US footwear brand Skechers has reported a drop in profitability in the fourth quarter despite record sales of 1.88 billion dollars.
Sales in the three months to December 31 increased 13.5 percent compared to the same period a year earlier, or 19.1 percent on a constant-currency basis, driven by a 22.3 percent increase in its home market of the US.
International sales were up 8.7 percent.
The company’s sales growth was partially offset by a 23 percent decrease in China sales, with the market hit by Covid-related restrictions, including the temporary closure of more than 1,000 Skechers stores in November.
But Skechers said it expects its China business to “improve throughout 2023” following the recent scrapping of the country’s zero-Covid policy.
Breaking it down by channel, Q4 wholesale sales increased 15.7 percent, driven by double-digit growth in the US, international distributors, Germany, India, Mexico, and Spain.
Direct-to-consumer (DTC) sales were up 10.8 percent.
Despite record quarterly sales, Skechers’ Q4 net profit narrowed to 75.5 million dollars from 402.4 million dollars a year earlier.
Record annual sales
Chief operating officer David Weinberg hailed another “milestone year” for the business as annual sales increased 18 percent to a record 7.4 billion dollars.
Net profit for the year, however, fell to 373 million dollars from 741.5 million dollars a year earlier.
Looking ahead, Skechers expects FY23 sales of between 7.75 billion dollars and 8 billion dollars, and diluted earnings per share (EPS) of between 2.80 dollars and 3 dollars.
For the first quarter, it expects sales of between 1.80 billion dollars and 1.85 billion dollars, and diluted EPS of between 0.55 dollars and 0.60 dollars.
Weinberg said that while “the inventory challenges at our domestic distribution center have been difficult to navigate, we are seeing improvements and remain confident in the strength of our brand and the demand for our products”.