What are the company's outlook and risks related to supply chain, commodity costs, and currency fluctuations for the remainder of 2025?
Company Outlook for the Remainder of 2025 (as described in the press release)
Revenue growth expectation: Skechers indicated that, after delivering a 13.1âŻ% yearâoverâyear increase in Q2 sales (ââŻ$2.44âŻbn on a reported basis, $2.41âŻbn on a constantâcurrency basis), the Company expects âcontinued strong momentumâ in the second half of 2025. Management highlighted that its product pipeline, expansion of its DirectâtoâConsumer (DTC) footprint, and ongoing brandâbuilding initiatives remain the primary drivers of that momentum.
Margin outlook: The Company expects gross margin to be comparable to or modestly better than the secondâquarter level, assuming stable commodity pricing and the continued execution of costâefficiency initiatives in its manufacturing and logistics networks.
Capital allocation: Skechers reaffirmed its intent to reâinvest earnings into product innovation, expanding its retail and eâcommerce presence, and selective supplyâchain enhancements. No major acquisitions or divestitures were announced for the remainder of the year.
Cash generation and leverage: With operating cash flow expected to remain robust, Skechers said it will maintain a strong balance sheet, continue paying dividends, and pursue shareârepurchase opportunities as appropriate.
Key Risks Highlighted for the Remainder of 2025
| Risk Category | Specific Concerns Mentioned (or Implied) | Potential Impact on 2025 Outlook |
|---|---|---|
| Supplyâchain disruptions | ⢠Ongoing global logistics constraints (port congestion, container shortages). ⢠Dependence on thirdâparty manufacturers located primarily in Asia, which could be affected by geopolitical tensions, labor unrest, or pandemicârelated shutdowns. |
⢠Delays in product deliveries could compress sales windows (especially for seasonal releases). ⢠May force higher airâfreight costs or inventory buildâups, pressuring workingâcapital and margins. |
| Commodity cost volatility | ⢠Rawâmaterial price swings for key inputs such as rubber, synthetic polymers, leather, and adhesives. ⢠Potential increases in energy and transportation fuel costs that feed into manufacturing and distribution expenses. |
⢠Higher input costs could erode gross margin if not fully passed on to consumers. ⢠The Company has limited ability to lockâin longâterm commodity contracts, leaving it exposed to spotâprice spikes. |
| Currency fluctuations | ⢠The Q2 results were positively impacted by foreignâexchange headwinds of $33.9âŻmillion (i.e., the U.S. dollar weakened against key currencies). ⢠Skechers operates in more than 40 markets; a strengthening U.S. dollar in the second half of 2025 could reduce the reported value of overseas sales. |
⢠Adverse FX movements could offset revenue growth and lower reported earnings even if constantâcurrency sales remain stable. ⢠The Company notes that it does not hedge most of its foreignâexchange exposure, making it vulnerable to rapid currency swings. |
How Skechers Plans to Mitigate Those Risks
Supplyâchain resiliency measures
- Maintaining multiâsourcing strategies and expanding the geographic mix of its contract manufacturers.
- Investing in advanced demandâforecasting tools and inventoryâvisibility platforms to anticipate bottlenecks and adjust production schedules proactively.
- Maintaining multiâsourcing strategies and expanding the geographic mix of its contract manufacturers.
Commodityâcost management
- Pursuing longâterm agreements with key material suppliers where feasible, especially for rubber and synthetic polymers.
- Working closely with vendors to optimize material specifications without compromising product quality, thereby reducing exposure to price spikes.
- Pursuing longâterm agreements with key material suppliers where feasible, especially for rubber and synthetic polymers.
Currencyârisk monitoring
- Regularly monitoring foreignâexchange trends and updating internal forecasts.
- While the Company does not engage in extensive hedging, it may adjust pricing in overseas markets on a caseâbyâcase basis to partially offset significant currency moves.
- Regularly monitoring foreignâexchange trends and updating internal forecasts.
Bottomâline answer
Outlook: Skechers is optimistic that sales will continue to grow in the second half of 2025, with margins expected to hold steady or improve modestly, supported by new product launches, expanding DTC channels, and disciplined capital allocation.
Risks: The Companyâs forwardâlooking statements flag three primary areas of uncertainty that could affect that outlook: (1) supplyâchain disruptions that could delay product flow and increase logistics costs; (2) commodityâprice volatility that could compress gross margins if higher rawâmaterial costs cannot be fully passed to customers; and (3) foreignâexchange fluctuations, particularly a strengthening U.S. dollar, that could reduce the reported value of overseas sales. Skechers is actively managing each of these exposures through multiâsourcing, selective longâterm commodity contracts, and ongoing currencyârisk monitoring, but acknowledges that these factors remain âmaterial risksâ that could materially affect its financial performance for the remainder of 2025.