SKECHERS Announces Second Quarter 2011 Financial Results
July 27, 2011
MANHATTAN BEACH, Calif.--(BUSINESS WIRE)-- SKECHERS USA, Inc. (NYSE:SKX), a global leader in lifestyle footwear, today announced financial results for the second quarter ended June 30, 2011.
Second quarter 2011 net sales were $434.4 million compared to $504.9 million for the second quarter of 2010. Second quarter 2011 net loss was $29.9 million or a loss of $0.62 per diluted share based on 48,341,000 weighted average common shares outstanding compared to net earnings of $40.2 million or earnings of $0.82 per diluted share based on 49,130,000 weighted average common shares outstanding for the second quarter of 2010.
"Second quarter results were impacted by several factors," began David Weinberg, chief operating officer and chief financial officer. "First, we were up against a record second quarter in 2010, and we aggressively reduced our excess toning inventory during the second quarter by selling two million pairs of our original Shape-ups for a loss of $21.0 million. We also recorded a $4.4 million reserve for additional product, which we believe reflects net realizable value. We made a decision to accelerate the clearance on early generation Shape-ups product in order to eliminate the overhang of excess inventory. We believe this will expand the sales of our new toning and performance product, which are showing positive results at retail. The impact of these two transactions was a loss of $0.31 per diluted share and a reduction of gross margin to 33 percent, which otherwise would have been 41.5 percent. We feel this was a big step in reaching our goals for the year, which include right-sizing our inventory, bringing new product to market, and getting our overhead in line with anticipated sales for 2012."
For the six months ended June 30, 2011, net sales were $910.6 million compared to net sales of $997.6 million in the first six months of 2010. Net loss was $18.1 million or a loss of $0.38 per diluted share based on 48,292,000 weighted average common shares outstanding as compared to net earnings of $96.5 million or earnings of $1.97 per diluted share based on 48,955,000 weighted average common shares outstanding for the first six months of 2010.
Gross profit for the second quarter of 2011 was $143.3 million or 33.0 percent of net sales compared to $237.6 million or 47.1 percent of net sales in the second quarter of last year. Gross profit for the first six months of 2011 was $335.9 million or 36.9 percent of net sales versus $475.1 million or 47.6 percent of net sales in the first six months of 2010.
Robert Greenberg, SKECHERS chief executive officer, commented: "Every business faces challenges as they grow and at this time last year we were experiencing record growth and were the leaders in an explosive new category of footwear. Recently we have leveraged our experience and learning in the toning category to develop new footwear in both our core lifestyle lines and in our rapidly evolving performance division. This product was delivered to our own SKECHERS retail stores in the second quarter and began reaching our key accounts in June and July. The initial sell throughs have been strong, and we believe will accelerate as the marketing begins for back to school. Dancing with the Stars host Brooke Burke is the face of our women's lightweight toning and running product, and we have several new commercials for our kids lines. We also recently signed Danny Woodhead, the New England Patriots exciting young running back, to appear in a multi-level marketing campaign for our SKECHERS Resistance footwear. Kim Kardashian is appearing in SKECHERS broadcast, print and outdoor advertising globally. We are pleased with our international sales, which grew by double digits, and our retail business, which remains steady with new stores opening in the United States and around the world. We believe SKECHERS continues to be a brand in demand globally, and there are many opportunities to grow our business in the coming years."
Mr. Weinberg added: "We believe that while the second half of 2011 will pose more challenges, we also see growth opportunities in both the international and retail businesses. We are pleased with the reception of our new product offerings for men, women and kids delivering in our stores and to accounts now. With our Holiday 2011 and Spring 2012 product being reviewed by our customers this month during prelines, we believe we are well-positioned for the future."
SKECHERS USA, Inc., based in Manhattan Beach, California, designs, develops and markets a diverse range of footwear for men, women and children under the SKECHERS name, as well as under several uniquely branded names. SKECHERS footwear is available in the United States via department and specialty stores, Company-owned SKECHERS retail stores and its e-commerce website, as well as in over 100 countries and territories through the Company's global network of distributors and subsidiaries in Canada, Brazil, Chile, and across Europe, as well as through joint ventures in Asia. For more information, please visit www.skechers.com.
This announcement may contain forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate or simply state future results, performance or achievements, and can be identified by the use of forward looking language such as "believe," "anticipate," "expect," "estimate," "intend," "plan," "project," "will be," "will continue," "will result," "could," "may," "might," or any variations of such words with similar meanings. Any such statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected in forward-looking statements. Factors that might cause or contribute to such differences include international, national and local general economic, political and market conditions including the global economic slowdown and market instability; entry into the highly competitive performance footwear market; sustaining, managing and forecasting costs and proper inventory levels; losing any significant customers, decreased demand by industry retailers and cancellation of order commitments due to the lack of popularity of particular designs and/or categories of products; maintaining brand image and intense competition among sellers of footwear for consumers; anticipating, identifying, interpreting or forecasting changes in fashion trends, consumer demand for the products and the various market factors described above; sales levels during the spring, back-to-school and holiday selling seasons; and other factors referenced or incorporated by reference in the Company's annual report on Form 10-K for the year ended December 31, 2010 and its quarterly report on Form 10-Q for the three months ended March 31, 2011. The risks included here are not exhaustive. The Company operates in a very competitive and rapidly changing environment. New risks emerge from time to time and the companies cannot predict all such risk factors, nor can the companies assess the impact of all such risk factors on their respective businesses or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, you should not place undue reliance on forward-looking statements as a prediction of actual results. Moreover, reported results should not be considered an indication of future performance.
SKECHERS U.S.A., INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands) June 30, December 31, 2011 2010 ASSETS Current Assets: Cash and cash equivalents $ 250,782 $ 233,558 Trade accounts receivable, net 275,958 266,057 Other receivables 10,375 9,650 Total receivables 286,333 275,707 Inventories 325,815 398,588 Prepaid expenses and other current assets 70,072 53,791 Deferred tax assets 11,720 11,720 Total current assets 944,722 973,364 Property and equipment, at cost less accumulated 367,152 293,802 depreciation and amortization Intangible assets, less applicable amortization 6,587 7,367 Deferred tax assets 12,323 12,323 Other assets, at cost 17,679 17,938 TOTAL ASSETS $ 1,348,463 $ 1,304,794 LIABILITIES AND EQUITY Current Liabilities: Current installments of long-term borrowings $ 9,893 $ 11,984 Short-term borrowings 46,096 18,346 Accounts payable 245,185 246,595 Accrued expenses 19,259 30,385 Total current liabilities 320,433 307,310 Long-term borrowings, excluding current 81,075 51,650 installments Deferred tax liabilities 77 - Total liabilities 401,585 358,960 Equity: Skechers U.S.A., Inc. equity 908,542 908,203 Noncontrolling interests 38,336 37,631 Total equity 946,878 945,834 TOTAL LIABILITIES AND EQUITY $ 1,348,463 $ 1,304,794
SKECHERS U.S.A., INC. CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) (In thousands, except per share data) Three Months Ended June 30, Six Months Ended June 30, 2011 2010 2011 2010 Net sales $ 434,351 $ 504,859 $ 910,585 $ 997,623 Cost of sales 291,021 267,214 574,645 522,560 Gross profit 143,330 237,645 335,940 475,063 Royalty income 1,376 875 3,024 1,260 144,706 238,520 338,964 476,323 Operating expenses: Selling 53,099 52,437 90,659 86,746 General and 139,965 127,299 281,948 249,786 administrative 193,064 179,736 372,607 336,532 Income (loss) from (48,358 ) 58,784 (33,643 ) 139,791 operations Other income (expense): Interest, net (1,596 ) 318 (2,974 ) 1,031 Other, net (944 ) 1,611 (595 ) 1,820 (2,540 ) 1,929 (3,569 ) 2,851 Earnings (loss) before (50,898 ) 60,713 (37,212 ) 142,642 income taxes Income tax expense (20,846 ) 20,396 (19,313 ) 46,202 (benefit) Net income (loss) (30,052 ) 40,317 (17,899 ) 96,440 Less: Net income (loss) attributable to (136 ) 80 209 (93 ) noncontrolling interest Net earnings (loss) attributable to $ (29,916 ) $ 40,237 $ (18,108 ) $ 96,533 Skechers U.S.A., Inc. Net earnings (loss) per share attributable to Skechers U.S.A., Inc.: Basic $ (0.62 ) $ 0.85 $ (0.38 ) $ 2.05 Diluted $ (0.62 ) $ 0.82 $ (0.38 ) $ 1.97 Weighted average shares used in calculating earnings (loss) per share attributable to Skechers U.S.A., Inc.: Basic 48,341 47,422 48,292 47,107 Diluted 48,341 49,130 48,292 48,955
Source: SKECHERS USA, Inc.
Released July 27, 2011