While Skechers’ third-quarter sales decreased by 3.9 percent year-on-year and net earnings dropped by 37.6 percent to $64.3 million, it was a significant improvement from the second quarter, when sales where 78.3 percent lower and the company ended with a net loss of $68.1 million.
The pandemic significantly impacted Skechers in the spring, but in the third quarter, it saw a return to growth in many markets, with September being the strongest month.
Men’s and women’s athletic casual footwear and sandal styles experienced the highest growth. The Skechers Kids segment also did well, especially in North America.
The company’s domestic wholesale business returned to mid-single-digit growth as its wholesale accounts replenished with products that were in demand. Key international markets also experienced growth - especially China, Germany and Australia, with strong double-digit increases. The demand continued on e-commerce channels and there was also strength in the re-opened “big box” stores, the group’s largest shops. On the other hand, sales to foreign distributors fell by 44 percent, as gains in Scandinavia, Australia and New Zealand were offset by losses in the Middle East.
In the quarter, the company offered consumers alternative means to shop through the launch of a new initiative to buy product online and pick them up in the store or the curbside at Skechers retail locations across the U.S. It also opened 24 company-owned stores that had been planned prior to the Covid outbreak - including flagship locations on Rue de Rivoli in Paris, Oxford Circus in London, Shinjuku in Tokyo, and two stores in Colombia. This brought the total store count to 3,770, up from 3,615 on June 30, 2020. During the fourth quarter, the company will open more stores at several key locations including Munich and Berlin.
By the end of the third quarter, all but a few Skechers retail locations were open, although many were operating with limited hours.
Skechers continued to invest in infrastructure, expanding distribution centers in Europe and North America, preparing the opening of a new logistic center in the U.K. by the end of this year, in view of Brexit, and nearing completion of its distribution center in China.
The group recorded a 4.1 percent decrease in the company’s international business, weighed down by lower distributor and retail sales, partially offset by increases in its joint venture and subsidiary sales, including growth of 23.9 percent in China and 18.1 percent in Europe. The European growth was led by Germany, France and Central/Eastern Europe.
Skechers had a 3.7 percent decrease in its domestic business, with lower retail sales partially offset by a surge of 172.1 percent in e-commerce and growth in its domestic wholesale business.
The company’s domestic wholesale revenues rose by 6.3 percent to $318.4 million, while international wholesale dipped by 0.5 percent to $643.4 million and the direct-to-consumer business fell by 16.9 percent to $339.0 million. Same-store sales tumbled by 22.1 percent, with decreases of 20.4 percent domestically and 26.1 percent internationally.
The gross margin declined by 0.1 percentage points to 48.1 percent, as a result of higher promotional activity internationally, partially offset by a favorable mix of online and international sales. The operating margin fell by 3.8 percentage points to 7.1 percent.
Skechers said it is not providing guidance due to the ongoing business disruption and uncertainty surrounding the impact of the pandemic on its business globally.