Skechers U.S.A., Inc.

Thank you for standing by. This is your conference operator. Welcome to Skechers' fourth quarter 2020 earnings conference call. As a reminder, all participants are in a 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 the number one 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 the number 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, the company's plans in response to the pandemic. At this time, there is significant uncertainty about the duration and extent of 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 of 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 8-K, and all other reports filed with 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 Sketcher's Chief Operating Officer, David Weinberg, and Chief Financial Officer, John Vandermaer. David?

Thank you for joining us today for our fourth quarter and year-end 2020 conference call. I hope you, your colleagues, and loved ones are staying safe and healthy. Before we begin, I would like to thank the Sketcher's global team for their dedication and resilience this past year as we face such incredible challenges. We couldn't have weathered the storm in such good shape without all your hard work. Many countries faced another surge of the pandemic in the fourth quarter, which negatively impacted businesses around the world, resulting in temporary store closures and reduced traffic. Even with the ongoing health crisis and challenges, Skechers experienced growth in several of our segments and meaningful improvements in key countries. Our fourth quarter sales were $1.32 billion, a half of 1% decrease from the prior year, which was a fourth quarter record, and notably a sequential improvement from the third quarter of nearly 2%, illustrating the continuing recovery of our business. Our strong year-over-year sales in the fourth quarter were the result of a 1.2% increase in our domestic wholesale business and a 1.1% increase in our international business, which was led by a nearly 30% sales increase in China, as well as growth in Europe and Latin America. Throughout the quarter and year, we strategically directed the flow of inventory to markets that were open, delivered fresh product to consumers, and continued to fulfill demand, resulting in growth in many key distribution channels. In 2020, consumers searched and desired comfort and value. With comfort as the cornerstone of the Skechers design initiatives, along with style and value inherent to our product development, we are a natural choice for all, including essential workers and those working from home. In our domestic wholesale business, our fourth quarter sales growth of 1.2% came primarily from our athletic casual, walking, and work footwear, as well as high single digit improvement in our men's business. The domestic business decreased 2.8% due to a 7.6% decline in our direct-to-consumer sales, which was negatively impacted by reduced traffic in our brick-and-mortar stores, a result of the stay-at-home guidelines and an overall decline in foot traffic and tourism. We believe our domestic brick-and-mortar stores will continue to be impacted by the pandemic at least through the first half of the year, though we expect to see improvement as more people receive vaccinations and government restrictions ease. The decrease in our domestic direct-to-consumer business was partially offset by a 142.7 percent increase in our domestic e-commerce channel, which continues to perform extremely well. With the focus of improving our direct-to-consumer experience, over the holiday season, customers were able to shop online and pick up in store at many of Sketchers' locations across the United States. We are now completing the update to our point-of-sale system to better connect within our e-commerce channel, And we are finalizing enhancements to our loyalty program, both of which we believe will further improve our omni-channel offering. We continue to view our e-commerce channel as an opportunity for meaningful growth, as sales increase significantly on both our domestic and international sites that we currently operate. And this coming year, we plan to launch new sites across Europe and South America, which will provide both a better brand experience for consumers as well as new sales channel for Skechers in many regions. Our international direct-to-consumer business decreased 4.4%, which was due to a decline in traffic with stay-at-home guidelines, reduced hours, and temporary closures, primarily in Europe, Canada, and Latin America. In total, Skechers' direct-to-consumer segment decreased 6.4% as the pandemic spread again in numerous markets, temporary store closures, and reduced hours continued. In the United States, consumer traffic at our stores was approximately 35 percent lower, and operating hours were reduced by approximately 20 percent. For our international company-owned stores, we effectively lost 17 percent of the days available to sell during the quarter. At quarter end, nearly 10 percent of our company-owned stores were closed due to health guidelines. Today, due to government restrictions, a number of our international locations remain closed or have reduced hours. All Skechers stores in the United States are open, and some domestic regions are trending positive, while others are still impacted by reduced hours and traffic due to local guidelines. To note, while our direct-to-consumer business decreased in the fourth quarter, we did experience sequential quarterly sales improvement of 9.5 percent. In the fourth quarter, we opened 19 company-owned Skechers stores, 12 of which were international locations, including a flagship store in Munich. We closed six locations in the fourth quarter, and another 18 have closed to date in the first quarter. By the end of the first quarter, another five to seven company-owned stores are expected to close. An addition of 108 third-party Skechers stores opened in the fourth quarter, bringing our total store count at quarter end to 3,891. The stores that opened were across 22 countries. with China opening the most locations, including our first dedicated golf store at the famed Mission Hills Golf Resort in Shenzhen. Our international sales improved 1.1% over the same period last year, and sequentially 4.5% higher than the third quarter. Our international wholesale business improved 2.5% from the fourth quarter last year. This was the result of increases in our joint venture business of 19.4%, led by an increase of 29.7 percent in China and an increase in our subsidiaries of 12.7 percent. The subsidiary growth was across Europe and Latin America, with exceptional improvements in the United Kingdom and Germany, as well as in Chile and Spain. As expected, our distributor business was down 57.9 percent due to ongoing store closures in several markets, including our largest distributor, which covers the Middle East. To support the open markets during the holiday selling period, our marketing efforts were focused on comfort with commercials and digital advertising to support key initiatives for men, women, and kids. This included a new campaign with former quarterback and lead NFL commentator Tony Romo for Max Cushing, who you will see in the Skechers Super Bowl commercial this Sunday. To support our business during 2020 and for the coming years, we took steps to not only enhance our POS systems and e-commerce platforms, including the addition of BOPIS and BOPAC in the United States, but also enhanced our distribution centers and supply chain production capabilities. Along with opening a new logistics center in Columbia, we have added a distribution center in the United Kingdom to serve the region in the post-Brexit environment. The automation of our new 1.5 million square foot China distribution center remains on track for full implementation by mid-year, And we continue working on the expansion of our North American distribution center, which will bring our facility to 2.6 million square feet in 2022. We anticipate many markets will remain challenged in the first half of the year due to the pandemic, but believe some countries are showing signs of recovery. During this time, we will continue to manage the flow of our inventory to fulfill demand where we are open, spend prudently in markets still impacted, and drive sales where possible. Now I'd like to turn the call over to John.