Skechers USA Inc Q3 2024 Earnings Call Summary

The following is excerpted from the question-and-answer section of the transcript.

Question: Jay Sole - UBS Investment Bank - Analyst : David, John, my question is about domestic wholesale growth. 26% is a really big number. You mentioned that some of the drivers were increased capacity of your customers to, I think, add SKUs and just adoption of new technologies. Can you just elaborate a little bit more on where the growth is coming from, what categories, like how you're able to achieve such high growth in domestic wholesale? Thank you.

Question: Jay Sole - UBS Investment Bank - Analyst : Got it. And maybe if we can also talk about India. It sounds like that market has seen some real progress in the last 90 days. Can you just tell us a little bit more about what you're seeing there? And just give us an idea of how important is India to future growth, like where -- how big is the market today for Skechers? And where do you think you can go over time?

Question: Laurent Vasilescu - BNP Paribas Exane - Analyst : David, John, I wanted to ask about the guide for top line. I know you raised the bottom end of the range a little bit. Obviously, in recent conferences, you talked about your expectations for China to be more muted for the back half. So I'm just curious to know what's the offset there that drove a little bit more upside for the top line for the year?

Question: Laurent Vasilescu - BNP Paribas Exane - Analyst : Very helpful. And then maybe just a 2-part question here. John, I think you mentioned the higher level of in-transit inventory, particularly around the Red Sea. Can you maybe kind of frame us how much do you think leakage will go into 4Q on revenues for top line as we kind of try to model out EMEA? And then second part of the question is really on the gross margin. I think that's a little bit of a surprise for many that the GM was down 80 bps. I can see our bridge for the wholesale and DTC gross margins. Maybe can you just provide a little bit more color. I think you talked about a little bit more discounting. Maybe you can kind of frame how we should think about the fourth quarter gross margin for the audience.

Question: Laurent Vasilescu - BNP Paribas Exane - Analyst : Super helpful, John. Thank you very much and best of luck for the holiday season.

Question: Jim Duffy - Stifel, Nicolaus & Company, Incorporated - Analyst : John, to start, a couple of clarification questions. In your prepared remarks, you talked about wholesale continuing to deliver strong growth in the fourth quarter and you spoke to remedy of the inventory situation. Were those global comments more specific to EMEA, which I think you were discussing just prior to each of those comments?

Question: Jim Duffy - Stifel, Nicolaus & Company, Incorporated - Analyst : Great. And then I wanted to ask on China. Your comments at a conference mid-September preceded the announcement of stimulus. Since then, we've had Golden Week. Have you seen any uptick in consumer activity in the China marketplace since? Or is it really still quite stagnant. And if you could, in that context, speak to the pathway to remedy the inventory situation in China?

Question: Alexandra Straton - Morgan Stanley - Analyst : Congrats on a great quarter. I just wanted to focus in just on SG&A here. It sounds like there might be an opportunity for you guys to curtail some of the selling expenses (technical difficulty). I'm just trying to understand kind of where should that go as a percentage of sales over time. It's definitely elevated versus history. And then really the same thing on G&A, just how you're thinking about that in the near term and long term and where that can go from these elevated levels.

Question: Alexandra Straton - Morgan Stanley - Analyst : Great. Maybe just one more quick bigger picture question. As you guys are kind of getting it sounds like more traction with this comfort technology, it's been more appreciated, maybe there's some restocking happening and you guys are expanding into new categories. Is this like opening up what types of wholesale partners that you guys can work with beyond what you've historically done? Or how is your kind of wholesale partner network changing, if at all?

Question: Christopher Nardone - BofA Securities, Inc. - Analyst : John, just a follow-up on US wholesale. Can you elaborate on how your spring order book is faring and just want to gauge your confidence in growing the domestic wholesale business next year, given the strength so far this year? And then also within the channel, just your assessment on the state of inventory would be very helpful.

Question: Christopher Nardone - BofA Securities, Inc. - Analyst : Okay. And just on just the overall state of inventory in the channel, like how are you feeling about that heading into the holidays?

Question: Krisztina Katai - Deutsche Bank AG - Analyst : I wanted to ask on ASPs. Just to get a -- foresee the pricing dynamics play out for the fourth quarter. I know you will be lapping some more challenging compares on the domestic DTC side. And just how do you expect pricing to play out during the holiday quarter, if you just think about consumers continuing their value-seeking behavior? And just how do you see industry promotions? Have those changed at all? Or how would you characterize the level of promotionality? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 24, 2024 / 8:30PM, SKX.N - Q3 2024 Skechers USA Inc Earnings Call

Question: Krisztina Katai - Deutsche Bank AG - Analyst : Got it. That's helpful. And then just a follow-up, I wanted to ask on India. Can you just update us where you are on your local sourcing strategy? Just what does capacity like now? Anything you can share in terms of how much you can produce now within India to supply domestically? And then how should we think about that from a margin perspective as well?

Question: Krista Zuber - TD Cowen - Analyst : This is Krista Zuber on for John. First question, could you talk to what you're seeing in terms of same-store sales growth and e-commerce growth and sort of new store productivity? It looks like there's been a fair amount of door growth both domestically and internationally in the past 12 months. And then I have one follow-up.

Question: Krista Zuber - TD Cowen - Analyst : Great. And just circling back on the G&A. Could you just talk to some of the efficiencies you're seeing within the supply chain that's driving the leverage that you saw in Q3 and the expectation going forward?

Question: Paul Kearney - Barclays Bank - Analyst : On EMEA, can you speak to the drivers behind that 30% growth given some of the challenges in the region? And then how do you think about that growth for Q4 given what appears to be an easier comparison? Then I have a quick follow-up.

Question: Paul Kearney - Barclays Bank - Analyst : And the follow-up is on inventory. And wondering if you can help frame how much of the increase in the quarter was driven from higher levels in China versus higher in transit in EMEA? and then on the China piece, what are your expectations for how long until inventory levels can normalize from the region? Thank you.

Question: Yanling Wong - Evercore ISI Institutional Equities - Analyst : I would like to add a little bit more on China. Could you just give us a little bit more details on where was below expectations, do you think the weakness was driven more by overall macro? Or do we think that we missed on some opportunities and sales in the region?

Question: Yanling Wong - Evercore ISI Institutional Equities - Analyst : Got it. And when I look at guidance, it seems to imply that the second half operating margins versus prior guidance is guided down. So I was wondering if there's any change to expectations to the fourth quarter operating margins there?