SKECHERS sees shortfall in earnings in Q4 2008

19 Feb '09

4 min read

SKECHERS USA Inc announced financial results for the fourth quarter and fiscal year ended December 31, 2008.

Fiscal year 2008 net sales increased 3 percent to $1.441 billion as compared to net sales of $1.394 billion in 2007. Net earnings for 2008 were $55.4 million versus net earnings of $75.7 million in 2007. For fiscal year 2008, diluted earnings per share were $1.19 based on 46,708,000 weighted average shares outstanding versus diluted earnings per share of $1.63 based on 46,741,000 weighted average shares outstanding in the prior year.

Net sales for the fourth quarter of 2008 were $298.1 million as compared to $302.0 million in the fourth quarter of 2007. Net loss for the fourth quarter of 2008 was $20.4 million versus net earnings of $12.1 million in the fourth quarter of 2007. Net loss per diluted share in the fourth quarter of 2008 was $0.44 based on 46,123,000 weighted average shares outstanding as compared to net earnings per diluted share of $0.26 based on 46,639,000 weighted average shares outstanding in the fourth quarter of 2007.

“SKECHERS 2008 net sales of over $1.4 billion represent a new record, a significant achievement in a year marked by a rapidly weakening global economic environment,” stated Fred Schneider, chief financial officer of SKECHERS. “Despite the record yearly sales, we saw a shortfall in earnings in the fourth quarter primarily due to a decrease in gross margin of approximately 1,000 basis points from the same period last year.

The decrease in gross margin is a direct result of the extremely weak retail climate, which caused a significant decline in U.S. retailers' comps as well as a number of both retail bankruptcies and going out of business sales. Due to these declining economic conditions, we began to manage our inventory levels down at reduced prices and increased our reserves by over $15 million. As we complete this process, we expect to see our gross margin percentage return to its historic levels of over 40 percent later in 2009.”

Gross profit for 2008 was $595.9 million compared to $600.0 million in 2007. Gross margin for 2008 was 41.4 percent versus 43.0 percent for 2007. Gross profit for the fourth quarter of 2008 was $95.0 million compared to $127.3 million in the fourth quarter of 2007. Gross margin in the fourth quarter 2008 was 31.9 percent versus 42.1 percent for the fourth quarter of 2007.

Robert Greenberg, SKECHERS chief executive officer, commented: “For SKECHERS, 2008 was a year of achievements with several new brands added to our fold, record sales, and meaningful growth in our international business. We continue to see the international arena as an opportunity to further grow our business, and are pleased with the continued solid performance of many of our SKECHERS and fashion brands in both the domestic and international markets.

We are continuing to develop fresh styles in our more well-established lines and look forward to our first full year of footwear from Bebe Sport, Punkrose, and the emergence of TapouT footwear in sport retailers and with specialty chains, and other key accounts. Our product remains affordable, fashionable and relevant, offering a great value in the current marketplace.

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