Skechers posted another strong quarter, thanks to the ongoing impact of rapidly rising sales outside the U.S. After recording more than $1 billion in revenues both in the fourth quarter of 2018 and the first quarter of 2019, the company ended up again with record sales in the second quarter. They reached $1,258 million, an increase of 10.9 percent over the year-ago quarter. In constant currencies, they went up at an even higher rate of 13.7 percent.
International sales jumped by 19.8 percent in dollars and by 25.2 percent in constant currencies, representing 55.7 percent of total sales. By contrast, domestic sales improved by a mere 1.5 percent.
Overall, the company's net income soared by 66 percent to $75.2 million, leading the share price of the company to climb by 13.4 percent after the publication of its results.
The management said it is continuing to strategically view its business with a “global lens,” as trends are traveling faster. Many key product styles are being introduced at the same time around the world, with nuances in certain markets.
In the second quarter, women's and men's sport and streetwear lines had a particularly good performance, along with the GOwalk collection and the brand's new Skech-Air styles. The Skechers performance division earned three awards in the quarter: Gear of the Year from Outside Magazine for Skechers' GO Run 7 Hyper model, Best of Outdoor Retailer from Shape, and Editors' Choice at Outdoor Retailer from Runner's World for the Skechers GO Run Maxroad 4 Hyper shoe.
The increase in foreign revenues was led by China, which grew by 12 percent in constant currencies, driven by women's and men's sport and street lines. In Europe, the management said that the marketplace is growing significantly for Skechers: The U.K. is performing well, and in Germany, the company is growing more than it forecast originally. Overall, Europe saw record shipments out of Skechers' Belgium-based distribution center.
The company's international wholesale operations rose by 18 percent, with a 31 percent increase in sales to distributors, a 13 percent increase in joint venture sales and a 19 percent gain in the revenues of Skechers' wholly-owned foreign subsidiaries.
The global revenues of the company's directly managed DTC operations improved by 14 percent. Comparable store sales and e-commerce were up by 4.9 percent, including growth of 4.2 percent in the U.S. and 6.7 percent internationally.
There were 109 additional international stores over the quarter, building up to a total of 2,695 locations at the close of the period. The company had 477 company-owned retail stores in the U.S., with four new warehouse stores opened and one store closed.
The domestic business benefited from an overall 9 percent increase in DTC, comprised of 7 percent growth in brick-and-mortar stores and a 36 percent jump in e-commerce. Wholesale revenues fell by 4 percent during the quarter.
Overall, the company's gross margin decreased by 0.9 percentage points to 48.5 percent as a result of promotional efforts to clear seasonal merchandise in select international markets. The loss was partially offset by higher domestic margins from improved retail pricing and product mix in the domestic retail and wholesale businesses.
Looking ahead to the third quarter, the company believes that it will achieve sales of $1,325 million to $1,350 million. This guidance includes the view that international revenues will grow by mid-teens, and that DTC will improve by high-single digits over the balance of the year. It also reflects confidence that domestic wholesale operations will be flat or up slightly on a full-year basis. Skechers expects between 250-300 new international stores to open by the end of 2019.