Skechers U.S.A., Inc.

Greetings and welcome to SCECHR's second 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 the conference over to SCECHRs. Thank you. You may begin.

Hello, everyone. My name is Shannon Brooker from the FP&A team. Thank you 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. Such forward-looking statements involve known and unknown risks including but not limited to global, national, local, economic, business, and market conditions, including the impact 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 Skechers' Chief Operating Officer, David Weinberg, and Chief Financial Officer, John Vandamore. David?

Thank you for joining us today on our second quarter 2023 conference call. Our results exceeded expectations with a new sales record of $2.13 billion and gross margin of 52.7%. These results are due to a 29% gain in our direct-to-consumer segment, double-digit growth internationally, and our focus on innovation throughout the business. As the third largest athletic footwear brand in the world, we continue to be the go-to source for footwear for the entire family. By creating fresh takes on proven sellers, expanding our comfort technologies, and offering new looks and collaborations, we continue to serve our engaged and loyal consumer base while expanding our reach to new demographics. Through every collection, we consistently deliver on our design tenets of comfort, style, innovation, and quality at a reasonable price. I would like to take a moment to congratulate our global team and acknowledge their dedication and expertise, which enabled Skechers to join the Fortune 500, an honor that belongs not only to every employee, but every partner and consumer. In addition to our successful and in-demand Skechers hands-free slip-ins, Skechers Arch Fit and Skechers Uno collections, and further building on our walking and performance offerings, we successfully launched several collaborations during the quarter, most notably with the legendary rock band The Rolling Stones. The men's and women's collection featuring their iconic logo first hit stores in North America and at the band's official store on Carnaby Street in London before rolling out across Europe and other markets. Just last week, we also launched a limited edition collaboration with Skechers ambassador Ashley Park for a capsule of fashion-forward footwear. This came on the heels of the release of our hit summer movie, Joyride. We have plans to launch more exciting collaborations over the remainder of 2023. We have a diverse team of notable and relatable talent appearing in Skechers' marketing campaigns, including Martha Stewart with her namesake collection, singer Doja Cat, and entertainer Snoop Dogg, among others. We have also signed regional ambassadors that resonate locally, including European footballers Frank LaBeouf and Jamie Redknapp, and Bollywood actress Triti Senan for India. We also have an elite team of golfers, runners, and pickleball pros training and competing in Skechers Performance Footwear. Our marketing efforts connect with consumers wherever they are to build brand awareness, to educate shoppers on our features and technologies, and most importantly, to drive demand for innovative products. Throughout the company, we view our accomplishments and activations as an opportunity to elevate the Skechers brand, to offer more people the comfort technology products they want and need, and to make their Skechers shopping experience seamless. As always, the goal is to grow and operate in an even more efficient, sustainable, and impactful manner. Before I discuss the business segments, I would like to note that in the quarter, we completed the acquisition of our long-term Scandinavian distributor. They helped Skechers successfully build our brand in the Nordic region with stores and e-commerce platforms and a network of wholesale customers across Finland, Sweden, Denmark, and Norway. We welcome the Sports Connection team and look forward to further broadening our reach and growing this important market. Looking at our second quarter results, Getcher's achieved record sales of 2 billion, 13 million, an increase of nearly 8% year over year and 9% on a constant currency basis. These results were driven by a 29% increase in our global direct to consumer segment, which represented 47% of our total sales in the quarter. Regionally, we grew 20% in APAC and 16% in EMEA, including 19% in China, 29% in Germany, 13% in the UK, 35% in Spain, and 27% in India. Sales in the Americas were slightly down. As expected, challenges in domestic wholesale were nearly offset by continued direct-to-consumer strength and wholesale improvements outside the United States. The domestic wholesale decrease was due to inventory-related issues impacting many of our partners. In addition, it is worth noting that we faced a difficult comparison to our particularly strong quarter last year, where we grew 30%. We saw a strength in our international wholesale business, increasing 10% as we grew in almost every market. Regionally, APAC grew 14% and EMEA grew 7%, including robust growth in China, Germany, India, and Spain. The Americas wholesale business decreased 19% primarily due to the previously noted domestic challenges, but grew 10% excluding the United States. Overall, wholesale average selling price per unit increased 8% from the pricing adjustments made last year, and unit volume decreased 13%. And turning to direct-to-consumer. The strong demand for our comfort technology footwear improved in-store product availability and effective demand creation led to 29% growth, evenly balanced between domestic and international markets. This includes growth of 28% in the Americas, 25% in APAC, and 47% in EMEA. In total, direct-to-consumer unit volume increased 24%, and average selling price increased 4%. In the second quarter, we opened 50 company-owned Skechers stores and closed 39. Store openings included 28 in China, 8 of which transferred from franchise to company-owned, 8 big-box stores in the United States, and 3 each in Chile and Vietnam. Additionally, we added 56 Skechers stores in 4 Nordic countries and 2 stores in Germany from the acquisition of our Scandinavian distributor. We ended the quarter with 4,705 Skechers stores worldwide, of which 3,161 were third-party stores. which included the 228 we opened in the second quarter, of which 157 were in China, nine in India, and eight in the Philippines. In the third quarter to date, we have opened two company-owned stores in the United States and one each in Colombia and Chile. We expect to open between 90 and 100 company-owned stores worldwide over the balance of the year. We continue to increase awareness and emphasize the many features of our comfort technology products, driving purchase intent and ensuring Skechers remains top of mind through targeted marketing initiatives, be it with our engaged ambassadors and athletes, in memorable campaigns on networks and streaming platforms, in publications, on social media, and through personalized digital content. Efficiently meeting consumer demand is essential to our growth. We have made significant investments in our distribution centers, are flowing fresh inventory through our retail stores, and are improving our delivery times and inventory levels, particularly at our North American distribution center. We have already begun shipping out of our new distribution center in Canada and expect to begin shipping out of our new facilities in India and Chile before the end of the year. And now I would like to turn the call over to John for more details on our financial results.