The following is excerpted from the question-and-answer section of the transcript.
(Questions from industry analysts are provided in full, but answers are omitted - download the transcript to see the full question-and-answer session)
Question: Brian Christopher McNamara - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst
: So I guess to kick off the conversation here, I'm sure it's a question you get asked a lot, but I think it's an important 1 in terms of the current competitive
landscape. So you guys have carved out a nice niche offering consumers comfortable shoes at a great value. I'm curious who your primary competitors
are in the U.S., specifically?
And then as you a kind of branch out into your more important international markets?
Question: Brian Christopher McNamara - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst
: Great. Is there anything particular you're doing in China? I mean, Audi reported results this morning that were still pretty negative, Nike at a plus
1% in their most recent quarter. You guys are doing a plus 10% on a tough comp. I get asked by investors a lot kind of -- is there any difference in
what you guys are doing in China relative to your competitor set? Or is it simply you're operating in that niche and that niche is quite strong?
Question: Brian Christopher McNamara - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst
: Got it. And can you remind us of Skechers' international's strategy? I find it unique. What are the characteristics of subsidiary JV and distributor
markets, as you -- particularly as you look to enter new markets?
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NOVEMBER 10, 2021 / 4:00PM, SKX.N - Skechers USA Inc at Berenberg US CEO Conference (Virtual)
Question: Brian Christopher McNamara - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst
: Got it. So there was a recent media report that suggested strategic alternatives for your Asia business, particularly China. I mean when does China
reach that transition point as you a kind of alluded to in your previous comments in terms of you guys a kind of feel confident enough to go it
alone? Or is that a kind of -- Is that a unique market where you think the JV model you have right now is a kind of the go-forward path?
Question: Brian Christopher McNamara - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst
: So what I refer to as your other international markets, and that's basically excluding China, India, and Canada, those are markets we can reasonably
estimate where they're at. I guess what international market in that other international category are you most excited about?
Question: Brian Christopher McNamara - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst
: Got it. So Skechers has predominantly been a volume story over time, but it appears pricing is playing a bigger role than it has historically, particularly
as your comfort technology appears to be commanding higher prices. How should we think about pricing as a contributor to annual revenue
growth moving forward?
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NOVEMBER 10, 2021 / 4:00PM, SKX.N - Skechers USA Inc at Berenberg US CEO Conference (Virtual)
Question: Brian Christopher McNamara - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst
: So Skechers provided annual guidance this year. I think for the first time in a long time, 2002 as I think it was the last year. I mean that's a pretty
momentous decision for you guys. I'm curious what went into that decision when we thought making process behind it?
Question: Brian Christopher McNamara - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst
: Got it. So on the same note, it appeared the company is pretty well positioned for a beat and raise year before kind of industry-wide supply chain
issues interfered. Is there any way to size up how much supply chain issues has impacted the company relative to your revised full year guidance?
Question: Brian Christopher McNamara - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst
: Got it. So will 2021 supply chain headwinds impact how you guys a kind of run the business moving forward?
Are there any learnings or is this something that was a kind of crappy for everybody?
Question: Brian Christopher McNamara - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst
: So you recently stated that there's no reason -- no impediment to you guys building a potentially a $10 billion revenue business by 2025 or 2026.
Your guidance this year, what you -- if you achieve that, it implies a CAGR of roughly 10% to 13% on the top line.
Now that's basically what you've done historically, but it's off a much higher base at this point. So can you remind us what will -- what are the drivers
of that potential growth as you see over the next a kind of 4 to 5 years?
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NOVEMBER 10, 2021 / 4:00PM, SKX.N - Skechers USA Inc at Berenberg US CEO Conference (Virtual)
Question: Brian Christopher McNamara - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst
: Can you talk briefly on e-commerce? I know it was a kind of a hot topic last year. It's been talked about a little less this year just as it relates to
Skechers. But you guys exited Q4 of last year had a pretty strong run rate.
I'm curious a kind of where that settled this year and a kind of how the e-com algorithm a kind of impacts your decisions to now open and potentially
Question: Brian Christopher McNamara - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst
: So your prepandemic operating margin was right around 10%, a little south of there. I think the goal for you, at least earlier in the year was a kind
of get back to that level first before talking about expanding further. And I think you are well on track to be comfortably north of their a kind of
before the supply chain stuff.
I appreciate and we'll continue to invest in the business where appropriate. How should investors think about potential margin expansion as you
build towards that $10 billion business?
Question: Brian Christopher McNamara - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst
: So I mean Skechers stock has historically been pretty volatile around earnings with a double-digit move in the share price reacting, in reaction to
earnings, not all that unusual at least from a historical standpoint.
But that volatility has diminished significantly with an average absolute move on your last 8 earnings reports of around 5%. What would you
attribute that reduced volatility to?
Question: Brian Christopher McNamara - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst
: We haven't touched much on your a kind of domestic wholesale business. Nike has made the big announcements over the last few years of exiting
certain wholesale partners, the family channel and the like. Presumably, that presents a pretty big opportunity for the likes of yourselves.
Can you a kind of size up that opportunity for us a kind of where you are perhaps what inning you are a kind of seizing that opportunity, and a kind
of how that impacts your relationships with your current wholesale partners?
Question: Brian Christopher McNamara - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst
: Can you envision a scenario next year, where the supply chain issues ease, and then all of a sudden, you just have a load of product, whether it be
sneakers or whatever you want to characterize it, as coming in the market at perhaps an inopportune time. It feels like consumer companies in
general are printing robust sales numbers.
How does the industry react to something like that, where the supply shortage is perhaps turning to supply surpluses? There's been issues in the
past with Nike, and the retail (inaudible) in 2017. A kind of how does Skechers a kind of navigate a potential scenario like that?
Question: Brian Christopher McNamara - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst
: So you've heard other competitors across footwear and apparel, talking about using more airfreight and things like that, perhaps sourcing in
different places. It doesn't seem like you guys have a kind of leveraged that opportunity, but I don't want to put words in your mouth, a kind of
what's the reasoning behind that?
And how do you see things normalizing next year as it relates to kind of freight, and some of the supply chain stuff?
Question: Brian Christopher McNamara - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst
: Got it. What international market I guess, is an up and coming 1 that nobody is paying attention to in the marketplace for you guys?
Question: Brian Christopher McNamara - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst
: And it seems like it's been -- well, an unusual year to say the least in India. Clearly, 2Q was a tough quarter, and then you got you guys came roaring
back in Q3 with nearly 70% growth.
Question: Brian Christopher McNamara - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst
: How do store openings in India a kind of look? I mean, clearly, you've been impacted by what's going on with the pandemic there. But how should
we think about store growth in that country.
I mean it's not your traditional -- I mean it's more of your traditional brick-and-mortar economy relative to Nike were a large e-commerce business.
Question: Brian Christopher McNamara - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst
: Got it. And then finally, I mean, you had mentioned earlier in your remarks that every CFO, including yourself, believes their stock is undervalued.
Clearly, there's a case to be made in your stock specifically, as our rating implies. But what are your priorities for capital allocation?
And if you believe the stock is undervalued, do share buybacks, makes sense at some point again?
Question: Brian Christopher McNamara - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst
: John, thanks so much for your time. I think we are out of time, but really appreciate you visiting with us today and for all the insights on your
company.
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