Skechers U.S.A., Inc. SKX released its second-quarter 2024 results, falling short of the Zacks Consensus Estimate on both the top and bottom lines. Despite an increase in sales, earnings declined year over year. The quarter faced challenges from various disruptions, including supply chain issues, currency fluctuations, regulatory hurdles in India, and soft consumer demand in China.
Nevertheless, Skechers maintained its focus on innovation, particularly in comfort technologies and strategic partnerships. Extensive marketing initiatives, such as venturing into new channels for football and basketball products, played a vital role in driving brand expansion. The company has set a target of hitting $10 billion in annual sales by 2026.
Over the past year, the stock of this Zacks Rank #1 (Strong Buy) entity has seen a 24.7% rise, outperforming the industry’s 30.3% fall.
Second Quarter Performance
SKX recorded sales of $2,157.6 million, slightly below the estimated $2,219 million. Despite this, the top line showed a 7.2% year-over-year increase, driven by a 6.9% growth in international sales and a 7.7% rise in domestic sales. The improvements in both segments were supported by strong DTC and Wholesale sales, leading to a total sales growth of 8.7% on a constant-currency basis.
Wholesale sales in the Americas rose by 10.3%, Europe, the Middle East & Africa (EMEA) by 3.9%, and had a slight dip of 2.6% in the Asia Pacific region. Direct-to-Consumer (DTC) sales growth included a 1.4% increase in domestic sales and a 15.2% rise in international sales.
Financial Overview
During the quarter, Skechers’ gross profit surged by 11.7% to $1.18 billion, and the gross margin expanded by 220 basis points to 54.9%. Total operating expenses saw a 16% increase to $977.9 million, with selling expenses rising by 26.1% and general and administrative expenses by 13.2%. The higher costs were primarily attributed to increased brand demand creation expenses and elevated labor and facility costs.
As of June 30, 2024, the company held cash and cash equivalents totaling $1.28 billion. Long-term borrowings amounted to $45.7 million. Skechers also bought back 0.9 million shares of its Class A common stock for $60 million in the second quarter.
Future Outlook
For 2024, Skechers anticipates sales between $8.88 billion and $8.98 billion, with expected earnings per share in the range of $4.08 to $4.18. The company has set a capital expenditure target of $325-$375 million. In the third quarter of 2024, SKX aims for sales between $2.30 billion and $2.35 billion and an EPS range of $1.10 to $1.15.
Industry Standouts
Other noteworthy players in the retail segment include Gap Inc., Abercrombie & Fitch Co., and Stitch Fix. Gap has seen a substantial earnings surprise in recent quarters, while Abercrombie & Fitch and Stitch Fix also hold promising outlooks in terms of earnings growth and sales expansion.
