Skechers USA, Inc.
) posted first-quarter 2013 earnings of 13 cents a share compared
with a loss of 7 cents delivered in the prior-year quarter on the
back of growth witnessed across domestic wholesale,
international, company-operated retail businesses and e-Commerce
However, the bottom-line results missed the Zacks'
expectations of 18 cents a share. Management stated that the
quarterly earnings were hurt by 8 cents a share due to foreign
currency translation loss of $3 million and a credit of $2.5
million to an account that bought a major part of excess toning
inventory way back in 2011.
Let's Unveil the Picture
Skechers, which competes with
Deckers Outdoor Corporation
), stated that total net sales for the quarter surged 28.6% to
$451.6 million from the prior-year quarter, reflecting increased
demand of products and healthy performance across all revenue
channels. Moreover, total revenue outpaced the Zacks Consensus
Estimate of $442 million.
With more emphasis on the new line of products, cost
containment efforts, inventory management and global distribution
platform, the company anticipates sustaining the growth momentum
in 2013. Skechers hinted at significant growth in the third
quarter in comparison to the second quarter due to early Easter
on Mar 31 this year, and back-to-school deliveries going into the
third quarter of 2013.
The domestic wholesale business marked an elevation of 44%,
reflecting a jump of 47.1% in pairs shipped coupled with strong
performance across men's, women's and kids' divisions. The
company's Performance Division portrayed an exceptional
performance attributable to Skechers GOrun, Skechers GOwalk,
Skechers GOrun Ride, and Skechers GOrun2. The company has also
introduced Daddy's Money for Juniors and SKCH+3 product
Skechers' international business soared 20.7% on the back of
29.9% growth in international distributor business and an 18.1%
rise in international subsidiary and joint venture sales. The
tough macroeconomic conditions weighed upon the company's
performance in Spain and Italy. However, Italy is now witnessing
a soft recovery. Pan-Asia region (including Japan), Russia,
Scandinavia, the Baltics, Turkey, Greece, Philippines, South
Korea, Australia/New Zealand, Middle East and Africa all
portrayed growth momentum.
Management now expects its international business to remain
even in the second quarter due to early Easter and booking
trends, but hinted sustained growth from the third quarter.
On a combined basis, retail business sales grew 16.9%, whereas
comparable-store sales advanced 12.2%. Domestic retail sales rose
16.2%, while comparable-store sales increased 11.3%.
International retail sales jumped 21.6%, whereas comparable-store
sales climbed 19.4%.
The company's licensing division has been another source of
revenues, whereby the company licenses its name and images. The
company generated $1.8 million in revenues during the quarter
from its licensing affiliates, which include apparel, eyewear,
backpacks, and socks.
Another highlight of the quarter was a 24% rise in sales from
the company's e-Commerce division. Though the company uses it as
a marketing tool, the division remains successful in driving
incremental sales during the quarter.
The quarter exhibited a major improvement in gross profit,
which soared 23.8% to $192.7 million, reflecting higher sales
volume, enhanced inventory and contemporary products. However,
gross margin shriveled 160 basis points to 42.7%. The contraction
in gross margin was due to lower selling price, product mix and
offloading of inventory at a discount.
Skechers had 353 retail stores under operation at the end of
the first quarter. The company during the quarter opened 1 store
each in Puerto Rico, Utah, Fla., and Glasgow. The company
shuttered 5 outlets in the quarter. So far, in the second quarter
of 2013, Skechers has opened one outlet in Puerto Rico, one in
Phoenix, and its first store in Santa Barbara. A new location was
inaugurated in Japan, bringing the total count to 4. The company
plans to open 3 more stores and close 5 outlets during the second
quarter. For the remaining part of the year, the company
anticipates opening 28 to 32 outlets.
At the end of the quarter, the company operated 118 outlets
under joint ventures in Asia, including stores operated by
licensees, 260 distributor-owned or licensed Skechers retail
stores globally, and 21 company-licensed locations in Canada,
Spain, Portugal, Ireland, and the Netherlands.
During the quarter, Skechers' under its joint ventures and
through its franchisees and distributors, opened 10 outlets,
which included 2 each in South Korea, China, and Hong Kong, and 1
each in Saudi Arabia, the Philippines, Denmark, and Lebanon. The
company now operates 75 stores in South Korea and 56 in China. So
far in the second quarter, the company has opened 12 outlets with
20 more on the cards. In the first quarter, the company shuttered
5 outlets, 1 in Indonesia and 4 in Russia. In the second quarter,
1 location was closed in Singapore.
Management remains committed to focus on new lines of
products, opening of additional Skechers stores and increasing
distribution channels with the development of international
distribution agreements to boost its sales and profitability.
Moreover, international business remains a significant growth
driver for the company's sales. Skechers, through its
distribution networks, subsidiaries and joint ventures, is poised
to enhance its global reach in the footwear market.
Other Financial Aspects
Skechers ended the quarter with cash and cash equivalents of
$264.7 million, long-term debt of $125.5 million and
shareholders' equity of $883.1 million, excluding non-controlling
interest of $46.1 million. Capital expenditures for the quarter
were approximately $7.8 million.
Zacks Rank for Skechers
Currently, Skechers carries a Zacks Rank #4 (Sell). However,
there are certain other stocks in the consumer discretionary
sector that warrant a look, such as
Iconix Brand Group, Inc.
), which carries Zacks Rank #1 (Strong Buy) and
Francesca's Holdings Corporation
), which holds a Zacks Rank #2 (Buy). Both the stocks are
expected to continue with their upbeat performances.
DECKERS OUTDOOR (DECK): Free Stock Analysis
FRANCESCAS HLDG (FRAN): Free Stock Analysis
ICONIX BRAND GP (ICON): Free Stock Analysis
SKECHERS USA-A (SKX): Free Stock Analysis
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