Told you I would be back with notes…I just never said when 
CFO David Weinberg on the fourth quarter:
“The fourth quarter marked a new record for the period and resulted in a new annual sales record and the first time we achieved $4 billion in annual sales. The growth in the quarter was the result of double-digit increases in our three distribution channels, a testament to the strength of our brand and the investments we have made to ensure our success this year and in the coming years. With international representing over 50% of our total business, we continue to believe that the global market poses our strongest growth potential. We believe our relevant and innovative brand and diverse distribution allow us to grow in multiple product channels and markets. To this end, we are continuing to invest in our design, marketing and worldwide infrastructure for our near and long-term success.”
Overall Business: Gross profit was $454 million (+27.5% YOY) with gross margins of 46.8%; a strong balance sheet with $736.4 million in cash and cash equivalents which comes out to about $4.70/share.
Quarterly net sales record of $970.6 million, 27% increase year over year
Quarterly sales growth was result of: 1) +40.2% int’l wholesale,; 2) +11.6% domestic wholesale; 3) +25.8% in worldwide Skechers retail stores (+12% same store sale comps).
Breaking down those sales into a bit more detail:
International Wholesale: +40.2% this quarter, comprised 41.5% of our total net sales for the quarter. Sales increase “primarily due to significant double-digit gains in our key subsidiary and joint venture countries including China and a triple-digit gain in several subsidiary markets”
Int’l Retail: +25.8% increase in international retail stores with +12% same store sale comps.
Total Int’l: International wholesale and retail combined represented 52.6% of total quarterly sales. CFO David Weinberg: “Our international business remains the biggest growth opportunity and we believe it will continue to grow at a faster pace than that of our domestic businesses.” Almost one-third of company-owned stores operate outside U.S. (196 out of 645).
Management also believes about $20-25M was pulled forward from 2018 1Q to 2017 4Q due to some int’l stores trying to get ahead of spring demand.
2018 company-owned store expansion guidance: Expect to open an additional 75 to 85 company-owned SKECHERS stores and remodel or relocate 15 to 25 existing stores.
E-commerce: Domestic e-commerce grew 28.2% YOY, company owns additional e-commerce sites in Canada, Chile, Germany, Spain, UK. E-commerce in China grew “double-digits”
Domestic Wholesale: +11.6% this quarter, increase of 13.9% in pairs shipped, average price/pair decreased 2%. Price decrease due to collections that have lower price points. In 3Q conference call, Kids collection was specifically called out for lower price points and bringing down average price, but the same claim was not made this conference call.
Domestic Retail: +15.2% sales this quarter, same store sale comps +10.5%.
Total company-owned and third-party stores: 2,570. In 4Q, 142 combined company-owned and third-party stores opened, including 74 in China, 22 in India, 7 in Indonesia. In 2018, expect 500-525 third-party stores to open.
Expenses keep increasing. Selling expenses increased to $63.9M, a 7.4% YOY increase. It was down sequentially however and only comprised 6.6% of sales. In 4Q 2016, selling expenses comprised 7.8% of sales. Finally beginning to see the long-promised increased efficiencies!
General and administrative expenses keep going up. This quarter it was $340.8M, a 25% YOY increase. About those increased expenses, incoming CFO John Vandemore explained:
“General and administrative expenses were up $67.4 million to $340.8 million, representing 35.1% of sales. This is compared to 35.8% of sales in the prior year period. The increase in dollars reflects our ongoing investments in our long-term global growth initiatives. It included $20.1 million associated with our 75 additional global retail stores and $37.8 million to support our international growth in both our joint venture and subsidiary businesses. China represented $22.1 million of this investment, in part, to support our record-breaking Single’s Day performance and a 78% increase in sales.”
Well, when you put it like that, John, it is hard to argue It’s just nice to see that now the company can show meaningful earnings growth and re-invest revenue back in business.
Skechers Kids did not earn a shout-out this quarter. That’s probably because, miracle of miracles, none of my four kids needed new shoes in the quarter. This quarter, that situation has been rectified on the home front, so expect to see some more love next quarter
Brand quality: I thought this quote was fascinating, so I had to include it from Weinberg when he was asked how the brand was perceived worldwide:
“So I would tell you that the brand is perceived as quality. It’s not considered as mid, but it’s considered as upper, although not the most expensive. So it’s quality, designed well, fashion-forward at a price probably on average slightly higher pricing than we see here in the United States. So if I had to ticket it, it’s probably a couple levels up in most parts outside the United States, certainly not all, because there are some third-world countries where the price is more significant than it is here in the United States.”
Tax rate: Guided for tax rate of between 12% to 17% for the year, though they did say they were still working through new laws and that might change.
Share buybacks: Authorized $150M in share buybacks over three years. Given that I believe the valuation will be increasing and all that cash on the books, I thought this was really weak. I wanted a lot more, especially for a three year time period!
Long term guidance: Expect to be about $6 billion in sales for 2020. That’s essentially 50% growth over three years. By my admittedly bad math, that’s about a 15% growth rate annualized I believe (feel free to check that). And that should be with much better margins along the way. So…not bad!
That’s about all I got. Another really solid quarter ladies and gents!
Matt
Long SKX
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