This paper is an evaluation of the financial performance of Skechers Inc.. This company is incorporated in the US and quoted on the NYSE. It is a designer and marketeer of its branded footwear for men, women and children under 8 different lines.
This evaluation will not only determine the financial performance of the company over a period of time but also bring to light the key factors involved in it.
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Financial performance of Skechers Inc
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Skechers came into existence in 1992 when Robert Greenberg who also founded LA Gear was ousted from the LA Gear board. It is headquartered on Manhattan Beach, California USA. Robert Greenberg along with his son as a distributor launched their first shoe line which comprised of utility styled boots and suede skate shoes. Initially it only distributed within the US , however later they made their prescence felt worldwide i.e. distributing in countries as diverse as Hong-Kong, Brazil and Italy.
Later on they diversified into various styles of footwear stretching from Sneakers to Athletic shoes and also launched many lines of apparel which comprise mostly of T-shirts. Some of their famous brands being SOHO Lab, Rhino Red, 310 Motoring, BEBE Sportswear.
Over the years many well known celebrities have signed endorsements with them for instance Britney Spears, Ashlee Simpson. In 2009 former American Idol winners Carrie Underwood and David Cook also signed an endorsement deal with Skechers which will continue throughout the year.
Skechers Inc. is a relatively new company as compared to some of its competitors for instance Nike Inc. which is more than 30 years old.
Although Nike is a much bigger company also but Skechers has done quite well in shorter p of time and has given Nike and many others stiff competition over the years.( Skechers Inc., n.d.)
Skechers’ Inc. has increased its working capital from $ 450. 8 million in 2006 to $ 523. 9 billion in 2007. The Cash Conversion Cycle in 2006 was 78 days however in 2007 it improved to 66 days. The CCC has seen a considerable improvement although receivables, payables and inventory levels remained much the same in 2007. The reason is the increase in business activity i. e. the increase in revenue and the subsequent increase in cost of sales.
Skechers’ operating cycle also improved , as we discussed above that inventory turnover has improved in 2007 ; talking in days it has reduced from above 100 days in 2006 to 94 days in 2007. High number of inventory turnover days are also not a good sign since it might expose the company to future losses incase inventory prices fall. As for Skechers Inc. their inventory levels have remained the same as last year, efforts should be made to reduce them in future periods besides increasing business activity.
Days Receivables Outstanding have also reduced in 2007 to 47 days as compared to 56 days in 2006. This shows that Skechers has put in efforts to improve debt collection Days Payables Outstanding were also quite high in 2006 at 86 days which got reduced in 2007 to 75 days. Although this is still quite high and management should make efforts to ensure that liabilities are paid off timely because delay in payments to suppliers can damage their relationship with the suppliers which could ultimately prove detrimental for the company.
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