Skechers, impacted by $50 million in incremental freight and logistics costs and elevated operating expenses, reported a 17 percent decline in third-quarter profit to $85.9 million from $103.1 million for the period ended Sep. 30. Operating expenses were nearly 20 percent higher at $754.0 million, and gross margin was down 280 basis points to 47.1 percent from 49.9 percent on the elevated freight expenses and an unfavorable mix. Period-end inventories were up 45 percent year-over-year at $1.78 billion, but the company expects to move the product at regular prices.
Total revenues rose 27 percent currency-adjusted at $1,878.4 million compared to $1,558.5 million. Wholesale revenues increased 26 percent with double-digit improvement in both the U.S. and non-U.S. markets – EMEA (+59%), Americas (+18%), and APAC (+8%). Unit sales increased 25 percent as the Average Selling Price (ASP) inched up 1 percent.
Third-quarter sales in the EMEA rose nearly 48 percent to $469.8 million from $318.4 million on double-digit growth in all EU countries. Scandinavia, India, Singapore, Philippines, and Turkey drove the distributor segment, but those gains were offset by declining shipments to Russia and softness in China and Japan.
Skechers’ direct-to-consumer business increased 12 percent in the third quarter, including a 15 percent gain in the U.S. and an 8.9 percent improvement in all other global markets. The Americas (+14%) paced all geographies, followed by APAC (+10%) and the EMEA (+6%). The company has 4,458 storefronts worldwide, including 177 that were opened during the period. There are plans to open an additional 35-45 company-owned stores by year-end. New e-commerce stores were opened in Poland and Switzerland in Q3.
The group is now forecasting fourth-quarter sales in the $1.725 to $1.775 billion range, some 0.7 to 3.5 percent below a Street consensus of $1.788 billion for the period ending Dec. 31. Approximately $100 million of the anticipated revenue erosion is related to currency. Skechers also slashed its projected earnings per share for the period to $0.30-$0.40. Senior management told analysts that they have not seen any significant drop in spending on the brand and that its casual and comfort offerings are resonating with consumers. China and Chile are the only markets where consumer demand is soft.
Skechers continues to make investments in its global distribution system in an effort to alleviate product bottlenecks and better speed merchandise to partners. The company’s new 242,000-sqm distribution center in Southern California is in its final stage of integration into the Skechers’ existing system and is expected to deliver improved processes and volume for the company through 2023. Additional ongoing distribution center investments slated to come online in the first half of next year include a 40,000-sqm facility in Vancouver that will help improve delivery times across Canada and a 102,200-sqm facility near Mumbai, India, scheduled to open around June 2023. A new distribution center in China will be completed in 2024.
