Skechers U.S.A., Inc.

Greetings. Welcome to the Skechers second quarter 2021 earnings conference call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now 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 8K, 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 Vandemor. David?

Thank you for joining us today for our second quarter conference call. I hope you, your colleagues and loved ones are healthy as the COVID pandemic continues to be a global challenge. We appreciate the resiliency of the Skechers organization over the past 18 months and hope that those facing the ongoing COVID related challenges are staying safe. Skechers second quarter financial results exceeded expectations as we achieved record quarterly sales of 1.66 billion. a 127% increase over 2020, and a 32% increase over 2019. This marks the first time our quarterly sales have exceeded $1.6 billion, and together with our first quarter, yields a new six-month record of over $3 billion. We also achieved a record gross margin of 51.2%, record quarterly diluted earnings per share of 88 cents, and exceptionally strong operating margins of 12.1%. Our record revenues were the result of increases of 147% in our domestic business and 114% in our international business, and both businesses increased over 30% compared to 2019. International sales comprised 56% of our total sales in the quarter. This growth, a result of increases across all reportable segments is reflective of higher average selling prices on significantly more units sold, less promotional activity during the period, and consumers embracing our comfort technology in our seasonal, athletic, and casual footwear lines, in addition to our apparel offering. It is important to note that these exceptional second quarter results came despite the ongoing global pandemic. COVID continued to severely impact some countries in the second quarter, most notably India. but also remained a challenge for many other markets with lockdown restrictions, temporary closures, and reduced store operating hours. The pandemic and other factors also continue to challenge our global supply chain. We appreciate the dedication and focus of the Skechers teams around the world. Without them, we wouldn't have achieved the results we had. Our international wholesale business grew 95% from the second quarter last year and 37% from 2019. The quarterly sales growth was primarily driven by China with an increase of 51% over the same period in 2020 and a 68% increase from 2019, as well as Europe, which had an increase of 150% over 2020 and 85% over 2019. Our joint venture businesses increased 56% for the quarter compared to 2020 and 46% as compared to 2019. In addition to China, Mexico and Israel also improved over both periods. Subsidiary sales increased 163% from 2020 and 48% from 2019, despite temporary closures and reduced operating hours in many regions, including India, Canada, Japan, and parts of Europe and South America. The UK, Germany, Canada, France, Spain, and Italy all achieved notable growth over both 2020 and 2019 comparable periods. Our distributor business improved 122% over last year, though it was down 7% from 2019. Several markets achieved growth not only compared to 2020, but also 2019. These include Australia, Russia, Taiwan, Algeria, South Africa, Scandinavia, and Ukraine, among others. Our largest distributor, the UAE, which handles much of our business across the Middle East and parts of Africa and Eastern Europe, saw significant improvements over 2020, and we believe it is continuing to improve. Skechers direct-to-consumer business increased 138% over 2020 and 26% over 2019, despite temporary store closures, primarily in India, Canada, Japan, and Chile. and reduced hours in many of our international company-owned stores due to local health guidelines. Worldwide com store sales were up 109% compared to 2020, including 96% domestically and 165% internationally. As compared to 2019, worldwide com store sales increased 13%, including an increase of 22% domestically, and a 9% decrease internationally, reflecting the ongoing store closures. Our direct-to-consumer average selling price per unit rose 17% compared to 2020, indicative of our less promotional stance and the success of our comfort technology products. Given the unpredictability of the coronavirus and its continued impact on many markets, we remain cautious about a return to normal traffic and sales in many international stores. but believe that we will see improvements where we are fully open and restrictions will ease. Our domestic direct-to-consumer sales increased 101% compared to the second quarter of 2020, and nearly 30% compared to 2019. Driving this growth was a 232% increase in our retail store sales, or 11% over 2019. The domestic retail store improvement was partially offset by a decrease in our domestic e-commerce channel of 25%, which faced difficult comparisons to the prior year. However, it is important to note that domestic e-commerce sales were up 337% over 2019. Our international direct-to-consumer business increased 259% over the second quarter of 2020 and 20% over 2019. The growth as compared to 2019 was the result of a larger international company-owned retail store base and increases in our e-commerce business. A number of markets achieved growth over both 2020 and 2019, including the UK, Spain, Germany, Mexico, and others. Our e-commerce channel remains a meaningful growth opportunity and continues to grow this business. We recently launched our new loyalty program in the United States, which we will be capitalizing on in the coming weeks. We're also looking forward to the planned expansion of our worldwide e-commerce presence this year and into 2022. In the second quarter, we opened 13 company-owned Skechers stores, including key locations in Antwerp, Barcelona, Berlin, and Lima. We closed eight locations in the second quarter as leases expired. We have opened three stores to date in the third quarter, and have another three planned through the end of the month, with another 20 to 25 expected to open by year's end. An additional net 63 third-party Skechers stores opened in the second quarter across 26 countries, including our first in the Dominican Republic. In total, at quarter end, there were 4,057 Skechers stores around the world. Another 145 to 155 third-party stores are expected to open by year end. Sales in our domestic wholesale business improved significantly. 206% in the second quarter compared to the same period in 2020, and 31% compared to the same period in 2019. Nearly every product category achieved growth in the quarter, with the highest gains coming from sport, kids, casual, and our seasonal sandal footwear. Additionally, the average selling price per pair increased reflecting the appeal of our new comfort product and technologies. Innovations in developing footwear technology has been a significant part of our DNA for much of our history. Going back to our made-to-last occupational footwear, to the lightweight cushioning and performance material for our first-generation Skechers Go Run and Go Walk lines, to features that deliver comfort in every pair. Our core product philosophy of comfort, style, innovation, and quality at the right price is resonating with consumers, especially during these difficult times, as we believe people are embracing a more relaxed lifestyle and want to incorporate comfort into their work and weekend wear. Throughout the quarter, we were strategic in our approach to marketing, communicating the comfort and innovations of Sketchers' vast collection of products for men, women, and kids. In the second quarter, our multi-platform approach included television, outdoor, print, and online in many global markets. This created awareness, helped drive sales, and resulted in our record revenues. To further support our business in the coming year, we are enhancing our infrastructure with new distribution centers in Peru, the UK, and Japan, and are looking for a location in India. We have completed our new 1.5 million square foot China distribution center, which as of this month is fully operational. We are continuing to work on the expansion of our LEED Gold Certified North American Distribution Center, which will bring our facility in Southern California to 2.6 million square feet in 2022. Given our global growth, we are confident that Skechers' innovative collection of comfort footwear and apparel resonated with consumers as they began returning to work, dining out, shopping, and traveling. Where markets were open and restrictions eased, sales exceeded our expectations. And in the markets that were largely closed due to local health guidelines, we still performed well given the circumstances. We believe our exceptional results in the second quarter are a sign of the power of the brand globally. And now I'd like to turn the call over to John for more detail.