The pandemic significantly impacted Skechers during the second quarter, as it ended the period with a net loss of $68.1 million against a profit of $75.2 million for the same quarter last year. Its revenues tumbled by 42.0 percent to $729.5 million, or by 41.0 percent in constant currencies. These results, although much lower than last year, exceeded expectations on both revenues and earnings, which sent shares up by 7 percent.
The management highlighted China as a bright spot, saying it led the path to recovery, first by stabilizing and then moving to growth by the end of the quarter. Sales in the country improved by 11.5 percent, as nearly all stores were open there during the second quarter.
While the direct-to-consumer business decreased by 47.1 percent, online sales soared by 428.2 percent, driven by each of the group’s platforms in North America, South America and Europe.
Based on what it observed in China, the management said it sees signs of recovery in other markets. It also has high hopes when it comes to e-commerce: this week, Skechers launched its new online shopping platform in the United States in a bid to provide a better customer experience. It plans to roll out the same platform to multiple countries later this year with even more countries planned for 2021 and beyond. Additionally, South Korea has launched an e-commerce platform this month.
The company made other investments in its digital capabilities, including more advertising online and the launch of a new mobile app and a new loyalty program over the next few quarters. It is also modernizing its in-store point-of-sale system to integrate engagement with customers both online and in store.
In the latest quarter, there was a 37.8 percent decrease in the group’s international sales, which was partially offset by an 11.5 percent increase in China sales. Meanwhile domestic sales dropped by 47.3 percent, reflecting the impact of store closures.
On a comparable store basis, direct-to-consumer revenues declined by 45.6 percent, including a 35.9 percent drop in in the U.S. and a 66.9 percent decline internationally.
The international wholesale business decreased by 29.9 percent. However, the company said it started to see similar recoveries in China and stabilization trends in other markets. These include Australia, France, Germany, Indonesia, Spain, South Korea and Taiwan. More than 90 percent of the third-party Skechers stores around the world have reopened. Traffic and sales have been strongest within the big box and outlet locations, as well as non-tourist stores. Company-owned stores that remain closed are primarily in South America.
Meanwhile, the domestic wholesale business fell by 57.2 percent, reflecting the majority of retail store closures during much of the quarter.
The group opened seven stores in the quarter - one in Germany and three each in the United States and Japan. A further 102 new third-party Skechers stores opened across 28 countries, bringing the total store count to 3,615 worldwide at quarter-end.
Overall, gross margin increased by 2.1 percentage points to 50.5 percent, due to a favorable mix of online and international sales.
Skechers did not provide any guidance due to the ongoing uncertainty, but believes it is well positioned with its comfortable footwear to meet the needs of customers who are working from home.
The measures it took to preserve liquidity have resulted in a $1.56 billion cash balance, lifted by the $490 million it drew down from its revolving credit facility in March.