Thanks to its strategy of viewing its business through a “global lens,” with many key product styles being introduced at the same time around the world, Skechers has pulled off another strong quarter.
Sales for the three months ended on Sept. 30 were 15.1 percent higher than in the period year ago, reaching $1,350 million. In constant currencies, they went up at an even higher rate of 17.2 percent. International sales continued to be the engine of growth, with increases of 21.9 percent in dollars and 25.7 percent in constant currencies, representing 58.7 percent of total sales. Meanwhile, domestic sales improved by 6.7 percent.
Overall, net income went up by 13.7 percent to $103.1 million. However, the company's shares went down by more than 4 percent following the announcement, as the earnings fell short of analysts' expectations. Overall, the company's gross margin improved by 0.3 percentage points to 48.2 percent as a result of improved retail pricing and product mix in its international businesses, partially offset by an increase in the average cost per unit in its domestic business. However, operating expenses remained flat as a percentage of sales at 37.8 percent, due in part to higher marketing expenses abroad.
The management said that its global marketing efforts are creating awareness and generating demand. In the last three months, Skechers' chunky fashion footwear has been featured on fashion week runways in New York, London and Milan, and the brand has launched unique collaborations in Asia, North America and other regions. In addition, the Skechers GO Run Hyper won Gear of the Year from Runner's World, and the group also won the Schuhkurier award in Germany for Brand of the Year.
In the third quarter, men's casual, street and sport performed particularly well. Women's GoWalk and sport, the work line and Bob's footwear collaboration were also popular. Additional product highlights in the quarter included the release of a Skechers premium heritage collection in the U.S. and Europe.
The increase in foreign revenues was led by China, which grew by 21.0 percent in constant currencies, followed by Mexico, which transitioned into a joint-venture earlier this year, as well the United Arab Emirates, Turkey, Russia and Japan. In Europe, the management said that the marketplace is growing significantly for Skechers, with the U.K., Germany and Spain performing well.
The company's international wholesale operations rose by 21.7 percent. The direct-to-consumer business controlled by the company climbed by 13.3 percent, and the domestic wholesale business increased by 5.0 percent. Comparable store sales at company-owned stores and e-commerce rose by 7.7 percent, rising by 6.8 percent in the U.S. and by 9.9 percent elsewhere.
Including franchises, 135 additional stores were added to Skechers' network of mono-brand stores around the world over the quarter, building up to a total of 3,307 locations at the close of the period, including 488 company-owned retail stores in the U.S.
The total store count outside the U.S. at quarter's end was 2,819. Along with four openings to date in the fourth quarter, an additional five to 10 are planned by the year-end, including a flagship store in Rome.