Skechers U.S.A., Inc.

Thank you for standing by. This is the conference operator. Welcome to Skechers' first quarter 2021 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 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 a conference call, you may signal an operator by pressing star 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 here, 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 Skechers Chief Operating Officer, David Weinberg, and Chief Financial Officer, John Dandemore. David?

Thank you for joining us today for our first quarter conference call. I hope you, your colleagues, and loved ones are staying safe and healthy. As the COVID-19 pandemic continues to be a global challenge, we remain dedicated to the safety of everyone in the entire Skechers organization and appreciate their ongoing efforts and resiliency during this difficult period. While many countries' restrictions are easing, our thoughts are with those regions facing another coronavirus wave. As is the case with most businesses, the pandemic continued to impact Skechers, but the high demand for our comfort technology product resulted in a strong beginning to 2021, and it feels reminiscent of 2019. In the first quarter, we achieved revenue growth of 15% over the same period last year. which resulted in our first quarterly sales of more than $1.4 billion. This was done while parts of the world remained closed due to the pandemic. The $1.43 billion first quarter sales were also an 11.9% increase over first quarter 2019, which was then a record for the period. Driving the record sales was a 20.2% increase in our international business and an 8.5% increase in our domestic business. This double digit growth drove international sales to 57.8% of total sales in the first quarter. Throughout the quarter, we focused on delivering our footwear and apparel to meet the needs of both our consumers and customers. Our sell-throughs across customer types and categories exceeded expectations in many markets, and we were able to deliver double digit growth. Getra's mission of delivering comfort, style, and quality and innovation at a value resonated with consumers prior to the onset of the COVID-19 pandemic, and the same is true now. Consumers are returning to a new normalcy, one that involves more walking, more comfort on the job, and a casual lifestyle mindset. We are a natural choice for any demographic worldwide with comfort technology at our core. The record sales are a testament to the fact that consumers appreciate our product offerings, which was seen by the success across many divisions. Our international wholesale business grew 23.8% for the first quarter last year and 13% from 2019. The quarterly sales growth was driven by an increase of 174% in China, which was severely impacted by the pandemic in the prior year. However, even as compared to 2019, China grew 45.5%. The international wholesale growth was partially offset by decreases in our subsidiary and distributor businesses. Subsidiary sales decreased 4.8% from 2020, but improved 4.2% from 2019. The first quarter 2021 decrease was due to temporary closures and reduced operating hours in Spain and Italy, and especially in the United Kingdom, where businesses were closed for the entire quarter. When markets were open, sales were strong, including in Germany, India, and Canada. Our distributor business was down 6.5% from last year, yet several markets experienced growth in the quarter, specifically Russia, Taiwan, Turkey, and Ukraine. We believe we will continue to see improvements in our distributor business in the second quarter and the remainder of the year. Sales in our domestic wholesale business decreased less than 1% in the first quarter compared to the same period in 2020, but improved 8.1% compared to the first quarter of 2019. We believe sales in our domestic wholesale business were negatively impacted by logistical challenges, which caused slower replenishment and product shipments to some accounts. Key sales drivers came from multiple categories with the largest gains in our women's sport, kids, work, and men's performance. Additionally, the average selling price per pair increased 2.7%, reflecting the strength and appeal of new comfort products and technologies. Sketchers' direct-to-consumer business increased 18.1% over 2020 and 13.1% over 2019, despite the fact that domestic operating hours were reduced by approximately 15% during January and February, and 7% in March. In our international company-owned stores, we lost 37% of the days available to sell during the quarter. Our domestic direct-to-consumer sales increased 28.4% compared to the first quarter of 2020 and 18% compared to 2019. This improvement came from our domestic e-commerce channel, which grew by 143%, and our brick-and-mortar stores, which grew by 13.6%. Our domestic direct-to-consumer average selling price per unit rose 10.9%, which speaks to the strength of our current product offering. While we expected our e-commerce business to continue to perform exceptionally well, we were pleased with the increased traffic and sales in our domestic retail stores, especially in March, which we believe improved as more people became comfortable shopping and we ramped up our marketing efforts. We have now completed the update of our point-of-sale system, which further optimizes our domestic direct-to-consumer channels and will continue to improve our omnichannel capabilities. We are now focused on rolling out this same platform worldwide. Our e-commerce channel remains a meaningful growth opportunity as sales increase significantly across the globe. We plan to expand our e-commerce reach across Europe, beginning with a new site in Ireland and the revamp of our UK site this summer. Our international direct-to-consumer business increased 1.9% over the first quarter of 2020 and 4.4% over 2019. The growth was largely attributable to our company-owned e-commerce sites and the strength of our sales in Korea, India, and Thailand, partially offset by ongoing temporary store closures due to stay-at-home guidelines across many markets, most notably in the United Kingdom. While we are seeing some markets reopening this month, including England last week. Other countries have extended or reinstated their lockdowns. Given the unpredictability of the coronavirus and its impact on many markets, we remain cautious about a return to normal traffic and sales in many international stores. In the first quarter, we opened 12 company-owned Skechers stores, six of which are in international location, including our largest store in India. We have opened seven stores to date in the second quarter, including our first in Antwerp. We closed 20 locations in the first quarter as we opted not to renew expiring leases, and we expect to close one additional store at the end of this month. An additional net 106 third-party Skechers stores opened in the first quarter, bringing our total store count at quarter end to 3,989. The stores that opened were across 16 countries, with most located in China and India. To support the open regions during the first quarter, we ramped up our marketing efforts to drive home our comfort message. This included former professional quarterback and lead NFL commentator Tony Romo in a max-cushioning commercial during the Super Bowl, and NFL coach John Gruden and sports analyst Howie Long in new commercials for Skechers ArchFit, as well as Brooke Burke featured in ArchFit and Skechers Apparel commercials during the quarter. Our new campaign, ran on television as well as digital platforms to support key initiatives for men, women, and kids. In the first quarter, we were awarded company of the year by leading industry publication Footwear Plus for the ninth time in 15 years. This was due to our efforts during the challenging 2020 year and our ability to deliver to consumers the comfort they wanted. We are pleased with our performance in the first quarter and think this was a solid beginning. especially given the ongoing pandemic-related difficulties most recently impacting our international business, which now represents 58% of our total sales. While many markets continue to face challenges, we are seeing strong signs of recovery and remain focused on delivering our comfort technology and managing the flow of our inventory to fulfill demand where we are open and drive sales where possible. Now, I'd like to turn the call over to John.