Net income jumped 23 percent to $121.2 million in the first quarter on 27 percent revenue growth to a record $1.82 billion versus $1.43 billion for the period ended March 31. Skechers’ top and bottom-line gains were accomplished despite a challenging environment in the APAC region and persistent higher unit freight costs that lowered the period’s gross margin to 45.3 percent from 47.8 percent in the year-ago period. No sales orders were pulled forward into Q1 from other periods, management confirmed to analysts. Product price increases are forecast to help minimize the gross margin contraction as the fiscal year proceeds.
Wholesale revenues rose 33 percent to $308.2 million, led by a 41.6 percent increase in the Americas and a 42 percent gain in the EMEA. Wholesale unit volume rose 22.7 percent. Management told analysts that the company had a record March in receiving and processing orders for its wholesale partners that was impossible to accomplish earlier due to supply chain issues. Direct-To-Consumer sales rose 16 percent in Q1 to $76.9 million, bolstered by a 157.3 percent increase in the EMEA region and a 15.1 percent increase in average selling price. DTC sales were 11.2 percent higher in the Americas and up 8.5 percent in APAC.
Regionally, the U.S. accounted for 75 percent of the Americas’ 31 percent sales increase to $946.9 million. The EMEA, augmented by markets rebounding from the pandemic in the year-ago quarter, produced a 49 percent gain in Q1 sales to $441.2 million. APAC region sales rose 4 percent to $431.5 million, led by 9 percent growth in China but negatively impacted by pandemic issues in adjacent markets.
Maintaining a stance where growth is expected to continue in the EMEA and Americas but difficulties in APAC should continue for an unspecified period, Skechers has adopted a more conservative outlook for Q2, predicting a sales range of $1.75 to $1.8 billion and an EPS range of $0.50 to $0.55. But the company has slightly raised its full-year outlook from the $7.0 to $7.2 billion in total revenues forecast in early February to $7.2 to $7.4 billion, with full-year EPS now pegged at $2.75 to $2.95 versus $2.70 to $2.90 earlier. Skechers, whose new, 240,000-sqm distribution center in Southern California is projected to become fully operational in Q3, is maintaining its longer-term outlook of $10 billion in annual sales by 2026.
“We feel great about how the brand is performing,” CFO John Vandemore told analysts yesterday afternoon. “There are growth opportunities across the globe. But we are conservative about APAC right now.” Senior management rejected any suggestions that inflationary concerns may be impacting the brand’s customers currently, suggesting the company is witnessing “great sell-throughs” at its own and third-party retailers in the U.S. “We haven’t seen any slowdown,” commented Vandemore.