Skechers U.S.A., Inc.

Thank you for standing by. This is the conference operator. Welcome to the Skechers' third quarter 2020 earnings conference call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then 1 on your telephone keypad. Skechers requests that analysts limit themselves to one question and one follow-up question only. to allow all analysts to have the opportunity to ask a question. Should you need assistance during the conference call, you may signal an operator by pressing star and zero. I would now like to turn the conference over to Skechers. Please go ahead.

Thank you, everyone, for joining us on Skechers' conference call today. I will now read the Safe Harbor Statement. Certain statements contained herein, including without limitation statements addressing the beliefs, plans, objectives, estimates, or expectations of the company or future results or events may constitute forward-looking statements that involve risks and uncertainties. Specifically, the COVID-19 pandemic has had and is currently having a significant impact on the company's business, financial conditions, cash flow, and results of operations. Such forward-looking statements with respect to the COVID-19 pandemic include without limitation statements the company's plans in response to the pandemic. At this time, there is significant uncertainty about the duration and extent of the impact of the COVID-19 pandemic. The dynamic nature of these circumstances means that what is said on this call could change at any time, and as a result, actual results could differ materially from those contemplated by such forward-looking statements. Additional forward-looking statements involve known and unknown risks, including but not limited to global, national, and local economic business and market conditions in general and specifically as they apply to the retail industry and the company. There can be no assurance that the actual future results, performance, or achievements expressed or implied by any of our forward-looking statements will occur. Users' forward-looking statements are encouraged to review the company's filings with the U.S. Securities and Exchange Commission, including the most recent annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8K, and all other reports filed with the SEC as required by federal securities law for a description of all other significant risk factors that may affect the company's business, financial conditions, cash flows, and results of operations. With that, I would like to turn the call over to SCETRA's Chief Operating Officer, David Weinberg, and Chief Financial Officer, John Vandemor. David? David?

Thank you for joining us today for our third quarter 2020 conference call. I hope you, your colleagues, and loved ones are healthy and staying safe. The pandemic continues to impact business throughout the world, but Skechers has seen meaningful improvements from the second quarter, including a return to growth in many markets. Third quarter sales were 1.3 billion, which was a 3.9% decrease from the prior year, but a 78.3% increase over the second quarter. a significant accomplishment, and an encouraging sign of the health of our brand. Growth came from each of our segments as the retail environment steadily improved with our wholesale channel stabilizing and in several instances growing. We believe our third quarter results speak to the relevance of our product, resilience of our company's distribution model, and our plan to emerge from the pandemic even stronger than before. In these uncertain times when people are predominantly working from home and more focused on their well-being, consumers desire comfort, and we have the product they want and need. Athletic and casual footwear and apparel with a focus on comfort is precisely in our wheelhouse. In our domestic wholesale business, growth came primarily from our adult, athletic, casual, and sandal footwear, along with single-digit improvements in our men's and women's collections. We experienced double-digit improvement in our kids' footwear, which is particularly notable given the absence of a traditional back-to-school selling season and many children still learning remotely. Our domestic wholesale business returned to growth in the quarter, rising 6.3%, a result of pent-up demand and the relevance of our product. We saw similar sales trends for our comfortable footwear and our other business channels with a return to growth in many markets, and quarterly improvements in our own direct-to-consumer business. The more than 3,770 Skechers stores, e-commerce sites, and availability in many of the leading retailers worldwide gave us the opportunity to fulfill demand and satisfy customers as the markets reopened. The pace of recovery has differed across geographies, but where markets are stable and open, Skechers experienced solid growth in sales. Our joint venture business was up 14%, led by an increase of 23.9% in China, where our e-commerce business was particularly strong. Our European subsidiaries were up 18.1% overall, led by fantastic growth in Germany, as well as in France and Central Eastern Europe. Our distributor business was down double digits due to ongoing store closures in several markets, including our largest distributor, which covers the Middle East. However, several markets recorded positive sales, including Australia, New Zealand, and Scandinavia, among others. By the end of the third quarter, all but a few Skechers retail locations were open, although many were operating with limited hours. In the quarter, we also opened 24 pre-COVID planned stores, including flagship locations on Rue de Rivoli, the premier shopping street in France, Oxford Circus in London, and Shinjuku in Tokyo. and two stores in Colombia and another 19 domestic and international locations. One store closed in the quarter. We plan to open several key locations in the fourth quarter, including our first in Munich and Berlin. In the third quarter, our direct-to-consumer business decreased 16.9% as consumer traffic remained challenged mostly in tourist and destination concept stores, as well as continued store closures in some markets. However, our domestic e-commerce business continued to grow significantly, even as our retail locations reopened, increasing 172.1% in a quarter. That said, we showed sequential improvement in our brick-and-mortar stores, particularly in our big box locations throughout the third quarter and from the second quarter. We continued to invest in our direct-to-consumer experience. During the quarter, we began a full-scale update to our point-of-sale system, and are now connected with our e-commerce channel, allowing consumers to shop our product online and pick up in one of our more than 500 US locations, either in-store or curbside. We believe these investments to fully integrate our physical and digital ecosystems into one omnichannel experience will drive sales as shopping online has become a preference and a growing necessity for many consumers. In addition to the 24 company-owned stores, 189 new third-party Skechers stores opened around the world and 48 closed, bringing our total company-owned third-party store count to 3,770 worldwide at quarter end. To support the reopening of our business in markets around the world, we strategically heightened our advertising efforts, continuing with a digital focus while adding in-store, outdoor, and new television campaigns for our comfort footwear. including one with baseball great and World Series champion Clayton Kershaw, who played this week in custom Skechers cleats. We believe the steps we have taken to protect and improve our business to reopen stronger than ever is evident in the growth we have achieved in many markets, including most notably our domestic wholesale channel. As we strive to continue this positive trend worldwide, we are further enhancing our infrastructure as well as our digital business. our new 1.5 million square foot China distribution center remains on track. And we are working diligently on the expansion of our North American distribution center, which we expect to be completed in the second half of 2021, bringing our facility to 2.6 million square feet. We also completed the expansion of our European distribution center, bringing it to 2.1 million square feet, and expect to open our first UK-based distribution center by the end of this year, Also, we have opened new distribution centers in Panama and Colombia, all to pave the way for growth as well as increased e-commerce business. We are on track to upgrade our e-commerce platforms in Canada, Europe, South America, Japan, and India. Further, as we continue to build our logistics centers for growth, and as we experience the pent-up demand for our product, we are ramping up our supply chain with increased factory production capacity to be in line with our future product needs. Now, I'd like to turn the call over to John.