Manhattan Beach, CA—Despite reporting a sharp decline in demand for its toning footwear, Skechers USA Inc. posted Wednesday a better-than-expected third quarter profit.
For the quarter ended Sept. 30, the footwear company posted net income of $8.3 million or 17 a share, down from $36.4 million or 74 cents last year. On an adjusted basis, the company earned 8 cents a share, beating analysts’ average estimates for a 1 cent a share.
Net sales fell 25.7% to $412.2 million, missing the $464.85 million analysts’ estimates expected. Gross margin dropped to 42.5% from 45.6% in third quarter 2010.
“The decrease in revenue is primarily attributable to … the decline in higher priced toning footwear and lower-than-expected sales across many of other Skechers footwear lines,” David Weinberg, chief financial officer, said. He added that the company was also up against strong comparisons from 2010 and that gross margin is expected to increase as the company lowers inventory levels and as international sales expand.
Robert Greenberg, ceo, added that “Last year we were experiencing record sales growth as the leaders of an explosive new category. This year we are leveraging that learning–both in product development and distribution. We created many new offerings in our fitness division, which delivered earlier this year, and have our first true performance footwear line delivering to our accounts this quarter. Early reads on this line in our own retail stores has been strong.”
Skechers also reported it plans to double its business in Japan over the next three to five years with the launch of its new subsidiary, Skechers Japan, G.
The company is assuming direct distribution of its brand from Achilles Corporation as part of an aggressive expansion strategy to build its brand. Initiatives include growing its offering of Skechers men’s and children’s lifestyle footwear, building the company’s fitness division, expanding its consumer base through high-profile marketing campaigns and opening new Skechers retail stores across the country.