Skechers started making price adjustments at the start of this year to counter foreign exchange headwinds and other input cost pressures. It is looking at some other offsets for the recent increases in raw material, transportation and logistics costs, without affecting its “reasonable price” marketing appeal.
The company told investors at the Morgan Stanley Global Sporting Day conference that it is still on the path to deliver double-digit operating margins, which it barely missed in 2019. It aims to boost gross margins in international markets and in the DTC channel, targeting especially India, China, South America and Eastern Europe.
While admitting that it is suffering some supply chain challenges, Skechers pointed out that it is less affected by the current extended Covid-19 lockdowns in Vietnam than Nike and some other competitors, partly because it is sourcing about as much from that country as from China, with only 10 percent coming from the heavily impacted southern region of Vietnam.
Skechers’ inventories were up by 24 percent year-on-year at the end of the second quarter, but merchandise in transit and categories with the fastest inventory turnover have been affected. Asked about Nike’s recent report of doubled transit time from factories to distribution centers, Skechers’ management acknowledged a similar or greater elongation in some cases. It predicted that the challenges will persist through the first half of 2022, but they “probably won’t be more than a blip in history.”
