Skechers USA Inc. is bolstering its fulfillment capacity to meet greater e-commerce demand as more consumers seek comfortable footwear during the coronavirus pandemic.
The Manhattan Beach, Calif.-based retailer, which owned and operated 4 million square feet of facility space before the pandemic, plans to more than double its capacity by next summer, said Chief Financial Officer John Vandemore, who has served in the role since 2017.
Skechers in recent years sought greater capacity to strengthen its e-commerce business, but challenges caused by the coronavirus pandemic in India delayed its efforts.
The company has experienced higher demand than expected for its products in recent months, accelerating the need for more capacity, Mr. Vandemore said.
Skechers in July reported $1.66 billion in sales for the quarter ended June 30, compared with $729.5 million for the prior-year period. Its net income totaled $137.4 million, compared with a net loss of $68.1 million the prior-year period.
“What we’ve seen is a tremendous rebound in demand, which really puts us back on the growth trajectory we were experiencing pre-pandemic,” Mr. Vandemore said. “Once we got confident that we were going to return to our growth trajectory, we absolutely were going to need that capacity.”
Mr. Vandemore said he attributes the higher overall demand in part to consumers becoming more familiar with online shopping and increasingly integrating casual footwear into their work attire.
Other shoemakers are also expanding their operations. Broomfield, Colo.-based Crocs Inc. is developing an additional building spanning 750,000 square feet on its Dayton, Ohio, distribution-center site. It expects to pay $31 million through 2030 to lease the property, according to a July filing.
John Vandemore, chief financial officer at Skechers USA Inc.
Photo: Skechers USA
Skechers, which held 5.1 million square feet of distribution space at the end of last year, owns and operates facilities in the U.S., China, Belgium, the U.K., Japan, Chile, Peru and Colombia.
The company opened a 1.6 million-square-foot distribution center in China in July and is opening a 325,000-square-foot center in the U.K. later this month. Skechers also is in the process of building out its 1.8 million-square-foot warehouse in Moreno Valley, Calif., by adding an additional 767,000 square feet. It also is planning to add a second facility in China and looking to acquire a space in India, the company said.
Skechers not only is investing more in warehouse space but also in automating its systems and processes in its facilities, for example, for locating inventory and picking and packing individual items. General and administrative expenses grew by 40% to $519.9 million for the quarter ended June 30, driven in part by warehouse expenses, the company said.
Skechers in the first half of this year spent about $66 million expanding the California distribution center it co-owns with real-estate developer Highland Fairview Operating Co.
Capital expenditures for the six-month period ended June 30 fell by 2.3% to $146.2 million from the prior-year period, when it had about $51.5 million in distribution-related expenses. Capex in the two periods were both higher than in the 2019 period, when Skechers spent $125.7 million, including $24.3 million for its China distribution center.
Skechers said it expects to spend up to $200 million in capex in the second half of the year, in part because of its bolstered world-wide distribution efforts.
Although the investments may work against Skechers’ profitability in the near term, they will help the company boost its margin structure over time, said James Duffy, managing director at investment bank Stifel Financial Corp.
“It’s not just additional square footage,” Mr. Duffy said. “The systems and processes support better throughput and better productivity as well.”
Write to Mark Maurer at [email protected]
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