, X around it we how feel very So comfortable and what it the can over we next

James Duffy

reasons stand May resilient from any out July, than question report try June on question a demand without then and And others? other to any And maybe the just as really faster follow as be since last uncertainty your you you where there across But demand that and market market your indications the end global every from perspective, to that most benefit in hand, region. are regions progression fading strongest? see end or might

David Weinberg

Well, I don't [indiscernible].

John Vandemore

growth the which mean vast would of the our breadth if the Yes. -- that about globally, the I probably and opposite. kind goes we we're the talked depth surprised I on you digits of look mean that, I easily. markets is by categories, remarks. into the of But of What digits I everywhere. and majority is multiple was actually, grew strength prepared talking in note just make least at Jim, double

challenged stronger the were We and broad about there quite significant of what FX XX%. talked Americas a strong. so experienced, across saw outside the ton talked And by for been very that of but impacted situation generally have was markets -- whatever APAC, challenges about them, were which, grew honestly, would EMEA, north We China even being while growth which we COVID prevailing few a very markets. or of

the profile in you in you're very give U.S., demand the comment of continued the performance. picture around note good, that which doing obviously David's about is That's is. brand I that's of for And it very it with is, very, to couple hot get really globally. And I'd think how growth the the much well. brand. -- how kind And good you a So the then notably demand global seeing earlier

Operator

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

Samuel Poser

market, region stuff X by A -- Of are speed where that. like to months -- the were on few. where times say, let's and transit you on like you versus, like ago

David Weinberg

I'm not that means. even sure what But...

Samuel Poser

like... it's Well, mean I

David Weinberg

What certainly up factories and specialties going of keeping was a the I it some are getting the our timing No, have We don't changes right there. do up. are certainly that on that are are we minute them minute. don't having that The has the There port of differential kinds same a the smaller great up and base. factory is some at basically getting nor say, containers, job for the there in all right that place difficulty. And picked throughout necessarily as products supply more any to factories is issue over to the are Transit chain times world. not see send or particular are We this that are crowded the better. time.

sales So we're not minute. right and having normalized inventory our trouble it we're own we've to to tell think rotates closer And -- getting and our a getting more filling production. done goods pipeline, transit time position, with around. this we to certainly trying including what I that we're you the could are get even by But

our process. that's work So in

Samuel Poser

answer and expect -- Number got handful to the big a half do you in I can Wholesale then I've of them, back you. of all DTC, picture wholesale more. you grow the which I'll And Got hope. faster? versus them, through go just two... in

John Vandemore

That's factors on China. that to going like depend

our or going we're of give by is weighting as level way outcomes. variety to the guidance said, probability prognostications we because So segment I channel handicap not a

So we the adjustment level. aggregate at on layer

to Our expectation is will both grow. continue that

toward a I do China be in the optimistic the remain is to prospects that for the is huge growth we Direct-to-Consumer because So a relative to skewed bit rest disproportionately about of business. think in both. factor going it

a will that the factor big other. play way a So have role big one or or

Samuel Poser

States, then Plus, how up are is now? do you, are forward degree. you Two, the Okay. going I expansion in United that And from what there? mean what And what -- and is vacating Nike so, right Plus that's benefit your is X other are folks? One, -- in seeing distribution Skechers helping set you it's ones. Skechers mean I where helping those the foresee other you how if

John Vandemore

beginning do consumers Yes. than LTV us Skechers a definitely new for rolled Plus Its more we nonmembers. great loyalty direct-to-consumer the method relationship U.S. out communicate They is productive. more It a directly. of the building members. a members generate to with job year for are last It's in program wonderful continues its to

and the use think scratching in you're is in general, growth surface costs Skechers starting marketplace digital today. we're Plus it on And acquisition out the higher What now. it I next probably to work leg that. very get retail drive sales the that's still method much you early innings, of is more a allows globally. higher we're something for to see because paying to rolled in not obviously and cost-effective you customer do though The to

both Our it's more that's frankly, That's over that or the the quite just It's in with and our we're to on be out And globe footprint allowing still same fuel program online a the business, global stores able productive becoming more our contributor grow digital rolling but we assets. expectation is so, the looking more to to because websites tools Direct-to-Consumer year to to and is us a provide have think next channels. add we early, we'll us. to well. in Direct-to-Consumer continues equivalent that given and and both across forward effective efficient going exceedingly and -- member where

Samuel Poser

U.S. Nike distribution your they wholesale in about the where Then and pulled out.

David Weinberg

sure know we ever place better. our really We whose very we growing. not is product think take. We're accepted. I'm We're

growing. It better. anticipate our are business better. is our points We price Our fits consumers

But our around growth where that's grow. and world, United situation given and large even where Nike the not own think is I'm grown the I States a sure in we've not Direct-to-Consumer to factor. contributing as as the continue

saying, particular some taking feel it's is product. piece don't I think we're So grow what tell pull We door market think share. the don't how continue Nike you big. and fits we we to can retail is at particularly on I I do the it's what it the our anybody leaving, whole of me? knocking that know. of offer part What Nike's decision in process to base. don't and customer have It's just back? own within taking

Operator

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

John Kernan

question. quick a And Awesome.

It some like still chain amount chain. supply also basis XXX a mentioned of margin. sounds on Asia. we're particularly the And shipment of to North in pointed there's costs Just obviously, America. supply decline you the in point factoring in plus you There's congestion gross fair delays,

when supply you holiday see tells chain years. the supply chain there normalize is that you last normalize? pretty think anything So us or difficult might X in to have But the do been for starts Obviously, XXXX? balls crystal

David Weinberg

difficult. a things in of here is it there's It would in of anymore. ground There and I quickly think transportation not issues and easy. distribution moving and that and side. and are opened a the around centers saturation us as would to destination normalize. look is anyway, There there's because through everything ports is it quickly next all with so up moves some lot truckers group. the for to and the it within move. two to it moving beginning should the more how quarters. That road with we had what to not And coming China on some as along its here, all something get than volumes past issues are I the fast much How point started hope

quicker how its will we internally we that new there the pack in would up United that, John port question issues, which chain but quickly open, like [indiscernible] says, that capacity opened us, to distribution We through get it. and no caught own everything our supply got the and remained and would that to everything if closer think earlier same in the open lockdown do and for States For were in the is our remained to lot would is can portion a supposed center singles dynamic. move get pick But was double Asia.

got and each piece and goes. it take each see on piece its You where evaluate to own

the better. it's the going throughout we're a around to just we and starting but and it which is we change and normalized all in We world, certainly day-to-day moving kept as bit overseas why thing, it's going So more to beef didn't we a It's up relevant we inventory get the [indiscernible] most to think case good and our system a so than ready order anybody the get we're earlier else. year. get to even move that we situation leave way

John Kernan

just to follow-up that, Maybe it. David. a Got

You mentioned when across sector the spiked inventory Skechers big started inventory. dollar increases much pretty and QX is and you percentage to have year-over-year. for

picture -- we year. balance dollars we Are the quarter go into growth the do think It's at into we inventory do think inventory fourth up be still think model we in free year? we think the XX% half? year-end? about capital How cash XX% next flow, how as last the back about working sheet Will thinking as How I flat? and there we was to now. up do try

David Weinberg

A lot and to on availability and chain normal. supply will back of that depend getting

into think say can advanced would and better fair quickly, if to it it's you the or back of pieces see in or to year. take I But at we even get places end the the X- the in efficient turn X-months lower inventory the more orders world ourselves all that. all got a to and then you

target it's not overproducing using and evaluating certainly it light on in given a it planning Asia. right moving keeping So we're but us now, and to available what's in

and line, come be we geopolitically efficient it, So hopeful as happens is year. every on likely, we inventories that through macroeconomic think more the on month will if we will the basis go not what a depending most we're in this most path, and on process and

John Vandemore

I add would John, to also that. just

it If only end was you the year, at the look to growth X%. the of relative

So be the difficult continue to comparisons this up to point. year-over-year

the when year. QX, saw the noted, in think I elevation last that's as we you

increase being can see to wasn't So X%. is, It the what that chain with end only the was that significant. the year, you supply relative it much of more the

So think I really not another just all throw mentioned chain about supply and about this as else. is there we that out data anything because point as I

Operator

reached question-and-answer participation. for your this lines concludes at you your time. also session, we you Thank today's conference, And the the and may of have which end disconnect

Skechers U.S.A. (SKX) 27 Jul 222022 Q2 Earnings call transcript