Skechers Revenue Jumps 13% in Fiscal Q2

Key Points

• GAAP revenue reached $2.44 billion in Q2 2025, rising 13.1% year over year (GAAP).

• Gross and operating margins declined significantly (GAAP), with gross margin down 1.6 percentage points.

• No forward-looking financial guidance was provided; China sales remain in decline.

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Skechers (NYSE:SKX), a global footwear and apparel designer known for its focus on comfort and innovation, released its results for the second quarter of fiscal 2025 on August 8, 2025. GAAP revenue was $2.44 billion, a 13.1% increase in GAAP sales from the prior year. Non-GAAP revenue of $2,410.0 million surpassed the analyst estimate of $2,351.54 million. Non-GAAP earnings per share matched the expected $0.83. However, the period highlighted declining margins, with gross margin falling to 53.3% from 54.9% (GAAP) and operating margin (GAAP) down to 7.1% versus 9.6% last year. Overall, the quarter reflected robust international growth and expanding direct-to-consumer sales, but ongoing margin pressure and cost challenges.

Source: Analyst estimates for the quarter provided by FactSet.

Business overview and recent focus

Skechers designs, develops, and markets a diverse range of footwear, apparel, and accessories, aiming to deliver both style and comfort. Its products target an international audience and include proprietary comfort technologies such as Hands Free Slip-ins (shoes that allow the wearer to step in without using hands), Arch Fit insoles (specialist insoles for support), and Air-Cooled Memory Foam (cushioning systems). The company splits its distribution between Wholesale -- selling to third-party retailers -- and Direct-to-Consumer channels, which include company-owned stores and branded websites.

In recent years, Skechers has focused on expanding international markets, bolstering its direct-to-consumer presence, and enhancing its product lineup with comfort-based technologies. Continual innovation in footwear, robust brand marketing led by global celebrity ambassadors, and global market expansion have been key areas underpinning the company’s success and growth trajectory. Managing cost structure, responding to shifting consumer demand, and optimizing global sourcing have become increasingly critical in light of recent economic and trade developments. The company did not report significant new product launches or major proprietary technology introductions in the second quarter, instead highlighting the role of existing comfort-focused lines and high-profile marketing partnerships. Investment in retail expansion, especially in international direct-to-consumer channels, is ongoing, with a focus on international markets showing the strongest demand.

Quarterly performance: Financial and operational developments

During the quarter, GAAP sales surged 13.1% compared to the same period last year, exceeding its revenue estimate by $58.46 million (Non-GAAP) and propelled mainly by strong international gains. The Europe, Middle East, and Africa region contributed standout performance, with sales up 48.5% year over year to $731.5 million (GAAP). International sales overall rose 22.0% (GAAP), supported by a sharp jump in International Wholesale, which climbed 29.6% to $888.1 million (GAAP). Distributor sales also expanded 20.6% to $136.1 million (GAAP). However, China remained a weak link; sales declined 8.2% (GAAP) and are down 12.1% for the first half, weighed down by macroeconomic pressures. Management categorized results in China as stabilizing but continues to expect only modest improvement for the remainder of the year.

In the U.S., performance was more subdued. Domestic sales held nearly steady, nudged down as wholesale activity declined by 7.5% to $413.3 million (GAAP), which was partially offset by a 7.6% rise in Direct-to-Consumer sales (GAAP) to $448.8 million. Company-wide, Direct-to-Consumer sales increased 11.0% (GAAP), maintaining a solid gross margin of 67.0% (GAAP). In contrast, Wholesale’s gross margin (GAAP) eroded to 41.4% -- a drop of 2.5 percentage points -- as higher promotional activity, especially in China, dragged profitability lower.

The quarter's revenue growth did not translate to improved profit margins, as gross margin (GAAP) declined to 53.3% from 54.9% in Q2 2024. Operating margin (GAAP) also slid, declining to 7.1% from 9.6%. Operating expenses rose 15.4%, outpacing revenue growth and elevating operating costs to 46.2% of sales (GAAP). Management cited increased spending on brand marketing and investments in distribution expansion as primary factors. The impact of foreign currency movements boosted reported results -- sales benefitted by $33.9 million and diluted earnings per share by $0.30.

No material one-time items or unusual events were highlighted during the quarter. Skechers did not declare any dividend for the period, consistent with its established practice; therefore, no dividend trend or change impacted results. The company noted risks to future profitability, including the effect of new tariffs on imported goods to the U.S. from China and ongoing cost pressures from global supply chain disruptions. Management is pursuing a combination of pricing adjustments, cost-sharing, and sourcing changes to offset these factors, but warned that many impacts would be felt most intensely during the third quarter. Inventory levels declined slightly from recent peaks. Cash and equivalents climbed to $1.38 billion.

Looking ahead: Guidance and investor watchpoints

Management did not provide specific financial guidance for the next quarter or the full fiscal year. This decision reflects heightened uncertainty in global trade dynamics, especially regarding tariffs on imports from China and the unpredictable consumer environment in the U.S. Leadership instead stressed the importance of maintaining flexibility, closely monitoring demand signals, and adjusting cost and sourcing strategies as market conditions evolve.

For investors, key issues to monitor in the coming quarters will be Skechers’ ability to manage margin pressure as operating and distribution costs rise and as new tariffs impact the cost of goods sold. The company continues to invest heavily in global distribution, marketing, and direct-to-consumer store growth, particularly outside the U.S. China’s ongoing sales slump, North America wholesale softness, and execution on sourcing flexibility will be central to future quarterly results. SKX does not currently pay a dividend.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

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JesterAI is a Foolish AI, based on a variety of Large Language Models (LLMs) and proprietary Motley Fool systems. All articles published by JesterAI are reviewed by our editorial team, and The Motley Fool takes ultimate responsibility for the content of this article. JesterAI cannot own stocks and so it has no positions in any stocks mentioned. The Motley Fool recommends Skechers U.s.a. The Motley Fool has a disclosure policy.