NEWS Six Month 2021 Financial Results


(in millions, except per share data) Sales $


Gross profit Gross margin SG&A expenses As a % of sales


Earnings (loss) from operations Operating margin Net earnings (loss)


Diluted earnings (loss) per share Store Count


Number of Store Locations as of


December 31, 2020 Domestic stores


International stores Joint venture stores


523 331


467


Distributor, licensee and franchise stores 2,570 Total Skechers stores


3,891 (1) Does not reflect temporary closures due to the COVID-19 pandemic.


international retail stores, slightly offset by declines in domestic e-commerce sales. Direct- to-Consumer comparable same store sales increased 109.2%, driven by an increase of 95.6% domestically and 165.2% internationally. Gross margin increased 72 basis points to 51.2% primarily driven by increased Direct-to- Consumer gross margins, resulting from higher average selling prices and reduced promotional activity. Higher average selling prices were partially offset by the unfavorable channel mix impact from lower domestic e-commerce sales and higher Domestic Wholesale sales. SG&A increased $220.3 million, or 51.0%. Selling expenses increased by $72.2 million, or 119.9%, due to higher global advertising costs. General and administrative increased by $148.0 million, or 39.8%. The increase was primarily the result of higher incentive compensation and labor costs as well as higher global warehouse and distribution expenses.


Earnings from operations increased $262.2 million to $201.2 million.


Net earnings were $137.4 million and diluted earnings per share were $0.88.


In the second quarter, the Company’s effective income tax rate was 20.4%.


“Our record second quarter results reflect the outstanding execution of our long-term growth strategy. Led by our comfort technology products and resonant brand, we continued to expand globally and further our direct-to- consumer presence,” stated John Vandemore, Chief Financial Officer of Skechers. “The result was evident in growth across our segments and record profitability and is a testament to the prudence of the infrastructure investments we have made and are continuing to make to support


our brand and our strategy. These factors coupled with the strength of our balance sheet, give us abundant confidence that Skechers remains poised to continue growing long into the future.” Year to date sales increased 56.5%. Year to date domestic and international sales each grew 56.5% with the largest contribution derived from International Wholesale growth. On a constant currency basis, the Company’s total sales increased 50.9%.


Sales grew across all segments with increases to Domestic Wholesale of 52.2%, International Wholesale of 52.3%, and Direct-to-Consumer of 69.0%. Improvements in Domestic Wholesale were the result of higher unit sales volume. Improvements in International Wholesale were the result of growth in China of 88.4% and Europe of 32.9%. Direct-to-Consumer comparable same store sales increased 54.8%, driven by an increase of 59.4% domestically and 40.8% internationally.


Gross margin increased 308 basis points to 49.5% primarily driven by increased gross margins in the Direct-to-Consumer segment, which was the result of increased average selling prices and reduced promotional activity. SG&A increased by $240.2 million or 25.5%. Selling expenses increased by $83.4 million or 62.1%, primarily due to higher global advertising costs. General and administrative increased by $156.7 million or 19.4%, primarily due to higher incentive compensation and labor costs as well as higher global warehouse and distribution expenses.


Earnings from operations were $358.9 million, an increase of $375.1 million compared to a loss of $16.2 million in the prior-year period. Net earnings were $235.9 million and diluted


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Number of Store Locations as of June 30, 2021


Opened Closed(1) 12 13


(23) (5)


67


260 352


(52)


(106) (186)


512 339 482


2,724 4,057


Six Months Ended June 30, 2021


916.2 2020


3,086.2$ 1,971.8$ 1,529.1


49.5% 46.5% 1,180.4


940.2


38.2% 47.7% 358.9 11.6% 235.9 $1.51


(16.2)


(0.8)% (19.0)


$(0.12)


Change $


1,114.4 612.9


240.2 375.1


254.9 $1.63


%


56.5 66.9


308bps 25.5


(943)bps 2,315.4


1,245bps 1,341.6 1,358.3


earnings per share were $1.51. The Company’s effective income tax rate was 20.3%. Balance Sheet


Cash, cash equivalents and investments totaled $1.32 billion, a decrease of $258.5 million, or 16.4% from December 31, 2020. The Company repaid $452.5 million on its revolving credit facility in the second quarter.


Total inventory was $1.06 billion, an increase of $40.5 million or 4.0% from December 31, 2020. Increased inventory levels primarily reflect growth in the International Wholesale segment.


Outlook


For the fiscal year 2021, the Company believes it will achieve sales between $6.15 billion and $6.25 billion and diluted earnings per share of between $2.55 and $2.65. Further, the Company believes that for the third quarter of 2021, it will achieve sales between $1.60 billion and $1.65 billion and diluted earnings per share of between $0.70 and $0.75.


Certain Non-GAAP Measures To supplement our unaudited condensed consolidated financial statements presented under generally accepted accounting principles in the United States (“GAAP”), we use the non-GAAP financial measures presented to evaluate our results of operations, financial condition, liquidity and indebtedness. We believe that these non- GAAP measures provide useful information to investors regarding financial and business trends related to our results of operations, cash flows and indebtedness and that when this non-GAAP financial information is viewed with our GAAP financial information, investors are provided with valuable supplemental information regarding our results of operations, thereby facilitating period-to- period comparisons of our business performance consistent with how management evaluates the Company’s operating performance and liquidity. In addition, these non-GAAP measures address questions the Company routinely receives from analysts and investors and, in order to assure that all investors have access to similar data the Company has determined that it is appropriate to make this data available to all investors. None of the non-GAAP measures presented should be considered as an alternative to net income or loss, operating income, cash flows from operating activities, total indebtedness or any other measures of operating performance and financial condition, liquidity or indebtedness derived in accordance with GAAP. These non-GAAP measures have important limitations as analytical tools and should not be considered in isolation or as substitutes for an analysis of our results as reported under GAAP. Our use of these terms may vary from the use of similarly-titled measures by others in our industry due to the potential inconsistencies in the method of calculation and differences due to items subject to interpretation. Reconciliations of these non-GAAP financial measures to the most nearly comparable GAAP financial measures are presented below.


AUGUST/SEPTEMBER 2021 • FOOTWEAR TODAY • 9


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