Skechers U.S.A., Inc.

Greetings and welcome to SCCHRS first quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn this conference over to SCCHRS. Thank you. You may begin.

Hello, everyone. My name is Ashley Keith from the SP&A team. Thank you for joining us on SKETCHER's 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. Such forward-looking statements involve known and unknown risks, including, but not limited to, global, national, and local economic, business, and market conditions, including the impacts of inflation, foreign currency fluctuations, Russia's war with Ukraine, and supply chain delays and disruptions. 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 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 Schedule's Chief Operating Officer, David Weinberg, and Chief Financial Officer, John Vandemor. David?

Thank you for joining us today on our first quarter 2023 conference call. For the first time in our history, we achieved quarterly sales of $2 billion and a first quarter record earnings of $1.02. These results were attributable to the strength of our brand and the demand for our comfort technology products supported by impactful marketing and distribution capabilities. With a product-first approach to our business, we are focused on staying true to our design principles, style, comfort, innovation, and quality, all at a reasonable price to ensure consumers worldwide have the footwear they need to enjoy their lives comfortably. Whether in the office, gym, school, or home, Whether walking, running, golfing, or playing pickleball, we have something for everyone. We ensure Skechers remains top of mind through memorable advertising. This quarter, we launched marketing campaigns that included a Super Bowl ad with Snoop Dogg, Martha Stewart, Tony Romo, and Howie Long. National television commercials for Skechers slip-ins with Amanda Kloots and Brooke Burke, among others. and targeted digital and out-of-home advertising for Skechers Uno with Ashley Park. We also further improved operations at our distribution facilities, ensuring a more efficient and continuous flow of inventory through our direct-to-consumer channels as well as timely shipments to our wholesale partners. Our success combines the talents of many individuals across our business, including those in our corporate offices, sales teams, and distribution centers, retail associates interfacing with consumers around the world, and so many others. This quarter's record sales wouldn't have been possible without the nonstop support, determination, and flexibility of the global Skechers organization and our partners at every step along the way. For the first quarter, Skechers achieved sales of $2 billion, a 10% increase year over year, or 13% on a constant currency basis. This incredible achievement was led by an increase of 24.5% in direct-to-consumer as well as 3.5% growth in wholesale. International sales increased 21%, representing 63% of our total sales for the quarter. Domestic sales decreased 5% due to declines in our domestic wholesale business of 18% related to inventory congestion issues impacting many of our partners. However, we also faced a very difficult comparison to a particularly strong quarter last year due to the alleviation of the West Coast port congestion. This is evident when compared to the first quarter of 2021, against which this quarter's domestic wholesale sales increase was an impressive 17%. By region, EMEA and APAC each grew 21%, the latter of which included 3% growth in China, as consumers started shopping, eating out, and traveling again after a long period of COVID restrictions. Sales in the Americas were flat as domestic wholesale declines masked robust growth in most other markets. Wholesale remains a critical element of our growth strategy, representing 65% of our total sales for the quarter. The 3.5% year-over-year sales increase was driven by 20% growth in our international wholesale business where nearly every market achieved double-digit growth. Overall, wholesale average selling price per unit increased 5% and unit volume decreased 2%. EMEA wholesale grew 20%, driven by double-digit increases in most markets, including Spain, Italy, and Germany, and APAC wholesale increased 24%, led by strong double-digit growth in India and single-digit growth in China. Sales to our distributors also improved in the region, driven by growth in Australia, New Zealand, Indonesia, and Taiwan. The America's wholesale business decreased 13%. However, excluding the United States, sales grew 10%. Our marketing efforts and increased traffic and conversion, along with our improved ability to replenish inventory in our company-owned stores, resulted in a 24.5% sales increase in our direct-to-consumer segment. The increase was the result of 29% growth in the Americas, 18% in APAC, and 30% in EMEA. In total, direct-to-consumer unit volume increased 27%, and average selling price decreased 2%. Domestic direct-to-consumer sales increased 25% due to double-digit growth in both our brick-and-mortar and e-commerce channels. International direct-to-consumer sales grew 24%, due to double-digit increases in nearly every market and even triple-digit in some. In China, direct-to-consumer grew due to the return of consumers to a brick-and-mortar shopping experience. The highest gains came from Hong Kong, South Korea, Chile, Thailand, and Canada. In the first quarter, we opened 56 company-owned Skechers stores and closed 25. Store openings included 18 in China, 13 in the United States, six each in Thailand and Vietnam, and three each in Germany and Israel. We ended the quarter with 4,549 Skechers stores worldwide, of which 3,074 were third-party stores, including 108 opened in the first quarter, 71 of which were in China, 15 in India, and our first store in Tajikistan. In the second quarter to date, we have opened one company-owned store in the United States. We expect to open between 125 to 140 stores worldwide over the balance of the year. We remain focused on growing our direct-to-consumer segment to efficiently drive sales and connect with our loyal consumers. During the first quarter, we launched our Sketch Plus loyalty program in Canada, the United Kingdom, Germany, and Spain, and expect to roll out this program to more countries. We're also in the process of updating our existing e-commerce platform in Chile, which is already one of our most productive international sites with plans to launch additional e-commerce sites internationally. During the first quarter, we launched our limited edition collaborations, which included the popular James Gold Crown Collection and our first with Diane von Furstenberg. We also introduced our first collaboration with Martha Stewart, which launched on International Women's Day in the United States and Canada. These limited releases position the brand to a more upscale audience, drive traffic to our e-commerce channel, and create buzz in the media. These collaborations are also part of our brand's demand creation efforts by ensuring Sketchers stays top of mind with important influencers and designers. We believe leveraging a roster of notable and relatable talent, both globally and in regional markets, is impactful and effective. We have a diverse team that includes Emily in Paris star Ashley Park, the legendary Snoop Dogg, and the recently announced movie and A-team actor Mr. T, which launched last week and exemplifies the breadth of our product offering. We also connect on the field thanks to Dodger pitcher Clayton Kershaw, and on the course with elite golfers and Skechers ambassadors Brooke Henderson and Matt Fitzpatrick, who won the RBC Heritage earlier this month while wearing Skechers Go Golf. With Pickleball pros Tyson MacGuffin and Catherine Parenteau on our roster playing in our Skechers Viper Cork Pickleball shoes, and as the official footwear sponsor of the Professional Pickleball Association Tour and US Open, we are connecting to the fastest growing sport in America. The enthusiasm for this sport is spreading to other markets, including Canada, the UK, and Singapore, among others. Our aim is to have consumers see, hear, and think about Skechers when they are shopping in stores, browsing websites from the comfort of their home, watching their favorite TV shows, listening to their favorite music station, or traveling the world. You'll find Ashley Park wearing Uno on billboards on the streets of Paris and Skechers slip-ins on a roadshow traveling the country of Spain. Skechers commercials are translated into dozens of languages. Influencers are posting about our products, reaching millions of their followers globally. We continue to pursue opportunities to connect with consumers, build brand awareness, and drive consumer demand for our innovative products. We have worked diligently to improve shipping within our own logistics facilities, particularly at our LEED-certified Gold North American Distribution Center, where inventory and shipping costs have both declined over the previous two quarters. By the end of 2023, we expect to begin shipping out of our new distribution centers in Canada, India, Chile, and Panama, And we also expect to open another phase of our planned LEED-certified gold corporate offices. Just last week, we released our first impact report. Our stewardship is focused on minimizing our environmental footprint in the communities where we operate. As an organization, Sketchers is thinking about our product, our people, and our planet because we believe it is a critical element of acting responsibly to serve all our stakeholders, including the families who love Sketchers. And now, I would like to turn the call over to John for more details on our financial results.