SKECHERS USA, Inc. (SKX)
Q4 2009 Earnings Call
February 17, 2010 4:30 pm ET
David Weinberg - Chief Operating Officer
Christopher Svezia - Susquehanna Financial Group
Sam Poser - Sterne, Agee & Leach
Susan Sansbury - Miller Tabak
Elizabeth Montgomery - Longbow Research
Previous Statements by SKX
» Skechers USA Inc. Q3 2009 Earnings Call Transcript
» Skechers U.S.A. Inc. Q1 2009 Earnings Call Transcript
» SKECHERS USA Inc. Q4 2008 Earnings Call Transcript
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Users of forward-looking statements are encouraged to review the companies fillings with the U.S. Securities and Exchange Commission, including the most recent annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all other reports filed with the SEC as required by federal securities laws for a description of other significant risk factors that may affect the company's business, results of operation, and financial conditions.
With that, Skecher's Chief Operating Officer, David Weinberg will begin with prepared comments.
Thank you for joining us today to review Skecher's fourth quarter and year end 2009 results. As always, we will open the call to questions following our prepared comments.
Fourth quarter 2009 net sales totaled $388.6 million, a new fourth quarter record, and $1.436 billion for the full year. Net earnings for the fourth quarter were $27.9 million and diluted earnings per share were $0.58. For the year ended December 31, 2009, net earnings were $54.7 million and diluted earnings per share were $1.16.
As discussed in our previous 2009 quarterly conference calls, we anticipated that the weak retail environment would negatively impact our domestic and international business in the first half of the year but the second half of the year would be profitable.
This has been the case as we’ve achieved strong momentum and record sales in both the third quarter and fourth quarter. Our record fourth quarter sales are the result of high double digit sales growth in both our international subsidiary and domestic wholesale businesses, high double digit growth in both our domestic and international Skechers retail divisions with combined domestic and international retail store comps up 17.4%, high double digit growth in our e-commerce division, double digit improvement in our women’s, kids, and work divisions with single digit growth in our men’s business, greatly improved gross margins of 48.7%, the result of less closeouts and more in line, in demand inventory combined with strong sell throughs, an increase in pairs sold of 8% and an increase in average price per pair of $5.27 or 27%.
Key achievements for the year include annual sales of over $1.4 billion in a difficult retail environment, domestic and international backlog of 40% at year end, and an improved balance sheet with approximately $296 million in cash and short term investments, representing $6.21 per share and current and on plan inventory to support our new divisions and retail store growth.
Based on our key performance indicators which include backlog of 40%, positive double digit retail comps and strong sell throughs, all of which continue into the first quarter. We believe we will see continued product and brand momentum in 2010.
During 2009, Skechers was a key footwear resource for our retail partners in the United States as both they and consumers gravitated towards a well known brand with compelling product that met their needs in terms of style and price and supported by relevant marketing.
Our domestic wholesale business increased approximately 38% in the fourth quarter and decreased 5% for the year. The improvement in domestic wholesale revenues in the quarter is particularly significant in comparison to the earlier quarters in the year which saw declines of 10% in the third quarter, 20% in the second quarter, and 18% for the first quarter.
The quarterly improvement is the result of strong sales in key Skechers mens and womens lines, the continuing growth of our kids lines, and an average price per pair up 27%. We saw broad acceptance of key new adult styles which increased our SKU position and existing doors and resulted in the opening of new accounts.
We supported our womens and mens lines with print, outdoor, and television campaigns along with grass roots marketing, creating a buzz across America and inspiring considerable press coverage. With the support of numerous TV spots featuring our cast of characters, our boys and girls lines saw double digit improvement.
The 5% decline in domestic wholesale for the year was primarily due to accommodation of the liquidation of inventory at reduced prices in the first six months, the challenging retail environment, and the closing of several fashion brands. The recent reaction by key accounts to our Skechers spring product has been extremely positive during our pre-line meetings over the last five weeks and at the recent trade shows, WSA and FFANY, which leads us to believe our domestic wholesale business will continue to be strong in 2010.