Skechers USA Inc at Morgan Stanley Global Consumer & Retail Conference Transcript

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

Question: Alex Straton - Morgan Stanley - Analyst : So John, we're sitting here in December, just got there, I can't believe it. We're looking at 2025 in the face. Maybe starting high level, what are the most topical industry kind of dynamics that you're focused on right now?

Question: Alex Straton - Morgan Stanley - Analyst : Perfect. And I promise everyone in the audience, we will circle back on holiday on consumer on tariffs. So I will not let you off the hook yet. But maybe before we go there, it seems like Skechers' competitive positioning in the last few years has evolved, at least from when I first started covering a number of years before that. So can you talk about where the brand fits into the mosaic of the industry now compared to maybe even just three, five years ago?

Question: Alex Straton - Morgan Stanley - Analyst : So John, that's a great overview of kind of where you guys sit, what's top of mind. Now let's maybe zoom in a good segue into revenue. You have this $10 billion target out there. Can you just refresh us on what those building blocks are to get you there from here? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 03, 2024 / 1:45PM, SKX.N - Skechers USA Inc at Morgan Stanley Global Consumer & Retail Conference

Question: Alex Straton - Morgan Stanley - Analyst : So you mentioned international, DTC, a little bit of domestic wholesale, it sounded like in terms of the big picture of getting there? Or how does that look in 2025 are any more important than others? Or what are the dynamics there?

Question: Alex Straton - Morgan Stanley - Analyst : Perfect. Maybe breaking that down a little bit, something that's unique about Skechers as you have such international exposure compared to some others I cover. So maybe we can do a quick lightning round on US, China, Europe, high-level views, kind of what's top of mind near term into next year.

Question: Alex Straton - Morgan Stanley - Analyst : Can we take on India a little bit more? I feel like you're one of a few that's kind of highlighted this opportunity and been very front footed. So why is it so compelling to you all? Is the competitive landscape different there?

Question: Alex Straton - Morgan Stanley - Analyst : Perfect. So we've covered kind of how you think about the world and revenue right now from a geographic perspective. You also highlighted DTC a key lever going forward. Can you break that down for us, how you're thinking about the strategy there domestically versus internationally? Is it different? How could the growth be different?

Question: Alex Straton - Morgan Stanley - Analyst : Perfect. Maybe now turning to the other side of the channel distribution, you've got wholesale. You highlighted domestical cell, which has been a strong point for all of you or for you going forward. And recently, can we just talk about the wholesale opportunity? How are you thinking about it now? I know you've had a lot of success, how much bigger can it get? What's on your mind there?

Question: Alex Straton - Morgan Stanley - Analyst : A common question we get about your wholesale business is how you think about some of these bigger -- I won't name names, competitors kind of publicly announcing they're re-entering or re-going after it. So how does that factor in to your thinking about that channel?

Question: Alex Straton - Morgan Stanley - Analyst : So one thing you mentioned about competing effectively in wholesale is newness and innovation, and I won't let you off the stage and until you talk about Slip-ins, as everyone wants to hear about. So maybe where are you at in terms of that product life cycle and what's next? Like what should we be on the lookout for from an innovation perspective out of Skechers for what you can disclose?

Question: Alex Straton - Morgan Stanley - Analyst : So a couple of other new areas you've entered, soccer, basketball, can you talk to me about what was the rationale behind entering them? How you see the go-forward opportunity? Are there any other sorts we should be looking out for your entry into?

Question: Alex Straton - Morgan Stanley - Analyst : Perfect. We've been a dead horse on revenue in that area.

Question: Alex Straton - Morgan Stanley - Analyst : Well, don't worry, we're going to go there. But first, bigger picture on EBIT margin sitting at 10% now, you've put this kind of low teens sort of out there.

Question: Alex Straton - Morgan Stanley - Analyst : So tell me, how do we get to that low teens type of place from here? What are the key levers to [a person who's] getting there?

Question: Alex Straton - Morgan Stanley - Analyst : So from what you just said, it sounds like maybe gross margin is a bigger piece to hitting that or talk me through?

Question: Alex Straton - Morgan Stanley - Analyst : Perfect. So maybe just digging a little bit on gross margin, some more high level for Skechers right now, I think, almost peak from what you guys have ever done. What's enabled that step change? And then what is the next lag for how you continue to drive that forward?

Question: Alex Straton - Morgan Stanley - Analyst : Great. So you gave us a little bit of a taste on SG&A, your favorite topic. I want to dive a little bit deeper now. It sounds like not expecting a ton of leverage near term. So maybe help us understand what's the message you want us to hear on your expectations for how you're managing SG&A maybe near term versus longer term.

Question: Alex Straton - Morgan Stanley - Analyst : And is that approach to marketing that you mentioned around the Slip-ins? Is that different than Skechers approach historically? And does that represent a change going forward as well that you'll invest more?

Question: Alex Straton - Morgan Stanley - Analyst : Okay. I'll stop hammering you on things in the income statement. I do want to talk about inventory. Yeah, inventory, we'll move there. It seems a little elevated across some of the footwear players, at least that sit in my coverage, looking at the latest results. So how do you feel about Skechers levels? How do you feel about inventory levels broadly in the industry right now? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 03, 2024 / 1:45PM, SKX.N - Skechers USA Inc at Morgan Stanley Global Consumer & Retail Conference

Question: Alex Straton - Morgan Stanley - Analyst : Perfect. Now speaking of holiday, you mentioned earlier, it sounded like a relatively positive early message. Can you elaborate a little bit more on that?

Question: Alex Straton - Morgan Stanley - Analyst : Perfect. I know we've got about a minute left. So I do want to open it up if there were any questions from the audience.

Question: Alex Straton - Morgan Stanley - Analyst : Yes, very short questions or if anyone has anything. Typically shy. So I'll ask you one final one. Don't worry, I still have many more. You talked a little bit about tariffs, how you're thinking about the implications there. Can you just refresh us on all the dynamics you're thinking about with the new administration, how it could potentially impact Skechers, what's most top of mind for you?

Question: Alex Straton - Morgan Stanley - Analyst : Great. Well, thank you so much for joining us today. We're right out of time.