Consumer demand and celebrity ambassadors are key to Skechers’ record third-quarter growth of $2.4 billion

Diving certificate:

• Skechers reported third-quarter sales of $2.35 billion, up nearly 16% from a year ago and a new record, the company said in an earnings release Thursday. Net income was $209.3 million, up 26% from $166 million year-over-year.
• Direct-to-consumer sales increased 9.6% to $931.7 million, led by a 28% increase in DTC in the company’s Europe, Middle East and Africa region. Total wholesale sales rose 21% to $1.4 billion in the quarter ended Sept. 30, with the company’s Americas region reporting nearly 22% growth in the segment.
• Skechers founder and CEO Robert Greenberg attributed the company’s current success in part to its partnerships with brand ambassadors and professional athletes. The company’s partners include Snoop Dogg and Philadelphia 76ers basketball player Joel Embiid, who wore Skechers at the Paris Olympics this summer. Skechers also recently signed television host Howie Mandel.

Insight into the dive:

In the first nine months of the year, Skechers reported sales of nearly $6.8 billion, up 12% from a year earlier. The latest results underscore the company’s confidence in its previously stated goal of $10 billion in revenue by 2026, Chief Financial Officer John Vandemore said.

Greenberg also attributed the company’s third-quarter growth and performance to value for money and a strong, consistent omnichannel presence through DTC and a network of key retailers.

DTC, in particular, “continues to be a key indicator of consumer sentiment,” Chief Operating Officer David Weinberg said during an earnings call, according to a transcript. Weinberg said domestic DTC sales rose 3.7% compared to last year’s 14% increase, largely due to strong e-commerce growth as more consumers turn to online shopping would have decided.

“As more consumers view our convenience features as essential, the importance of novelty and evolving our designs with our signature technologies across core and new product offerings remains critical,” Greenberg said in an earnings release. Greenberg said the company increases awareness of consumer products through technology-driven marketing campaigns and through partnerships with brand ambassadors and professional athletes.

Greenberg said Skechers is still in the early stages of penetrating deeper into team sports through the continued introduction of court, soccer, basketball and cleat shoe offerings, as well as expanding its roster of athletes who compete in Skechers shoes. In August, the company also unveiled a shoe collection in collaboration with John Deere, the maker of agricultural and construction equipment.

For the fourth quarter, the company expects revenue between $2.17 billion and $2.22 billion. For the full year, Skechers expects revenue to be between about $8.93 billion and $8.98 billion, slightly above its previous forecast of $8.88 billion to $8.98 billion.

That forecast may be conservative given the company’s overall performance, TD Cowen analysts led by John Kernan said in a note Friday. Analysts forecast that Skechers’ wholesale channel is expected to post positive year-over-year growth in the mid- to high-teens in the fourth quarter, while DTC performance is expected to be similar to the third quarter.

Additionally, analysts said that while Skechers’ average selling prices could support sales and gross margin in each channel, DTC represents a slowdown from an omnichannel same-store sales perspective given strong door growth over the past 24 months for both domestic markets appears to be occurring, particularly international and international direct to consumer sales.