Skechers expects its sales to rise to between $8,725 million and $8,875 million in its 2024 financial year, up by 9 to 11 percent compared to the previous year, after wholesale sales posted a recovery in the first quarter and momentum continued in its DTC business. The guidance is up from previous indications of an expected 7 to 11 percent sales growth this year. Skechers also raised its guidance for diluted earnings per share to between $3.95 and $4.10 from $3.65 to $3.85 previously.
In the quarter ended March 31, sales rose by 12.5 percent to $2,251.6 million, the latest of a string of quarterly sales records and above the top end of company guidance of $2,225 million. DTC sales grew by 17.3 percent to $829.9 million, reflecting 8.0 percent sales domestic growth and 24.1 percent in the international business. Wholesales increased by 9.8 percent to $1,421.7 million, returning to growth with a 7.7 percent increase in the domestic wholesale business and a 10.9 percent increase internationally.
In the international business, growth in wholesale was attributed to improved inventory positions at certain partners, growth in distributors across geographies and “particularly strong” sales in China, Germany and the UK. “For domestic, the return to growth was a result of significant improvement in the flow of orders with both improved average selling prices and volume,” explained David Weinberg, the COO, in a conference call with analysts.
Growth continued to be led by international sales, which rose by 15.2 percent to $1,452.8 million and represented 65 percent of the total quarterly sales pie. Domestic sales grew by 7.8 percent to $798.8 million. On a regional basis, sales were up by 17 percent in the EMEA region amid “broad strength in nearly every country.” Sales in the Americas were up by 7.8 percent.
Asia Pacific growth came in at 16 percent, as the company highlighted 13 percent growth in China and a “slight” increase in India as it resolved logistics difficulties with a new distribution center. “We’re incredibly pleased with what we saw in China this quarter,” said John Vandemore, the CFO. “As we look at the balance of the year, we remain cautiously optimistic that we’ll continue to see more of that recovery.”
Regarding India, Vandemore noted that Skechers aims to manufacture an increasing amount of its products in the country. “The issue in the short term is simply the capacity of that market to bear it. And that’s not a Skechers issue at all, honestly. That’s an industry-wide issue and something we continue to work on with our manufacturing partners,” he said.
The company’s gross margin widened by 3.60 percentage points to 52.5 percent in the quarters. The improvement was driven by lower freight costs and higher average selling prices as consumers sought out “higher-margin technology-infused products.” Net profit jumped by 28.8 percent to $206.0 million as diluted EPS rose 30.4 percent to $1.33, well above company guidance of $1.05 to $1.10.
Inventory at the end of the quarter amounted to $1.36 billion, down by 9.4 percent compared to the year earlier and 10.8 percent below Dec. 31, 2023, as Skechers pointed to its record quarterly sales and efforts to manage inventory levels. “We believe our inventory levels are healthy and comprised largely of proven sellers, fresh innovations and new product categories,” said Weinberg.
After net openings of two domestic company stores, 21 international stores, and 12 third-party-owned stores in the first quarter, Skechers ended the first quarter with 5,203 stores, up from 5,168 at the end of 2023. In the second quarter to date, it has opened 15 stores, including three company-owned stores in China and the US. The company aims to open 155 to 170 company-owned stores worldwide over the remainder of 2024.
For the second quarter of 2024, Skechers anticipates sales of between $2,175 million and $2,225 million and diluted earnings per share of between $0.85 and $0.90. “Earnings per share will be down slightly in the quarter due primarily to the timing of demand creation spending, which is typically highest during the second quarter as we amplify consumer awareness for our product portfolio and position our brand for successful summer and back-to-school periods,” said Vandemore.
