Skechers Reports 2017 Q4

For anyone else who is still in SKX, it just reported its second really good quarter in a row. It’s up 70% since last October when it reported its 3rd quarter results.

Company finally announced a buyback, but I thought it was a little weak, given all the cash they have and that it’s only for $150M and for through 2021. But, other than that, looks like a great quarter. Solid beat. Shares look like they’re up about 5% in AH trading, which takes us almost back to where we were yesterday :slight_smile:

“With three months of strong sales, a robust holiday selling season that included increased demand for our innovative lighted children’s footwear and comfortable adult styles, and double-digit growth in each of our three distribution channels, we achieved a new fourth quarter sales record of $970.6 million,” stated David Weinberg, chief operating officer of Skechers. “The four record sales quarters in 2017 resulted in a new annual sales record of $4.16 billion, an increase of over $600 million from the previous year’s sales. This growth is a testament to the worldwide strength and relevance of our product, marketing and brand.”


Here’s some numbers:

Net Sales (millions)		Q1		Q2		Q3		Q4			
2013								515.8		450.7		
2014				546.5		587.1		674.3		569.7	
2015				768.0		800.5		856.2		722.7	
2016				978.8		877.8		942.4		764.3
2017			       1072.8		1025.9		1094.8		970.6

EPS (diluted)			Q1		Q2		Q3		Q4			
2013								0.18		0.09	
2014				0.20		0.23		0.33		0.14		
2015				0.37		0.52		0.43*		0.19	
2016				0.63		0.48		0.42		0.04
2017				0.60		0.38		0.59		0.21**

Gross Margin (%)		Q1		Q2		Q3		Q4
2016				44.2		45.2		47.4		46.6
2017				44.4		47.6		47.5		46.8

*SKX 3-for-1 stock split 10/15/15, but all EPS figures are split-adjusted
**Adjusted for one-time tax expense related to Tax Cuts and Job Act

2017 Q4 Earnings:

Revenue Growth (billions)
2016 Q4 TTM Revenue = 3.56
2017 Q4 TTM Revenue = 4.16
Year Over Year Revenue Growth = 16.9%, previous quarter rev growth 12.4%

EPS Growth (diluted)
2016 Q4 TTM Earnings = 1.57
2017 Q4 TTM Earnings = 1.78
Year Over Year EPS Growth = 13.4%, previous quarter EPS growth (6.4%)

P/E (Check Current Price) = 38.18/1.78 = 21.45

1YPEG = 21.45/13.4 = 1.6

Be back with notes after I listen to the conference call.

Long SKX
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International growth is up a LOT, which is what they telegraphed a few quarters ago (which would be about the time they were downtrodden, and about the same time I loaded up the truck w/ SKX shares!). I’d be nice for them to pop again, but I’ll be ok with steady and predictable if nothing else.


Told you I would be back with notes…I just never said when :slight_smile:

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 :slight_smile: 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 :slight_smile:

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!

Long SKX
MasterCard (MA), PayPal (PYPL), Skechers (SKX) and Square (SQ) Ticker Guide
See all my holdings at


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!

I’m a little surprised by that as well. What’s your take? Are they just using the “reinvesting in the business (especially the int’l parts)” line as air cover? Or is it something else? I’m ok if they don’t buy it all back at the high side, but over a 3-year period, that’s a fairly inconsequential number.

SKX ended up being one of my larger holdings – I guess it was intentional, as I loaded up the truck when it dropped into the 19s. I just had a high conviction that it would recover once the international stuff was back on track via JVs, and will likely expand.

Still wish they would make extra-extra-wide (6E) shoes for me, though…

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I’m a little surprised by that as well. What’s your take?

I think they’re just ultra-conservative with their money, to be honest. When Greenberg was CEO of LA Gear, the company got into debt and eventually went under. I bet that has a lot to do with it, but not really sure.

Long SKX

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