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Skechers Sees Higher Freight Costs Keeping Gross Margins Flat

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For Skechers, higher Average Selling Prices (ASPs) being generated by the brand will be eaten up by higher freight costs this year, company management said last week. The brand is projecting the severe supply constraints it experienced in Q3 to continue for the remainder of FY21 and H1/FY22. FY21 total revenues for Skechers are now pegged at $6.15-$6.2 billion.

COO David Weinberg told analysts last week that the company continues to invest in distribution centers and infrastructure, opening new DCs in the U.K. and China in Q3 and narrowing down location possibilities for a new DC in India. Additionally, Skechers intends to expand its North American DC to 2.6 million square feet in 2022.

Meanwhile, the company confirmed that constraints on its Q3 business were more related to shipping container shortages, port congestion and last-mile transportation delays than Asian factory shutdowns. During Q3, Skechers’ domestic wholesale business rose 10 percent, bolstered by its women’s GO WALK product and men’s sport and work styles. Overall U.S. sales increased 20 percent with domestic ecommerce up only 3 percent year-over-year, largely due to limited product availability.

The day after Skechers’ Q3 results were released, Bloomberg reported that the Manhattan Beach, CA company is considering several strategic options for its Asia business, including an Initial Public Offering that could raise as much as $1.5 billion.

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