Amid overall strong results in the second quarter, Skechers saw a decline in the U.S. wholesale market.
Wholesale sales decreased 5.9 percent, largely due to a 25 percent dip in the U.S. wholesale market. Across U.S. retail, wholesale channels have been largely challenged due to consumer caution and excess inventory, which has negatively impacted brands like Skechers with a large wholesale presence. Skechers also faced tough comparisons to the prior year in Q2, in which wholesale sales grew 30 percent.
Despite the dip this quarter, Skechers executives were confident that the sector would continue to improve moving forward.
In a call with analysts on Thursday, Skechers CFO John Vandemore said Skechers expected Q2 to see the worst impact from wholesale challenging — and that the results were actually better than the company expected due to customers pulling up orders into the quarter. He expects reorders to increase in the back half of the year.
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“We’re cautiously optimistic that things are starting to turn for the back half of the year,” Vandemore said. “Although again, timing being what it is, we may see some shifts around, although nothing like that is currently anticipated in our guidance.”
Vandemore added that inventories are currently in good shape across Skechers’ top 20 or so wholesale customers, which bodes well for the likelihood of reorders.
“I don’t know how long it will take them to deal with the totality of whatever congestion they’re experiencing,” Vandemore said. “What we do know is that our product is in demand and selling well. There certainly doesn’t appear to be any significant backup to our inventories in those key accounts.”
Analysts also viewed the Q2 wholesale decline as a small bump in the road in context of Skechers’ broader growth.
“We see significant upside to Skechers’ top-line guide due to US wholesale potentially returning to growth faster than expected and signs indicating the company’s product assortment continues to resonate with consumers globally,” wrote UBS analyst Jay Sole in a Friday note to investors.
Skechers’ products have continued to resonate and drive demand as consumers seek out innovation and comfort. The brand’s Slip-ins shoes, a hands-free innovation, has even resonated with President Joe Biden, who was recently spotted wearing a pair while boarding Air Force One. Skechers has also seen success with its high perfomance golf and pickleball shoes.
Stifel analyst Jim Duffy said wrote in Thursday note that this “strong consumer interest in Skechers product” could lead to more pronounced wholesale demand in the second half of the year as retailers look to restock strong selling products.
Wedbush analyst Tom Nikic expressed a similar sentiment in his positive outlook for the fiscal year.
“The brand continues to show strong momentum,” he said. “And the one sore spot (U.S. wholesale) may have just passed its trough quarter.”
