Skechers has been opening up new distribution centers in order to meet the demand for its online sales. The company is investing $100 million on these facilities and expects to make a profit of approximately $60 million.
Skechers USA Inc. is increasing its fulfillment capacity to accommodate increased e-commerce demand as the coronavirus epidemic causes more people to seek out comfortable footwear.
According to Chief Financial Officer John Vandemore, who has served in the position since 2017, the Manhattan Beach, Calif.-based company, which owned and managed 4 million square feet of facility space before to the epidemic, expects to more than quadruple its capacity by next summer.
Skechers has been looking for more capacity to enhance its e-commerce business in recent years, but difficulties created by the coronavirus epidemic in India have slowed its progress.
In recent months, the business has seen greater demand for its goods than anticipated, increasing the need for additional capacity, according to Mr. Vandemore.
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Skechers reported $1.66 billion in revenue for the quarter ending June 30, up from $729.5 million in the previous year. It had a net profit of $137.4 million, compared to a deficit of $68.1 million the previous year.
Mr. Vandemore added, “What we’ve seen is a phenomenal recovery in demand, which really puts us back on the growth track we were on pre-pandemic.” “Once we were sure that we were going to be back on track with our development, we were going to require additional capacity.”
Mr. Vandemore believes that part of the reason for the increased general demand is that customers are getting more comfortable with internet purchasing and incorporating casual footwear into their work uniform.
Other shoemakers are growing their businesses as well. Crocs Inc., headquartered in Broomfield, Colo., is expanding its Dayton, Ohio, distribution facility with a 750,000-square-foot expansion. According to a July filing, it plans to spend $31 million to lease the land until 2030.
Skechers USA Inc.’s chief financial officer, John Vandemore
Skechers USA (photo credit: Skechers)
Skechers owns and manages distribution centers in the United States, China, Belgium, the United Kingdom, Japan, Chile, Peru, and Colombia, with 5.1 million square feet of space at the end of last year.
In July, the firm built a 1.6 million-square-foot distribution facility in China, and a 325,000-square-foot center is set to open in the United Kingdom. the end of the month Skechers is also expanding its 1.8 million-square-foot warehouse in Moreno Valley, California, with an additional 767,000 square feet. It also plans to open a second plant in China and is searching for a location in India, according to the firm.
Skechers is increasing its warehouse capacity as well as automating systems and procedures at its facilities, including as inventory tracking and selecting and packaging individual products. General and administrative expenditures increased by 40% to $519.9 million in the quarter ended June 30, owing in part to warehousing costs, according to the firm.
Skechers spent approximately $66 million in the first half of this year upgrading its California distribution facility, which it co-owns with real estate developer Highland Fairview Operating Co.
Capital expenditures for the six months ended June 30 decreased by 2.3 percent to $146.2 million, compared to $51.5 million in distribution-related costs in the prior-year period. Both quarters saw greater capex than the previous year, when Skechers spent $125.7 million on capital expenditures, including $24.3 million on its China distribution facility.
Skechers said it plans to spend up to $200 million on capital expenditures in the second half of the year, owing to its expanded global distribution initiatives.
Although the expenditures would hurt Skechers’ profitability in the short term, they will help the business improve its margin structure in the long run, according to James Duffy, managing director of investment bank Stifel Financial Corp.
Mr. Duffy said, “It’s not simply more square footage.” “Better throughput and productivity are also supported by the systems and processes.”
Mark Maurer can be reached at [email protected]
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