SKX - Earnings call 3 2023 | Skechers U.S.A., Inc.

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Operator

Greetings, and welcome to the Skechers Third Quarter 2023 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn this conference over to Skechers. Thank you.

You may begin.

Unknown Executive

everyone. Hello, David from is FP&A Broach [ name the ] team. My Skechers' for harbor today. I joining you conference statement. us safe Thank the on call read will now Certain involve or future addressing or events limitation, estimates statements forward-looking expectations uncertainties. results including, statements constitute plans, that or company beliefs, and objectives, statements the of may contained herein, risks the without wars, United States, chain acts the general apply the other and conflicts disruption the foreign retail economic, and risks, the to, [ global, limited fluctuation, forward-looking and supply Such ] and business market retail the of but and including, as markets statements they and inflation, involve known to not war world impact conditions, consumer specifically in challenging including around and currency and local of unknown in industry delays national company.

to required XX-K, There federal a implied reports other report Form will can expressed Users statements achievements operations. actual company's business, be on forward-looking the risk and current recent with flows results statements all as cash other laws and Form Exchange our reports securities reports factors encouraged of quarterly filed XX-Q including that the no may performance description forward-looking the occur. annual SEC the Commission, future or results, of most X-K the U.S. assurance review by affect the Form for of with company's on on all Securities that of filings and any or significant by financial condition are

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

David Weinberg

quarter us joining XXXX for you conference for today thank and our afternoon, third call. Good

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our in goals remain and note quarter, objectives review third accomplishments our unchanged. we the that As to we want

in committed are to and impactful Skechers an increasingly experience the delivering technology ultimate shopping We world, and to products the manner. efficient, the comfort enhancing operating sustainable

XX% driven domestic third of International our were increased increase our of X% XX% $X.XX in quarter sales Gains segment. direct-to-consumer total achieved increased our year-over-year. by sales results. approximately representing a X%, sales sales, increase X%. at billion, of record We Looking an and

due X%, the sales decreased X%. to quarter, in distributor sales which lower wholesale international wholesale led to Our down primarily being

better prior Domestic driven the third deliveries wholesale accelerated in wholesale international was by year, quarter. at than expected Excluding to flat distributor X%. significantly was sales, up

our the product difficult first part are return marketplace, and levels signals continue trends year, domestic requests in incredible sell-throughs, we to of domestic see a XXXX the the healthier We the including encouraged the about of early for are solid back a in wholesale and of to optimistic we in prospects for booking deliveries, importantly, by XXXX. After positive most lineup. inventory growth wholesale on

This direct-to-consumer, locations increase XX% was growth where result to domestically performance our online increase driven XX% the by internationally, XX% a our the our strong a our growth driver with in sales, and of segment long-term total EMEA. Americas, of a XX% APAC XX% of includes direct-to-consumer our growth and stores. in and strategy. key in in both XX% Turning is At of brick-and-mortar XX%

seamless a As on are ensuring have improving more flow focused a and inventory. and such, we efficiencies creating driving we for of demand consumers fresh experience

quarter, and States, we France, and both X XX each in Chile the XX China, Skechers included In and XXX third-party XXX Canada, third-party India, the X Israel Vietnam, third stores. stores stores Colombia to China India, and X Skechers United in Hong count in XX. store Store Kong stores X X,XXX including to our our Korea, bringing and in in each in company-owned the in in and In X,XXX big South total X box and XX count opened, closed openings Peru. opened X in worldwide period,

date, company-owned the we've and Colombia opened States the X In United in X U.K., in to the fourth and each stores quarter Chile.

year. over to We expect XX worldwide to the company-owned the remainder of open XX stores

margins while XX% our inventory, growth. efforts simultaneously Reflecting maintaining our from XXXX year-end declined and manage to our increasing gross levels diligent

new the to to turn John year. operational our would details to We results. distribution Panama have expect out our now call like be of at in for Chile, our and end And I begun facilities shipping and the before we Canada centers of also financial over and more India in the on

John Vandemore

direct-to-consumer of David, which strength strength the by our regions. everyone. momentum grew continued delivered you, surpassing and quarter the Skechers brand of successful sustained growing highlights segment, strategy. afternoon, the Thank led $X our of and good and another digits record billion all double Skechers growth in globally the of sales, long-term execution X%, This

globally XX% to of quarter $XXX.X XX% domestically. million, our we Now sales international e-commerce Direct-to-consumer strong and the channel across meaningful on a which platforms. continued our again omnichannel and with outperformance experienced performance We reflects e-commerce to grew stores, innovative in target in let's are in saw review consumers internationally direct-to-consumer seeing driven on as for increases our year-over-year demand we The the results. inventory shifted retail our Consistent our once our enhance levels. our continued to what XX% third are industry, financial by capabilities. at products deliver as strategy growth our we stores domestic slowdown

versus which due in influenced of to declined expected prior X% billion. can $X.XX sales to year-over-year decreased X%, we decline due a which International Domestically, to of the accelerated orders, a year, facing flat which particularly prior timing was than we're markets, timing sales predominantly sales difficult to the were the to and heavily year. orders. Wholesale better our result significantly sales the a wholesale distributor by be comparison

as quarter, we encouraged for of in were well distributor up booking Excluding half positive the performance wholesale the first international by the have X%. were of segment the sales, sales we as XXXX. observed the wholesale trends Overall,

regional turning the to billion, driven quarter increased Now markets. by sales. across our year-over-year third for the sales In X% to Americas, growth $X.XX

continue in We of EMEA, offset direct-to-consumer stores. strong grew sales X% our our million, within direct-to-consumer region, driven business the to growth growth, see year-over-year In the drive by by distributors. strength to our to retail particularly nearly lower $XXX.X sales

strong double demand grew reflecting innovative direct-to-consumer particularly sales brand our product equation, the assortment in the distributor from for year-over-year, digits our Excluding EMEA channels. and

double-digit China, of sales growth driven in increased sales all Pacific, across Asia back In growth on the markets. year-over-year, XX%, robust million, $XXX.X segments In by channels. XX% in most grew

we are recover, by sustained retail and trends encouraged our seen, growth this positive expectations. which continues the As to exceeded we have market rates have

pricing XXX lower margins demand XXX The sales as retail XX.X%, gross by and as favorable a improvement to of basis percentage as points points prior year-over-year and growth was increased costs. distribution Operating XX.X%, in store expanded the to investments reflecting up channel mix expenses driven quarter increased year. capabilities. well creation, Third basis unit were compared

increased support our as investments brand worldwide. collection and X.X%, increased segment to and awareness as distribution consumer XX sales and marketing expenses expenses to and technologies percentage points on comfort Selling direct-to-consumer General higher basis newly capabilities increased The year-over-year administrative categories. driving to infrastructure a our were basis to higher globally, advance of for due volume-driven within to growth our points depreciation due year-over-year focused expansion to rent, mainly launched of sales of and our primarily a expenses of the including XX.X%. percentage brand expenses XXX building labor

for X.X% the Earnings million, compared from was prior XX% a operations the quarter XX.X% operating the to our margin increase prior in year, were year. to and compared $XXX.X

for prior exceeds year-to-date third prior full XX.X% accomplishment. in per diluted $X.XX which, year shares tax share per compared earnings share increase. to brings Our on This million XXX.X per share year. our items, unusual were diluted remarkable XX% effective Earnings all quarter a $X.XX, excluding was when XX.X% to the a results, rate the outstanding,

$XXX.X of to the cash, increase in capital year We balance our turning working million now efficiency. cash challenges experienced the billion management our prior and sheet. versus equivalents processing $X.XX improved the to Inventory $X.XX when ended And investments, and prior from with quarter million acute centers. compared a of billion, and was constraints capacity at operating distribution $XXX.X decrease XX% we or an year,

over Americas holiday or we prior to in current Notably, EMEA inventory that $XXX levels to levels both We demand early XX% and million key and and believe positioned our compared lowered well inventory the are selling by period the XXXX. year. support healthy during the

at end and stores to to million, expenditures purposes, our to new globally. our investments construction were of which were Capital was million million year quarter related with flat distribution direct-to-consumer million in including the $XXX.X technologies the million, receivable infrastructure and in Accounts $XX.X compared corporate for and expansion to related transportation, retail of wholesale our corporate general in quarter $XX.X the $XX.X our offices related prior of business. essentially line $XX.X

priorities, include Our capital focused which business strategic presence brand globally. and our direct-to-consumer expanding investments are supporting growing our our on

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

maintaining our while continue to ] enviable to [ sheet fund balance an consistent liquidity. our with deploy We capital stated philosophy

Now guidance. turning to

consumer We are portfolio proposition. and confident for brand demand compelling our in of our strength and globally value the product underlying differentiated

spending consumer of cautious due balance the the uncertainty in the year, remains continued in around outlook general environment and for macroeconomic environment to the particular. our However,

sales year, billion, we range billion of diluted range quarter earnings net $X.XX full the to to billion in $X.XX. the share $X.XX be $X.XX in range per of net earnings expect $X.XX in fourth billion per range the $X.XX. of to the $X.XX to of For and share in This sales the $X.XX will and implies

capabilities for look XX% that, and call additional thank China on we to you fourth time strategic X. Our year the and opening effective continue as India, omnichannel in $XXX our to expenditures our turn will for Thursday, like We be and and be expect and in total expected our financial quarter tax I including between you markets adding and capacity and we year expanding February stores, for still between million the $XXX today, is on release expect key rate to David million incremental to results, priorities, capital XX%, of full which updating invest forward we we over your closing to to Chile. now all remarks. distribution With

David Weinberg

the will States for to in delivered of of in the Skechers worldwide. to a footwear the offering We political X our and enhances brand. We performance remainder and commitment expect record Skechers quarter, and to expanded these and growth, continue the largest for continued we consumers headwinds recognize our offering John. factor the third challenge our you, our Thank and year. positions United impact sports sales around were quarterly technologies that believe business comfort to world the the the this us reflects top quality macroeconomic that and

We of comfort, our tenets reach are believe an of deliver momentum us price product and diverse resonates with innovation and consumers. our billion more will by style, as and positioned allow $XX to affordable to continue well ability at quality our positive goal our we our efficiently distribution XXXX, to

life. Skechers walks truly is of for all

the are lifestyle pitch, We the comfort it that deliver be trail, and brand footwear, now, golf occupational pickleball basketball we on go-to and court. for court soccer performs, comfort, course, and

annual with come. profitable more the be are sales to team excited the the another for notable new driving We believe to what record, in We're end years in and we achievements will successful manner grateful efficient entire Skechers a growth and to year delivering an quarter.

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

Operator

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

Jay Sole

John, about the fourth David, I ask quarter. Great. want the to guidance for

the guidance in first if spending the earnings of earnings XX%, there's the are X%. midpoint environment. X year, look down mentioned, obviously at about macro for XQ of But that concern the earnings says the You obviously, And which consumer is up tremendous. I quarters be will for

are for So give a seeing you magnitude a of that you that little in in you right just tells that would help margins, slowdown? if help us seeing like understand now And what us don't on bit fourth what be, expect quarter if margins like maybe you're the XQ, you mind?

John Vandemore

Sure, Jay.

as which expected. spending environment. all we've But is adjusted shape because year, had concerns the than the about have For we things I plan general better continuously this we've relatively remain we entire seen think up What view consumer consistent. our haven't that parameters of get intra-quarter, we much against we full the year

so good This our QX in is performance, better-than-expected quarter, another we internationally particularly outperformed high example pull through, direct-to-consumer forward which and flow-through of significantly range EPS. why flow expected really

Some QX. is of that from coming

that So we're in. pulling of bit a

surrounding and on in Day. you Singles international the QX I sensitive be quarters. other market as wildcard would us of say is the And the the some a very performance to for China China. events difficult-to-read to incredibly been is perform, all going how particularly know, markets That's

this to our though, As expectations. continued outperform quarter, you last it initial saw

we're doing QX this in stuff attempting to ensure carried quarter forward. from that what that came QX the is we us So EPS guidance with know into rewarded the is

we prudent felt certainly We the to probably China are it both markets. about consumer how to QX expectations perform particularly spending as some There are directions. going more those globally. well around consumer of sensitive of international environment in important kind will But of indicators kind as in was spending, be in our

were to prior substantially recognized we last business would wholesale It's there saw we marketplace. domestic in quarter, able seeing why our get the were shoots was we green again We similarly when which some wholesale thought. domestic to actually this flat also year, I quarter. what those to again, definitely we better were note, than

ends possible of we our that It's necessary fourth good people haven't to rates. that be condition entirely yet view forward that's seen margin, It from sell-through, haven't and pricing. some orders in into up point pull yet happen. What relative of quarter. some leading is carrying levels we seen But effect And good the even inventory QX. trickle-down the might forward, a to sell-through that's pulling good on

predict until are to seen for of go and trigger orders us haven't those that domestic timing to we going to We pulled, exactly tough it's when the accounts. do, out

pressures So for those guidance are kind QX of the the specifically. on downward

Although, we full carries through again, think one I the balance would results. note, of, to of proud if at tremendous and on has the you to this it basis, been year look quite it a a and relates full the year, year we're certainly as that year

remarks, of again, positive some I'd that's in very comment And as bidding in an a for next out are we what the signs opening our and just made well. we seeing encouraging year, then point incredible

Jay Sole

something Well, can had time. big transition, gives Maybe basketball really What have All David, opportunity basketball? ask something opportunity grow push in? to to do that's to a can obviously, basketball. an you've that basketball careful once invest also, a that that the business make you want confidence long really into about to try the I And ahead an that has into you you just always something I right. very advantage of. been helpful. been a for if today to now company very right can that of you company's time the is really makes What confidence is take see build ambition

David Weinberg

anybody not that going world. comfortable what that X to basketball. are the is them, they're the athletes promote that from that It's to And we're athletes tell me serious we've I sense wear. what the things to them, it's in to certainly for think technologies else paid. And them. confidence These more we're I'll and seen brand. they're talking the they way push with we of gives we're an only wear have buying what to And and very paying from receptive it's we're significantly the how that they them not athlete most our enjoy to around you to, technologies play those more acceptance make than the get very not the the

So started running. it started starts with we we -- with pickleball,

to get great it win was over as We to you the but that not shoes all it's many have people more soccer, market. speak a far as concerned. can we the running When we world them, difficult went awards football, shoes, running There's great. are to

We who the was shoes the receptive, familiar to brand. to it. wears receptive very black come out, we the He very helped certainly have committed who shoes, a was played He's the like with him. us. who player loves brand, Kane, Harry He before with with him loves He them. -- he

I the very have think out worry truly like much play in people are can in that is their anymore. comments as shoes make enjoy. comfortable and feet finding that we play quality It's our They they to they quality about the don't they as very maybe he's the with even Harry can He his though and golf. comfortable. [ up start he's career far is that play. us it ] in feeling has into this fastest very, told usually And his way as works had

Randle, was level, of went was working a he's others. Terrance and given with very them wears them, them, well, on about the way he are we're and how pair said of there is and he's certainly before we about he talk He positive on very telling hope people does them. to a shoes comfortable he made When loved the He on them. as the for was which speaking comfortable TV they very talking wearing is comments you other He day, -- them, interested players right how the was basketball receptive. we I Julius to what the When players about to Instagram them, and with brand, higher saw deal. for some them away.

will proud gives there. I perform confidence see is given So levels the they've us on anything it fact, well, that of us product that I willingness that part as brand of and I think be that believe you'll will it's their as a do those and well to the reception and NBA and well, is and it think sells -- they're multiple competes the out that's that play the

are and those brand is has something brand and in promote So backing players and all with certainly careers people taking they could of us with. brand and the play the continue them dealing capable delivering certainly capable our given their and the of complete with confidence

Operator

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

Laurent Vasilescu

about leading I And quarter. gross U.S. U.S. would -- forward gross will love to for How you there quarter and into then year? fourth be ask there wholesale. was quarter mentioned, John, a next pull about on the then margin trajectory for about the XQ wholesale think think fourth you fourth you do I that How do think margin? into

John Vandemore

Yes.

quarter. a about does mean definitely let the some So mix direct-to-consumer had margin, bit this premium once, David little of mix We mix from different particularly for the price. unanticipated. some within of is a the kind channels. we gross benefit. as me materialized, talk factors channel That's X product bit some little this saw a was mentioned, benefit newer which I There quarter, in at carry channel technologies, a

last We had also that put that pricing overt in internationally place year had us. benefited some we

of we'd not some think, some some into. as carry we had of points giving that I then because cost you'll significant forward. savings. you we're price did that that, And be to leave, like going opening And Some of get a back that, back result see to

seen the we'll healthy still at expect in of pricing get the international put us of cost we'll a I give couple get would back. of the last quite should kind mechanic, mix as very we expect still improvement but the to and benefit, savings, probably for years. significant as That year-over-year, the not quarter, fourth we've side again,

market domestic think, up, actually I X.X%. were far this concerned, as quarter, so the mentioned, as I is In we wholesale

watching of seen guarded were whom So we haven't bit wholesale market. being consumer the many cautiously deliveries we some are trigger of we of coming but Because out yet a accounts, still of little spending said flat, there. that accelerated the

different. much. that perspective Our changed little, not a view our It's up distinctly it's year but hasn't full is

be if QX coming expect to that the we And that's that's to We we said just were side. we get able could on flat. both QX, remember in see now It's QX pretty change for I that you -- quickly. would caveat QX saw into wholesale And would down. why and domestic QX. we that what

not we're that to we're what in we're but convinced So the yet moment. us QX, going that's down bookings the because modeling tell at what be that's

Again, lean certainly good inventory sell-through, that continues into for if the don't possibility. is to expect what we distinct perspective, that's the for But of hold, a want the too now, from much planning a put forecast. we to

Laurent Vasilescu

maybe then, high to about through economics And always the helpful. level, how it these talk be forward about maybe, like just key proposition do it's your just Very Kane, global what athletes a Harry works? can could of John, walk around audience, make the categories? there's for value just sponsoring just football. maybe you will Love -- proposition. you questions maybe, SG&A. value the crowded going think And Obviously, in if David, X hear you basketball, And in field

John Vandemore

bit Insofar our with is everyone parties unique. are it I to first be little clearly, ambassadors, relationship, as comfortable with. Yes. mean a relationships a both has

to just who for get comments into a getting particularly mean, I to we earlier, folks with when and go We're going are out name. big a us, looking a pay we're new category. David's to don't amount Just collaborate big

know well the help It's and going for really brand the not overall. brand work portfolio, engaged soccer So football, biggest just getting and the build we the with name every the to X across somebody the with ambassadors team we've for dollar. the biggest about is to that is of

are there economics. Clearly,

of shared success the are on output. based Some

cetera. appearance fixed on levels, et are based Some

brought a love So brand. our say Most also importantly, the brand. feel I the within very engaged which we're like with but sales overall parameters ambassadorships we economics variety. augment in They're on the both fit the in would entering, our much are The they marketing. we they board and that recent on credentials categories

So within we there. fit it

categories, complement to we're we're be everybody with to supporting looking is, not going of products. but to thing thoughtful X and mention the sign the trying we're a entering want because category and strategy. partners not brand very numbers. be athletes I'd just The our also other good the the with our That's everywhere. But We just

more a us I not because given these nurture these successful to quarter. them think reward to a business, you'll is than what we entrants -- build instantaneously try see do just want make

well. fit the structure as that So economics with

David Weinberg

Yes. And a the complete proposition, is proposition. a this shoes. of shoes starting we we price, of not offer and value I'm as for as now with a a right move And far competitive basketball is we goes value as sure football only multitude people we're through, What as through. it do multitude higher very topnotch

not comfort Of necessarily that great business end, kids down forward, at top the have will as particular and we people go which that we carry for quality having course, moderate great for we then more there's a point, play, kids quality price at and because then still know well. marketplace and comfort, value to a as we'll give more

all quality, price a out we're and we taking we play. everyone. over necessarily as time, pride delivering certainly So in through go think we'll But something now the top-notch, not best deal and with, the we we demographics expand for that have most it's will

point, And by way, fits add has the our how and guidance fits wholesale just year. to it everybody been how coming wholesale the for another about into and talking

it, our about difficulty the we is have think of business that you and now If the big such direct-to-consumer. a piece differential in

the so part begun big a difficult yet, hasn't tell. on the holiday period, of which depend it's obviously to will quarter So

with month to which starting gauge perspective in tell items a very wholesale Day, to just to which all those is because at Singles difficult the also October difficult pieces a is through, us significant we're late the come from also tell. pre-order of a the to period. sales is December. And a to there's Spring too in When move potential, which worldwide end quarter, as basis, on early Spring we the go for especially early the holidays forward deliver is to November, big

October, is us. it. All to is which early very feel And process, really month reads, positive in being about it's towards personally, I those. make to of too those coming make difficult But the a that

knows transparent, our for trying around we're the potential from is right sit be that least no perspective. possibility is my as where and both breaking a certainly So by and this our maximized guidance, everybody coming But the out early Spring direct-to-consumer to means at we honest, in now. world

Laurent Vasilescu

Super best helpful. gentlemen, Thank you, of luck. and

Operator

TD question next the coming John from line of is with Kernan Our Cowen.

Krista Zuber

This Zuber on is John. behalf of Krista

XXXX. Just more as a actions bit foresee on of get you in, QX domestic pricing you a just X compares, year. lapping into check some I how sense challenging particularly of head in additional I last you're believe, mean, ASPs, versus certainly,

great. if light you that, just would that shed be could some on So

John Vandemore

Yes.

So I expect be at kind a as you ASPs, on lot making in products. comparable movement of of to think we ASPs look wouldn't

mix et at So see year bit Arch point customers technology, the you're trade, What ASP Skechers to Fit price our likely has cetera. price a product seen little certainly, growth, but in has what which Slip-in product because technology. inflated the we've Skechers Hands-Free you're also is higher this some after consciously looking and our if choosing the is coming and increases, FX, FX that's that

think, us we A the That's we up portfolio but little of customers product. So balance good the the of XXXX, talk type too trade for for you to I would specifically some reflection what the are within year. about early that's, higher-priced ASP expect. for activity seeing of expect a

Krista Zuber

may. X just I if follow-up, Great. And

levels the how on XXXX? finishing inventory, the at Just sheet you inventory end do kind of balance see of the

John Vandemore

we made in recall, exactly inventory, made if we you headway XX on months when Well, is ton distribution inventory of what which a ago, would and mean, we do we've we swimming had challenges. were we said I --

X/X we're do fact that you Europe think of Americas, down I by the every can we gives need both that you tell to say we're mean, ounce in and proof today the going I you we So that what we'll do.

orders We the leave David have, right the the we inventories in an feel if a perspective, for from and of very would have bit things room now They you, we're early also positioned as well very inventory inventory They're we second well are well about for XXXX. part early tell the I positioned good us about move ago. little we to XXXX. opportunity talked very a But up overall, both positioned holiday. do permits, of the feel very but

David Weinberg

we it tend New the to the end early get to which at this on water early inventory January and fourth than rather and -- positive any has we of Historically, not first should we'll in chances into the this we the quarter in be about demand fourth later, where take late, prepared to build because year. everything the Spring Chinese before in we'd December trying and quarter. the feelings next because And rather Yes. of comes take to and need it be earlier at year stand, rather up the November and we're Year's, quarter, quarter and back than have now build early, we've early have we it given move pick

Operator

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

Gabriella Carbone

opportunities year, are? happen? So where on particularly maybe of margin would about mix could be potential shift the the think expansion that how biggest maybe we path the should and for front, wholesale beyond given And return thinking the margin then you us the gross help this about

John Vandemore

Yes.

on gross a for year we've astronomical the pretty a think because done to margin, what have increase I it's year-over-year. think just on I we recognize moment

a that of as to It's we're our of to our drive I quarter. Part that we're be we margin, also the say, environment talked we're fading we've the benefit increasing increasing some we mix see longer out about our the it's environment competitive do expect which contributor that restraining going which a we would in. improvement to mix promotion before. and of more selling It's is both system, certainly best factors international to do in meaningful fourth to of kind now product, are what can overall. the of though Some business, it of horizon is the of as expect profitable direct-to-consumer. same view, accretive relative the are we're of costs wholesale

we've this is overall been a -- in increased in story And to of both to stores, We're -- think, doors our outsized contributor. abundant any that's open business. have open been that certainly opportunities, give a not we of back. to of we contribution year. from also right, looking our retail meaningful year's particular, not continue think I a that's this direct-to-consumer part is with And its the categories, growth those which that, we're

part There that some to be lower factors early although from So this are from primary of cost trailing Those be freight. drive won't benefit, going That will -- well again, that nearly what the next this be, year, but as should or seen size of main year. those as lingering be opportunity. some not year the as to the will contributors. be continue we've significant scale benefits saw we into the there there

Gabriella Carbone

And a distributorship. I follow-up. backdrop helpful. maybe that Europe. of out wanted really excluding within if wondering that, That's expectation? trends did kind just into was could what just you in you're your I the the But seeing play understand I how consumer it. in dig to market Got ask burst

John Vandemore

business, because similar thought quarter, was outdistanced of we've we to our even was Europe domestic significantly this It's our although is little should kind in-store growth becoming in it given an we more and the EMEA relatively it's what the outperformed in in both what Yes. a market, interesting seen expect market, direct-to-consumer incredibly situation Obviously, strong. bit situation. which the online and wholesale that strong

as double we out you mentioned, grew EMEA take distributors, digits. When the wholesale

face year fourth I some quarter, markets up QX. the fourth that really the is some a QX, So drags continues And relative the we would face strong. that's which of comp to to in say above I on market to going in hard comparisons. XX%. mean be it's that XX%, were last had very quarter to X difficult

general, was that I in encouraging just to environment performance store But encouraging would And the saw same remains domestic Europe. of that, variety. we overall, would add say, incredibly also incredibly the in the consumer I also

we the to has good. today. where through any behavior. That's consumer in customer it remains consumer. sell Where the So look concerns is continue unusual we're who level, that seeing to if patents, wholesale things that That's any at order to concern level see

Operator

coming Jim question next from Our is Duffy with Stifel.

Jim Duffy

channel I can necessarily. then inventory. guys the speaking progress the Tremendous on that which you are sense pockets I'm have of there partner still more team challenge? curious a respect a comment the on that. question congratulations normalized? on excess from that's the the business. Any if to are you're for Or and seeing what for I'm inventory, becoming to DXC inventory Skechers-specific industry, not with you

John Vandemore

lean. I directly. Well, that last point, would can about. Skechers-specific if which you say would I on things see you back tell we which or year can would reference far aggregate, looked within that, as In if because say XXXX you, down you're as speak as it layer, a compare account, I pretty a look to we talking depends customer

business. their grown have Some

more turns, have much et more Some efficient, cetera. gotten

And some lagged. have

account. And not environment in similar so it's every for a

But good us. offer. good to in I lean can own from would that margin, things innovative. remark sell-through, of other more have lot that in the there And continue aggregate, context new, would we I accounts that it's we about seeing, of our price. to look good say product is a know And also stores fresh, again, It's out

own spending in concern the circumstances. markets. going position, not really I good downstream. both think normal but that major It's expect just on what's reorders yet under our would about account, And the is consumer to feel happen we simply we to see So to the with leading also

Can't we very and similar have from really than the tales other brands. heard other speak stories broadly to industry

to seeing. So are like a it others what that's seems pretty similar setup

Jim Duffy

DXC wanted to ask the And then sense. makes business. I That on

a store, and the had have year inventory do store availability You inventory was unique some you compromising limiting in ago congestions productivity. that comparisons versus

about some of some that the continuing? being comparisons? tremendous of moderation, DXC lapping Or is you gains degree there think we just -- business. the given see here Do in that made You've strength should the uniqueness

John Vandemore

suffering we've so quarter. expect a the from inventory. at this see more up made ever. happened of not detriment year lack being last we would much this time pushed to say is from there saw We than we a the continued still strength far were And consumers really online. of and I What online Well, full. had Online to stores stores be strength, lot

a we Stores available they online to product of was were product. more we And well part, that. what our in offset, why, had That's level. This a quarter, had were available, than of normalized think inventory unwound was little brought by stocked. there stores. they -- more kind on we bit e-commerce. the in the They obviously, down a newer It happened slowdown

far this we're what you, seen we've far, I thus lapping where encouraged comparable of in quarter. strength. so still a point we're We're levels -- even would seeing inventory tell by having getting to store

to last plus-XX% hard you said at mean, I normal we when retail think it's As behavior. about plan quarter, though, levels

cautious about planning being for. So definitely we're we're what

direct-to-consumer consumer really bearing a our start see saw had level, burden at the we of it bit overall, going last e-comm think the And to activity. I But good strength unfavorable the to of normalize from good I really year was more comparison our performance. we're when

going get about So here lot. both to point see selling holidays. overall, key what we're really we will still the feel shortly Obviously, And a from determine into made internationally. earlier, we that good to period domestically and David's

early ahead be all holiday that's to too to of And so still it's us. able we in because call what expect

Jim Duffy

I traffic as are trends? Or are last conversion? driven strength lot being to seeing DXC, What respect seeing if you increased good of volume, may. the traffic by X a you Is just increased Maybe question on with well? the

John Vandemore

channels, less seeing It happened, channel. performance. bit little depends a continue has about say for Traffic from we've some average, made and on areas, traffic Where traffic. In perspective. an traffic drive some AOV to you're faded regional in the behavior. I'd a though, particularly UPT on up it's it perspective, that's off

on we're so for And conversion. making up it

Jim Duffy

guys. Nice work,

John Vandemore

Jim. Thanks,

Operator

the Alex Morgan Our next from of with Straton coming is Stanley. line question

Alexandra Straton

particular question year. and quick in SG&A next on a spend going Just forward maybe

year? of trying of could your kind are typically points right it Or go-forward grows maybe next the sales. what a the and just couple just impact to I'm around think spending what takes understand that's if below I SG&A puts level?

John Vandemore

SG&A a of of mean #X happens. factor Alex. The volume, different always big where a always is things, I basket kind Yes. the of is volume lot

trends enable us the was should more we would into happening we the think we we would That in to et what year leverage of us manage be in in elsewhere. that distribution, to portion, the this more as line had growth, normally that but with leverage is, to allowing SG&A, much year, in expect SG&A come to to volume put where areas leverage those we put saw into us to position being volume again, would able I particularly able cetera, sales the future, unusual that volume not having line. it as this like. more and wasn't some In

within sometimes several underway. quarter, amount, It's of time on. this growth. have launch. yet we I money lot these But case. been -- you're duplicative to there's centers parameters have and focused and some kind you And note have top I'm a categories that really going have would give We bear. obviously, distribution on we spending center we've there's from although this the we're also to investments that costs to about do online when both the preopening talked something we another, Those transitioning that of We are are year. to not X of want to specific it keep know line a going usually,

a get perspective We're and to profitable. open up margin for going from quarter. them because Those of to operating it drag a while number an near-term get are a takes stores just meaningful always this

something also a less point which of reflective some the G&A shown within business and of we've is the back is of the leverage. factors we state to well the can get that there's I than preparing current ultimately for do So future, think

also made overinvesting the perspective. then sales window think, you we've think a particular, really side, technology S with in shoes their resonates I consumers really that to out It's mentioned I offering We've and make a just them. when unique are And marketing something got, note that Skechers us. It's about shopping Hands-Free seek as behavior. on our is in It to just year, this solution. unique understand the we're consumers sure in we a

And to branded gets make so year. that we want sure this well

think we're conscious years investments making well. that the some little as -- think will trend side we in are and why sales marketing So off pay above for that's on a to come, we bit

Alexandra Straton

in, think least those well to latest it front Is inventory being costs? gross And the I at to quick all at it were was follow-up. just X -- impacted in by as margin costs that still Maybe like the half higher impact gross some is burdening extent. logistics margin some

John Vandemore

in those were margin. SG&A. Well, in weren't gross Those

now, cost speaking past like, be think to a move year is performance. some mentioned the we've of is costs sure. which They're we There would inventory of a overall you're about that than driver of what done do we those that to I think, incurred lot -- major longer last the really, are we congestion. lingering not I

But we're here. costs, although them out not material noted of the know we're most haven't we thereof. components out So completely would all of those I of

this that we From got a shipping gross in of a year that continue year. cost from pricing. balance definitely had mix the margin And excessively into the to prior perspective, what we through really benefits then see benefits high and as QX, is we favorable in but from little lapping QX bit,

to merch was what we've higher to results, is where it abnormalities a is able impacting show sort any margin, margin ever without getting a cleaner So than why been of it's of last you're than we're more significantly point which seeing year. a

Operator

next Our Wedbush with from Securities. is Tom question coming Nikic

Tom Nikic

Can there. your much think impacted so year, us has the $XX last I high guide you million. we million when $XX the for you U.S. end I by think there's I since think know have headwind beat changes by I the FX John, revenues, the you year you guidance? how that for imagine the reported, would dollar full essentially about and strengthened that time the -- high a of guidance lot, a end lowered contextualize

John Vandemore

that's of it. little bit Yes. I a mean

around think China midpoint in actually to caution is to conservatism change I a $XX of scheme is handle wholesale to by domestically during everything about get holiday on And trying our we're to the if going good the amount to what on million, around see would not you, a materialize where Singles be. grand which a do in going things. then front. Day, the we about midpoint, things So with we has that tell big

flip about FX. quarterly those of now, come the side, really That's that the to or I ton this from on to which X are of do factors, also It we're It on year going more X really X line we've you, the for us guide. with a it's X those factors, the factors have doesn't basis sight from, a because to of talked clean because those beating hardest that talking would is months tell ones get all been have into more for where about about.

Tom Nikic

that trends about I could if normalize with up has sell-through been the the All have -- better trends. sell-through the the year wholesale been you've on to And talking eventually, Is sell-in. business. follow than sell-in long, Understood. how

XXXX about you're Spring to Now are orders having again that wholesale should in Spring up seeing starting visibility we happen? Like XXXX? think that into orders, recovery you being

John Vandemore

all in should, for we've it that's it most honesty, cure like decoupling think we but to the that of a We year. as has. quickly as Not would faster than seen it

And good. And take the that sell-through said, comfort prices retailers we some At than ultimately, The got of to we've stronger some think seen fact catch mismatch. strong. lean. The certainly, definitely as to I they've the thus we've the The is is are that point, far sell-in. contribution of inventories up. been are what margin those at X have match has point.

mean, And our flip the to The up. wholesale, up. stores brand. the look growth when to was bit growth coming markets a customers you overall. at the was look think, including mentioned our our within domestic vast little I script are it domestically, majority and I though, both international I growing. of regions, performance are We the the if up those the at

brand. the to the have the have getting to is which we on the right customer business, because sell-in rely our to the composite to now. than wholesale our brand those we into includes can't advantage taking We of So more own control of avenues partners, like But they're of some them what direct-to-consumer.

David Weinberg

I also magnitude at of big have was of to businesses. for take our parts the inventory a order how you of look think different

see as say into sellout far is for business $X we're hasn't take We're as billion-plus. grown We're catch at if third going up year-over-year at you which suppliers catch that the don't worry, the inventory If by we Yet growing we're cost, at other them we're telling you our we sold. And to use, if inventory, concerned. our one $XXX finishing bought great, quarter, obviously, $XXX very no billion is looking nicely. were business, side, account can own million predominantly $X than statement up. selling less our at our on our in means has we'd be look we on which that soon. meanwhile, But our you to that million

Our inventories are line in and lean.

order So of magnitude percentage, on as They've are you had inventories much far them. out in evaluate a distributors. inventory significant so online. believe, growing. our grows, when increase seems been coming for and The our stronger we I It selling we is QX. direct-to-consumer They Their a in well. true as did. same, will They're are

that increase as in well purchasing. So perspective, that our will for

product in chasing couple and know the well outside so marketplaces, level. have into particular people world in had that certainly nervous their and a U.S. their in barring products only product predominantly because are the here, And it's And clean obviously third point. we businesses about as anybody only feels as inventory they as not I because are business while about well in in general insight known. at their hot we this and parties, everybody out at a different the don't do But don't a more general. we much some Skechers do, that there's see in our U.S., many Europe

to closer. back clean, be we they're stuff know we some, be and So holding know sell. our And got but they ourselves they'll and will

in know way than by the back-to-school, through says have because that issues time place. normal part we assume the that or second I would we'll the like will it's over next quarter, sometime I we but got all to to anybody inventory flows year, the and first year, just get issues time, going in a inventory. that first to be next believe to more it's too don't quarter, get one of So will believe, We'd much coming bigger

Tom Nikic

in if about And could basketball it. I more the launch. just Got X sneak

Unknown Executive

always We basketball. about talk can

Tom Nikic

you comes that like get this as I given not big view guess, basketball mean, is some their opportunity to one I Like, maybe you're mind, that to doors business. Foot in today? the Do an into Locker obvious

David Weinberg

going, buy those do We some and other consumers, think we consumers product doesn't distribution. Yes, to possible, through us sell we'll as those that places, or control. certainly And and that's I everywhere, think this come direct-to-consumer fairly not certainly it. but will our we expand it's our exclusive. find Obviously, get they can there's our it's of

we around world, to can we'll have grow the yet. us levels capture the football will technology, through to carefully into we powering and and a we we'll we through for wear continue we the great penetrated grow certainly we're make the biggest and today the earliest as move forward, on basketball. planning that a grassroots people haven't not on the And into make -- at do impact of That's it opportunity basis, the will on But following think a we want We on both lot not as But consumers. think on get comfort to it's product, and worldwide in to soccer, time. that those distribution build We're more we it thing. -- grow. that

Tom Nikic

I'm Julius hoping shoes your playoffs elevate this good. help Sounds game in his year. can the that

fingers So crossed.

David Weinberg

No on We're it. working problem.

Operator

the Piper is final from with line Zvejnieks Our coming Sandler. of question Abbie

Abigail Zvejnieks

you how then you Europe. give any you quarter-to-date? domestically specific can wholesale was has can EMEA Just there in on wholesale -- gave trended know digits as just And color international up double -- I the follow-up, -- is for direct-to-consumer a

APAC Excluding that is metric for give same you those can possible? distributors,

John Vandemore

great this so direct-to-consumer continue to isn't the about to continued quarter, business. in So I comfortable early David's similar saying far probably we're holiday note strong. would direct-to-consumer been readthrough of often. be a have things But to think I we've kind as October far seen strength comment, good, as

similar period in a in where QX. much particularly last noted, and QX year, into inventory disparity a situation store getting where, as to compared are we more levels, it's We the in

going to as lift There's to a going much more normal year. comparison. it's So this a be be not of

as with we saw of there as a business of much isn't distributor APAC there I without disparity in in by the of APAC -- of APAC. the because we've But continued really well. within some wasn't between We we an e-commerce go to x number that distributors. concentrated context, seen domestic encouraged give would geographically. Distributors turnaround say things. distributor don't some also much what on a we're don't are it's growth of the or side really And

timing distributors a seeing the much year-over-year. differential weren't So Asia of as

Just -- compared the at it when to this last quarter the recollect XX%. year up last by like correctly, context, into last put quarter, way, we or were to look if distributor quarter, distributors I

with simple comparison also prior to as that very So that it's And that a unfavorable year number. factor in well. was dealing contributing a we're

Abigail Zvejnieks

sense. you. Thank That makes

Operator

we conference. at and day. reached our Ladies session. We thank wonderful And you for gentlemen, may disconnect lines Have the have you your today's you. question-and-answer end of does participation, your Thank a this conclude and this time.

Skechers U.S.A. (SKX) 26 Oct 232023 Q3 Earnings call transcript