skx-10q_20230331.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 001-14429

SKECHERS U.S.A., INC.

(Exact name of registrant as specified in its charter)

Delaware

95-4376145

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

228 Manhattan Beach Blvd.

Manhattan Beach, California

90266

(Address of principal executive office)

(Zip Code)

(310) 318-3100

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading symbol		Name of each exchange on which registered
Class A Common Stock, par value $0.001 per share		SKX		New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of April 27, 2023, 134,270,786 shares of the registrant’s Class A Common Stock, $0.001 par value per share, were outstanding.

As of April 27, 2023, 20,463,521 shares of the registrant’s Class B Common Stock, $0.001 par value per share, were outstanding.

SKECHERS U.S.A., INC. AND SUBSIDIARIES

Form 10-Q

Table of Contents

PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets (Unaudited)	3
	Condensed Consolidated Statements of Earnings (Unaudited)	4
	Condensed Consolidated Statements of Comprehensive Income (Unaudited)	5
	Condensed Consolidated Statements of Equity (Unaudited)	6
	Condensed Consolidated Statements of Cash Flows (Unaudited)	7
	Notes to Condensed Consolidated Financial Statements (Unaudited)	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	19
Item 4.	Controls and Procedures	19

PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	20
Item 1A.	Risk Factors	20
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	20
Item 3.	Defaults Upon Senior Securities	20
Item 4.	Mine Safety Disclosures	20
Item 5.	Other Information	20
Item 6.	Exhibits	20
	Signatures	21

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

SKECHERS U.S.A., INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Unaudited)

	As of			As of
(in thousands)	March 31, 2023			December 31, 2022
ASSETS
Current assets
Cash and cash equivalents	$	760,040		$	615,733
Short-term investments		89,507			102,166
Trade accounts receivable, less allowances of $61,984 and $59,472		1,052,687			848,287
Other receivables		82,948			86,036
Inventory		1,502,247			1,818,016
Prepaid expenses and other		222,556			176,035
Total current assets ($1,061,021 and $1,014,962 related to VIEs)		3,709,985			3,646,273
Property, plant and equipment, net		1,377,588			1,345,370
Operating lease right-of-use assets		1,239,222			1,200,565
Deferred tax assets		461,614			454,190
Long-term investments		80,743			70,498
Goodwill		93,497			93,497
Other assets, net		81,822			83,094
Total non-current assets ($608,819 and $598,973 related to VIEs)		3,334,486			3,247,214
TOTAL ASSETS	$	7,044,471		$	6,893,487
LIABILITIES AND EQUITY
Current liabilities
Accounts payable	$	892,057		$	957,384
Accrued expenses		269,225			294,143
Operating lease liabilities		247,411			238,694
Current installments of long-term borrowings		100,469			103,184
Short-term borrowings		30,471			19,635
Total current liabilities ($538,025 and $568,158 related to VIEs)		1,539,633			1,613,040
Long-term operating lease liabilities		1,092,711			1,063,672
Long-term borrowings		230,275			216,488
Deferred tax liabilities		8,722			8,656
Other long-term liabilities		126,835			120,045
Total non-current liabilities ($310,148 and $293,726 related to VIEs)		1,458,543			1,408,861
Total liabilities		2,998,176			3,021,901
Commitments and contingencies (Note 10)
Stockholders’ equity
Preferred Stock, $0.001 par value; 10,000 shares authorized; none issued and outstanding		—			—
Class A Common Stock, $0.001 par value; 500,000 shares authorized; 134,259 and 134,473 shares issued and outstanding		134			134
Class B Common Stock, $0.001 par value; 75,000 shares authorized; 20,474 and 20,810 shares issued and outstanding		20			21
Additional paid-in capital		383,540			403,799
Accumulated other comprehensive loss		(80,217	)		(84,897	)
Retained earnings		3,411,374			3,250,931
Skechers U.S.A., Inc. equity		3,714,851			3,569,988
Noncontrolling interests		331,444			301,598
Total stockholders' equity		4,046,295			3,871,586
TOTAL LIABILITIES AND EQUITY	$	7,044,471		$	6,893,487

See accompanying notes to unaudited condensed consolidated financial statements.

SKECHERS U.S.A., INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Earnings

(Unaudited)

	Three Months Ended March 31,
(in thousands, except per share data)	2023		2022
Sales	$	2,001,928	$	1,819,594
Cost of sales		1,023,349		995,431
Gross profit		978,579		824,163
Operating expenses
Selling		128,560		108,209
General and administrative		626,442		540,050
Total operating expenses		755,002		648,259
Earnings from operations		223,577		175,904
Other income (expense)		9,923		(5,746	)
Earnings before income taxes		233,500		170,158
Income tax expense		43,216		33,992
Net earnings		190,284		136,166
Less: Net earnings attributable to noncontrolling interests		29,841		14,943
Net earnings attributable to Skechers U.S.A., Inc.	$	160,443	$	121,223
Net earnings per share attributable to Skechers U.S.A., Inc.
Basic	$	1.03	$	0.78
Diluted	$	1.02	$	0.77
Weighted-average shares used in calculating net earnings per share attributable to Skechers U.S.A., Inc.
Basic		155,140		155,996
Diluted		156,755		157,448

See accompanying notes to unaudited condensed consolidated financial statements.

SKECHERS U.S.A., INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

	Three Months Ended March 31,
(in thousands)	2023			2022
Net earnings	$	190,284		$	136,166
Other comprehensive income, net of tax
Net unrealized (loss) gain on derivative contract		(1,416	)		5,843
Gain on foreign currency translation adjustment		6,851			1,489
Comprehensive income		195,719			143,498
Less: Comprehensive income attributable to noncontrolling interests		30,596			20,021
Comprehensive income attributable to Skechers U.S.A., Inc.	$	165,123		$	123,477

See accompanying notes to unaudited condensed consolidated financial statements.

SKECHERS U.S.A., INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Equity

(Unaudited)

	Shares						Amount									Accumulated
(in thousands)	Class A Common Stock			Class B Common Stock			Class A Common Stock			Class B Common Stock			Additional paid-in capital			other comprehensive loss			Retained earnings		Skechers U.S.A., Inc. equity			Noncontrolling interests			Total stockholders' equity
Balance at December 31, 2022		134,473			20,810		$	134		$	21		$	403,799		$	(84,897	)	$	3,250,931	$	3,569,988		$	301,598		$	3,871,586
Net earnings		—			—			—			—			—			—			160,443		160,443			29,841			190,284
Foreign currency translation adjustment		—			—			—			—			—			4,680			—		4,680			2,171			6,851
Distributions to noncontrolling interests		—			—			—			—			—			—			—		—			(750	)		(750	)
Net unrealized loss on derivative contract		—			—			—			—			—			—			—		—			(1,416	)		(1,416	)
Stock compensation expense		—			—			—			—			14,252			—			—		14,252			—			14,252
Shares issued under the incentive award plan		225			—			—			—			—			—			—		—			—			—
Shares redeemed for employee tax withholdings		(99	)		—			—			—			(4,498	)		—			—		(4,498	)		—			(4,498	)
Repurchases of common stock		(676	)		—			(1	)		—			(30,013	)		—			—		(30,014	)		—			(30,014	)
Conversion of Class B Common Stock into Class A Common Stock		336			(336	)		1			(1	)		—			—			—		—			—			—
Balance at March 31, 2023		134,259			20,474		$	134		$	20		$	383,540		$	(80,217	)	$	3,411,374	$	3,714,851		$	331,444		$	4,046,295

Balance at December 31, 2021		135,107			20,939		$	135		$	21		$	429,608		$	(48,323	)	$	2,877,903	$	3,259,344		$	282,728		$	3,542,072
Net earnings		—			—			—			—			—			—			121,223		121,223			14,943			136,166
Foreign currency translation adjustment		—			—			—			—			—			1,501			—		1,501			(12	)		1,489
Distributions to noncontrolling interests		—			—			—			—			—			—			—		—			(4,650	)		(4,650	)
Net unrealized gain on derivative contract		—			—			—			—			753			—			—		753			5,090			5,843
Stock compensation expense		—			—			—			—			17,967			—			—		17,967			—			17,967
Shares issued under the incentive award plan		566			—			1			—			(1	)		—			—		—			—			—
Shares redeemed for employee tax withholdings		(192	)		—			—			—			(7,971	)		—			—		(7,971	)		—			(7,971	)
Repurchases of common stock		(652	)		—			(1	)		—			(24,999	)		—			—		(25,000	)		—			(25,000	)
Balance at March 31, 2022		134,829			20,939		$	135		$	21		$	415,357		$	(46,822	)	$	2,999,126	$	3,367,817		$	298,099		$	3,665,916

See accompanying notes to unaudited condensed consolidated financial statements.

SKECHERS U.S.A., INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Three Months Ended March 31,
(in thousands)	2023			2022
Cash flows from operating activities
Net earnings	$	190,284		$	136,166
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities
Depreciation and amortization		41,424			36,516
Provision for bad debts and returns		9,792			14,024
Stock compensation		14,252			17,967
Deferred income taxes		(6,146	)		5,365
Net foreign currency adjustments		(9,605	)		2,281
Changes in operating assets and liabilities
Receivables		(185,430	)		(280,334	)
Inventory		325,478			24,012
Other assets		(76,533	)		3,515
Accounts payable		(70,945	)		(65,404	)
Other liabilities		2,549			(28,871	)
Net cash provided by (used in) operating activities		235,120			(134,763	)
Cash flows from investing activities
Capital expenditures		(71,213	)		(89,398	)
Purchases of investments		(37,942	)		(17,992	)
Proceeds from sales and maturities of investments		40,356			32,178
Net cash used in investing activities		(68,799	)		(75,212	)
Cash flows from financing activities
Repayments on long-term borrowings		(3,875	)		(18,642	)
Proceeds from long-term borrowings		14,947			2,247
Net proceeds from short-term borrowings		10,836			49,050
Payments for employee taxes related to stock compensation		(4,498	)		(7,971	)
Repurchases of common stock		(30,014	)		(25,000	)
Distributions to noncontrolling interests		(750	)		(4,650	)
Net cash used in financing activities		(13,354	)		(4,966	)
Effect of exchange rate changes on cash and cash equivalents		(8,660	)		8,566
Net change in cash and cash equivalents		144,307			(206,375	)
Cash and cash equivalents at beginning of the period		615,733			796,283
Cash and cash equivalents at end of the period	$	760,040		$	589,908