11 Feb Skechers Q4 Earnings Jump 34 Percent on 27 Percent Sales Gain
Skechers USA, Inc. reported sales for the fourth quarter of 2015 were $722.7 million compared to $569.7 million in the fourth quarter of 2014. Gross profit for the fourth quarter of 2015 was $329.9 million or 45.6 percent of net sales compared to $257.6 million or 45.2 percent of net sales in the fourth quarter of 2014.
Net earnings for the fourth quarter of 2015 were $29.4 million compared to net earnings of $21.9 million in the fourth quarter of 2014. Net earnings per diluted share in the fourth quarter of 2015 were $0.19 based on 154.6 million weighted average shares outstanding compared to $0.14 based on 154.1 million weighted average shares outstanding in the fourth quarter of 2014.
Earnings were just short of Wall Street’s average estimate of 20 cents a share but revenues exceeded the consensus target of $693.5 million.
“Skechers achieved record fourth quarter sales of more than $722 million in 2015. This resulted in earnings from operations of $54.7 million in the fourth quarter, which is an increase of 65.7 percent from the same prior year period, and record annual revenues of $3.147 billion for 2015, an increase of 32.4 percent compared to 2014,” began David Weinberg, Skechers chief operating officer and chief financial officer. “The fourth quarter growth was across our key product lines for men, women and kids, which led to high single-digit gains in our domestic wholesale business, and double-digit increases in our international wholesale and company-owned retail stores businesses. Also in the fourth quarter, our international business grew to 41 percent of our total sales, bringing it closer to our goal of 50 percent within the next two to three years.”
Skechers annual effective tax rate for 2015 increased slightly to 21.7 percent from 21.3 percent as of September 30, 2015, which increased its fourth quarter 2015 effective tax rate to 23.9 percent and reduced its earnings per share by $0.01. In addition, the company’s gross margins were negatively impacted by approximately $8.1 million due to negative foreign currency translations and an additional $2.0 million in other expenses related to foreign currency transaction losses during the fourth quarter of 2015.
Fiscal year 2015 net sales were a record $3.147 billion compared to net sales of $2.378 billion in 2014. Gross profit for 2015 was $1.424 billion or 45.2 percent of net sales compared to $1.072 billion or 45.1 percent of net sales in 2014. Earnings from operations for 2015 were $350.8 million compared to $209.1 million in 2014.
Net earnings for 2015 were $231.9 million compared to $138.8 million in 2014. Net earnings per diluted share for fiscal year 2015 were $1.50 based on 154.2 million weighted average shares outstanding compared to $0.91 based on 153.1 million weighted average shares outstanding in the prior year.
Robert Greenberg, Skechers chief executive officer, commented: “Surpassing $3 billion in annual sales is a remarkable accomplishment and to achieve this growth across both our domestic and international businesses speaks to the global strength of the Skechers brand. In the United States, we are the number two footwear brand and the number one walking and work brand, and we were named the 2015 company of the Year and received the Athleisure Design Excellence award by Footwear Plus magazine. Our accelerated international growth is an indicator of the global acceptance of our product and marketing, which now includes icons Ringo Starr and Sugar Ray Leonard as well as pop superstars Demi Lovato and Meghan Trainor. While we continue to take increased shelf space within our existing accounts worldwide, the Skechers retail store count has also grown to more than 1,300 company-owned and third-party owned locations at year-end. Pivotal to this growth has been continued product innovation and expansion into more categories enabling us to appeal to an even broader demographic. As the title sponsor of the Skechers Performance Los Angeles Marathon and the official running sponsor of the European Ironman, we are reaching elite athletes and running enthusiasts like never before. With Demi Lovato’s social media posts about Skechers, we are also resonating with hundreds of thousands of savvy teenagers around the world. Our cast of characters remains a focus for our kids advertising, while also capturing the tweens with takedowns of our popular adult sport styles. As we continue to focus on comfort, style and quality in every shoe design, we are expanding our business within both existing doors and into new accounts and countries as well. With an additional 330 to 340 Skechers retail stores opening worldwide this year, we estimate there will be more than 1,650 Skechers stores by the end of 2016, of which approximately 575 stores will be company-owned. Looking at 2016, we plan to continue to grow worldwide and believe we will see strong double-digit and, in some cases, triple-digit gains in countries around the world.”
Weinberg added: “The record net sales growth we achieved for 2015—both the gains of 22 percent in our domestic wholesale channel and 59 percent in our international distributor and subsidiary business channel over 2014—is very significant given the sluggish domestic retail environment in the back half of 2015, as well as declining currencies in several key countries. The improvements in our wholesale and Skechers retail businesses were due to the continued strong demand for our fresh product and our impactful marketing.”
Weinberg continued: “As we look at the coming year, we believe our company-owned retail stores are on target with mid- to high-single digit retail comps in January and we are continuing to gain market share. We have had a very strong start to the first quarter with January sales up approximately 35 percent compared to January 2015 as well as a strong first week of February. Our backlogs are up 9.5 percent at December 31, 2015, which were impacted by some distributors pulling forward orders from January to December. During the fourth quarter, our distributor sales increased 91.6 percent as compared to the same period last year. Additionally, our incoming order rate in January was also very strong with both our domestic wholesale and European subsidiary businesses ordering closer to season, which is resulting in increasingly improved backlogs for the first quarter. It is important to note that our backlog does not include company-owned Skechers retail stores—of which we have 68 more stores than in the prior year, as well as our joint ventures in Asia, including China, which we expect will have very strong double-digit growth in 2016. Our inventories are up approximately 36.7 percent from the prior year end with fourth quarter 2015 net sales that increased 27 percent, and our financial position is strong with $508.0 million in cash and cash equivalents. To further position the company for continued growth, we have improved efficiencies in our distribution centers, which allowed for us to ship more than 2.3 million pairs from our European distribution center in January 2016, an improvement of more than 100 percent from the same period last year. With the anticipated completion of the final expansion phase of our European distribution center in May, we will have more than a million square feet of space. With the strong start to the first quarter and the broad acceptance of our brand worldwide, we see significant potential to continue to grow our international business in 2016 by investing in our product, marketing and infrastructure. We remain comfortable with the majority of the analysts’ current consensus range of $885 million to $920 million in net sales and $0.50 to $0.55 in earnings per share for the first quarter.”