Skechers’ revenues in the EMEA region, bolstered by a strong performance in the Direct-to-consumer channel, rose by 14 percent to $492.5 million. The DTC gain was offset across the region by supply chain disruptions from the Red Sea crisis, which pushed some deliveries into H2.
“We achieved a new Q2 sales record with growth in both our wholesale and DTC businesses across the globe,” pointed out David Weinberg, Skechers’ CFO. “As we navigate the challenges ahead, including transit delays due to the Suez Canal closures […] we see numerous opportunities to expand our business and are extremely encouraged by the demand for our brand.”
In Q2, net income fell by 8 percent to $140.3 million despite a 7 percent sales increase to a record $2.16 billion as U.S. wholesale rebounded from a string of sluggish results. Operating income declined by 5.1 percent year-over-year to $206.5 million, while lower freight costs and a favorable mix of DTC volume contributed to a 220-basis-point improvement in gross margin to 54.9 percent. Inventory closed at $1.51 billion, down 2 percent year-over-year, while the European impacts pushed total on-hand stocks down 18% and in-transit up inventory up nearly 100 percent.
DTC improved by 9 percent to $1,025.5 million, and Wholesale gained 6 percent to $1.13 billion. Wholesale realized double-digit increases in men’s and children while the women’s business was positive. Total pairage and average selling price (ASP) both rose during the period. Brick-and-mortar traffic was down in the period, offset by gains in e-commerce. However, DTC faced a difficult comparison against last year’s 29 percent growth. International grew 7 percent to $1,293.8 million as DTC increased 15 percent to $608.6 million, and wholesale gained less than 1 percent to $685.2 million. Distributor sales increased 13 percent to $112.8 million
By region, Americas grew 7 percent to $1.1 billion, with over half the growth coming from U.S. wholesale. DTC was up across all markets, including multi-double-digit gains outside the US. The disruptions saw on-hand inventory down 40 percent while in-transit spiked 150 percent. APAC ticked up 2 percent to $564.2 million, feeling impacts from the ongoing import regulatory changes in India, where local production is ramping up to meet regulations and the company looks to leverage its new Mumbai distribution center. The region was also impacted by China’s slowing growth to +3 percent (+7% CC) to $312.7 million as currency impacts were met with economic sluggishness across the 618 shopping festival.
Citing greater visibility into H2 headwinds, the company raised its full-year sales guidance to $8.875 to $9.75 billion (up from $8.725 to $8.875 billion) with diluted EPS between $4.08 and $4.10 compared to prior expectations of $3.95 to $4.10. Strong order flow is expected to continue for domestic wholesale, while Europe will improve as supply chain delays abate and strong orders land in the wholesale channel.
“We continue to see very good DTC performance, internationally,” commented John Vandemore, an independent director at Skechers. “We’ve got a very nice order book built for domestic [US] and international wholesale. We’re mindful of the challenges that are out there, some of which may persist to one degree or another in H2, but we believe we’ve adequately weighted that in the range of outcomes we could expect.”
Vandemore characterized the group’s expectations for H2 as modest and suggested there is plenty of “consumer demand out there,” as evidenced by what the company sees in its e-commerce and wholesale order book.
Looking ahead on the product and endorsement front, the Skechers’ soccer boot line will finish its global rollout this month, followed by basketball in August. Q2 saw a new campaign launch for soccer, with flagship endorsee Harry Kane now joined by West Ham United’s Mohammed Kudus and Ragnar Ache of German club FC Kaiserslautern. For basketball, the company has picked up Rickea Jackson of the LA Sparks for WNBA representation alongside the 76ers’ Joel Embiid.
