SKECHERS Announces Third Quarter 2015 Financial Results

Record Net Sales of $856.2 Million, an Increase of 27.0 Percent

Earnings from Operations of $95.6 Million

Net Earnings of $66.6 Million

Diluted Earnings per Share of $0.43

MANHATTAN BEACH, Calif.–(BUSINESS WIRE)–SKECHERS USA, Inc. (NYSE:SKX), a global footwear leader and the second
largest athletic footwear brand in the United States, today announced
financial results for the third quarter ended September 30, 2015. All
share and per share information has been retroactively adjusted for the
three-for-one stock split that was effective on October 15, 2015.

Third quarter 2015 net sales were $856.2 million compared to $674.3
million for the third quarter of 2014. Gross profit for the third
quarter of 2015 was $387.0 million or 45.2 percent of net sales compared
to $304.5 million or 45.2 percent of net sales for the third quarter of
last year. Earnings from operations for the third quarter of 2015 were
$95.6 million as compared to earnings from operations of $74.1 million
in the third quarter of 2014.

“With product and marketing initiatives that continue to resonate with
our consumers worldwide, we achieved a new quarterly sales record of
$856.2 million in the third quarter of 2015. These results followed
record first and second quarter revenues, resulting in a 34.1 percent
net sales increase for the first nine months of 2015 as compared to the
same period last year,” began David Weinberg, chief operating officer
and chief financial officer. “Driving the quarterly revenue were net
sales increases of 11.8 percent in our domestic wholesale business, 52.9
percent in our international wholesale business, and 20.9 percent in our
Company-owned global retail business, which includes a 10.4 percent
increase in comparable sales for the quarter. Of note, the gains in our
business came despite the impact of negative foreign currency exchange
rates in Brazil, Canada and Chile, and a rather sluggish domestic retail
environment where we still achieved an increase in average price per
pair of 6.8 percent during the third quarter in our domestic wholesale
business.”

Net earnings for the third quarter were $66.6 million compared to net
earnings of $51.1 million in the third quarter of 2014, an increase of
30.3 percent. Diluted net earnings per share for the third quarter were
$0.43 on 154.5 million weighted average shares outstanding, compared to
diluted net earnings per share of $0.33 on 153.0 million weighted
average shares outstanding for the third quarter of 2014. The Company’s
diluted earnings per share for the third quarter of 2015 was negatively
impacted by several factors including foreign currency translation and
exchange losses of $13.5 million, and increased deferred rent expenses
of $3.5 million related to the new Fifth Avenue Skechers retail store,
which opened during the third quarter, and a second Skechers location in
Times Square, which just opened. Additionally, during the third quarter
of 2015 diluted earnings per share were impacted by increased legal
expenses of $5.0 million related to the settlement of personal injury
lawsuits from the Company’s toning footwear business; and $5.9 million
in higher legal fees and associated costs primarily related to
intellectual property litigation, which included the matter of Converse,
Inc. v. Skechers U.S.A., Inc.
, which went to trial before the
International Trade Commission in August of this year. The Company
believes that most, if not all, of these legal matters will come to a
conclusion by early next year. During the third quarter of 2015, these
additional expenses reduced diluted earnings per share by $0.15.

For the nine months ended September 30, 2015, net sales were $2.425
billion compared to net sales of $1.808 billion in the first nine months
of 2014. Gross profit for the first nine months of 2015 was $1.094
billion or 45.1 percent of net sales, compared to $814.3 million or 45.0
percent of net sales for the first nine months of 2014. Earnings from
operations for the first nine months of 2015 were $296.1 million,
compared to earnings from operations of $176.1 million in the first nine
months of 2014.

Net earnings for first nine months of 2015 were $202.5 million compared
to net earnings of $116.9 million in the same period last year, an
increase of 73.2 percent. Diluted net earnings per share in the first
nine months of 2015 was $1.31 per share on 154.1 million weighted
average shares, compared to net earnings per share of $0.77 per share on
152.7 million weighted average shares for the same period last year. As
of September 30, 2015, the Company’s backlog increased 28 percent as
compared to September 30, 2014.

Robert Greenberg, SKECHERS chief executive officer, commented: “The
continued quarterly sales records, including our highest quarterly
sales in the Company’s 23-year history in the third quarter, is a
testament to the strength of our brand and the innovative product we
continue to develop and deliver. We are pleased that Skechers has grown
to be the second largest athletic footwear brand in the United States,
and that we are expanding into new doors and opening more Company-owned
stores in key locations, including a Skechers store on Fifth Avenue in
New York and our second in Times Square. At the close of the quarter,
there were 1,210 Skechers stores worldwide, including just over 830
outside the United States. The Company continued its positive sales
trend in the third quarter with double-digit gains in our international
subsidiary, distributor and joint venture operations, including a
triple-digit increase in China. To build our brand during the period, we
aired numerous commercials for kids with our animated characters, as
well as a new Sugar Ray Leonard Skechers Sport spot, a BOBS from
Skechers spot featuring the No. 1 song ‘Riptide’ from Vance Joy, and our
Demi Lovato commercial during the excitement over her new single ‘Cool
for the Summer,’ among others. Also in the quarter, we signed pop singer
Meghan Trainor as our latest global ambassador, and entered a multi-year
agreement for the title sponsorship of the Los Angeles Marathon under
the Skechers Performance Division. We are looking forward to the holiday
season with new commercials starring Demi Lovato, Brooke Burke-Charvet
and Kelly Brook, as well as several new Skechers Kids spots. Our
marketing and product are on target, and we are continuing to invest in
our infrastructure and develop new product innovations to advance our
brand and drive momentum around the globe. We believe that this positive
momentum will continue to grow across our three main business channels
in 2016. We continue to invest in our global business to further gain
market share and monetize what we see as a significant long-term
opportunity for Skechers.”

Mr. Weinberg added: “Though we believe the sluggish macro domestic
retail environment and declining currency in several key markets had an
impact on our net sales, the third quarter was still a sales record. We
are continuing our retail expansion and plan to open an additional 12 to
17 Company-owned Skechers stores before the end of the year, in addition
to the five that have already during October 2015. Along with the 12
Skechers stores already opened through our international distributor and
franchise partners this month, another 45 to 55 Skechers stores are also
planned through the remainder of the year—which will bring us to more
than 1,280 stores by year-end. Given our double digit retail comps,
increase in backlogs of approximately 28 percent and market share gains,
we believe consumer demand remains strong for our footwear categories
worldwide. With the improved efficiencies in our distribution centers
and our solid financial position, including, $510.7 million in cash and
cash equivalents, the Company is well positioned for continued growth.
While we are comfortable with the analysts’ current consensus for fourth
quarter revenue and earnings, we see the significant potential in the
first quarter of 2016 and the entire year by investing in our product,
marketing and infrastructure.”

About SKECHERS USA, Inc.

SKECHERS USA, Inc., based in Manhattan Beach, California, designs,
develops and markets a diverse range of lifestyle footwear for men,
women and children, as well as performance footwear for men and women.
SKECHERS footwear is available in the United States and over 120
countries and territories worldwide via department and specialty stores,
more than 1,200 SKECHERS retail stores, and the Company’s e-commerce
website. The Company manages its international business through a
network of global distributors, joint venture partners in Asia, and 13
wholly-owned subsidiaries in Brazil, Canada, Chile, Japan, Latin America
and throughout Europe. For more information, please visit skechers.com
and follow us on Facebook (facebook.com/SKECHERS)
and Twitter (twitter.com/SKECHERSUSA).

This announcement contains forward-looking statements that are made
pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. These forward-looking statements include,
without limitation, the Company’s future growth, financial results and
operations, its development of new products, future demand for its
products and growth across the Company’s three main business channels
and globally, its planned expansion and opening of new stores,
advertising and marketing initiatives, and the conclusion of legal
matters. Forward-looking statements can be identified by the use of
forward looking language such as “believe,” “anticipate,” “expect,”
“estimate,” “intend,” “plan,” “project,” “will be,” “will continue,”
“will result,” “could,” “may,” “might,” or any variations of such words
with similar meanings. Any such statements are subject to risks and
uncertainties that could cause actual results to differ materially from
those projected in forward-looking statements. Factors that might cause
or contribute to such differences include international economic,
political and market conditions including the uncertainty of sustained
recovery in Europe; entry into the highly competitive performance
footwear market; sustaining, managing and forecasting costs and proper
inventory levels; losing any significant customers; decreased demand by
industry retailers and cancellation of order commitments due to the lack
of popularity of particular designs and/or categories of products;
maintaining brand image and intense competition among sellers of
footwear for consumers; anticipating, identifying, interpreting or
forecasting changes in fashion trends, consumer demand for the products
and the various market factors described above; sales levels during the
spring, back-to-school and holiday selling seasons; and other factors
referenced or incorporated by reference in the Company’s annual report
on Form 10-K for the year ended December 31, 2014 and its quarterly
report on Form 10-Q for the quarter ended June 30, 2015. The risks
included here are not exhaustive. The Company operates in a very
competitive and rapidly changing environment. New risks emerge from time
to time and the companies cannot predict all such risk factors, nor can
the companies assess the impact of all such risk factors on their
respective businesses or the extent to which any factor, or combination
of factors, may cause actual results to differ materially from those
contained in any forward-looking statements. Given these risks and
uncertainties, you should not place undue reliance on forward-looking
statements as a prediction of actual results. Moreover, reported results
should not be considered an indication of future performance.

SKECHERS U.S.A., INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands)

 
September 30,

2015

December 31,

2014

ASSETS
Current Assets:
Cash and cash equivalents $ 510,679 $ 466,685
Trade accounts receivable, net 396,428 272,103
Other receivables   15,642   16,510
Total receivables 412,070 288,613
Inventories 500,201 453,837
Prepaid expenses and other current assets 70,865 57,015
Deferred tax assets   18,866   18,864
Total current assets 1,512,681 1,285,014
Property, plant and equipment, net 388,842 373,183
Other assets   39,131   16,721
Total non-current assets   427,973   389,904
TOTAL ASSETS $ 1,940,654 $ 1,674,918
 
LIABILITIES AND EQUITY
Current Liabilities:
Current installments of long-term borrowings $ 30,565 $ 101,407
Accounts payable 407,612 352,815
Short-term borrowings 57 1,810
Accrued expenses   79,881   49,705
Total current liabilities 518,115 505,737
Long-term borrowings, net of current installments 70,147 15,081
Other long-term liabilities   26,901   19,993
Total non-current liabilities   97,048   35,074
Total liabilities 615,163 540,811
Stockholders’ equity:
Skechers U.S.A., Inc. equity 1,285,468 1,075,249
Noncontrolling interests   40,023   58,858
Total equity   1,325,491   1,134,107
TOTAL LIABILITIES AND EQUITY $ 1,940,654 $ 1,674,918
 

SKECHERS U.S.A., INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(Unaudited)

(In thousands, except per share data)

 
Three Months Ended September 30, Nine Months Ended September 30,
  2015     2014     2015     2014  
Net sales $ 856,179 $ 674,270 $ 2,424,640 $ 1,807,839
Cost of sales   469,173     369,772     1,330,486     993,563  
Gross profit 387,006 304,498 1,094,154 814,276
Royalty income   2,312     2,070     7,824     6,928  
  389,318     306,568     1,101,978     821,204  
Operating expenses:
Selling 63,685 50,239 177,652 140,820
General and administrative   230,048     182,186     628,210     504,325  
  293,733     232,425     805,862     645,145  
Earnings from operations 95,585 74,143 296,116 176,059
Other income (expense):
Interest, net (2,503 ) (2,484 ) (8,037 ) (8,536 )
Other, net   (3,409 )   (3,898 )   (5,180 )   (4,832 )
  (5,912 )   (6,382 )   (13,217 )   (13,368 )
Earnings before income tax expense 89,673 67,761 282,899 162,691
Income tax expense   15,839     12,682     60,342     36,351  
Net earnings 73,834 55,079 222,557 126,340
Less: Net earnings attributable to noncontrolling interests   7,232     3,956     20,093     9,450  
Net earnings attributable to Skechers U.S.A., Inc. $ 66,602   $ 51,123   $ 202,464   $ 116,890  
 
 
Net earnings per share attributable to Skechers U.S.A., Inc.:
Basic $ 0.44   $ 0.34   $ 1.33   $ 0.77  
Diluted $ 0.43   $ 0.33   $ 1.31   $ 0.77  
 
Weighted average shares used in calculating earnings per share
attributable to Skechers U.S.A., Inc.:
Basic   152,895     151,882     152,677     151,753  
Diluted   154,477     152,954     154,073     152,746  

Contacts

SKECHERS USA, Inc.
David Weinberg
Chief Operating Officer,
Chief
Financial Officer
(310) 318-3100
or
Investor Relations:
Addo
Communications, Inc.
Andrew Greenebaum, (310) 829-5400