Sales grew by 27 percent to $722.7 million in the fourth quarter of 2015 for Skechers USA, leading to a 34.3 percent increase in net earnings to $29.5 million for the period. However, the company indicated that it had an increase of only about 8 percent in its wholesale revenues in the U.S., representing a big deceleration from the growth of 22 percent it had registered in this segment during the third quarter. Sales at its domestic retail stores went up by 14.2 percent, with an 8.2 percent increase on a comparable store basis.
The big push came from its sales outside the U.S., which came to represent 41 percent of total revenues in the quarter. They grew especially in Western Europe and China, a country where Skechers' turnover for the year jumped to $220 million from $86 million in 2014.
The brand's international wholesale revenues accelerated in the quarter, rising by 64.9 percent and taking their growth for the year up to 58.8 percent. Sales to foreign distributors went up by 91.6 percent in the quarter. The company's own retail sales jumped by 43.4 percent, including a 13.0 percent increase on a same-store basis.
Part of the quarterly increase was due to early shipments ahead of price increases being implemented in the new year, which also led to an increase of only 9.5 percent in the global order backlog as of Dec. 31. Skechers has raised its average prices by 2.5 percent in the U.S. and by 7 percent in local currencies overseas, in order to offset the strength of the dollar.
Along with the enlargement of the company's European distribution center, whose shipments doubled to more than 2.3 million pairs in January, the price increases should help the company to keep up the sales momentum in 2016. Domestic orders for the second quarter are not as strong as they were for the first quarter, which had a strong start with a sales increase of 35 percent in January.
The company is projecting the addition of 330 to 340 single-brand stores to its global retail network in 2016. This should build it up to a total of more than 1,650 Skechers stores around the world, 575 of which would be directly owned.
A $10.1 million foreign currency hit didn't prevent Skechers from raising gross margins slightly in the fourth quarter to 45.6 percent from 45.2 percent in the year-earlier period, due perhaps in part to the growing strength of its higher-priced sports offerings. Advertising expenses grew to 5.5 percent of sales from 5.0 percent.
The gross margin for the full financial year rose slightly to 45.2 percent from 45.1 percent. The annual turnover went up by 32.4 percent to $3,147.3 million, breaking the $3 billion barrier for the first time, with sales rising by 22 percent in the U.S. and by 59 percent elsewhere. Operating earnings jumped to $350.8 million from $209.1 million, and the company ended up with a net profit of $231.9 million, up sharply from $138.8 million.
Skechers' management continues to predict that international sales will make up half of its turnover in two to three years time, up from 40 percent in 2015. It also sees a possible new source of growth from the introduction of apparel. It is testing the product in its own stores, and it may start to offer it to wholesale partners next year, but it will probably not make a meaningful contribution until two or three years from now.