World Footwear

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Skechers profits down by 24%

Jul 27, 2018 United States
Skechers profits down by 24%
Second quarter results for Earnings Per Share and Profits disappointed analysts. Profit in the period was down by 24%, whereas Sales continued to post positive growth
Skechers USA Inc. has released its second-quarter results. Earnings per share were reported to be 29 cents as compared to the predicted 41 cents, and the 45 billion US dollars in profits marked a 23.9% decrease with respect to last year. This sparked an immediate reaction for the brand’s stock valuation, which instantly went down by more than 25%. 

According to the company, this decrease in earnings was expected and due to weakness in its domestic wholesale and international distributor businesses, which suffered due to a slowdown at a large Middle East distributor.  Furthermore, in the opinion of Jane Hali & Associates’ retail analyst Jessica Ramirez, another matter needs to be taken into consideration, which is that “in the US [Skechers] struggle to compete with the cool factor of brands like Nike and Adidas across wholesale channels where they overlap. They haven’t managed to create a cool factor around the brand.”

However, Skechers still reported sales of 1.13 billion US dollars, which marked a 10.6% increase from 2017, in line with analysts’ expectations. The result was driven by a 25% rise in the company’s international wholesale business and a 13% increase in company-owned global retail sales. “We achieved another record sales quarter and continued to see significant growth in our subsidiary and joint venture businesses, which resulted in record sales of 2.38 billion US dollars over the first six months of the year”, stated David Weinberg, Chief Operating Officer of Skechers, adding: “Our largest international markets, Canada, China, South Korea, Germany, India, and the United Kingdom, achieved double-digit sales growth in the second quarter, a testament to our global strategy. Additionally, China shipped approximately 5.6 million pairs in the period, a new quarterly record.”

For the third quarter, Skechers is expecting earnings per share of 50 to 55 cents and sales of 1.2 to 1.23 billion US dollars. These predictions still fall short of analysts’ expectations of 67 cents and 1.26 billion respectively. Nevertheless, Weinberg’s approach to the future is very positive. He stated that “looking forward, we believe both of our domestic wholesale and international distributor businesses will be positive in the second half of the year,” adding: “Our focus for the balance of 2018 is to continue to grow our international business while maintaining our strength in the United States.”

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