Skechers U.S.A. Inc. (SKX)
Q1 2009 Earnings Call
April 29, 2009 4:30 pm ET
Robert Greenberg - Chief Executive Officer
Fred Schneider - Chief Financial Officer
David Weinberg - Chief Operating Officer
Chris Svezia - Susquehanna Financial Group
Sam Poser - Sterne Agee
Jeff Mintz - Wedbush
Maggie Gilliam - Gilliam & Company
Dave Turner - Avondale Partners
Previous Statements by SKX
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I would now like to turn the conference over to Skechers for their opening remarks. Please go ahead.
Good afternoon and thank you for joining Skechers quarterly financial results conference call. I will now read the Safe Harbor statement. Certain statements contained herein, including without limitation statements addressing the beliefs, plans, objectives, estimates or expectations of the company for future results or events may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended.
Such forward-looking statements involve known and unknown risks, including but not limited to global, national and local economic, business and market conditions, in general and specifically as they apply to the retail industry and the company. There can be no assurance that the actual future results, performance or achievements expressed or implied by such forward-looking statements will occur.
Users of forward-looking statements are encouraged to review the company’s filings 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 operations and financial conditions.
With that, Skechers Chief Operating Officer, David Weinberg, will begin with prepared comments.
Good afternoon and thank you for joining us today to review Skechers first quarter 2009 results. As always, we will open the call to questions following our prepared comments. First quarter 2009 net sales totaled $343.5 million. Net income for the first quarter was $8.2 million and diluted net earnings per share were $0.18 for the first quarter of 2009.
During the first quarter, we recorded a reduction to our income tax expense of $1.9 million or $0.04 per share related to an over accrual of income tax expenses from the prior year. As anticipated, the weak retail environment negatively impacted our domestic and to a lesser degree international business in the quarter.
In spite of this, we were profitable in the first quarter and showed significant improvements over the fourth quarter of 2008. Our focus in the quarter was on managing our expenses and inventory. We reduced our inventory by $88 million from year end. In addition, we reduced our general and administrative expenses by $5.2 million.
In spite of 29 more retail stores being operated in the first quarter of 2009 versus 2008, and additional expenses of $3.8 million related to China and Brazil as we gear up our operations in these regions. We are continuing to manage our expenses and inventory as we carefully monitor the economic environment. We intend to protect our shelf space and continue to advertise.
We believe we will be profitable in the second half of the year and we will emerge as an even stronger company due to our well-known and trusted brand, wide range of product at reasonable prices, dedicated advertising support, and our ability to efficiently deliver the right product and more importantly, when our accounts need it. The continued downturn in the economy and the impact on retailers and consumer spending habits resulted in our first quarter domestic wholesale business decreasing by 18% over the same period last year.
It is important to note that Skechers continues to either hold or gain shelf space in many of our core accounts. Several of our Skechers and uniquely branded fashion lines experienced solid sales in the quarter, including Skechers Sport for Men, unlimited by Marc Ecko, Zoo York for Women and our fashion kids collections. Also, our new brands at BEBE Sport and Punkrose exhibited strong initial showings.
We support each of our brands with targeted marketing that includes print, television and outdoor advertising. In the first quarter, we launched new campaigns for our Skechers men’s and women’s lines, including a new ad with American Idol winner David Cook; new Marc Ecko print and TV campaigns starring High School Musical star Vanessa Hudgens and mixed martial arts fighter Frank Mir; and new print and TV for Punkrose and Zoo York.
We also developed new TV campaign for kids featuring our animated characters. We continue to believe that advertising our brands in our unique and targeted manner positively impacts sales. While we continue to remain one of the top footwear vendors to a majority of our accounts, the reduction in orders we have experienced reflects the extremely cautious stance our retail partners are taking with regard to inventory planning.
Because of this, the current retail environment will continue to be a factor in our domestic wholesale business. Our lines are experiencing strong sell-throughs at retail now and we believe our brand remains very relevant and important to the offerings of our accounts. We are focusing on developing fresh styles in each of our lines and delivering a style right value proposition that resonates with consumers in the United States.