Skechers’ Q2 Earnings Skid

by MR Magazine Staff

MANHATTAN BEACH, Calif.— Skechers, the scrappy California shoe company, reported net earnings of $14.9 million for the second quarter of 2007, down from 2006’s $17.6 million second quarter.

The company’s press release optimistically emphasized that second quarter sales of $352.2 million are 20.5% higher than the same quarter last year, but the market has been focused on the short term loss in earnings. The company blames its new Cali Gear line of shoes, which has needed extra attention for its launch.

“While we are pleased with our top-line increases, our profitability was below our previous guidance,” COO Fred Schneider said in yesterday’s release. “This is due to a combination of several factors: including an increase in sales support merchandise incurred in connection with the launch of the new Cali Gear by Skechers product; increased general and administrative expenses incurred to develop the new Cali Gear by Skechers product as well as some of our newer brands; increased warehousing, distribution and personnel costs associated with both our international and domestic wholesale and retail growth and the need to add the additional domestic distribution facility; and the acceleration of our new store growth. We believe that many of the expenses we are incurring now will benefit us in the short and long term as we build for growth.”

Founded by erstwhile hairdresser and entrepreneur Robert Greenberg and his son Michael in 1992, Skechers started just days after both Greenbergs were pushed out of L.A. Gear, a shoes company the elder Greenberg started in the early 1980’s. The company went public in 1999.

Skechers struck it rich by imitating higher-priced shoes, flooding the market with many more styles per year than its competitors. The company has been able to move shoes from the design stage to the store window much quicker than their rivals, and for a fraction of the retail price.