Skechers saw revenues in the third quarter ended Sept. 30 rise by 19.2 percent to a record $1,551 million, an achievement that the company described as “remarkable” amid supply chain bottlenecks that have constrained sales growth and are seen extending into 2022. At constant currency rates, sales rose by 17.1 percent.
Net income grew to $103.1 million from $64.3 million. The gross margin expanded to 49.6 percent from 48.1 percent the year earlier, as the positive impact of higher average selling prices and fewer promotions in its direct-to-consumer (DTC) business outweighed the negative impact of higher freight costs. The operating margin grew to 9.4 percent from 7.1 percent.
The overall sales gain was a result of a 20 percent increase in the domestic business and a 19 percent rise in the international business, which represented 58 percent of total sales for the quarter. However, the company’s European subsidiaries suffered a drop of 11 percent due to congestions at European ports that appeared to have been resolved in October.
Skechers’ DTC revenues jumped by 44.1 percent to $488.4 million, led by a 61 percent increase in the company’s international business and a 35 percent rise in its domestic business. Compared with the third quarter of 2019, DTC was up by 20 percent, with a 14 percent increase domestically and a 30 percent jump internationally.
In the third quarter, the growth in the domestic DTC business was driven by a 43 percent gain in brick-and-mortar stores while the domestic e-commerce channel increased by 3 percent on the year but was up some 180 percent over 2019. Skechers said the domestic e-commerce business was particularly affected by limited product availability.
The increase in the international DTC business was attributed to rebounding demand and the easing of Covid-19 restrictions, with growth led by triple-digit increases in Chile and South Korea and double-digit increases in the U.K. and Mexico, alongside robust growth in Canada, Peru and India.
The company’s wholesale revenues increased by 10.5 percent, rising by 10.1 percent to $350.7 million domestically and by 10.6 percent to $711.9 million in its international business.
Skechers said it is continuing to invest in e-commerce, launching new sites on a new platform in Ireland in September and the U.K. in October, with more markets planned for the fourth quarter and next year.
In the third quarter, it opened 10 company-owned Skechers stores, including two in Colombia and one each in Peru, India, Germany and France. It closed one location in the quarter. Thus far in the fourth quarter, it has opened three stores, including one in Naples, Italy, while it plans to open an additional 15 to 20 locations by end year.
Skechers also opened an additional net 119 third-party Skechers stores in the quarter in 28 countries, led by a net new 67 in China, nine in India, six in Australia and four in New Zealand, bringing the total number of Skechers stores to 4,170 at the end of the quarter.
The company’s joint venture business increased by 5 percent for the quarter, due to a 10 percent increase in China, alongside strong sales in Mexico and Israel, which were partially offset by declines in several Asian markets because of continuing Covid-19 restrictions. Subsidiary sales increased by 6 percent, primarily driven by improvements in India, as well as Colombia and Canada.
John Vandemore, the company’s chief financial officer, said factory closures in Southern Vietnam that had affected some footwear companies strongly had a limited impact on its own operations in the quarter given that most of its Vietnam factories are elsewhere in the country. However, shipping container shortages, port congestion and last-minute transportation delays negatively impacted the company’s third quarter sales performance.
“As we look to the fourth quarter and into the first half of 2022, we believe supply chain constraints will remain a challenge, although we are beginning to see progress in key global ports, especially in Europe and other international markets,” said David Weinberg, chief operating officer of the company.
Skechers expects to post sales of $1.51 to $1.56 billion in the fourth quarter. For the full year, it now sees sales of between $6.15 and $6.20 billion compared to previous guidance of $6.15 to $6.25 billion.
