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Founded in 1992, Skechers U.S.A. develops footwear, apparel, and accessories around the world. The company operates in two segments: wholesale and direct-to-consumer. Skechers reaches consumers through a mix of company-owned retail stores, e-commerce, third-party marketplaces, and licensed partners, with a strong global presence in both physical and digital channels.

Q1 2025

Q4 2024

Skechers U.S.A. (SKX): Company Profile, Stock Price, News, Rankings

legacy

Skechers U.S.A.

skechers u.s.a.

Greetings, and welcome to Skechers First Quarter twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn this conference over to Skechers.

Good afternoon, everyone. Thank you for joining Skechers first quarter twenty twenty five earnings conference call. My name is Soo Hong. I'm a senior director of international merchandising at Skechers, and I've been with the company since 2017. My favorite style at Skechers is the cozy fit in white navy.

Joining us on today's call are Skechers' Chief Operating Officer, David Weinberg and Chief Financial Officer, John Vandermel. Before we begin, I would like to remind everyone of the company's safe harbor statement. Certain statements made on today's call contain forward looking statements based on current expectations, including without limitation, statements addressing the beliefs, plans, objectives, estimates and expectations of the company and its future results and certain events. These forward looking statements involve known and unknown risks, uncertainties and other factors, which may cause actual results to differ materially from such statements. 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.

Please refer to the company's reports filed with the SEC, including its annual report on Form 10 ks and quarterly reports on Form 10 Q for more information on these risks and uncertainties that may affect the company's business, financial conditions, cash flows and results of operations. With that, I would like to turn the call over to Chief Operating Officer, David Weinberg.

Good afternoon, and thank you for joining us today on our first quarter twenty twenty five conference call. The first quarter marked a new sales record for Skechers with $2,410,000,000 in revenue or $2,460,000,000 on a constant currency basis and earnings per share of $1.34 Our strong financial performance across both our wholesale and direct to consumer segments was the result of continued global demand for our comfortable and innovative footwear and growth across geographies, driving our international to 65% of our total business. This growth is of significant importance given the increasing macroeconomic uncertainty and waning consumer sentiment. Both domestic and international sales increased by 7% with growth of 14% in EMEA and 8.3% in The Americas. In APAC, sales decreased by 2.6% primarily due to soft consumer spending in China.

However, when excluding China, APAC sales grew 12%. We continue to view international as our primary growth engine, strategically investing in our retail store network and enhancing our distribution efficiencies. Skechers enduring success stems from our core design principles of style, comfort, quality and innovation at an affordable price. Our mission is to make convenience and comfort part of consumers' everyday life, no matter their age, interest or lifestyle. Sketch's proprietary hands free slip ins technology, ArchFit, StretchFit and other features are the center of this comfort movement.

Our technical performance division continues to expand its roster of elite athletes with the signing of footballers, Isco Alarcon, a Spanish national team veteran and rising star Nicolo Pasili, who plays for Roma and the Italian national team Jasperit Bumra, India's fast cricket bowler and national team veteran baseball player Jake Berger of the Texas Rangers and basketball pro Norman Powell of the Los Angeles Clippers. This quarter, we also announced the signing of Kiki Iriathan, first round draft pick of the WNBA Washington Mystics and legendary golfer Bernard Langer. Our athletes provide valuable feedback on the development of our best in comfort technical footwear and lend credibility and awareness as we further build our presence on the court, pitch, green and field and extend our region to new accounts and countries to meet the needs of sports enthusiasts globally. Complementing our athlete driven initiatives are multi format lifestyle marketing campaigns that feature diverse roster of talents. This includes Howie Mandel, Tony Romo, Howie Long, Martha Stewart and Brooke Burke as well as regional ambassadors like former European footballers Jamie Redknapp and Frank LaBeouf, Spanish singer David Bisbal and German singer Vanessa Mai among others.

Looking at our first quarter results in detail. Our record first quarter sales of $2,410,000,000 was a result of 7% increases in both our domestic and international channels due to the continued demand for Skechers. We saw regional growth in EMEA of 14% driven by strength across nearly all markets and The Americas of 8.3% with continued strength in The United States and Canada, partially offset by a decrease of 2.6% in APAC, primarily due to the continued economic pressures in China. Again, when excluding China, APAC grew 12%. We believe Skechers has significant growth opportunities in this region and we remain committed to investing in our product, marketing, retail footprint and logistics.

Wholesale sales increased 7.8% with growth of 4.2% domestically and 9.5% internationally. The domestic wholesale growth reflected broad based demand for our comfort technology products across our kids, men's and women's categories. Within international wholesale, we experienced solid growth across many regions and markets driven by the strength of our brand and appealing innovative products. Turning to our direct to consumer segment, sales increased 6% with domestic growth of 11% including strong performance in e commerce, international increased 2.9%, When excluding China, international grew 12% due to the strong DTC sales in nearly every market. SKECHERS branded stores showcase our comfort technology products for the entire family as well as innovative performance footwear and continue to drive awareness and purchase intent.

We ended the quarter with 5,318 Skechers stores worldwide of which eighteen twenty one are company owned locations including six eighteen in The United States. We opened 51 company owned stores in the quarter, including 15 locations in China, Thirteen in The United States and three each in Hong Kong and Mexico. We also relocated five stores, including the new performance focused store in Edmonton, Canada and expanded two others. We closed 17 stores

the period, fifty third party stores opened, including 12 in China, Six in Indonesia and the first Skechers store in Argentina. Sixty Two Third party Skechers stores closed in the quarter including 42 in China bringing our third party store count at the quarter end to 3,497. We expect to open an additional 150 to 170 company owned stores worldwide in 2025. Included in the estimate is the 13 company owned stores opened to date in the second quarter. Our investment priorities remain focused on three key areas: expanding our distribution centers in The United States, China and Europe to more efficiently deliver our product and manage the expected growth in these markets enhancing our product offering with new technologies and categories while amplifying demand creation and growing our direct to consumer footprint and capabilities.

We are encouraged by the positive reception to our varied product initiatives during our recent domestic and international customer meetings, reaffirming our commitment to evolving, innovating and adapting our footwear to meet the needs of consumers and drive demand across our global footprint. While we are fully cognizant of the uncertainty in the current environment, we believe we are well positioned to navigate this leveraging the strength of our brand, our distinct and global market position and our healthy balance sheet. And now, I'd like to turn the call over to John for more details on our financial results.

Thank you, David, and good afternoon, everyone. Skechers' first quarter results reflect the continued strength of our business across channels and worldwide geographies, a testament to the power of our global brand and the appeal of the innovative comfort technologies embedded in our product portfolio. We are incredibly pleased with these results, especially in the face of such extreme market dynamics and believe they reflect our focus on managing factors within our control and delivering on our strategic plan. Before we get into our financial review, let me comment briefly on the current global trade environment, which presents a similar level of uncertainty to that observed during the initial phase of the COVID pandemic. Insofar as tariffs are concerned, we continue to address these with the same levers we have spoken about previously: cost sharing with vendors, sourcing optimization and price adjustments.

We are in the midst of pulling these levers while simultaneously monitoring the environment for needed adjustments and closely watching consumer behavior to ascertain future demand characteristics. Ultimately, we remain confident in our ability to navigate these challenges as we have in the past. We know that our proven track record of managing this globally diverse brand with a unique and compelling product portfolio focused on delivering style, comfort, quality and innovation at a reasonable price will enable Skechers to endure and likely thrive during this time. Now turning to our financial results. We achieved first quarter sales of $2,410,000,000 an increase of 7.1%, in line with our expectations.

On a constant currency basis, sales were $2,460,000,000 up 9%. Direct to consumer sales grew 6% year over year to 879,400,000.0 Domestic increased 11% driven by strong performance in our e commerce channel and growth in our retail stores. International grew 2.9% year over year. Excluding China, our international direct to consumer sales grew 12%, which highlights the broad strength across regions in nearly every country and the continued opportunities to grow our brand across the globe. Wholesale sales increased 7.8% year over year to $1,530,000,000 International sales increased 9.5% with robust growth in many markets, reflective of our geographic diversity and strength.

Domestic growth of 4.2% aligned with our expectations of the marketplace returning to more stable growth trends. Turning to our regional sales. In EMEA, sales for the first quarter increased 14% year over year to $718,200,000 driven by robust consumer demand with double digit growth in both our wholesale and direct to consumer businesses. In The Americas, sales increased 8.3% year over year to 1,100,000,000 driven by modest growth in our domestic wholesale channel and strength in our direct to consumer channels in nearly every market. In Asia Pacific, sales declined 2.6% year over year to $589,000,000 Excluding China, Asia Pacific sales grew 12%, led by double digit growth in Japan, Thailand and South Korea.

We continue to navigate a difficult macroeconomic environment in China, where sales declined 16% following double digit growth in the prior year. As challenging market conditions persist, our expectations for the year remain modest. Leveraging the strength of the SKECHERS brand, we are focused on opportunities to fuel demand and expand our offering of comfort technologies, which continue to resonate with consumers across the globe and represent an important opportunity in China. Gross margin was 52%, down 50 basis points compared to the prior year, primarily due to lower average selling prices from higher levels of promotion in certain markets like China and customer mix. Operating expenses increased 180 basis points as a percentage of sales year over year to 41%.

Selling expenses as a percentage of sales increased 70 basis points versus the last year to 7.7%, largely focused on brand building investments and expanding awareness

latest comfort technologies. General and administrative expenses increased 110 basis points as a percentage of sales versus last year to 33.3% due to higher labor and rent to support our growth in our direct to consumer segment as well as increased distribution costs, particularly in Europe to support higher volumes and alleviate processing constraints. Earnings from operations were $265,100,000 a decrease of 11% compared to the prior year. Our operating margin for the quarter was 11% compared to 13.3% last year. Significant foreign currency exchange rate fluctuations drove other income to $24,500,000 an increase of $26,600,000 compared to the prior year.

This is similar to the charge incurred in Q4, primarily reflecting foreign currency exchange rate volatility during the quarter. Our effective tax rate for the first quarter was 22.3% compared to 19% in the prior year, reflecting the impact of the global minimum tax regulations we discussed last quarter. Earnings per share were $1.34 per diluted share, essentially flat compared to the prior year on 151,500,000.0 weighted average diluted shares outstanding. And now turning to our balance sheet. We ended the quarter with $1,240,000,000 in cash, cash equivalents and investments and maintain liquidity of $1,850,000,000 when including our revolving credit facility.

Inventory was $1,770,000,000 an increase of 30% or $413,200,000 compared to the prior year, primarily related to elongated transit times due to the closing of the Suez Canal. However, when compared to the prior quarter, inventories decreased 7.6%, including a slight decrease in China, where we continue to actively manage inventory levels. Capital expenditures for the quarter were $147,100,000 of which $68,900,000 related to investments in our distribution infrastructure, predominantly from the expansion of our distribution centers in North America and China. Forty Four Point Six Million related to new store openings and enhancing our direct to consumer technologies and $14,800,000 related to the expansion of our corporate offices. We continue to deploy our capital consistent with our stated philosophy, prioritizing the maintenance of a top tier balance sheet and investments required to grow our business.

In response to the current climate, we are being more conservative about other capital allocation opportunities until we have more foresight into the path ahead. And now turning to guidance. As we began 2025, we communicated our belief, reflected in our annual guidance, that this would be another year of growth on the basis of the tremendous demand for Skechers we observed across the globe, particularly internationally. The first quarter confirmed that belief, reflecting the strength of our brand and product assortment. Today, we still believe many markets will continue along that trajectory, absent unforeseen impacts from the current macroeconomic environment.

However, we must also acknowledge that the world is significantly more uncertain today than three months ago. We were in a similar situation five years ago, albeit for different reasons. I'm not in the habit of quoting myself, often, but the language I use then is equally applicable today. We will not be providing revenue or earnings guidance at this time, as the current environment is simply too dynamic from which to plan results with a reasonable assurance of success. As David stated, while the near term is uncertain, we are confident that we are taking the necessary actions to ensure that Skechers will successfully navigate this crisis.

We not only successfully navigated the situation five years ago, but emerged as a stronger brand and fully expect to do the same this time. With that, we thank you for your time today and look forward to updating you on our second quarter financial results, which we expect to release on Thursday, 07/31/2025. I will now turn the call over to David for closing remarks.

Thank you, John. We believe our first quarter performance, including record sales, is exceptional. We delivered our outstanding comfort products to consumers globally, further grew our direct to consumer business and expanded our presence within our extensive network of retail partners. While we are aware of the uncertainty in the macro environment, we believe we are well positioned with our distinct and global market position. We have a proven track record of managing our business in crisis situations, such as we experienced five years ago.

Like then, we are grounded in a clear strategic plan and remain agile and responsive to this dynamic situation. As a truly global brand with international representing 65% of our total business, we remain focused on enhancing network for greater efficiency and reach, enabling us to deliver more innovation, drive purchase intent, and ensure that our products are available when and where consumers want to shop, all while operating in this volatile environment. We would like to thank the entire Skechers organization as well as our suppliers and our retail partners for their determination and flexibility as we navigate the road ahead together. And now, I'd like to turn the call over to the operator for questions.

Thank you. We will now be conducting a question and answer You may press 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. So that we may address questions from as many participants as possible, we ask that you limit yourself to one question and one follow-up. If you have additional questions, you may re queue, and time permitting, those questions will be addressed.

One moment, please, while we poll for questions. Thank you. Our first question comes from the line of Jay Sole with UBS. Please proceed.

Great. Thank you so much. David, John, you mentioned some of the things you're doing to deal with the tariff situation. Could you just talk a little bit more about China specifically? Just give us an idea of how much of the company's production is going to happen in China this year and what percent of that is coming to The U.

S? And what can you is there something you can do to minimize that and over what time frame? That's the first part of the question. The second part is, from an industry standpoint, what are the you and your competitors, what are they is there anything you guys are doing collectively to try to communicate the issues that you have with the administration to try to figure out a way to lower the tariffs or create some kind of workaround so some of the tariffs that are out there don't become too onerous? Thank you.

Thanks Jay. Obviously, a key question, although we're not in the habit of giving sourcing percentages by destination market. What I would reiterate is a couple of things that were in our prepared remarks, namely that we're looking at the same three levers to deal with the higher tariffs from many markets to The U. S. The same way we did this before.

That's looking at resourcing, it's looking at vendor cost sharing and it's looking at pricing. And all of those are actively being pursued by the company to one degree or another. Obviously, in the current environment, we will be looking to minimize production going to The United States from high cost locations, including tariffs. But we're not ready to say today anything more specific than that. I would also though emphasize the note that David made a couple of times during his prepared remarks, which is two thirds of our business is outside of The United States.

So while this issue is incredibly in focus as it relates to our domestic market, recognize that two thirds of our business is much less impacted, if not minimally to not impacted at all, by the current situation. The other thing I'd note is that we have a substantial base of very valuable, highly collaborative partners we work with to manufacture goods. And we are working hand in glove with them in this process, so we can get to the best outcome overall for our business. And so far as industry efforts, we've participated in efforts alongside many our competitors to convey what we think is the best approach towards the global trade parameters that are in discussion today. But at the moment, I think that's probably not going to be the most likely outcome for a near term resolution.

Rather, it's going to rest on our shoulders to deal with the issue in front of us in many of the same ways we've dealt with it before.

Thank you. Our next question comes from the line of Lauren Bafflescu with BNP Paribas. Please proceed.

Good afternoon. Thank you, David. Thank you, John, for taking the question. I certainly recognize that you can't guide versus ninety days ago, but I think what's interesting from the prepared comments, there was a point of when you said, we still believe many markets will continue along with the trajectory versus the original guide. John, David, could you guys potentially unpack that a little bit more for the audience like what markets are you seeing notable volatility?

Is it within The United States, Europe, China? Love to get some more color there as we think about modeling 2Q and potentially for the back half of the year. Thank you.

I might start first on the markets that we don't see substantially changing in the near future. And that's really the vast majority of the markets is, again, harping on the two thirds of our business occurring outside of The United States. The majority, the vast majority of those markets performed very, very well this quarter. And we expect we'll continue to perform well absent unbeknownst changes from the macroeconomic climate that may result from the current situation in several of the larger economies. But I would state most clearly that what we see today has nothing to do with consumer demand.

Consumer demand for the SKECHERS brand, for our comfort technology products is extremely robust and, quite frankly, is almost hard to for us to catch. And so that's not the issue. Now, obviously, the markets that, today probably present the most uncertainty are The United States and China for two different reasons. In The United States, it's obviously a market where we're watching consumer behavior pretty closely, and we're watching both signals in our own business, but signals in other businesses, and those have clearly gotten more uncertain, in the recent past. I would say in China, that's a market that continues to work its way through some of the macro challenges we've talked about.

The decline this quarter, think, is a bit more outsized mostly because of last year. If you recall last year, China in the first quarter was a good growth market for us, grew double digits. So I would take into context this quarter's result is more in our view a continuation of the performance we saw over the back half of twenty twenty four, but it also is illustrating some signals of stability and we are taking the actions that we've previously discussed around demand creation, product assortment, a focus on comfort that we think will actually yield significant benefit as the market continues to improve. So that's more of a status quo than anything else, but still a market where we know long term there is great prospects for the brand and we believe the actions we're taking today will have a significant impact to help drive that market toward recovery. But more than anything, would want folks to understand that there is certainly at the outset no concern from a consumer perspective for our brand because what we see there are tremendous signals as evidenced by a lot of the regional growth you saw across both wholesale and our direct to consumer business, particularly in EMEA, but also in The Americas, and then ex China in APAC, which all grew quite nicely in the quarter.

Thank you, John, for all that color. And then with regards to tariff concerns, I think you laid out three strategies: cost sharing, sourcing optimization, pricing. How should we think about those three levers? You you listed them on that order. Should we think about cost sharing with your partners, manufacturing partners as the biggest lever and then pricing being the last lever?

Love to get you know, the degree of magnitude. Are they all equal weight? And how fast can you implement each of those three levers? Thank you.

Yeah. You know, you're going get a lot of unknowns in that, Laurent. No, we did not list those levers in order of either economic unit or other importance to us. They're all being actively managed. We're working aspects of the strategy and the reason why we're inhibited on our ability to explain fully is that that's an evolving topic.

I mean, we're right now today only in a pause on potentially drastic increases everywhere outside of China. And so how that unfolds will have a dramatic impact on how we plan sourcing.

Yes. I think it's important to note that we have to remain flexible. So we don't have a target and then keep moving part of our strength and what we've done in the past is we use all the levers and all sets of those levers, stay flexible and apply them where it's the best for us to go at that particular time. And that could change, like John said, over a short period of time. So, I think just to reiterate, we think we're in a good place.

We have some levers. We don't know what the final is, so we don't know which levers will do the best. What we do know is that the product is being received very well around the world and selling through. And we have faith in our way to maneuver these things to know that we'll come out as well as is possible.

Understood. Last question. Two weeks ago, Levi's was asked if there was anti Americanism starting to brew with the brand. Answer was no. I'd love to get your take there, obviously which is a very dynamic environment, but just love to get your take.

Obviously you guys are seen as a global brand, just to get a little bit more color there would be very helpful for the audience. Thank you.

I would not say in any way we've seen any evidence of either anti Americanism or anti Skechersism, no isms. What I would tell you though is, as we've emphasized before, Skechers is very much an international brand and we're perceived that way in many markets. We don't rely as heavily as others on some U. S.-based assets for marketing the brand globally. We like to be very locally attuned.

And so for that, the benefit is being perceived as much more of an international, locally applicable brand than an American brand per se. So no, we haven't seen any evidence of that, we wouldn't expect that. But obviously, we're watching the overall performance of the business very, very carefully at this stage.

Thank you. Our next question comes from the line of Jim Duffy with Stifel. Please proceed with your question.

Hi, this is Peter McBoldrick on for Jim. Thanks for taking our question. I was curious in the context of your playbook to address the tariff headwinds in The U. S, could you discuss your appetite for taking price and ability to do so across regions and not just in The U. S?

Well, as we said, I mean pricing at the customer and the consumer level is certainly something we're considering. We want to weigh that, as David said, against what type of impact we feel that would have overall, both to customers and consumers. I would surmise that much like when we've dealt with tariff situations or extreme cost impacts before, some amount of that will evidence itself ultimately in price. But if we're weighing that as we go along, I think in this case the issue is so specific to The United States, given the trade environment that we're probably unlikely to look across the globe for offsets, simply because one of the things you have to be very careful about in explaining any price action to the customer and the consumer is the rationale behind it.

And what we've generally seen is when that's a logical explanation, when it's contextualized in the consumer's mind, the customer's mind as to why and that it makes sense, we find they're much more receptive to absorbing that. But the honest answer is at the moment, that's still something we're deciding upon, we'll need to assess the impacts of, and ultimately as David also mentioned, you know, we'll be flexible about, you know, if try one approach and it's ineffective, we'll very quickly move to another. We're not afraid to change tactics if that's what conditions dictate.

Okay. And then on the expense side, as you manage what you're able to control amidst the uncertain backdrop, can you size the discretion over spending growth as we progress through 2025?

There's a certain amount of certainly discretion that we have. I think what we want to weigh again though is, let me step back, we have tremendous brand strength, we have great product, we've got a strong balance sheet, and we have ambitions to continue to grow this brand. We don't want to be penny wise pound foolish in the near term. Obviously, we will keep in mind the totality of what is going on in the world, how that impacts our business, and make adjustments from there. But we also don't want to take foolish action today that would jeopardize our opportunity long term.

We referenced five years ago because there are, we think, some instructive outcomes where we continue to invest through that cycle and emerged as a stronger brand, and we feel many of the same opportunities will exist in the future ahead. So we'll exercise discretion, we'll monitor things carefully, but we want to be thoughtful and we want to bet on the long term, the long term health of our brand first, because that is what will ultimately enable the most success later on.

You. Our next question comes from the line of Adrienne Yih with Barclays. Please proceed.

Thank you very much for all the color. I guess my first question is the comment on 65% outside of The U. S, roughly 40% sourcing in China. Is there any under any circumstance, is it possible to be so aggressive about redirecting all the China sourcing to non U. S.

Locations? And how quickly could you shift any sourcing that you need to? And then my second question is on inventory. As we go kind of through this pricing cost dynamic, we saw this, I think you probably didn't, but in the cotton inflation era in 2011 and 2012 and there's kind of a push pull between units,

you want them down and conservative versus the dollars that they're going to be up necessarily. How do you think about that in the back half? And are you seeing any movement on marketplace orders right now? Thank you very much.

Insofar as the production is concerned, I would say all cards are on the table. We're looking at how we optimize the global cost of tariffs in all markets when we look to move production around. Obviously, with an effective tariff rate at about 159%, products from China to The U. S. Are prohibitively expensive.

So that will be an anchor behind some of our thinking. Again, we're going to stay away from absolutes because what we believe will affect the outcome most is being thoughtful and flexible as time goes on. But certainly, we'll look to optimizing for the lowest overall landed cost in total and by market when we make those decisions and shifting around production destination market will be a feature of that. In terms of inventory, I think probably what I would note most is we're still dealing with some of the impacts of the Suez Canal closure, and that is the most significant impact to our inventories. And as we had said last year, that will continue until we lap that situation because that's a logistics challenge, not a business challenge per se.

From there, I would say quite frankly, the more inventory we have under the prior tariff regime in The United States, the better off we would have been. But mostly, we're continuing to manage inventory as closely and thoughtfully And that means very low amounts of at risk inventory. The substantial majority of our inventory is either a booked order in the future or dedicated to our own DTC business, both of which have a pretty high fidelity to delivery. In terms of orders, it's a little early to say too far into the future other than next quarter, but I would say we're watching orders carefully, we're watching customers carefully.

Some are certainly nervous because of the environment, but what I would say is when we've shown them our product assortment, which we just got done doing here in Manhattan Beach and are in the process of doing across the globe, we see we get tremendous and positive response to what we're bringing forward, both in terms of the Comfort Technology products that we've had in the past, but also some newer products that are doing very, very well for us. So although they may be nervous overall, when we talk to them, they're excited about what we're bringing forward, about what we're offering. And ultimately, we'll have to find a way to manage through some of this uncertainty together. And that's what we're poised to do.

Fantastic. Appreciate the color. Best of luck.

Thank you. Our next question comes from the line of Alex Granton with Morgan Stanley. Please proceed.

Thanks so much for taking the questions. Just a couple of follow ups from me. Just on your China sourcing exposure being relatively high. I'm just curious if historically something has kept you from moving out of that country compared to peers, and whether that's more flexible now and for whatever reason? And then another follow-up on inventory is I'm just curious how much do you have on hand right now that's not tariffed?

And how do you think about the flow of how long you have this window of non tariffed inventory before it starts becoming tariff? Trying to think about how this flows to the income statement throughout the year. Thanks a lot.

Yes, mean, I think when you look at production, right, it's partly about where your destination market is, it's partly about the capabilities of your partners. I mean, we've always maintained a fairly flexible view on where we want to get our product from. It has historically emanated largely from Asia, but that's also quite frankly where we have some of the best quality, some of the lowest cost opportunities and some of the most, quite frankly, deeply rooted relationships with manufacturing partners. It flexible. We're in the process of flexing that right now.

But again, we can't think about this just from a U. S. Perspective, because that two thirds of our business that's not in The United States is pretty robust and is not currently impacted by a similar environment to what you see unfolding in The United States. So we'll be flexible on it, but I think it's important to keep the broader aperture of our business in mind when you think about that, because it's not a principally domestic business. Insofar as inventories are concerned, we did take action to get more inventory on land as much as we could.

Right before the most recent announcements, we did take efforts to pre clear through our free trade zone DC what we could. I would say, to answer your question in a slightly different way, we will begin to feel the impacts of the current tariff regime in the tail end of the second quarter and fairly acutely in the third quarter. Those are probably going be the two most sizable impacts based on what we know today. Some of that will also be contingent upon what which of those levers we pull and how quickly we're able to pull them and to what degree. So there's still more unknown than known in that, which is again why we've at the moment paused our guidance, but all of those are being actively pursued and we're doing everything we can bring in goods, obviously, at the lowest possible landed cost.

I think it's important to note also that, at least in my perspective, we haven't really been slow to move and take multiple sourcing for our product. Like John said, because we're two thirds outside The United States, that's still a very viable factory base for us on a worldwide business that we continue to support and work with. The percentages that go to each country can change much more quickly than changing the entire production facility. So our business continues to grow in Southeast Asia, in APAC outside of China. We do foresee China continuing a growth curve somewhere in the near future.

And we continue to make product and we can move it and try to maximize what we can. Like I said, we have significant flexibility and we try to use it. That's why it's very difficult to be tied down to percentages and how quickly. I think it's fair to say the smallest piece of what we make and what brings comes to The United States will now come from China at least in the short term till some new things are brought out. We really have no intention of bringing any 150% goods.

Having said all that, I don't know that we won't bring in enough goods as we get to the back half of the year as things change and move forward. There's just too many moving parts. And we don't see that as a big possibility now. So we're still moving forward. We still have great faith in those places that, like we said, outside The United States and China.

That continue to grow. And that can take production from multiple sources.

ask a quick follow-up? Just when do you have to have holiday orders in by? Like how long do you have until you have to the shoe drops on that?

That's a questionable pun, Alex. I would say, for the most part about now, it will depend upon the nature of the product, if it's entirely new construction, it's earlier. If it's something that we've had before, the current environment will exacerbate that a bit as we move things around. And one of the things you have to keep in mind. It's not just, you know, what capacity do you have, but what's the logistical support behind that.

And that's another element of the calculus you have to consider, particularly when you're down something like the holiday.

Thank you. Our next question comes from the line of John Kiemann with TD Cowen. Please proceed.

All right. Thanks for taking the question, guys. Hope all is well out in Manhattan Beach.

Usually is. So we're all obviously trying to become experts in how to model cost of goods sold in a new tariff regime. You talked about some of the key inputs and offsets like pricing, supply chain optimization, cost sharing. How do we think about your landed cost as a percent of your overall COGS, whether it's FOB or the other term maybe might just be landing costs. How much of that when we look at our much more simple Excel models and trying to forecast the gross margin and EBIT margin impact, how should we think about that critical input?

Well, I first compliment all of you really. A lot of the work that's been done up to this point in time, we found to be surprisingly close to the mark in terms of overall dynamics with regards to factors like FOB costs, etcetera. I mean, obviously, it is the most significant component of the cost of goods when you take into account the product life cycle. I think you do point out something that is important to keep in mind though, right? The primary impact for something like duties and tariffs is to the FOB price of the goods, but there are other elements that get impacted, particularly when you're moving production around both geographies and to different production facilities.

You know, efficiency factors are different, labor costs are different, freight and logistics, both availability and timing are different. And so that's why this is not an incredibly easy answer to give, especially with the amount of volatility in the situation, because all those factors have to be weighed. Bluntly speaking, it doesn't help when the policies change as quickly as they have over the last three weeks. Some stability is necessary to be able to run the analyses we need to be able to make informed decisions on sourcing, what to do with product, what to do with pricing, what to do with cost, all that. And that's all in the works.

Got it. That's helpful. Just one follow-up question. DTC has gradually become a bigger portion of the business. I think it's mid-40s percent globally.

Skechers U.S.A. Q1 2025 Earnings Call Transcript | Fortune

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Skechers U.S.A. (SKX) Q1 2025 Earnings Call Transcript

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