Skechers USA, Inc.
- Company Name
- Skechers USA, Inc.
- Stock Symbol
- Class Period
- October 20, 2017 to July 19, 2018
- Motion Deadline
- November 3, 2018
- Southern District of New York
The complaint charges Skechers and certain of its officers with violations of the Securities Exchange Act of 1934. Skechers is a global footwear company that designs and markets branded footwear for men, women and children in more than 170 countries and territories through an international network of subsidiaries. The Company sells its footwear in department, specialty and independent stores, as well as through more than 2,600 retail stores and its online websites.
Since entering the Chinese market ten years ago, Skechers’ sales have grown 73% annually on average. However, according to the complaint, Skechers’ explosive growth was not sustainable due to the Company’s lack of the operational infrastructure necessary to efficiently meet international demand and the continued increases in the Company’s Selling, General & Administrative (“SG&A”) expenses. In order to counter the downward pressure the Company’s ballooning SG&A expenses was having on Skechers’ stock price, defendants falsely claimed that Skechers’ SG&A growth would slow and ultimately achieve leverage – growing sales faster than expenses – in 2018.
The complaint alleges that, contrary to defendants’ false statements regarding Skechers’ SG&A growth achieving leverage in 2018, Skechers lacked the operational infrastructure to handle demand and sustain true sales growth in its international markets, which forced it to rely on expensive third-party operational solutions to drive its sales growth. As a consequence, Skechers’ SG&A expenses would continue exceed sales growth for the foreseeable future. As a result of defendants’ false statements and/or omissions, the price of Skechers common stock was artificially inflated during the Class Period to a high of more than $42 per share, which allowed certain insiders to sell more than $38.4 million worth of their Skechers stock at artificially inflated prices.
On April 19, 2018, Skechers disclosed that its first quarter 2018 SG&A expenses actually grew by 23.4%, drastically outpacing its 16.5% sales growth. On this news, the price of Skechers stock declined over 27%, but remained artificially inflated due to defendants’ false assurance that Skechers would achieve leverage by the third quarter of 2018. Thereafter, on July 19, 2018, Skechers once again disclosed that its SG&A expenses in the second quarter of 2018 had grown by 19.7%, nearly twice the rate of its sales growth of 10.6%. On this news, the price of Skechers stock fell an additional 20%, to close at $26.27 per share on July 20, 2018.