Skechers U.S.A., Inc.

Greetings, and welcome to the Skechers' first quarter 2024 earning conference call. At this time, all participants are on 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 Skechers. Thank you. You may begin.

Good afternoon, everyone. My name is Karen Lozano. I'm the general manager of Store 2 in Gardena, California, and I've been on the Skechers team for an exciting 11 years. Thank you for joining our 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, and local, economic, business, and market conditions, including the impact of inflation, foreign currency fluctuations, challenging consumer retail markets in the United States, wars, acts of war, and other conflicts around the world, 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 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 Vandermore. David?

Good afternoon, and thank you for joining us today for our first quarter 2024 conference call, which marks our 100th as a public company. We started the year with a new quarterly sales record of $2.25 billion, an increase of 12.5% or $250 million compared to last year. and adjusted diluted earnings per share record of $1.33. Additionally, we achieved gross margins of 52.5% and an operating margin of 13.3%. These impressive results were driven by growth in both our reportable segments, direct-to-consumer and wholesale, as well as across all regions of the world. The strong global demand for our brand was due to fresh innovations in our proven styles. a more robust offering of our many comfort technologies and the expansion of our performance and lifestyle divisions into new categories and collections. These newer offerings include our partnership with Snoop Dogg and the Skechers football and basketball lines. As the comfort technology company, we focus first on delivering the ultimate and innovative comfort and style across our product lines so that every pair looks and feels exceptional. This includes our machine washable footwear for kids, durable outdoor styles and sports styles, and our street and court fashion collections. For our performance division, great attention and detail is paid to elevating the fit and comfort while meeting the needs of elite athletes and enthusiasts of football, basketball, golf, and pickleball, as well as running and walking. Top professional athletes like Harry Kane, Oleksandr Shintchenko, Julius Randle, Terrence Mann, Brooke Henderson, Matt Fitzpatrick, Catherine Parenteau, and many others around the world are competing in Skechers and embracing our comfort that performs. This enthusiasm from those at the top of their game is also resonating with consumers and the media, including Shape Magazine, which just named Skechers Viper Court the best pickleball shoe in their 2024 report, and Sports Illustrated Germany, which featured Harry Kane on the cover wearing our SKX-01 football boots and Skechers Performance Apparel. The brand and each of these product initiatives are supported by impactful marketing initiatives, be it this year's commercial for the Super Bowl with Mr. T and Tony Romo, to our first basketball campaigns with Julius and Terrence. In the quarter, we launched new spots for kids, bobs, max cushioning, and work, all with Skechers hands-free slip-ins. And just last week, we added a new lineup of commercials that includes Skechers Uno with actress Ashley Park and Go Walk Slip-Ins and Apparel with TV host Amanda Kloots. Along with these on-air campaigns, we employ a 360-degree marketing approach reaching consumers at multiple touch points. To achieve the notable growth that we have this quarter and to continue to meet the needs of consumers around the world, it takes the effort and dedication of the entire global Skechers team our designers and supply chain partners who ensure our product is of the highest quality, and our third-party retailers whom we have valuable relationships with. We thank each associate, employee, and colleague for working together for our continued success. Looking at our first quarter results, sales increased 12.5% to $2.25 billion. International sales increased 15%, representing approximately 65% of our total sales in the first quarter. and domestic sales increased 7.8%. By region, EMEA increased 17%, APAC by 16%, and the Americas by 7.8%. Additionally, both wholesale and direct-to-consumer grew nicely in the quarter. Our wholesale sales increased 9.8%, reflecting a return to growth in both international at 11% and domestic at 7.7%. Internationally, the increase was due in part to improved inventory position at certain partners, the growth of our distributors across geographies, and particularly strong sales in China, Germany, and the UK. For domestic, the return to growth was a result of significant improvement in the flow of orders with both improved ASPs and volume. Skechers is in demand by many of our customers around the world, as is evidenced by our strong sales. Direct-to-consumer, which increased 17%, continues to be an important segment of our business and an indicator of positive consumer appetite for our brand. With growth in nearly every market for both our brick-and-mortar and e-commerce stores, we saw a 24% increase internationally and an 8% increase domestically. We ended the quarter with 5,203 Skechers-branded stores worldwide of which 1,671 are company-owned locations, including 565 in the United States. We opened 52 company-owned stores in the quarter, including 22 in China, 10 in the United States, 5 in Colombia, and 2 in both India and Korea. We closed 29 stores in the quarter. Also in the period, 95 third-party stores opened, including 54 in China, 9 in Indonesia, and three each in Australia, the Philippines, and Turkey. This brings our third-party store count at quarter end to 3,532. In the second quarter to date, we've opened 15 stores, including three company-owned stores in both China and the United States. We expect to open 155 to 170 company-owned stores worldwide over the remainder of 2024. Our record sales in the quarter along with our efforts to manage inventory levels, resulted in a 9.4% reduction year over year and an 11% reduction from December 31st, 2023. We believe our inventory levels are healthy and comprised largely of proven sellers, fresh innovations, and new product categories. To efficiently manage our inventory flow, we continue to invest in our logistic capabilities, including our new distribution center in Panama, which is expected to be operational in the second quarter, as well as a new company-operated DC in Columbia, which we plan to move into later this year. To efficiently grow our business worldwide and meet the needs of consumers seeking the ultimate in comfort technology, we continue to invest in our operations, product, and marketing. With our numerous accomplishments over the past quarter, we look forward to strategically growing our business in the coming year, as well as in the years ahead. And now, I'd like to turn the call over to John for more details on our financial results.