Q4 2023 Skechers USA Inc Earnings Call
Greetings and welcome to the Skechers fourth quarter 2023 earnings conference call at.
Operator: Greetings and welcome to Skechers' fourth quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode.
At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation.
Operator: 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.
Moderator: And a reminder, this conference is being recorded I would now like to turn the conference over to Skechers. Thank you you may begin.
Company Representative: Thank you for joining us at the Skechers Conference. I will now read the safe harbor statement. Certain statements contained herein include, without limitation, statements addressing beliefs, plans, objectives, estimates, or expectations. Page PAGE of NUMPAGES www.verbalink.com, Such forward-looking statements involve known and unknown risks, including, but not limited to, Global, National, and Local Economic, Business, and Marketing. The End, foreign currency. Challenging Consumer Retail Market. The United States, wars, acts of war, and other conflicts around the world, and supply chain delays. General, and specifically as they apply to the retail... There can be no assurance that the actual future results, performance, or achievements expressed or implied by any of our forward-looking statements will materialize.
Ravi: Hello, everyone. My name is Ravi how long from the SBA team. Thank you for joining us on Skechers conference call today, I will now read the safe Harbor statement.
Ravi: 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.
Ravi: 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 costs.
Ravi: Around the world and supply chain delays and disruptions in general and specifically as they apply to the retail industry and the company.
Ravi: 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.
Ravi: 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.
Company Representative: This was a forward-looking statement; sorry. Company's Firearms for the U.S. Security, including the most recent annual report on Form 10-K, quarterly reports on Form 10-K, www.kernanreports.org, and all other reports filed, as required by federal securities laws for a description of all of our financial, cash flows, and results of our business. With that, I would like to turn the call over to Skecher Financial Officer, John.
Ravi: Of all other significant risk factors that may affect the company's business financial conditions cash flows and results of operations.
Ravi: With that I would like to turn the call over to Skechers, Chief Operating Officer, David Weinberg, and Chief Financial Officer, John <unk>.
Ravi: David.
David Weinberg: Good afternoon, and thank you for joining us today for our fourth quarter and full year 2023 conference call.
David Weinberg: Good afternoon, and thank you for joining us today for our fourth quarter and full year 2023. We ended the year with a new annual sales record of $8 billion, an increase of $556 million compared to last year. This milestone was the result of four quarterly sales records, including $1.96 billion for the fourth quarter.
David Weinberg: We ended the year with a new annual sales record of 8 billion, an increase of 556 million compared to last year.
David Weinberg: This milestone was the result of a small quarterly sales records, including 196 billion for the fourth quarter.
David Weinberg: We also achieved a new annual gross margin record of 51.9%. These impressive results were driven by the worldwide demand for our products, our innovative marketing efforts, and our customers. A growing base of loyal consumers. Strong relationships cultivated throughout our partner network. This is the hard work of our dedicated team.
David Weinberg: We also achieved a new annual gross margin record of 51, 9%.
David Weinberg: These impressive results were driven by the worldwide demand for our products, our innovative marketing efforts growing base of loyal consumers wrong relationships cultivated through our partner network and the hard work of our dedicated team worldwide.
David Weinberg: As always we remain focused on our core design principles style comfort innovation and quality at a reasonable price.
David Weinberg: As always, we remain focused on our core design. Style, comfort, innovation, and quality, all at a reasonable price. In 2023, we pushed our technologies to new heights with the introduction of two new categories. Football and Vasilescu.
David Weinberg: 2023, we pushed our technologies to new heights with the introduction of two new categories.
David Weinberg: With Paul and basketball.
These new categories expand the breadth of our award winning performance condition, which also includes running walking golf and Pickle ball.
David Weinberg: These new categories..., to expand the breadth of our award-winning performance division, also include running, walking, golf, and. We partnered with Harry Kane, last year's top goal scorer in Europe, to launch Skechers USA. Harry, along with a roster of athletes, including recently announced Arsenal defender Oleksandr Sienkiewicz, are generating excitement and elevating awareness of Skechers boots at key football specialty Skechers.com. Today, I'm pleased to announce that Skechers football is now available in the United States and will be coming to markets around the world.
David Weinberg: We partnered with Abbvie King last year's top goal scorer in Europe to match Skechers football Harry along with a roster of athletes, including recently announced Arsenal defender Oleksander Genco are generating excitement and elevating awareness of Skechers booths at key football specialty.
David Weinberg: Retailers select skechers stores and online in Europe.
David Weinberg: Today I'm pleased to announce that sketches football is now available in the United States and will be coming to market around the world.
David Weinberg: We also signed New York Knicks, I'll start Julius Randle, and La Clippers parents man for Skechers basketball.
David Weinberg: We also signed New York Knicks All-Star Julius Randle and LA Clippers Terence Mann for Skechers Basketball. Collection has been launched in the world's largest basketball market, America, China, and the Philippines, and we'll expand to new markets in 2020. Please see the complete disclaimer at https://sites.google.com. We remain committed to growing our successful lines. Transcripts provided by Transcription Outsourcing,
David Weinberg: The collection has been launched in the worlds largest basketball markets, North America, China, and the Philippines, and we will expand into new markets in 2024.
David Weinberg: Athletes are a growing portion of our marketing plans, but we remain committed to growing our successful lines like skechers hands free slippage goldwasser.
David Weinberg: And continue to focus on expanding our proven business.
David Weinberg: This past year, we introduced more standout collections to further extend our reach including capsules with partners, Martha Stewart and Snoop dog.
David Weinberg: This past year, we introduced more standout collections to further extend our reach, including capsules with partners Martha Stewart and Snoop Dogg. For 2024, we are working on more initiatives and collaborations. Including a global agreement with John Deere that will unite two trusted brands for a new technical footwear offer. The key initiatives are supported by targeted and unique marketing campaigns. , and Purchaser's Choice. Thank you. This includes athletes and brand ambassadors recognized globally, as well as locally, such as Cha Eun-woo, a K-pop star and actor who we will be using extensively across the Asia Pacific.
David Weinberg: For 2024, we are working on more initiatives and collaborations including a global agreement with John Deere that will unite two trusted brands for a new technical footwear offerings.
David Weinberg: These key initiatives are supported by targeted and unique marketing campaigns to drive awareness and purchase intent. This.
David Weinberg: This includes athletes and brand ambassadors recognized globally as well as locally.
David Weinberg: At chop.
David Weinberg: A K pop star and actor, who we will be using extensively across the Asia Pacific region.
David Weinberg: Our accomplishments in the year included becoming a Fortune 500 company and surpassing 5,000 sketches per year. Together with our team and partners, we are designing and efficiently delivering our comfort products to the world. Looking at our fourth quarter results, sales increased 4.4% to 1.96%. International Sales increased 7%, representing approximately 64% of our total sales in the fourth quarter, and Domestic Sales.
Our accomplishments in the year, where numerous including becoming a fortune 500 company and surpassing 5000 Skechers retail stores.
David Weinberg: Together with our team and partners, we are designing and efficiently delivering our comfort products to the world.
David Weinberg: Meeting, our consumers' footwear needs and enhancing the sketches shopping experience in an impactful manner as we further grow our direct to consumer and wholesale businesses.
David Weinberg: Looking at our fourth quarter results.
David Weinberg: <unk> increased four 4% to $1 96 billion.
David Weinberg: International sales increased 7%, representing approximately 64% of our total sales in the fourth quarter and domestic sales were flat we continue to see strength in our direct to consumer segment, which increased 20% and for the first time exceeded 50% of our total sales.
David Weinberg: We continue to see strength in our direct-to-consumer segment, which increased 20 percent and for the first time exceeded 50% of our, Our wholesale sales decreased 8%, primarily due to some retailers conservatively managing inventory levels and checking goods. Domestic Wholesale Decreased Ten Percent. The retail Self-Boost that our major accounts were actually up... International Wholesale declined 7%, primarily due to EMEA, which faced inventory congestion at a handful of... The decrease was partially offset by improvements in AIPAC, including double-digit improvements in China, which had a healthy return to growth over the key fourth quarter holidays. In all, 2023 was a challenging year for all. Particularly in the United States,
David Weinberg: Our wholesale sales decreased 8%, primarily due to some retailers conservatively managing inventory levels and taking goods closer to season.
David Weinberg: Domestic wholesale decreased 10% no retail sell throughs in our major accounts were actually up single digits.
David Weinberg: International wholesale declined 7%, primarily due to EMEA, which faced inventory congestion at a handful of retailers the.
David Weinberg: The decrease was partially offset by improvements in APAC, including double digit improvements in China, which had a healthy return to growth over the key fourth quarter holidays.
David Weinberg: In all 2023 was a challenging year for wholesale, particularly in the United States, but our key indicators give us optimism that our wholesale business will return to growth in the first half of 2024.
David Weinberg: Please see the complete disclaimer at https://sites.google.com, first half of the 2000s. Turning to our direct-to-consumer segment, where sales group 20... International was up 27% due to strong performance, physical and digital, and Domestic Increase 12. Driven by strong sales during the key holiday, in the fourth quarter. We reach a new milestone with our 5,000... Opening in Bogota, Colombia. At year-end 2023, we had 5,168 Skechers-branded stores. We opened 67 company-owned Skechers stores in the quarter and closed 12. We continue to expand our global reach with the addition of 27 stores in China, 9 stores in the United States, 4 locations in Colombia, three each in Italy, Mexico, Thailand, and the United States, two each in Chile, Malaysia, and Peru, and one in France, Spain, and Vietnam.
David Weinberg: Turning to our direct to consumer segment, where sales grew 20% international was up 27% due to strong performance across both physical and digital stores and domestic increased 12% driven by strong sales during the key holiday selling period.
In the fourth quarter, we reached a new milestone with our 5000th Skechers store opening in Bogota, Colombia at year end 2023, we had 5168 skechers branded stores worldwide.
David Weinberg: We opened 67 company owned Skechers stores in the quarter and closed 12, bringing us to <unk> hundred 48 locations.
David Weinberg: We continue to expand our global reach with the addition of 27 stores in China nine stores in the United States more locations in Colombia, three each in Italy, Mexico, Thailand, and the United Kingdom to Leach in Chile, Malaysia, and Peru, and one in France, Spain and Vietnam.
David Weinberg: Also in the period, 217 third-party stores opened, including 160 in China and 11 each in Australia and Indonesia, bringing our third-party store count to 3,500. In the first quarter to date, we opened four company-owned stores in the United States and Europe, two weeks in Colombia, Thailand, and South..., and one each in Chile, Costa Rica, India, Malaysia, and Panama.
David Weinberg: We're also in the period 217 third party stores opened including 160 in China and 11, each in Australia, and Indonesia, bringing our third party store count to 3520.
David Weinberg: In the first quarter to date, we've opened four company owned stores in the United States and China, two each in Colombia, Thailand, and South Korea, and one each in Chile poster Rica, India, Malaysia, and Panama, We expect to open 140 to 160 company owned stores worldwide in 2024.
David Weinberg: We expect to open 140 to 160 company-owned stores worldwide in 2020. Following last year's supply chain congestion, we remain focused on carefully managing our inventory, which resulted in a 16% year-over-year... We also continue to invest in our logistics... and began shipping from our new 600,000 square foot facility in Mumbai, as well as our newly opened distribution center in British Columbia, which we expect to become a primary source of shipments for Canada this year. Reducing delivery times and costs. Furthermore, we expect our new distribution center in Panama to be operational, to meaningfully increase our South American... As always, we are committed to delivering the ultimate in comfort technology. Sketchers Shopping Experience and Operating in an Increasingly Effective Way And now, I would like to turn the call over to John for more details.
David Weinberg: Finally last year's supply chain congestion, we remain focused on carefully managing our inventory levels, which resulted in a 16% year over year reduction.
David Weinberg: We also continue to invest in our logistics capabilities, we began shipping from our new 600000 square foot facility in Mumbai as well as our newly opened distribution center in British Columbia, which we expect to become a primary source of shipments for Canada. This year, reducing delivery times and costs further we expect our new.
David Weinberg: <unk> center in Panama to be operational this quarter, which will meaningfully increase our south American capacity.
David Weinberg: As always we are committed to delivering the ultimate in comfort technology enhancing the skechers shopping experience in operating in an increasingly efficient manner.
David Weinberg: And now I would like to turn the call over to John for more details on our financial results.
John M. Vandemore: Thank you, David, and good afternoon everyone. In 2023, there will be several challenges. There will be significant macroeconomic, The Bulletproof Executive 2013, as well as wholesale challenges, particularly in the United States.
John: Thank you David and good afternoon, everyone two.
John: 2023 presented several challenges there were significant macroeconomic headwinds, including inflation and rising interest rates as well as wholesale challenges, particularly in the United States largely stemming from inventory congestion.
John M. Vandemore: Largely stemming from inventory, Against this backdrop, Skechers delivered strong performance. Gross margins of 51.9% and Earnings Per Share of $3.00, which are records for our. We also made meaningful progress toward our goal of double-digit operating margins. 9.
John: Against this backdrop Skechers delivered strong performance for the full year, achieving sales of 8 billion gross margins of 51, 9% and earnings per share of $3 49.
Each of which are records for our brand.
John: We also made meaningful progress toward our goal of double digit operating margins, reaching nine 8%.
John M. Vandemore: Collectively, these accomplishments demonstrate the strength of the Skechers brand around the world and Our Ability to Deliver Profitable Growth. Thank you for being focused on expanding our brand presence. The Bulletproof Executive 2013, Turning to the quarter, Skechers delivered another 4th quarter sales record of $1.96 billion.
John: Collectively these accomplishments demonstrate the strength of the Skechers brand around the world and our ability to deliver profitable growth.
John: Our talented global team remains focused on expanding our brand presence developing exceptional product for our consumers and executing against our growth strategy.
John: Turning to the quarter Skechers delivered another fourth quarter sales record of $1 96 billion growing four 4%.
John M. Vandemore: Robust consumer demand for our distinctive comfort technology products and compelling value propositions drove continued strength in our global direct-to-consumer, 990. This segment represented, This remarkable performance was driven by... 27% International. This is both our physical and digital stores achieving double digits. The momentum in our direct-to-consumer segment is indicative of strong consumer demand driven by the combination of our fresh and innovative products paired with effective brands. We are excited about our omni-channel growth and delivering on our strategy to expand our consumer presence worldwide. Wholesale Sales decreased 8.0 percent year-over-year to 962.
Robust consumer demand for our distinctive comfort technology products and compelling value proposition drove continued strength in our global direct to consumer business, which grew 20% year over year to $998 3 million.
John: For the first time in our history. This segment represented over 50% of total sales.
John: This remarkable performance was driven by an increase of 27% internationally and 12% domestically with both our physical and digital stores achieving double digit growth there.
John: The momentum in our direct to consumer segment is indicative of strong consumer demand driven by the combination of our fresh and innovative product paired with effective brand marketing.
John: We are excited about our omni channel growth opportunities as we continue to deliver on our strategy to expand our direct to consumer presence worldwide.
John: Wholesale sales decreased eight 3% year over year to $962 6 million.
John M. Vandemore: As expected, domestic wholesale sales declined 10% versus the prior year, as customers continued managing inventory levels. International Wholesale Sales declined 7.1% primarily due to lower shipments reflecting both the difficult comparison to last as well as inventory. However, we continue to be encouraged by positive shipping and order. The Bollinger Band, 2005.
John: As expected domestic wholesale sales declined 10% versus the prior year as customers continued managing inventory levels conservatively.
John: International wholesale sales declined seven 1%, primarily due to lower shipments in Europe, reflecting both a difficult comparison to last year as well as inventory congestion in certain markets.
John: We continue to be encouraged by positive shipping and order trends, we see in the first half of 2024, both domestically and internationally.
John M. Vandemore: All rights reserved. Now turning to our America sales for the fourth quarter. 955.
John: Now turning to our regional sales in the America sales for the fourth quarter increased three 2% year over year to $955 4 million driven by continued strength of our direct to consumer business, particularly in our retail stores, which grew double digits across most markets.
John M. Vandemore: . Driven by continued strength of our direct... Particularly in our retail, across the most. This is partially offset by the format.
Scott Kerben: All right, folks. Thanks for tuning in. I'm your host, Scott Kerben, and EMEA sales decreased 7.3% to 183.5, thanks in part to lapping robust growth of twenty nine.
John: This was partially offset by the aforementioned domestic wholesale market dynamics.
John: In EMEA sales decreased seven 3% year over year to $383 6 million due in part to lapping robust growth up 29% in the prior year.
Scott Kerben: Direct-to-Consumer Channels grew double-digit, nearly every, Unfortunately, this is not enough to offset lower wholesale.., were impacted by difficult comparisons, as well as inventory. In Asia-Pacific, sales increased 15%. 626.
John: Direct to consumer channels grew double digits year over year in nearly every country and.
John: This was not enough to offset lower wholesale sales, which were impacted by difficult comparisons as well as inventory congestion at certain customers.
John: In Asia Pacific sales increased 15% year over year to $622 million led by double digit growth in most markets and China sales grew 22% driven by double digit growth across channels, including improved sales during the critical holiday period.
John M. Vandemore: 626, led by double-digit growth in most markets. In China, sales grew 22%, driven by double-digit growth across... including improved sales during the critical holiday season. And we continue to be encouraged by the progress. Similar to last... challenges due to higher as well as. ®MD-BO Skechers Distribution Center outside of Mumbai.
John: We continue to be encouraged by the progress we see in China.
John: Similar to last quarter, India saw challenges due to higher inflation as well as shipment delays associated with our transition to the new Skechers distribution center outside of Mumbai.
John M. Vandemore: However, we expect the market to return to normal growth trends over the The Bulletproof Executive 2013, Fourth quarter gross margins were 53.1%. 470. The improvement was driven by higher average selling prices from our product and channel. The Bulletproof Executive 2013, Inc. The University of Georgia College of Agricultural and Environmental Sciences UGA Extension College of Agricultural and Environmental Sciences, Selling Expenses Increased 90% The percentage of sales versus last year to nine, primarily due to increased marketing, including investments focused on brand building and driving consumer awareness for our comfort technology products and newly launched categories. General and Administrative Expenses, 37, primarily due to the leverage in our wholesale. Particularly in the United States. Overall, spending rose as a result of higher rent.
John: We expect the market to return to normal growth trends over the course of 2024.
John: Fourth quarter gross margins were 53, 1% up 470 basis points compared to the prior year.
John: <unk> was driven by higher average selling prices from our product and channel mix. In addition to improved freight costs.
Operating expenses increased 270 basis points as a percentage of sales year over year to 46, 5%.
John: Selling expenses increased 90 basis points as a percentage of sales versus last year to nine 3%, primarily due to increased marketing globally, including investments focused on brand building and driving consumer awareness for our comfort technology products and newly launched categories.
John: General and administrative expenses increased 170 basis points as a percentage of sales to 37, 1% primarily due to deleverage in our wholesale operations from lower sales, particularly in the United States.
John: Overall spending rose as a result of higher rent depreciation and labor to support growth in our direct to consumer segment.
John M. Vandemore: The Bulletproof Executive 2013, Earnings from operations were $135,000. 50%.......
John: Earnings from operations were $130 3, million% to 50% increase compared to the prior year and our operating margin for the quarter was six 6% compared to four 6% last year.
John M. Vandemore: , are affected, compared to nine. Priority. We were able to utilize foreign tax. The Bulletproof Executive 2013, 155. And now, turning to our... We ended the quarter with $1.39 billion in cash equivalents and investments. 598.1, Priority, primarily from improved working capital management. Inventory was $1.53 billion.
John: Our effective tax rate for the fourth quarter was 23% compared to nine 6% in the prior year. When we were able to utilize foreign tax credits and benefited from certain discrete items.
John: Earnings per share were 56 per diluted share a 17% increase on $155 6 million diluted shares outstanding.
Speaker Change: And now turning to our balance sheet.
Speaker Change: We ended the quarter with $1 $39 billion in cash cash equivalents and investments an increase of $598 $1 million versus the prior year, primarily from improved working capital management and operating efficiency.
Speaker Change: Inventory was $1 53 billion, a decrease of 16% or $292 6 million compared to the prior year, when we faced capacity challenges and processing constraints at our distribution centers.
John M. Vandemore: 6 million compared to the prior year. Volume based Capacity. Notably, we lowered inventory levels domestically by 1-3rd compared to the prior year, and we believe our current inventory levels are healthy and well-equipped. Support Demand, Accounts Receivable at Quarter End, we're The Bulletproof Executive 2013, Capital Expenditures for the quarter were $85,000, of which $32.9 million were related to Direct-to-Consumer. 25.1 million related to the expansion of our... 10.8 million related to the construction of our new corporate office. Our capital investments are focused on supporting Priority. Growing Our Direct Consumer Segment. The Bulletproof Executive 2013. All rights reserved. In the fourth quarter, we repurchased approximately 1.1 million shares of our Class A common stock at a cost of approximately $1.2 billion. We will continue to deploy our cavalry, www.skechers.com, 1 minute, durable, Now turning to... As we enter our 20th year, we have the unique ability to serve consumers around the world, with our collection of comfort technology products coupled with our compelling value proposition. We are taken together,
Speaker Change: Notably, we lowered inventory levels domestically by one third compared to the prior year and we believe our current inventory levels are healthy and well positioned to support demand in early 2024.
Speaker Change: Accounts receivable at quarter end were $863 million essentially flat compared to the prior year.
Speaker Change: Capital expenditures for the quarter were $85 million of which $32 9 million related to investments in new store openings and direct to consumer technology.
Speaker Change: $25 $1 million related to the expansion of our distribution infrastructure and $10 8 million related to the construction of our new corporate offices.
Speaker Change: Our capital investments are focused on supporting our strategic priorities, which include growing our direct to consumer segment and expanding our brand presence globally.
Speaker Change: During the fourth quarter, we repurchased approximately one 1 million shares of our class a common stock at a cost of approximately $60 million.
Speaker Change: We continue to deploy our capital consistent with our stated philosophy, while maintaining a durable balance sheet and abundant liquidity.
Now turning to guidance.
Speaker Change: We enter 2024, we have the unique ability to serve consumers around the globe with our collections of comfort technology products, coupled with our compelling value proposition taken.
Taken together, we are confident in the strength of our brand.
John M. Vandemore: We are confident. The Bulletproof Executive, 2013. However, we are also keenly aware of the un... Such a Dynamic Operating Environment, Most Notably Geopolitical and Macroeconomic. And his back.
Speaker Change: We are also keenly aware of the uncertainties that remain in such a dynamic operating environment, most notably geopolitical and macroeconomic risks and have factored this into our initial guidance for 2024.
John M. Vandemore: Thank you for joining us. Thank you. Thank you. Thank you. Net Earnings Per Share, $3.65 The Bulletproof Executive 2013, 1-7-5 to Net Earnings Per Share, $1.00, $5.00 The Bulletproof Executive 2013, are affected.
For the full year 2024, we expect sales in the range of $8 6 billion to $8 8 billion and net earnings per share in the range of $3 65 to $3 85.
Speaker Change: For the first quarter, we expect sales in the range of $2 75 billion to two to two 5 billion and net earnings per share in the range of $1 <unk>.
Speaker Change: The $1 10.
Speaker Change: Our effective tax rate for the year is expected to be between 20 and 21%.
David Weinberg: Thank you. 2020, SKX, LLC. We expect total capital expended to be $400 as we continue to invest in our strategic priorities, www.skechers.com Expanding our Omni-Channel Capabilities, Adding increments, www. SKX.com The Bulletproof Executive, 2013, will likely elevate our capital. We remain confident in our long-term growth strategy and are well-positioned to drive profit. We thank you all for your time today and look forward to updating you on our first quarter, which we expect to release on Thursday. And with that, I will now turn the call over to... Thank you, John. In 2023, Skechers delivered record quarterly and annual sales, became a Fortune 500 company, and surpassed 5,000 Skechers stores. We partnered with top-tier talents for collaborations and marketing campaigns that resonated with consumers. Most importantly, we are committed to delivering comfort that performs with our footwear expansion. These are two of the largest sports worldwide.
Speaker Change: We expect total capital expenditures to be between 350 and $400 million as we continue to invest in our strategic priorities, including opening additional stores, expanding our omnichannel capabilities and adding incremental distribution capacity in key markets, including constructing our second distribution center.
Speaker Change: In China.
Speaker Change: A 2 million square foot facility, which will likely elevate our capital expenditures this year and next.
Speaker Change: We remain confident in our long term growth strategy and are well positioned to drive profitable growth.
Speaker Change: We thank you all for your time today and look forward to updating you on our first quarter financial results, which we expect to release on Thursday April 25th.
Speaker Change: With that I will now turn the call over to David for closing remarks. Thank you John in 2023, Skechers delivered record quarterly and annual sales became a fortune 500 company and surpassed 5000 Skechers stores worldwide, we partnered with top tier talent for collaborations and marketing campaigns that resonated with consumers.
Speaker Change: <unk>.
David Weinberg: Importantly, we are committed to delivering comfort that performs with our footwear expansion to two of the largest sports worldwide football and basketball.
David Weinberg: Good fall and best extended our offering of Skechers hands-free slip-ins to a broader audience by integrating this technology into both new and proven styles. We thank our entire supply chain and the Skechers team for delivering another. As we enter 2024, we remain confident in the strength of our brand worldwide and the ongoing consumer demand for our exceptional products. We expect some domestic and international partners will continue to conservatively replenish inventory and that macroeconomic concerns will remain. We are focused on working with our global partners to return to growth. Cancer, a direct-to-consumer business. The Bulletproof Executive 2013, It is our belief that with our many product initiatives... Their First Roster of Athletes and Ambassadors. Skechers USA Inc., and now I would like to turn the call over to the, Thank you.
And extended our offering of sketches hands free slippage to have grown up audience by.
David Weinberg: Creating this technology into both new and proven styles.
David Weinberg: All were notable milestones and achievements, we thank our entire supply chain and the skechers team for delivering another successful quarter.
David Weinberg: As we enter 2024, we remain confident in the strength of our brand worldwide and the ongoing consumer demand for our exceptional product. We expect some domestic and international partners will continue to conservatively replenished inventory and that macroeconomic concerns will remain we are focused on working with our global partners.
David Weinberg: Our return to growth within wholesale enhance our direct to consumer business and further grow our international sales.
David Weinberg: It is our belief that with our many product initiatives and our tech first roster of athletes and ambassadors, we have numerous opportunities to tell the skechers story and grow our business worldwide.
Speaker Change: Now I would like to turn the call over to the operator for questions.
Speaker Change: Thank you we will now be opened.
Operator: We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue.
Speaker Change: A question and answer session, if you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if you'd like to remove your question from the queue for participants using speaker equipment, and maybe necessary to pick up your handset before pressing the FERC.
Operator: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment, please, while we poll for questions. Thank you.
Speaker Change: One moment, please while we poll for questions.
Speaker Change: Thank you no no no no it's all about.
Speaker Change: Yeah.
Speaker Change: Okay.
Lorenz Salescu: Our first question is from Lorenz Salescu with CNP Ariba. Please proceed with your question. Good afternoon.
Speaker Change: Our first question is from Lorraine, So let's go with <unk>.
A&P: A&P, partly about please proceed with your question.
Lorraine: Oh, good afternoon, and thank you very much for taking my question.
John M. Vandemore: Thank you very much for taking my question. I would like to ask about the U.S. wholesale business. It was a little bit of a surprise to see that it was down 14%. John, can you talk a little bit more about the growth that you're seeing for the first half of the year? And I think you also commented a little bit about overseas growth. That would be very helpful.
Lorraine: I would like to ask about the U S wholesale business.
A&P: A little bit of a surprise to proceed down 14%.
A&P: John can you talk a little bit more about the growth that youre seeing for the first half of the year and I think you've also commented a little bit about.
A&P: Overseas growth that that would be very helpful.
John: Yes, I mean just to.
John M. Vandemore: Yeah, I mean, just to be specific, domestic wholesale is down 10%, not 14%. Listen, the domestic wholesale marketplace has been... Rocky All Year. As David made mention in his prepared remarks, you know, we're seeing a lot of conservatism still within that customer base. Now, what I think is interesting is David also mentioned.
John: To be specific domestic wholesale was down 10% not 14.
The domestic wholesale marketplace has been.
Rocky: Rocky all year as David mentioned in his prepared remarks, we're seeing a lot of conservatism still within that customer base now what I think is interesting is as David also mentioned.
John M. Vandemore: The Wholesale Retail Sales, the sell-through at our top-tier wholesale accounts, was actually up slightly for the year. So what I think you can see in that is exactly what we've been talking about. This has been a year of de-stocking, from a period of congestion last year driven by that post-pandemic surge.
Rocky: Wholesale retail sales sell through at our top tier wholesale accounts was actually up slightly for the year. So what I think you can see in that is exactly what we've been talking about this this has been a year of destocking.
Rocky: From a period of congestion last year is driven driven by that post pandemic surge.
John M. Vandemore: As we look forward to 2024, we're actually really optimistic about what we're seeing, both in terms of shipments thus far, now through the first month of the quarter, and bookings for the first half, which is about as far out as we're booked at this point. So we're actually pretty optimistic about what we're seeing. I think it reflects... a cleansing of that inventory situation that clearly predominated for this year. And I think that, along with what is clearly extraordinary consumer demand for the product, as evidenced in our direct consumer numbers, will continue to power us through to 24, and what we very reasonably expect at this point will be a return to growth in the domestic wholesale channel. Very helpful, John.
Rocky: As we look forward to 2024 were actually really optimistic about what we're seeing both in terms of shipments. Thus far now now through the first month of the quarter and bookings for the first half, which is about which is about as far out as were booked at this point. So we're actually pretty optimistic about what we are.
Rocky: We're seeing I think it reflects a cleansing of that that inventory situation that clearly predominated for this year.
Rocky: And I think that along with what is clearly.
Rocky: Extraordinary consumer demand for the product as evidenced that our direct to consumer numbers.
Rocky: We will continue to power us through to 'twenty four.
Rocky: While we are very reasonably expect at this point would be a return to growth in the domestic wholesale channel.
Speaker Change: Very helpful John and.
John M. Vandemore: And if I could follow up as a second question here, in two parts. China was up very nicely, you know, I think 22%, clearly outpacing some other international brands in the marketplace. What are you seeing in that marketplace right now for January? And how do you think about that for 2024? And here's the second part of my question, John, sorry. But how are you thinking about selling expenses? Is the new resting heart rate, like 9%, going forward with these new contracts? Thank you very much.
Speaker Change: If I could follow up.
Speaker Change: The second question here two parts to China was up very nicely.
I think 22% clearly outpacing some other other international brands.
Speaker Change: In the marketplace, but what are you seeing in that marketplace right now for January and how do you think about that for 2024 and here's my second part of my question, John Sorry, but how are you thinking about selling expenses is the new resting heart rate like 9% going forward with these new contracts.
John M. Vandemore: Yeah, on China, I mean, we were incredibly pleased with what we saw, you know, we talked about in the quarter, you know, with double 11, 1212, with that holiday selling period. You really need to allow the whole period to mature before you have a good sense of what happened, and we're incredibly pleased with how that market performed overall. Now, I would say, it's still not back to where we think it will reset eventually; it's still a market in recovery. But in terms of Q4 performance, which you're right about, it was up 22%. And by the way, China was up 15% for the full year, which is really good given where they started.
Speaker Change: Thank you very much.
John: Yeah on China, I mean, we were incredibly pleased with what we saw as we talked about in the quarter with double 11, 12, 12 without holiday selling period, you really need to allow the whole period to mature before you have a good sense of what happened.
John: And we're incredibly pleased with how that market performed overall now I would say, it's still not back to where we think it will reset eventually it is still.
John: Our market and recovery, but in terms of Q4 performance, which so cure rate.
John: It was up 22% and by the way China was up 15% for the full year, which is really good given where they started.
John M. Vandemore: You know, we're optimistic about what we see. I don't want to talk a ton about what we've seen by market or channel to date, but I would say so far, we continue to be encouraged by what we've seen in China in early January, definitely outpacing our early expectations, which is good. There's obviously, you know, CNY coming up in a period of time we need to see unfold.
John: We're optimistic about what we see.
John: I don't want to talk a ton about what we've seen by market or channel to date, but I would say so far we continue to be encouraged by what we've seen in China in the early January rates definitely outpacing our early expectations, which is good theres, obviously C N y coming up in.
John: A period of time, we need to see unfold, but.
John M. Vandemore: But so far, I would say, you know, China continues to do better than we originally expected and continues to show every marker of recovery that we could hope for. In terms of selling, no, I don't think we're setting a new level here. As we mentioned, over the course of this year, we have very consciously been overinvesting in particular in brand building, especially around our new technologies. You know, everything from Skechers' hands-free slip-in technology to ArchFit technology.
John: So far I would say China's continues to do better than we originally expected and continues to show every.
John: Every marker of recovery that we could hope for.
John: In terms of selling no I don't I don't think we are setting a new level here as we mentioned over the course of this year, we very consciously been over investing in particular in brand building, especially around our new technologies.
John: Everything from Skechers hands free flip in technology to arch fit technology, and then we did layer on some incremental work in support of these newer categories, but you got to keep in mind. We're investing ahead of the curve. There as you would want to do when you're opening a new category. So I don't think that represents a new <unk>.
David Weinberg: And then we did layer on some incremental work in support of these newer categories. But you have to keep in mind that we're investing ahead of the curve there, as you would want to do when you're opening a new category. So I don't think that represents a new resting point as much as it represents an investment we're making to make sure consumers understand and appreciate our comfort technologies and are aware of our new entrance into, you know, very, you know, lucrative performance categories like basketball and football. So, you know, where we reach that ultimately is determined, but insofar as this year is concerned, I think we've pretty consistently told you we were overinvesting intentionally, and that's what you're seeing in the amount.
John: Resting point as much as it represents an investment we're making to make sure consumers understand and appreciate our comfort technologies and are aware of our new entrants into very we think lucrative performance categories like basketball and football.
Paul: Paul So.
Paul: Where are we reading.
Paul: It's determined but and so far this year is concerned I think we've pretty consistently told you we were over investing intentionally and thats and thats, what youre seeing in the amounts here.
David Weinberg: Hey Laurent, I just wanted to point out as well, as far as domestic wholesale goes, there are just some nuances from quarter to the new year. Well, the whole quarter, we report, October was the weakest part of the quarter, and I think it led people to believe that they try to take the goods as late as possible and worry about the season. As we got through November and December, it grew on us, and I believe for everybody, it turned out to be a very good holiday season.
Ron I, just wanted to the point that as well as far as domestic wholesale there's just some nuances from from quarter and into the new year.
Paul: While the whole quarter. We report October was the weakest part of the quarter and I think I've led people to believe.
Paul: That they try to take the goods as late as possible and worrying about the season as we got through in November December It grew for us and I believe for everybody. It turned out to be a very good holiday season.
David Weinberg: And December started to pick up shipments for us as well. And when you look at the shipments we've had in January, that more than makes up the difference. If you take the shift, we've had a significantly stronger January than we would have originally anticipated across the board by all means, as well as domestic wholesale, even though the weather was kind of difficult. So I think people are coming back and picking up, and getting ready to move into the new season. So I think if you put the fourth quarter and January together, we really haven't missed that much and are really getting set for the spring season. David, John, the super helpful co-op.
Paul: In December started to pick up shipments for us as well and if.
Paul: If you look at the shipments we had in January that more than makes up but the difference. If you take this shift we've had a significantly stronger January than we would've originally anticipated across the board by all means as well as domestic wholesale even though whether it was kind of a difficult. So I think people are coming back and.
Taking up and getting ready to move into the new season. So I think if you put.
Paul: The fourth quarter and January together, we really havent missed that much and I was really getting set for the spring season.
Speaker Change: David John Super Helpful color. Thank you very much and best of luck.
Lorenz Salescu: Thank you very much and best of luck. Thanks, Ron. Thank you. Our next question is from Jay Sole with UBS. Please proceed with your question. Great. Thank you so much.
Speaker Change: Thanks, Brian.
Speaker Change: Thank you. Our next question is from Jay sole with UBS. Please proceed with your question.
Jay Sole: Great. Thank you. So much my question is just on the guidance what's implied the guidance for this year for EBIT margins can you just talk about how the guide for Q1, and then for fiscal 'twenty four splits between gross margin and SG&A.
Jay Sole: My question is just on the guidance, what's implied in the guidance for this year for EBIT margins. Can you just talk about how the guidance for Q1 and then for fiscal 24 splits between gross margin and SG&A? www.skechers.com. Well, hello Jay.
Speaker Change: [laughter] well Hello, Jay.
Speaker Change: Pretty specific.
Jay Sole: Look I think I think what I would say is we still foresee some favorability in gross margin.
John M. Vandemore: Pretty specific. Look, I think what I would say is we still foresee some favorability and gross margin in Q1. Now, that's going to be incredibly mix-dependent, right?
Jay Sole: In Q1, now that's going to be incredibly mixed dependent right. If you think about the mix we had last year.
John M. Vandemore: If you think about the mix we had last year that was heavily tilted toward DTC, and in this quarter, in particular, where we went about 50% for the first time ever from a direct-to-consumer perspective, we've got to be mix-conscious here because we do expect the wholesale business to return to growth. We still think there's some accretion left in the gross margin. You'll see that in Q1. That should flow pretty nicely down through.
Jay Sole: That heavily tilted toward DTC and in this quarter in particular, where we went about 50% for the first time ever from a direct to consumer perspective.
Jay Sole: We got to be mixed conscious here, because we do expect the wholesale business to return to growth, we still think theres. Some theres some accretion left in the gross margin you'll see that in Q1.
Jay Sole: That should flow pretty nicely down through.
John M. Vandemore: We're going to continue to invest in marketing. And just from a marketing perspective, Q1 does tend to have some events in it, most notably the Super Bowl, which over-indexed a little bit relative to sales. I would say, look, we continue to aim for that double-digit operating margin. I mean, I think we actually came in, at the end of the day, much better than we thought we would this year, much closer. We're only 200 BIPs away from the sun.
Jay Sole: We're going to continue to invest in marketing and just from a marketing perspective.
Jay Sole: Q1 does tend to have some events most.
Jay Sole: Most notably the Super Bowl that over index, a little bit relative to sales.
Jay Sole: I would say you know look we continue to aim for that that double digit operating margin I mean, I think we actually at the end of the day came in much better than we thought we would this year much closer where 200 bps away.
John M. Vandemore: We'll continue to chip away at that. As you know, we don't guide to that level, but it's certainly a guidepost for us, and we'll continue to work towards getting there. And we certainly continue to believe it's entirely a reasonable objective for us to hold. Okay, that sounds great. If I could just try one more.
Jay Sole: We'll continue to chip away at that.
Speaker Change: Yeah as you know, we don't guide to that level, but it's certainly a guidepost for us and we will continue to work towards getting there and we certainly continue.
Speaker Change: I believe it's entirely reasonable a reasonable objective for us to hold.
Speaker Change: Okay that sounds great and if I could just try one more I know this is probably not the specific one but just any color you can give us on revenue growth.
John M. Vandemore: I know this is probably not the specific one, but just any color you can give us on revenue growth by segment within the guidance for this year. Yeah, I would expect that. And again, some of this is going to boil down to timing, because as David mentioned, we are really seeing a lot of close-in order activity and pull-up activity, so, you know, this could flip. I would say at the moment, our current expectation is that you're probably going to see, you know, a slight uptick on the domestic wholesale side. Wholesale overall should be up a good healthy amount, probably a high single-digit number. Direct-to-consumer, we also continue to expect to do well. You know, maybe not as well as it did this year, because it's a pretty heady rate at, you know, 24% for the full year, but we still expect, you know, double-digit opportunities to reveal themselves, certainly for the first bit of the year. So we continue to see a good trajectory, a good recovery. I think, you know, if anything, where we sit today, we think, you know, there's probably a lot more opportunity than risk in that, but it's also early, so we're going to watch things unfold. Okay, great. Thanks so much.
Speaker Change: Segment within the guidance for this year.
Speaker Change: Yeah, I would expect.
Speaker Change: And again some of this is going to boil down to timing because as David mentioned.
Speaker Change: We are really seeing a lot of close in order activity and pull up activity. So you know this.
This could flip I would say at the moment, our current expectation is you're probably going to see you know and <unk>.
Speaker Change: A slight uptick.
Speaker Change: Uptick on the domestic wholesale side wholesale overall should be up a good healthy amount of probably a high single digit number.
Speaker Change: Correct to consumer we also continue to expect to do well, maybe not as well as it's done this year, because it's pretty heady, that's a pretty heady rate at.
Speaker Change: At 24% on the full year, but we still expect.
Speaker Change: Double digit opportunities to reveal themselves certainly through the first the first bit of the year. So.
Speaker Change: We continue to see good trajectory good recovery I think if anything where we sit today we think.
Speaker Change: Theres, probably a lot more opportunity than risk in that but it's also early so we're going to we're going to watch things unfold.
Speaker Change: Okay Super Thanks, so much appreciate it.
Jay Sole: Appreciate it. Thanks, Jeff. Thank you. Our next question is from Jim Duffy with People. Please proceed with your question. Hi, this is Peter McGoldrick on behalf of Jim.
Speaker Change: Yeah. Thanks, Jeff.
Speaker Change: Thank you. Our next question is from Jim Duffy with Stifel. Please proceed with your question.
Speaker Change: Hi, This is Peter Mcgoldrick on for Jim. Thanks for taking my question I wanted to ask about store openings.
James Vincent Duffy: Thanks for taking the question. I wanted to ask about store openings. You had 200 net new own doors in 2023, and you have plans for 160 next year.
Peter Mcgoldrick: 200, net new own doors in 2023, and your plans for 160 next year could you talk about what you're seeing on new store productivity level.
Peter Clement McGoldrick: Can you talk about what you're seeing at the new store productivity level? How you're building those stores out? How they compare to your existing footprint?
Peter Mcgoldrick: How you're building those stores out how they compare to your existing footprint and from our total retail base of 5000, plus in the total Skechers retail network.
John M. Vandemore: And from a total retail base of 5000 plus in the total Skechers retail network? How should we think of that progressing going forward in 2024 and future years? Yeah, thanks, Peter.
Peter Mcgoldrick: How should we think of that progressing going forward in 2024 and future years.
Speaker Change: Yeah, Thanks, Peter Yeah.
John M. Vandemore: Yeah, look, we were making an estimate on new stores. But you know, the thing to keep in mind is what's most important to us in new stores is that we're opening the right type of stores globally. And so, you know, I would tell you, we tend to give a range and then we work within that range or above or below, depending upon the opportunities that present themselves. I think that's a number you can rely on with, again, a bias towards us probably adding more than that if opportunities reveal themselves. And keep in mind, that's a global number. That's a global company-owned number.
Speaker Change: Yeah look we were making an estimate on new stores, but the thing to keep in mind what's.
Speaker Change: What's most important to us on new stores that we're opening the right type of stores globally.
Speaker Change: So I would tell you we tend to give a range and then we work within that range or above or below depending upon the opportunities that present themselves.
Speaker Change: I think that that's a number you can rely on with again, a bias towards us probably adding more than that if the if opportunities reveal themselves and keep in mind. That's a global number that's a global company owned number. So that includes some markets that have a bit more dynamicism than what you'd see in the United States shorter leases.
John M. Vandemore: So that includes some markets that have a bit more dynamicism than what we see in the United States, shorter leases, you know, lower startup costs. And so those tend to be a little bit more fluid as we go throughout the year. In terms of the total number of stores, you know, I can't give you a final resting number, but I can tell you it's well north of where we are. We mentioned achieving our 5,000th store, which, if I'm remembering correctly, is in Columbia, and we're already, you know, well past that at north of, you know, 5,160. So we're going to continue to expand that. We think that the envelope worldwide is significantly above, you know, if not double where we are today at some future point. New store openings have continued to do well. You know, we certainly have a fairly pronounced focus on what we would call big box stores, so stores that can hold a broader assortment. They can hold accessories and apparel.
Lower startup costs and so it does tend to be a little bit more fluid is as we go throughout the year.
In terms of the total number of stores I, you know I can't give you a final resting number but I can tell you, it's well north of where we're at and we mentioned achieving our 5000th store, which if I'm remembering correctly is in Colombia.
Speaker Change: And were already well past that.
Speaker Change: At North of 5160 or so.
Speaker Change: We're going to continue to expand that we think that envelope worldwide is significantly above if not double where we are today at some future point.
Speaker Change: New store openings have continued to do well, we have certainly domestically a fairly pronounced focused on what we would call big box stores. So stores that can hold a broader assortment they can hold accessories apparel.
John M. Vandemore: And that's what we continue to open in the United States. I think that's what you should expect from us, absent, you know, an occasional opportunity in an outlet that we may not already be in that we think has an opportunity. I would tell you again, I think the opportunity in the United States remains fairly robust for stores for a while. And, you know, obviously, most important to us is that those stores open the right way, that they have a path to profitability that has them contributing at the level we would normally expect. I would also just add, though, that it's not just about stores. You know, we are definitely pushing our omni-channel solution globally.
And that's why we continue to open in the United States I think that's what you should expect from us.
Speaker Change: Absent an occasional opportunity in an outlet that.
Speaker Change: We may not already be in that that we think has an opportunity.
Speaker Change: I would tell you again I think the opportunity in United States remains fairly robust first for stores for a while.
Speaker Change: And obviously most important to us is that those stores open the right way that they have a path to profitability that has them contributing at the level. We would we would normally expect I would also just add though I mean, it's not just about stores.
Speaker Change: We are definitely pushing our omnichannel solution.
Speaker Change: Globally.
John M. Vandemore: It was an incredibly successful channel for us this year, particularly in the markets that we opened last year. You know, in the fourth quarter, we saw spectacular growth in many of those markets that had our new platform. And, you know, I think that continues to offer us opportunities to satisfy consumer desire for our product across a lot of different avenues. And so that's still going to be a heavy emphasis for us, particularly internationally but worldwide. Alright, thank you. And then there are some comments on inventory congestion and international markets weighing on deliveries in the fourth quarter. Can you tell us more about what's going on here?
Speaker Change: It was an incredibly successful channel for us this year, particularly in the markets that we that.
Speaker Change: That we opened last year.
Speaker Change: In the fourth quarter, we saw a spectacular growth in many of those markets that had at our new platform.
Speaker Change: I think that continues to offer us opportunities.
Speaker Change: To satisfy consumer desire consumer desire for our product across a lot of different avenues.
Speaker Change: That that's still going to be a heavy emphasis for us, particularly <unk>.
Speaker Change: Internationally, but but worldwide.
Speaker Change: Alright. Thank you and then there were some comments on inventory congestion in international markets weighing on.
Speaker Change: Deliveries in the fourth quarter can you tell us more about what's going on there.
John M. Vandemore: And then quantify any impacts to the quarter? And, and how should we think about this embedded in the first quarter guidance as well? Yeah, I would describe them as, A, temporal.
Speaker Change: And then quantify any impacts to the quarter end and how should we think about this embedded in the first quarter guidance as well.
Yeah, I would describe them as a temporal so we don't we don't think that they are durable we don't expect theyre going to last into 'twenty. Four I would also say it was pretty specific to a handful of customers. What was notable is it also tended to occur in markets, where we werent naturally able to offset through <unk>.
John M. Vandemore: So we don't think that they're durable. We don't expect them to last into 24. I would also say it was pretty specific to a handful of customers. But what was notable is it also tended to occur in markets where we weren't naturally able to offset through direct-to-consumer, you know, what may have been a deficit in the market vis-a-vis the demand we had. You know, because unfortunately, not every market has today what I would call the right balance or the ultimate balance of direct-to-consumer and wholesale. So if we see a pullback in wholesale in a market where we don't have a significant direct-to-consumer presence, we can't make that up. And as you've seen throughout the year, I mean, that's what we've been doing all year.
Speaker Change: <unk> to consumer.
Speaker Change: What may have been a deficit in the market vis vis the demand we had.
Speaker Change: Because unfortunately, not not every market has today, what I would call the right balance or the ultimate balance of direct to consumer and wholesale. So if we see a pullback in wholesale in a market, where we don't have a significant direct to consumer presence, we can't make that up and as you've seen in the year I mean, that's what we've been doing all year we.
John M. Vandemore: We've been significantly outgrowing on the direct-to-consumer side because consumers want the product. And that's offset some of the challenges on the wholesale side of things. And in the quarter in particular, we had some situations where we couldn't recover it vis-a-vis our direct-to-consumer channel because it wasn't quite as mature as in other markets.
Speaker Change: Been significantly outgrowing on the direct to consumer side, because consumers want the product.
Speaker Change: And that's offset some of the challenges on the wholesale side of things and in the quarter. In particular, we just we had some situations where were we couldnt recover at visa B, our direct to consumer channel because it wasn't quite as matures and as in other markets, but I would also point out and I'll just use an example, I mean.
John M. Vandemore: But I would also point out, and I'll just use an example, we had markets last year that grew 100 percent. So if you take their, you know, two-year stack, they're still growing significantly this quarter. But if you're comping against a market that grew 100 percent, that's pretty hard, especially if it's a mature market. So I would keep in mind there were definitely some difficult comparisons, particularly in EMEA, that we were facing this quarter that are a bit anomalous and certainly don't, I think, in any way indicate, you know, a letdown expected for 24 or beyond. Thank you. Our next question is from John Kernan with C.D. Cowan & Company. Please proceed with your question. Hi, this is Alex Douglas on behalf of John.
Speaker Change: We had markets last year that grew 100%. So if you take their two year stack. There is still growing significantly this quarter, but if you are comping against a market that grew 100% that's pretty hard, especially if it's a mature market. So I would keep in mind, there were definitely some difficult comparisons, particularly in EMEA.
Speaker Change: That we were facing this quarter that are a bit anomalous and certainly don't I think in any way indicate.
Speaker Change: I'll, let down expected for 'twenty four or beyond.
Speaker Change: Thank you.
Speaker Change: Yeah.
Speaker Change: Our next question is from John Kernan with TD Cowen and company. Please proceed with your question.
Speaker Change: Hi, This is Alex Douglas on for John Thank you for taking my question and congrats on a nice quarter.
John M. Vandemore: Thank you for taking our question and congratulations on a nice quarter. So, if I remember correctly, you commented on the last call about consumers trading up within the portfolio as being a driver of higher ASPs. Were there any changes to that trend in Q4? And if that trend did persist, do you expect that to be a driver of gross margins in fiscal 24? Thank you.
Alex Douglas: So if I remember correctly you commented on the last call about consumers trading up within the portfolio as being a driver of higher asp's.
Alex Douglas: Was there any changes to that trend and in Q4.
Alex Douglas: And if that trend did persist.
Alex Douglas: Do you expect that to be a driver of gross margin in fiscal 'twenty.
Speaker Change: Thank you.
Speaker Change: That trend did persist.
John M. Vandemore: That trend did persist, which again is, we think, reflected in consumers choosing to buy our products with our comfort technologies embedded in them. So what we've seen is within our own portfolio, consumers trading up. A lot of that was evident last year, though, so I don't know that that's going to drive a significant amount of year-on-year gross margin accretion because we're pretty squarely lapping that now. But it is something we continue to see in our portfolio, and as we can deliver more technologies to consumers and, quite frankly, just bring more consumers into those technology solutions in our footwear. It certainly offers opportunities to continue to upsell them, but I don't know that it's going to be a pronounced effect this year simply because, you know, we're lapping that effect last year. That's very helpful.
Speaker Change: Which again is we think reflected of consumers choosing to.
Speaker Change: To buy our products with our comfort technologies embedded in them.
Speaker Change: So what we've seen is within our own portfolio consumers trading up a lot of that was evident last year, though so I don't know that that's going to drive a significant amount of year on year gross margin accretion because we're pretty squarely lapping that now but it is something we continue to see in our portfolio and as and as.
Speaker Change: We can deliver more technologies to consumers and quite frankly, just bring more consumers into those technology solutions in our footwear.
Speaker Change: It certainly offers opportunities to continue to up sell them, but.
Speaker Change: I don't I don't know that its going to get pronounced effect. This year simply because we're lapping that effect last year.
Speaker Change: That's very helpful. Thank you.
John M. Vandemore: Thank you. Our next question is from Rick Patel with Raymond Gaines. Please proceed with your question. Hey, this is Josh filling in for Rick.
Speaker Change: Our next question is from Rick Patel with Raymond James. Please proceed with your question.
Speaker Change: Hey, this is Josh filling in for Rick. Thanks, So much for taking my question.
Rick Patel: Thanks so much for taking my question. I was just curious if you'd be able to talk about the impact, if any, that you're seeing from any of the Red Sea issues. I know it's a very fluid situation, but I'm just curious if you can touch on how it might be affecting shipping times and freight costs as we think about the next few quarters and upcoming year. Well, as far as Europe is concerned, we're no different than anybody else.
Josh: I was just curious.
Josh: If you'd be able to talk about the impact if any that you're seeing from any of the red sea issues I know, it's a very fluid situation, but I'm. Just curious if you could touch on how it might be affecting shipping times and freight costs as we think about the next few quarters in the upcoming year.
Josh: As far as Europe is concerned we're no different than anybody else I think the good news for US is we had a higher demand going in and I, just showing up in the first quarter a good board a lot of goods in early and.
David Weinberg: I think the good news for us is we had higher demand going in, and it's showing up in the first quarter. We brought a lot of goods in early and feel we're in a pretty good situation, depending on how long it lasts. There's no way around the additional time it takes to get there and the number of times the ships are out of port and picking up new ones. We have some issues in the U.S. as well, obviously, because the West Coast is getting a little backed up because of the issues down in the Panama Canal and going through the East Coast. But given all that, it doesn't seem to be as extensive as it could be.
Josh: So we're in pretty good situation, depending on how long it goes with there's no way around the additional time it takes to get there in a number of times the ships there are out.
Josh: Out important picking up new.
Josh: We have some issues in the U S as well, obviously, because the west coast is getting a little backed up.
Josh: Because of the issues down in the Panama Canal and going through the east coast, but given it all it doesn't seem to be as extensive as it could be I don't know what the future holds for right now we seem to be in pretty good shape, we had taken our deliveries in early.
David Weinberg: I don't know what the future holds, but right now, we seem to be in pretty good shape. We had taken our deliveries in early, knowing that we were going to ship very heavily at the end of December and through this whole month of January. As I said before, January has held up very well. It was beyond our expectations around the world.
Josh: Knowing that we were going to ship very heavily in the end of December and sort of this whole month of January.
Josh: Like I said before January has held up very well it was beyond our expectations.
Josh: <unk>.
Around the world. So right now we sit in a good position inventory wise and with the receipt of goods and we will see what happens as we go back through the year, but right now for the month of January going into February we sit in a very strong position in shipping very well.
David Weinberg: So right now, we sit in a good position inventory-wise and with receipt of goods, and we'll see what happens as we go back through the year. But right now, for the month of January and going into February, we sit in a very strong position and are shipping very well in our major market. I really appreciate the color.
Josh: In our major markets.
Speaker Change: Really appreciate the color.
Tom Nikic: Our next question is from Tom Nikic with Wedbush Securities. Please proceed with your question. Hi, this is Matt Quigley on behalf of Tom.
Our next question is from Tom.
Speaker Change: Nick <unk> with Wedbush Securities. Please proceed with your question.
Speaker Change: Hi, This is Matt quickly on for Tom.
Matt: You touched a little bit on your prepared remarks about your initial entries into soccer and basketball this past year just how.
David Weinberg: He touched a little bit on your prepared remarks about your initial entries into soccer and basketball this past year. How should we think about the growth opportunities for those categories for 2024 and beyond? Well, there are obviously major growth opportunities for us around the world. I don't know if they're quite a 24, certainly not an early 24.
Matt: How should we think about the growth opportunities for those categories for 2024 and beyond.
Matt: Well, they're obviously major growth opportunities for us around the world I don't know if theyre quite a 'twenty four is certainly not an early 24. This is all just cultivating and getting our players in order and getting our imaging correct around the world, but we do think as we go through.
David Weinberg: This is all just cultivating and getting our players in order and getting our image correct around the world. But we do think as we go through the year, as we exit 24 and into 25, the opportunities for us on a worldwide basis... Both for the footwear and apparel, and for signing players and moving into more sports will be significantly larger. We have a great start with it, there's been a great reception for the high price and technically advanced footwear we have, and we have a lot of interest from a lot of professional players and a lot of places around the world to try them, get them, use them, so we're trying to be careful and go slow because it is obviously a It's a significantly large marketplace, but we're very happy with where we are today, how it's starting and how it's being received, and getting ready to take it out around the world in stages as we go throughout this year. Great, thanks a lot.
Matt: Through the year I think we can exit 'twenty four and into 'twenty five the opportunities for us on a worldwide basis.
Matt: <unk>.
Matt: Both for the footwear and apparel.
Matt: And for signing players that are moving into more sports will be significantly large and.
Matt: We have a great stock for at this great reception for the high price and technically advanced footwear, we have and we have a lot of interest from a lot of professional players and a lot of places around the world to try them get them use them. So we're trying to be careful and go slow because it is obviously, a very high profile and cigna.
Matt: <unk> large marketplace, but we're very happy with where we are today, how it's starting and how it's being received and getting ready to take it out around the world in stages as we go throughout this year.
Speaker Change: Great. Thanks, a lot.
Speaker Change: Our next question is from Aberdeen, Danielle with Piper Sandler. Please proceed with your question.
Abby Denyett: Our next question is from Abby Denyett with Piper Sandler. Please proceed with your question. Great, thanks for taking my question. Um, you talked about that deficit in the wholesale market, you know, causing the strength in DTC this year. So just how do we think about lapping that DTC strength domestically, you know, as the wholesale channel restocks at some point, and then I have a follow-up. Yeah, thanks, Abby. I would just be very specific.
Danielle: Great. Thanks for taking my question, you talked about that deficit in the wholesale market.
Danielle: Causing the strength in D. C. This year. So just how do we think about lapping that DTC strength domestically.
Danielle: As the wholesale channel restock at some point and then I have a follow up.
Speaker Change: Yeah, Thanks, Debbie I would.
Speaker Change: I'd be very specific I don't I don't think it caused.
John M. Vandemore: I don't think it caused The Wholesale Challenge. I think it was the solution for many consumers who found that they couldn't get our latest product, our technology-infused product, you know, at their favorite traditional retailer. So it was kind of a plan B for many of those consumers that, luckily, we had the inventory and the product available for. Listen, I think as we look forward to the year, as we mentioned, we continue to expect the direct consumer business to grow. You know, it may not grow at the heady a pace we saw this year, but it'll still continue to grow nicely.
Speaker Change: The wholesale challenges I think it was the solution for many consumers who found that they couldnt get our latest product our technology infused product.
Speaker Change: They're at their favorite traditional retailers. So it was kind of a plan b for many of those consumers that thankfully, we had the inventory and the product available for listen I think as we look forward to the year as we mentioned we continue to expect the direct to consumer business to grow it may not grow as at head.
Speaker Change: Our pace, we saw this year, but it'll still continue to grow nicely. It is for US one of our strategic imperatives, we see opportunities for stores up for digital to grow.
John M. Vandemore: It is one of our strategic imperatives. We see opportunities for stores and for digital to grow, and so, you know, again, I don't think it really will have a significant impact on the opportunity to continue to grow direct to consumer. It just may not be that we have as much, again, significant growth next year as we did this year.
Speaker Change: And so again I don't think it really will have a significant impact on the opportunity to continue to grow direct to consumer. It just may not be that we have is again is significant.
Our growth next year as we did this year, but again I would just ask everybody to keep in mind in that growing 24% year on year in your direct to consumer business is pretty.
John M. Vandemore: But again, I would just ask everybody to keep in mind that growing 24% year-on-year in your direct consumer business is pretty fantastic. So again, we continue to expect growth there. We don't think there's any reason why wholesale and DTC can't grow together. We've done that at innumerable moments in our history, and we expect that to be the focus of this year. And I would add to that. I mean, it's on the back of an incredible product, right?
Speaker Change: Pretty fantastic. So again, we continue to expect growth. There. We don't think there's any reason why wholesale and DTC can grow together we've done that.
Speaker Change: And in new in Numerable moments in our history, and we expect that to be the profile for this year and I would add to that I mean, it's on the back of incredible product right. The reason why we're seeing the success at the consumer level. We're seeing is incredible product with great technologies that that really resonate and so that's.
John M. Vandemore: The reason why we're seeing the success at the consumer level we are seeing is an incredible product with great technology that really resonates. And so that's going to be what pulls those sales through both in wholesale and in the direct-to-consumer side.
Speaker Change: That's going to be what polls.
Speaker Change: Pulls those sales through both in wholesale and in the direct to consumer side.
Speaker Change: Yes.
Abby Denyett: That's helpful. And then just quickly, distributor sales were pressured this year. With those coming back, does that put any pressure on the wholesale growth margin, or is it not material? It can be material.
Speaker Change: Got it that's helpful and then just quickly.
Speaker Change: February sales were pressured this year with those coming back does that put any pressure on wholesale gross margin or is it not material.
Speaker Change: It can be material it depends we tend to see more quarterly fluctuations, but it is it is true that our distributor gross margins are lowest now keep in mind, we also bear.
John M. Vandemore: It depends. We tend to see more quarterly fluctuations, but it is true that our distributor gross margins are the lowest. Now, keep in mind that we also bear almost none of the operating costs for that channel. So it's a very good operating margin. It's just a lower gross margin. Look, we'd love nothing more than to see the distributor business get back to where it was last year. Again, again, keep in mind last year was a little bit of an anomaly because it had been making up for the year before. I would also just point out, you know, one of the things to keep in mind as you look at that year on year distributor number is that, you know, we took one of our major distributors in the Nordic region in-house via an acquisition. So for three quarters, I think, or maybe a little bit more than that, you know, we transitioned them to be a fully consolidated entity.
Speaker Change: Almost none of the operating costs for that.
Speaker Change: That channel. So it's a very good operating margin, it's just a lower gross margin.
Speaker Change: Look we'd love nothing more than to see the distributor business get back to where it was last year again again keep in mind last year was a little bit of an anomaly because it had been making up for the year before I would also just point out one of the things to keep in mind as you look at that year on year distributor number is that we took one of our major.
Speaker Change: <unk> in the Nordic region in house, VW and acquisitions over three quarters, I think or maybe a little bit more than that.
Speaker Change: We transition them to be a fully consolidated entity. So we also took consciously a chunk of our of our.
John M. Vandemore: So we also took consciously a chunk of our distributor sales and moved them in-house. So some of that decline is just vis-a-vis that transaction.
Speaker Change: Distributor sales and move them in house. So some of that decline is just vis vis that transaction.
Abby Denyett: Okay, that's helpful. Thank you. Thanks, everybody.
Speaker Change: Got it okay. That's helpful. Thank you.
Speaker Change: Thanks.
Speaker Change: Thank you. Our next question is from Alex <unk> with Morgan Stanley. Please proceed with your question.
Alex Stratton: Thank you. Our next question is from Alex Stratton with Morgan Stanley. Please proceed with your question. Okay.
Alex Douglas: Great. Thanks, all for taking the question.
John M. Vandemore: Thanks a lot for taking the question. You sound a lot more optimistic than you all have in a number of quarters on the wholesale order book. So maybe, do you guys view this as the domestic wholesale weakness being firmly behind you?
Alex Douglas: You've got a lot more optimistic than you all have a number of quarters I'm not on the wholesale order book. So maybe do you guys view this as a domestic wholesale weakness is being firmly behind you.
John M. Vandemore: And as a quick follow-up on that, say the market does inflect or the demand does inflect further, do you feel you have enough inventory to fulfill that demand? I would say we're cautiously optimistic. We're behind, you know, what bedeviled the domestic wholesale business really for the last, I'd say, five quarters because this stretches back to when congestion first began. And what we're seeing in orders, what we're seeing in conversations would give us, It gives us that encouragement. Now, we'll see, because it's been a while, but we're optimistic about what we're seeing, and I think that's good. I think, Yes, we feel good about our inventory position. I mean, if things go crazy, you're going to be in a catch-up mode.
And as a quick follow up on that and say that market doesn't factor the demand doesn't but further do you feel you have enough inventory to fulfill that demand.
Yeah.
Alex Douglas: I would say we're cautiously optimistic we're behind you know what what would be double the domestic wholesale business really for the last I'd say five quarters. Because this this stretches back to win congestion first began.
Alex Douglas: And what we're seeing in orders what we're seeing in conversations would would give us.
Alex Douglas: And it gives us that encouragement now, we'll see because it's been a while but but where.
Alex Douglas: We're optimistic about what we're seeing and I think that's good I think yes, we feel good about our inventory position.
Alex Douglas: If things go crazy.
Alex Douglas: B and a catch up mode.
John M. Vandemore: But I'd say, by and large, because of what David mentioned, we brought in some inventory early at the tail end of last year, and we're very efficient right now at the levels we're at. Plus, we've invested a lot in our distribution, so we have the infrastructure, which is getting increasingly more efficient every day, to handle that. We would feel good about our ability to chase opportunity within limits. There's obviously a production timeline you have to be cognizant of, but we would certainly feel pretty good about our opportunity to chase orders if they came in, particularly toward the back end of the booking window. That's helpful.
Alex Douglas: But I'd say by and large because of what David mentioned, we brought in some inventory early at the tail end of last year.
Alex Douglas: And we're very efficient right now at the levels. We're at plus we've invested a lot in our distribution. So we have the infrastructure, which is getting increasingly more efficient everyday to handle that.
Alex Douglas: We would feel good about our ability to chase opportunity within limits right, but theres, obviously, a production timeline you have to be cognizant of it but we would certainly feel pretty good about our opportunity to chase.
Alex Douglas: Orders if they if they came in particularly.
Alex Douglas: Towards the back end of the of the booking window.
Speaker Change: That's helpful. Maybe one follow up how do you guys view like the inventory in total in the footwear market right now has that kind of been more so cleaned up in your view.
Alex Stratton: Maybe one follow up. How do you guys view the inventory and total in the footwear market right now? Has that kind of been more so cleaned up in your view? Well, we don't have perfect visibility into the totality of the inventory. I can say, and I think we've said this before, you know, we feel really good about where the Skechers inventory is at with our wholesale partners. We felt that way for a while; we felt there was an opportunity for, you know, those retailers to get even more behind some of the new fresh technology-infused product. And I would say that it's still the case today.
Speaker Change: Yeah.
Speaker Change: Well, we don't have perfect visibility into the totality of the inventory I can say and I think we've said this before we feel really good about where the skechers inventory is at and our wholesale partners.
Speaker Change: Felt that way for awhile, we felt there was opportunity for.
Speaker Change: For those retailers to get even more behind some of the new fresh technology infused product.
Speaker Change: And I would say that that's still the case today.
Alex Stratton: Thanks a lot. Thank you. There are no further questions at this time. This does conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.
Speaker Change: Thanks, a lot.
Speaker Change: Thanks, Doug.
Speaker Change: Thank you there are no further questions Tom.
Speaker Change: This does conclude today's conference you may disconnect. Your lines at this time. Thank you for your participation.