Skechers U.S.A., Inc.

Greetings and welcome to Skechers' first quarter 2022 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. As a reminder, this conference is being recorded. I would now like to turn this conference over to your host, Skechers Investor Relations. Thank you. You may begin.

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 this 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 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 the SEC as required by federal securities laws for 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 Vandemoor. David.

Welcome everyone to our first quarter 2022 conference call. Before we discuss our record quarterly results, I would like to acknowledge the devastating humanitarian crisis in Europe as a result of the war in Ukraine. Together with our employees and partners, we have donated close to half a million dollars to organizations working to provide relief on the ground for the innocent victims impacted. As always, Our first concern is the well-being of the Sketchers team and the well-being of those impacted by this conflict. This year marks Sketchers' 30th anniversary, and we are off to an excellent start in 2022 with a new quarterly sales record of over $1.8 billion. We are proud of the accomplishments and milestones we've achieved and couldn't be more excited about what the future holds. Our product offering and the enthusiasm for the Sketchers brand have never been stronger. This is clear in the Skechers stores from London to Los Angeles and Munich to Mumbai, and in displays and shops and shops in retailers around the world. It is also apparent in our marketing campaigns, whether it's alongside major events like commercials with Willie Nelson surrounding the Super Bowl, or being the official footwear sponsor at this month's U.S. Open Pickleball Championships and the LPGA's LA Open here in Los Angeles, or on screens at home, on phones in the mall and city streets. Skechers is truly everywhere, and as consumers continue to embrace comfort along with an active lifestyle, we remain a leading choice as the comfort technology company. Now let me turn to our first quarter results, which include the updates to our reporting structure that we announced two weeks ago. We believe this approach best reflects how we manage and lead our business and will improve transparency in our operational results. More information regarding these changes can be found in our investor website. The first quarter sales record is a remarkable achievement, given the ongoing pandemic-related challenges we continue to face, including worldwide store closures and supply chain disruptions. Sales grew nearly 27% overall, well balanced between domestic growth of 29% and international growth of 26%. We believe the significant growth was due to the broad-based demand for our innovative comfort products from consumers globally, supported by our impactful multimedia marketing, worldwide team, and enhanced infrastructure. Our total international business now comprises 57% of our sales, reflective of our strong brand awareness worldwide. In the quarter, our wholesale business, increased 33% led by growth in the Americas and EMEA, both of which grew over 40% in the quarter. Overall wholesale sales were driven by a 23% increase in units shipped and an 8.6% increase in average price per unit. Of particular note in the quarter, our U.S. wholesale performance increased markedly due to double-digit improvements across genders and most categories. reflecting strong consumer demand and sell-through at retail, as well as improved availability of product and our ability to receive and process additional inventory. For EMEA, the growth was the result of increases across all of Europe. Asia Pacific wholesale sales in the quarter were essentially flat year over year due to the weakness in the region where COVID continued to negatively impact our ability to operate. China grew over 9%, though lower than our long-term targets, a notable achievement given the constraints in the quarter. We expect continued market challenges in APAC throughout the second quarter as governments contend with the impacts of the pandemic. We are confident in the return to historical growth patterns and the long-term growth prospects for the Skechers brand in this region. We invested significantly in increased personnel and worked diligently to process in-transit inventory to our wholesale partners to ensure consumers get the product they want. We value our relationship with our diverse network of retail partners who have worked alongside us as they recognize the strength and reliability of Skechers. Turning to our direct-to-consumer business, sales increased 16% in the quarter, led by results in the media, where sales increased over 150%, primarily reflecting last year's COVID-related store closures and operating restrictions. However, consumer demand for Skechers remained robust across all regions including the Americas and APAC, which grew by 11% and 8.5% respectively. We saw a double-digit growth in both our physical stores and our e-commerce business, primarily as a result of a 15% improvement in average price per unit from increased demand for more innovative comfort technology offerings and fewer promotions. In the first quarter, we opened 31 company-owned Skechers stores, including 13 in the United States and 7 in China. We closed 41 locations in the quarter, including 12 in the United States and 7 in China. Including our 2,958 third-party stores, 77 of which opened in the first quarter, including our first location in Bolivia, there were 4,308 Skechers stores worldwide at the end of the period. In the second quarter, We've opened 10 company-owned stores to date, and by year end, we plan to open an additional 160 to 180 locations. Our investments remain focused on supporting our strategic priorities, growing our direct-to-consumer business, expanding the presence of our brand, and meeting the needs of our consumers globally. The rollout of our new e-commerce platform continued in the first quarter, with the launch of new sites in France and Spain. And already in this quarter, We have launched new sites in the Netherlands and Italy and plan to launch others across Europe, Asia, and South America this year. We also continue to invest in our retail capabilities in the quarter by upgrading our POS systems in Japan and Belgium, with the rest of Europe to be completed by the end of the third quarter. These investments further our progress as an omnichannel retailer. We have improved the flow of goods through our North American distribution center and expect to be operational on our LEED-certified gold expansion in the third quarter of 2022. We have also finalized a location for our new distribution center in India, which we expect to be opened in 2023, and have recently secured locations for distribution centers in Canada and Chile. We are also planning to open a new distribution center in Panama and expand our distribution facilities in Peru this year Colombia next year, and China in 2024. Investments in product and marketing continue to result in strong global demand for our comfortable and innovative product. We introduced several new comfort technology collections in the quarter that enhanced our fit and function offerings. We also introduced two new ambassadors, Willie Nelson and Martha Stewart, and launched campaigns with Chris Carter, Rusty Wallace, and Amanda Kloots. This quarter, we announced a global agreement with pro golfer Matt Fitzpatrick and pro pickleball players Tyson McCuffin and Catherine Parentow, who are playing in Skechers Pickleball Footwear. This growing roster of well-known talent and athletes allows us to appeal to an ever-widening consumer base. And now, I would like to turn the call over to John for more details on our financial results.